Comment by jedberg
3 years ago
Based on what I've seen/heard, they seem to follow a similar comp philosophy to Netflix -- pay top of market to get the best people.
But it's also important to note that only $300K of that is in cash. The other $600K is in profit participation, which could take years (maybe even a decade!) to be realized. It could also be worth $6M a year when it's realized.
But ultimately it's an investment of your time. Or to think of it another way, you're getting paid $900K a year but you're also investing $600K a year in OpenAI, which may end up being an amazing return or nothing at all, just like any startup investment.
Although with Sam at the helm, my guess is it will probably be worth more than $600K a year.
Honestly, if you take 300k home, the risk isn't that high. But the reward is insane.
That person could probably be making 500k+ at a FANG with less variance in the stock component.
I read this here and there and don't doubt it, but then again I've never seen/met anyone IRL (outside of C-level) making this much money as an employee.
Are they just extremely rare cases or am I just not aware of the valley and their customs?
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To be realistic ... 300K in the bay is barely livable if you're targeting a middle class life with kids and targeting retiring at 65.
First, ~46% of it is gone in taxes including federal tax (~25%), state tax (~8%), FICA (~4%), and sales tax on everything you eventually use the money for (~9%).
So that's 162K left. Not a lot to pay sky-high rents, car payments, insane medical bills despite insurance, lawyers to fight said bills, save up money for parental elderly care, save up money for yourself for retirement, etc.
And yeah, having kids on that money? Very difficult.
If you're not in the bay area, different story, it's a very nice income. But they probably won't give you that package if you're remote.
And if you're in the bay and not planning on having kids, it's an okay salary.
I get what you're saying, but the median income for SFO is way below what tech people get paid. "barely livable" is perhaps a bridge too far for the $300k+ crowd. :)
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To be realistic, even in the Bay, 300k is more than livable if you're targeting a middle class lifestyle with kids and retiring at 65.
If you can't retire at 65 on 300k a year, you're not living a middle class lifestyle. Not even close.
Rent: 4k/month = 48k. Car payments 750/month = $9k. Using your post-tax numbers (which are wrong) that leaves over $100k per year for all the other random stuff you've listed, which is more than most people in the Bay Area make in a year.
(Also, you're math is wrong on the taxes; the rates you use are the statutory progressive rates, not the effective rates (so, for example, the effective rate on $300k would be approx 22% at the federal level assuming standard deduction but no retirement contributions or child credits). FICA is capped at the first $160k of income (meaning you don't pay more if you make more).)
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Yeah, take home of $13.5k a month can get a little tight if you're looking at an $8k mortgage on a crappy little shithole condo
You surprisingly (considering you're making 5x the median household income for the US) end up having to lightly adhere to some sort of budget. With car payments, sending money to your family, and local inflated prices, it's easy to find yourself not saving enough for early retirement
I think if you just don't buy new cars or first class international plane tickets you can get by pretty comfortably though. I saved $100k a year with a pre-tax total comp of $350k for a few years in the Bay Area
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A few years ago, I bought a 3-bedroom house in East Bay area, with a nice backyard (which looks distinctly less nice now, but hey, programming is a time-consuming job), and a decent public high school in walking distance for my two kids, all the while getting a whooping <$250K salary. Still had enough money left to invest in mutual funds and enjoy trips to Hawaii every other year or so.
I honestly don't know what to say. If you really think 300K/year is barely livable then I hope someone in your family has a sit down with you and ask blunt questions about what the fuck you're doing with all that money.
You're getting mercilessly downvoted by people suffering from extreme cognitive dissonance. Even the very idea of trying to save money for future medical catastrophes that are statistically bound to happen (parents, etc) are financial ticking time bombs.
Taxes aren't that high even if you are under the standard deduction. Assuming you are married here as you are taking about kids.
Fed + fica is 21% combined. State is 6%. Imputing sales tax doesn't make sense either - rent isn't subject to it.
Take home is a bit north of $200k. Yeah, that's affluent here. Not upper class, but solidly upper middle.
This "middle class life" really isn't middle class if a top 10% income can't afford it.
You might want to check what the difference between mean and marginal tax rate is. For somebody with a lifestyle in which $162k a year is considered "barey livable" that should be sth very easy to understand.
>save up money for parental elderly care
Sorry, what? Your parents? I can see that paying for 3 generations on one income can be hard.
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> To be realistic ... 300K in the bay is barely livable if you're targeting a middle class life with kids and targeting retiring at 65.
LOL. Do you live in Mars?
If 300k is "barely livable", then how does a Starbucks barista make a living in SV?
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You know you can just look up income stats for SF right?
Unless you have a tax write off, then you don't have to pay that much tax.
You can get legal insurance as well and get all that nonsense done for $20.
Elderly people can go retire in Mexico and have a better life than whatever is possible in the US, in towns full of other retired people.
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[irony] Yeah, for less than 2 million a year you can't raise a family [/irony]
interesting pov. not sure if serious thou
I guess the first part of that is like netflix, but as you know the second part is not since netflix is 100% cash unless you want to participate some portion of that in the employee stock plan.
Yes, the first part of the philosophy, pay top of market. Not the second part, where they employee gets to choose their level of exposure to investment risk. But Netflix is a public company, and OpenAI is not.
If I can’t use “the pay” to exchange for goods and services when I earn it, it’s not “pay”
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The part about paying top of market to get the best talent is the same. The breakdown of comp is not.
Sorry to be perhaps slightly rude, but you don't seem to have added anything other than saying the same thing as the person you replied to?
No, Netflix pays top of market like you said “in cash”. Paying “profit sharing” in a company that isn’t profitable isn’t nearly as valuable.
Edit:
I love this analogy
> Or to think of it another way, you're getting paid $900K a year but you're also investing $600K a year in OpenAI, which may end up being an amazing return or nothing at all, just like any startup investment.
Would someone invest 2/3rds of their compensation in one company? I know I diversify my RSUs within six months after getting them.
I feel like person you're replying to specifically implied that OpenAI does it differently in that aspect, and they were also high up at Netflix so is likely very familiar :)
> Would someone invest 2/3rds of their compensation in one company? I know I diversify my RSUs within six months after getting them.
I also sell my RSUs right away. But you're forgetting one thing -- if I make $600K somewhere else, I can't invest it in OpenAI. It's the opportunity to invest in a startup that you wouldn't get otherwise that is most valuable, if you think the startup will be valuable.
Do you think the next funding round or when it goes public will increase its valuation?
Can you name on tech company that went public in the past decade that has outperformed the S&P? What’s OpenAIs moat that couldn’t be duplicated by a deep pocketed public tech company like Facebook, Google or Amazon (my employer)? Two of those companies already have large publicly available data centers and an existing customer base to sell to.
Beware of taxes though. If you leave the company before it's public, and the stock has increased in value, you have to pay capital gains taxes when exercising and there's the possibility that stock may end up worthless.
There have been many startup employees that have paid hundreds of thousands of dollars in taxes only to see their paper gains eventually disappear.
I recall a story someone told me a while ago. Software business that did local CoL/prevailing wages. Hired an intern one summer that was just running around in circles around the other, more senior devs. Useless to say they loved him and the next summer they tried to get him back, even offering a signing bonus for an internship (something they considered unheard of) but he was already at a large search engine company down in the Bay. You can guess the comp was probably already 3x what his previous job was offering. Of course, he wouldn't return.
There's a whole class of engineers were completely invisible to most companies, even if they are in the same "local market" [0][1] (Some use the term "dark matter devs" but I know it has another meaning [2]). These guys tend to fly under the radar quite a bit. If you are in a tier 2 market or company, your chances of attracting one are close to nil. Because they are extremely valuable, they don't interview a lot and tend to hop between companies where they know people (or get fast tracked internally).
FAANG companies have internship pipelines, with bonus for returning interns. These guys are off the market years before they even graduate.
[0] https://blog.pragmaticengineer.com/software-engineering-sala...
[1] http://danluu.com/bimodal-compensation/
[2] https://www.hanselman.com/blog/dark-matter-developers-the-un...
This is why Sam wants regulation.
All this money spent, yet if the open source world can catch up, it'll all be for naught.
They need a world where everyone sits atop OpenAI, not a thousand different startups with their own models.
OpenAI might pay its engineers $900k, but an AI startup founder can easily get to a $5M, $10M valuation in under a year.
> you're getting paid $900K a year but you're also investing $600K a year in OpenAI
It might sound simple, but I've never viewed startup equity like that; thanks for the slightly different perspective.
I don't understand why people think sam has magic powers. He started one failed company and has no technical ability to make openai into anything more than it is.
yeah, Netflix is almost all cash in comparison. No clue what kind of liquidity OpenAI provides to cash out. Since it's "profit based" it actually seems even riskier, Microsoft could prevent OpenAI from showing any profit if they really want to
and if the info about the actual architecture of GPT-4 is legit, OpenAI might not have as much of an edge on the competition as they'd like people to believe. So that equity might not be worth quite as much as they think and explains why they so cagey about it in their paper on it. And why Sam Altman is calling for restrictions on research to slow down competitors
https://twitter.com/soumithchintala/status/16712671501017210...
Open AI does not make profits though
Although with Sam at the helm, my guess is it will probably be worth more than $600K a year.
or not . I would rather work for facebook with profit participation. zuck seems to know how to make a profit.
I would take it. There are some interesting things to work on.
sure but it looks like you can sell PPU's to investors?
no "right to first refusal" or some transfer restriction?
even if there was, while it might take a decade before IPO and market price discovery, it's almost expected that they would make a private tender offer sometime before that, letting employees realize some value of their shares long before 10 years is up.
or you could just sell and take the $900k or so, and plop it into some PE funds where you’ll be a preferred investor in a variety of high quality, lower valued, offerings and don't have to waste a decade of your life on the graciousness of one employer’s management and prospects
fingers crossed. don't forget to buy some of the S&P too.