Does your IT salary depend on what makes you different?

"Rational people" think at the margin...

It’s Monday, and that means I take another crack at an economic principle and apply it to software development and IT. (Here is a link to the series so far.)

This week we are on principle #3 which goes something like this:

Rational people think at the margin.

I am going to put aside questions about whether (or which) people are “rational”, or whether I would be qualified to make the assessment in the first place.

Instead, I want to focus on the “margin”. (Perhaps that makes me “rational”, after all.)

In this context, the “margin” relates to an economics principle called “Marginal Utility“.

A summary of the concept (for our purposes, anyway) is that people will value two otherwise equivalent items against each other based on their “marginal” (or incremental) differences, positive or negative.

So we might pay more for one car based on its gas mileage or on its performance characteristics, all other attributes being pretty much the same.

Fundamentally, the market of buyers and sellers converges on a certain price at which a commodity might be bought or sold.

As long as a surplus of buyers or a shortage of supply exists, prices may rise… and the converse also holds.

Designing for marginal utility

Now, if a company wants to sell its products at a premium, you may have heard that it needs to “differentiate” them in the market.

More specifically, the company needs to name, find or design a marginal utility for its offers… an incremental change that drives a disproportionate increase in assessments of value (price).

Don't quit your day job!

My business teacher, Toby, used an analogy like this (the following numbers are illustrative only, and may not be accurate):

  • A “good” college basketball player, scoring 26 points per game, has no chance of becoming a professional…
  • A “great” player, routinely scoring 30 points per game, might get drafted at a league minimum salary…

While…

  • The “elite” player who always scores 34+ points per game might get a starting salary ten times higher (not to mention endorsement deals and other additions to income)

Looking at it that way, you could say that the difference between getting into the pros and not is 2 baskets per game.

You could also say that the elite player gets 90% of their income from the extra 2 baskets they make every game.

Bringing the topic back to IT

Since I thought it would be good to set up what marginal utility is and offer an illustration, it seems to me that we can spend a couple of weeks on this subject. We can speak about designing marginal utility at the individual, team and organizational levels.

So while we have the notion of salaries fresh in our minds, let’s start with you and me, shall we?

First, let me make my intentions really clear: I accept that people say money isn’t everything. People don’t have to slave and toil to get paid more. There is nothing morally ‘right’ or ‘wrong’ about wanting higher pay or not.

Remember that the topic is marginal utility in the domains of software and IT. So I am just speaking of the topic about how much we get paid. That’s all – I have no judgments and am not making any recommendations – “I’m just sayin’.”

I have nothing particularly witty to write this time - this is a piggy bank on a pile of money.

In the basketball analogy, good players don’t become professionals. There is nothing wrong with them – they’re good… just not valued highly enough to get in at that level of competition.

In my career, most of the IT people I’ve met are good.

They get paid what the market bears for their roles, which our industry declares clearly and consistently in job descriptions from one company to the next.

A Java developer is a Java developer, and they make a certain amount of money. They make a little more as a consultant, generally speaking.

A “senior” Java developer wants to get paid more, but the standard for assessing what “senior” means is not well established.

And don’t get me started on what an “architect” really is in all its various derivations… except they also expect to get paid more, and have higher expectations to live up to.

The point is: as long as what defines your capabilities and accomplishments is the same as everyone else, the market sets your rate pretty clearly.

In this situation, your income fluctuates with the market, and you are a commodity, in a sense. A business may see you as replaceable, you may struggle to find your next role and you may feel trapped in roles, feeling underpaid and undervalued.

On the other hand, when you find those strengths that you bring to bear – those things that makes you incrementally more valuable than someone else in your role – that could be marginal utility (your “2 baskets more“) for which you compel other to pay a premium.

Just be careful in thinking that what you value about yourself is what they value, and that you deliver enough that they will feel your premium is worth it.

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We can’t afford to hide out

Animal CamouflageWith all the possibilities in front of you, why are you hiding out?

That was one of the questions I asked myself as I reviewed a business talk this morning. The speaker was the owner of The Aji Network, speaking to his students toward the end of a two-year period, referring to some who had shown up for his talks but never worked to produce any identity with him. Since they didn’t engage after countless opportunities, he didn’t know how to help them, and had no background with them that could lead to new offers, networking or other transactions in the future.

For his part, he said it didn’t bother him because his main focus was looking for those who would produced positive identities with him (my paraphrase).

Then he referred to “hiding out”. The fact is, the students had actually paid to be members of his organization for two years, and then elected to sit on the sidelines, thinking they were “absorbing” learning when they missed out on the larger opportunity in front of them – every serious business professional we meet is a possibility for helping produce our futures.

In the talk I was reviewing, nobody will ever know what might have happened with those students. But it got me thinking about different situations I have been in and whether I also “hide out” at times. Even worse, where have I actually paid to engage in the first place, and then failed to take the opportunity!

The thing is, when we were in high school and college, we might have felt we could afford an air of entitlement – our parents paid their taxes, so we were entitled to public school. Or our parents paid tuition and we were entitled to private school. Similarly, as long as we paid for our credit hours, we could sit in class with folded arms and dare our teachers to teach us anything!

I know there are places I didn’t engage as I could have at times in my career, but in the marketplace we really can’t afford to hide out. That is one contributor to the most embarrassing situation imaginable.

There are so many changes taking place with such velocity that learning how to engage and building networks of help are critical practices for any businessperson who doesn’t want to end up bitter and resentful that the world “passed them by”.

It takes humility and confidence stop hiding out. It also takes courage and a sense of urgency that building your networks will not happen on its own. Where do you struggle with hiding out?