Tech Companies Overhire 30x

Sam Bankman-Fried (SBF) and others argue that tech companies systematically over-hire, creating inefficiencies and reduced productivity. This view is supported by examples like FTX operating a $30B company with minimal staff compared to industry standards.

Key Points:

• FTX's Lean Operation Model:

  • Built initial product with just 2 engineers
  • Currently operates with 25-30 engineers total
  • Maintains around 200 total employees while valued at $30B

• Why Hiring Doesn't Scale Well:

  • Coordination becomes exponentially harder with more people
  • Each doubling of employees squares the amount of communication needed
  • Diffusion of responsibility occurs - tasks that 5 people could do might not get done by anyone

• Problems with Traditional Tech Company Growth:

  • Growing from 200 to 2000 employees doesn't 10x productivity
  • Sometimes more hiring leads to less getting done
  • Companies lower hiring standards as they scale
  • Average coworker experience becomes worse over time

• Cultural Decay in Fast-Growing Companies:

  • Race between understanding culture and hiring speed
  • At 50% growth, new employees can be properly mentored
  • At 300% growth, employees only have 4 months to learn before teaching others
  • Harder to keep everyone aligned on company mission and values

• Incentive Problems:

  • Manager compensation tied to team size creates wrong incentives
  • People create "bullshit jobs" to justify larger teams
  • Career advancement often tied to number of direct reports
  • Budget and headcount become proxy for importance

• Alternative Approach:

  • Hire fewer, higher-quality people
  • Pay them significantly more than market rate
  • Focus on productivity per person rather than team size
  • Maintain high standards throughout growth