To solve the turnover issue, sure. It’s not like the employees had that many other places to go to that could afford to do the same, he could just double or triple everyone’s salary and nobody’s going anywhere. It was a necessary business expense. EXPENSE. He could’ve made more money if he didn’t have to pay it. Similarly to the raw materials, electricity, and every other unavoidable business expense.
It’s also not the same for software engineers, for an example. Too many companies hiring, or at least there used to be until a few years ago. You have to not just pay a lot of money, you also have to have a large bonus 3 or 4 years down the line, often in the form of stock options. Otherwise your engineer making 300k will just take the next job for 400k in half a year to a year.
In normal companies that can’t afford bonuses that are more or less life-changing windfalls, there’s no “investing” in employees. You can pay the market rate for a new grad and they disappear in a year or two to another company that doesn’t take new grads at all but rather poaches employees once they’ve gotten some initial work experience and thus they waste less money than the companies hiring and training juniors and can afford to pay more. The company that doesn’t “invest” in employees, gets more bang for its buck.
He could’ve made more money if he didn’t have to pay it. Similarly to the raw materials, electricity, and every other unavoidable business expense.
Citation needed with data. Because I’d argue pay on the factory is also proportional to quality output. So would they have still made the money with a worse product?
What data? If he could’ve built the cars without paying a single employee, it would’ve been more profitable. That, however, was impossible. Hence, “necessary operating expense”. He just realized that the actual necessary expense was higher than what was previously thought, and in fact it was underfunded.
You CAN invest into human resources, but salaries ain’t it. If your new employees are having trouble getting started and you spend the time and effort to build an onboarding plan, that’s an investment. It’s a one time thing that pays off repeatedly in the future. If you buy or build amenities for your employees to have a nicer time in the workplace (even just a coffee machine and ping-pong table), even those are investments. Employer-provided housing for employees? If it’s owned by the company rather than rented continuously, it’s an investment.
Mind, the expense still dictates the quality of your service or product. Like I said, AI hasn’t replaced us yet. But if there was an AI you could host on-prem, that could replace one single human worker perfectly and improves over time like the human, and it cost, say 50 grand for a server to run it and a grand a month for the electricity, but the human it replaces has a total cost of employment of 5 grand a month? Just over a year and it’s paid off. THAT is an investment, versus continuing to pay the employee indefinitely.
I pulled the numbers out of my ass because actual nvidia DGX servers cost way more than that, but it’s to illustrate the point of what’s an investment, vs what’s an operating expense. And an entire server dedicated to one company could run multiple agent instances in parallel off of one LLM, if our hypothetical future human-replacing AI is just an LLM with an agent layer, so perhaps it costs 500k and replaces 10 people instead. Also the human employee price here is closer to eastern europe than western europe or US.
R&D is the one exception to labour costs being an expense vs investment. Paying someone building a new revenue stream is an investment, because one day that revenue stream will pull in more money, even if it’s no longer being actively developed. The hours people spend working on maintaining all the old stuff, which in most big orgs is honestly a fuckton of manhours, however, are an expense.
Look, I’m not trying to assign humans a lower value or anything. I’m just saying that from an accounting perspective, most employees are just a necessity to keep the thing running, like electricity. The process of R&D is a bit of an exception and some businesses will even give their software or other intellectual property a value in the books and depreciate it over time. But even then, the investment is into the product, not the people. Because the people can bail on you at any time, barring some special exceptions.
TL;DR: Look, I’m saying employees are a NECESSARY business expense. It’s just that we’re not slaves and after a large bonus or whatever, your employee can just… leave. You absolutely can get more productivity and better retention out of your employees by paying them more, but it’s not an investment on its own. Investment in the business implies future value even if you stop investing. As such, the best investments into your employees are actually things that still benefits the next employee after the current one is gone. Equipment, amenities, etc.
Look, I’m not trying to assign humans a lower value or anything. I’m just saying that from an accounting perspective, most employees are just a necessity to keep the thing running, like electricity. The process of R&D is a bit of an exception and some businesses will even give their software or other intellectual property a value in the books and depreciate it over time. But even then, the investment is into the product, not the people. Because the people can bail on you at any time, barring some special exceptions.
I’m not gonna muddle the expense vs investment, because either way, your still devauling the actual humans in this. Trying so say your not, then dobjuag that, undermines the first line.
Thats my issue. Is that the language we use to talk about real people matters. And talking about it like they don’t contribute, just expense is a huge part of it.
To solve the turnover issue, sure. It’s not like the employees had that many other places to go to that could afford to do the same, he could just double or triple everyone’s salary and nobody’s going anywhere. It was a necessary business expense. EXPENSE. He could’ve made more money if he didn’t have to pay it. Similarly to the raw materials, electricity, and every other unavoidable business expense.
It’s also not the same for software engineers, for an example. Too many companies hiring, or at least there used to be until a few years ago. You have to not just pay a lot of money, you also have to have a large bonus 3 or 4 years down the line, often in the form of stock options. Otherwise your engineer making 300k will just take the next job for 400k in half a year to a year.
In normal companies that can’t afford bonuses that are more or less life-changing windfalls, there’s no “investing” in employees. You can pay the market rate for a new grad and they disappear in a year or two to another company that doesn’t take new grads at all but rather poaches employees once they’ve gotten some initial work experience and thus they waste less money than the companies hiring and training juniors and can afford to pay more. The company that doesn’t “invest” in employees, gets more bang for its buck.
Citation needed with data. Because I’d argue pay on the factory is also proportional to quality output. So would they have still made the money with a worse product?
What data? If he could’ve built the cars without paying a single employee, it would’ve been more profitable. That, however, was impossible. Hence, “necessary operating expense”. He just realized that the actual necessary expense was higher than what was previously thought, and in fact it was underfunded.
You CAN invest into human resources, but salaries ain’t it. If your new employees are having trouble getting started and you spend the time and effort to build an onboarding plan, that’s an investment. It’s a one time thing that pays off repeatedly in the future. If you buy or build amenities for your employees to have a nicer time in the workplace (even just a coffee machine and ping-pong table), even those are investments. Employer-provided housing for employees? If it’s owned by the company rather than rented continuously, it’s an investment.
Mind, the expense still dictates the quality of your service or product. Like I said, AI hasn’t replaced us yet. But if there was an AI you could host on-prem, that could replace one single human worker perfectly and improves over time like the human, and it cost, say 50 grand for a server to run it and a grand a month for the electricity, but the human it replaces has a total cost of employment of 5 grand a month? Just over a year and it’s paid off. THAT is an investment, versus continuing to pay the employee indefinitely.
I pulled the numbers out of my ass because actual nvidia DGX servers cost way more than that, but it’s to illustrate the point of what’s an investment, vs what’s an operating expense. And an entire server dedicated to one company could run multiple agent instances in parallel off of one LLM, if our hypothetical future human-replacing AI is just an LLM with an agent layer, so perhaps it costs 500k and replaces 10 people instead. Also the human employee price here is closer to eastern europe than western europe or US.
R&D is the one exception to labour costs being an expense vs investment. Paying someone building a new revenue stream is an investment, because one day that revenue stream will pull in more money, even if it’s no longer being actively developed. The hours people spend working on maintaining all the old stuff, which in most big orgs is honestly a fuckton of manhours, however, are an expense.
Look, I’m not trying to assign humans a lower value or anything. I’m just saying that from an accounting perspective, most employees are just a necessity to keep the thing running, like electricity. The process of R&D is a bit of an exception and some businesses will even give their software or other intellectual property a value in the books and depreciate it over time. But even then, the investment is into the product, not the people. Because the people can bail on you at any time, barring some special exceptions.
TL;DR: Look, I’m saying employees are a NECESSARY business expense. It’s just that we’re not slaves and after a large bonus or whatever, your employee can just… leave. You absolutely can get more productivity and better retention out of your employees by paying them more, but it’s not an investment on its own. Investment in the business implies future value even if you stop investing. As such, the best investments into your employees are actually things that still benefits the next employee after the current one is gone. Equipment, amenities, etc.
I’m not gonna muddle the expense vs investment, because either way, your still devauling the actual humans in this. Trying so say your not, then dobjuag that, undermines the first line.
Thats my issue. Is that the language we use to talk about real people matters. And talking about it like they don’t contribute, just expense is a huge part of it.