In Praise of Salary Negotiation
You get as much as you negotiate. The non-negotiator will in the end become the victim.
I climbed my way from third-world poverty to having the fortune and privilege to say “no” to 99% of Silicon Valley opportunities. I had a vivid desire to prove to the world that even though birth circumstances are accidental, growth is a decision. Having the faith of my parents in me to “shine in the world someday" is probably the primary element of luck I’ll forever take for granted, as every other tool in my box was made up of imagination and hunger to not stay still.
My fortunes can be summarized in a series of S-curves of advancement, where an S-curve is defined as a key insight that you explore, then exploit, then let go of. I won’t bother the reader with the specific choices of these curves, mostly having to do with choosing “impossible” goals and setting out to achieve them; some having to do with education, some to do with cultural integration and others, career maneuvering. The crux of the mechanics by which I learned to serially conquer each circumstance and achieve abnormal advancement is a 10-step formula that I have recently and retrospectively distilled from all my experiences.
I also won’t focus on all the steps of this formula in this writing, as that violates the engineering principle of Single Responsibility for the poor article laying helplessly in front of you. Instead, this article is about Step #6 of my 10-step plan:
Influence and Negotiation
In this article you will not learn how to negotiate. I’m drafting another one, which with any luck should take less than six months to publish. And the order of these is by design.
At the turn of the century I was studying Computer Science in a world where the dot com bust was wrecking havoc. Luckily I didn’t learn about the economy until five years after that major event, because with my education I was lifting myself from minimum wage to $13 an hour. In high school, going to KFC was a monthly luxury for me; one that besides cash, took some effort to master, as I didn’t speak English at the cashier level. Studying Hamlet and Julius Caesar helped neither with ordering the combo nor expressing feelings towards the opposite sex (an S-curve story perhaps for another time).
So imagine my dissonance with the social backlash against technological economy mayhem. I was just happy to be able to afford one KFC combo per hour after taxes, and particularly Kentucky Fried Chicken because when I lived in the revolution- and war-torn anti-American Iran, my formerly capitalist father often reminisced about American Innovation, even when it came to chicken.
A short 20 years later, I sit with my wife in San Francisco, showering her in loving words that don’t involve the phrase “thou art”, having left a corporate job where expensive breakfast, lunches and dinners are free. And most ironically for the good Colonel Sanders, we’re both pescetarian — that’s what vegetarians in San Francisco are called.
But I digress. I have shared the “how” behind my rising fortunes with untold number of friends and loved ones near and dear to me; It’s in one ear and out the other. This is why I needed to start you off with this article, and digress into my studying Computer Science. During that undergraduate program, I learned a key insight from a failure.
It turns out that with my ailing English, I hadn’t learned all the math-related translations pertaining to calculus, algebra and such concepts, the core of which I had learned in non-English junior high school. In university, I was rapidly falling behind. Combined with a temporary physical illness, I started failing courses and after the first year, dropped out completely. This led to depression.
I took a detour and studied Psychology instead. Engineers solve their own problems. Mine was psychological. And during that precious detour, I learned one of the most valuable lessons that life has ever taught me:
A person who doesn’t want to be helped cannot be helped.
That was the essential summary of an entire non-clinical Psychology degree. I decided that I wanted to be helped. So I went to the Math Faculty and spoke to the advisor. I signed up for the most difficult challenge ever concocted in University of Waterloo faculty history: study for an entire General Math Degree without credit. If you pass, we might let you continue in Computer Science.
I was hungry to help myself, so I said yes. After six years of struggle, I became the first person in that university's history to come back from dropping out, and complete the difficult and coveted Waterloo Honors Computer Science degree.
This I achieved, after earning two extra degrees I wasn't even planning to claim, studied orthogonally and in detour. To force my will and get what I wanted, namely economic stability, I had to master three things: language, human psyche and the differentiating advantage of a skill.
It’s not how you do something that gets you to the top of the S-curve. It’s why you’re doing it. The how works itself out.
I cannot teach you how to negotiate if you don’t want to be perceived as a negotiator. You must bring your own reasons. But I’ll help you with a few.
Anyone with a three year old can attest that they know how to manipulate and negotiate. In ancient times everyone negotiated. In fact, scientists have showed that even monkeys understand fairness and negotiation tactics. If you’re so skeptical to not be able to imagine that, simply watch the TED Talk on Equal Pay for Monkeys, and see what a monkey does when you pay him unequally for the same exact work as his colleague:
The modern industrial age man is terrible at negotiating. I say “man” intentionally here, because women, having been largely excluded from workplace participation in the industrial age, are now catching up to negotiating a place at the table where the actual process of negotiation even begins.
There’s much written about women’s unequal pay for the same working circumstances, as well as their lack of transparency with regards to promotion. This is primarily a severe case of being late to the negotiation learning-curve. The most impressive woman at negotiation that I’ve seen thus far is Marissa Mayer. She started as an engineer in Google and became the CEO of Yahoo, an ailing multi-billion dollar company. Her 8-page unauthorized biography by Business Insider is an ode to her ability to tune out present-day cultural circumstances and go for the “impossible”.
There’s a recurring theme here that I want the reader to notice: Good negotiators themselves often believe that what they’re negotiating is “impossible” to achieve. The difference is that a normal human being undergoes an experience of free will, through which they stop right before hitting the perceived wall. Negotiators believe that cage walls are built to be torn down. Watch the discontent monkey throw back the cucumber and rattle the wall. That’s our internal wiring being demonstrated, dating back billions of years.
Negotiation between two parties is an argument for collective advantage. When a value is created with equal participation, even three year-olds perceive fairness as splitting the rewards down the middle. The trouble arises when participation or undertaken risk is not equal. This leads to a gray area in which, because contributions are not accurately measurable, assigning rewards awkwardly implies these measurements. And for most people, depending on their sensitivities, being on either side of that implicit act of judgement is painful. This is why there are two main types of personalities that strongly resent negotiation:
- Engineers and Scientists suck at negotiation, because in their world everything is quantifiable.
- The meek despise negotiation, because they don’t want to impose.
The former get by, because despite their terrible skills in unquantifiable circumstances, they have the leverage of a monopolistic hand in their specialty. If they won’t be crowned as master negotiators, their children aren't going hungry either.
But the latter, the 80% norm in this world, pay the price of seeking peace and co-existence. In The Bible the text reads:
Blessed are the meek: for they shall inherit the earth.
The Bible, King James Version, Matthew 5:5
Not to be insensitive to the religious among us; But for the last two millennia, the meek have not inherited the earth despite having populated it and having counted many blessings in the meantime.
Gratitude is the necessary state for a healthy mind and a happy society. Though trade, even in the realm of skills, does not prosper by exchanging gratitudes without accounting. Persians say “an account is an account, though a brother is a brother”, to relieve themselves of the awkwardness present when balancing business dues. They smile at each other when exchanging this vow and whatever they truly owe each other in business. This is despite their obnoxious social nicety rules where nobody wants to let anyone else pick up the check, offering up their own life if the other person touches the bill. Business is business, even among the members of a reverse-negotiation society made of Taarof masters and implorers of thy absolute and utmost pleasure.
The character of the meek is best captured by Cervantes in Don Quixote, the mad man who went on a knight-errant adventure with no clear value in sight, but “defeating enemies” two centuries after the last Moor left the Spanish Peninsula. He picks an esquire from the village farmers to follow him around the country doing his bidding. How do they negotiate?
“Leave it to God, Sancho,” returned Don Quixote, “for he will give her (your wife) what suits her best; but do not undervalue thyself so much as to be content with anything less than governor of a province.”
“I will not senior,” answered Sancho, “specially as I have a man of such quality for a master in your worship, who will know how to give me all that will be suitable for me and that I can bear."
That’s how Sancho Panza ended up roaming the country for zero pay.
Those who have travelled anywhere outside the North American continent are familiar with the awkward realization that prices often don’t exist as labels. If you’re a traveller in Turkey, man or woman, you’re likely to be courted by a man who has no business but earning your pleasure. He’ll talk to you off the street, offer you tea, sweets and secrets to the best places to go in Istanbul.
And a few minutes into having slipped into the warm arms of this sweet stranger who for some reason is living between beautiful rugs, you come to the realization that you’re in fact in a rug store. The man has children. And unless you buy something, he won’t get to continue being nice to the next traveller going by. You have no need for, but have managed to buy six units of, Turkish rugs.
Those who have had the fortune of speaking to HR about a white-collar job are quite familiar with the notion of “experience tiers”. Oh, we have Engineer I, II and III. We have Registered Nurse I, II and III. We have Junior, Intermediate and Senior Analysts. And the "pay grades” for these tiers are standard.
Nothing tells you how little you’re of perceived value to a potential employer than being presented with fixed pay grades. If you’re approaching such jobs by choice, you’re selling the future of your children for social comfort. If you have to deal with these jobs because that’s the only type of employer you have in your industry, either be content with whatever you have today or make a big change in your life to get out of this situation: You will need more than one lifetime to go much further than where you are now.
My first job as "Analyst I” was at a Technical Customer Support consulting job. The client was a Fortune 500 company, but the consulting group I was working for, as I found out later, had a fixed-value project with them. Their bad negotiation tactics with the rich client had trickled down to the employee level, forcing salaries to be tier based. Instead of fighting the lost cause of climbing a tiered system, I simply left the consulting after a year and joined another Fortune 500 company directly. Folks staying behind would take 15 years to double their salary. I did it in a single year. That’s a LOT of KFC combos, even though I was slowly learning that maybe they’re not that great for your health when you could afford other meals!
In 1950, The Hawthorne Works (a Chicago Factory) had commissioned a study to see if their workers would become more productive in higher or lower levels of light. Henry A. Landsberger, the commissioned scientist, was baffled to discover that both lower and higher levels of light increase productivity, but only for a while. After many experiments, he concluded that it wasn’t the intensity of light, but rather the change — any change, in the level of light or anything else non-light-related — that was causing an increase in productivity. In other words, workers were working harder when they thought you paid attention to them in novel ways. This, the scientist called The Hawthorne Effect .
Negotiation disappeared in the western world when (1) the industrial age broke down units of specialization to those that could be repeated by uneducated and interchangeable workers, and (2) when The Hawthorne Effect was discovered and used to keep worker discontent at bay.
All the manager changes, perk additions and subtractions, company-wide re-orgs, hiring waves and downsizings are variations on The Hawthorne Effect. Fresh massive changes at the large-company level are innately perceived as “they’re paying attention to us and making calculated changes, therefore they must also be paying attention to my compensation and keeping it in accordance with my performance. All I have to do is to work harder to qualify for the next tier of merit-based compensation.”
Even as the industrial era is giving way to the information age, this myth of “merit-based pay” persists and is propagated by the very corporations that stand to benefit from it. It’s only recently coming to light, as reported by Reuters, that the big technology companies in Silicon Valley that nearly invented the word “meritocracy” for the “knowledge workers” had, behind the scenes, colluded to keep wages down . Instead of competing in a meritocratic free market, they primarily resorted to the very tactics prescribed in The Hawthorne Effect to keep their incumbent workers from realizing their true market value. This is not an argument for whether these workers are well-fed or not, but rather an appeal to the free market argument. The “I’m happy enough” Sancho Panza motto is unacceptable, even from the lips of the victim, when you can postulate that the money left on the employer’s table could have possibly funded a better education for that worker’s children.
The worker in the western world is living more than ever in an information asymmetry. Most are too content to want things to be any different. The few that have the desire for, have faith in, and can imagine a better life for themselves and their family, will seek to learn how to negotiate for a more representative and honest share of the fruits of the value they’re adding.
You’re worth zero. I’m worth zero. Every member of humanity is worth zero. Let’s get that out of the way. Compensation does not equal worth.
The first rule of Economics 101 that I learned in school was a phrase my professor began every single class with: “Trade makes EVERYONE better off.”
A skilled worker trades their skill and time for living wages. Through doing something that most other people are not educated enough to do, you’re creating value in society and bartering it for the things other people can do that you cannot. Centuries ago, bartering was made easier through the advent of cash. So we’ve lost track of why some skills are more compensated than others.
The less interchangeable a person is with others, the more valuable their skill-set. If I’m watching your dog and everyone else is capable of doing the same, dog-watching is not highly compensated. When I raise my rate, a thousand other people are there to take my place for the old lower pay. A cashier is slightly higher paid, because they have to know math. This used to pay well when knowing basic math was a rare skill, but these days almost everyone has that skill. I should qualify my “almost” comment, as a significant percentage of Americans, even in this day and age, are unfortunately illiterate and not availing themselves of even this subtle level of differentiation.
On the other extreme, there are skill-sets that take a monopolized strategy to exact the right level of pay:
Land owners are the oldest monopolies, dating back to the Babylonian Empire. Emperor Hammurabi’s Code of Law , remaining as Cuneiform Scripts, outlines the existence of feudal holdings as early as 1894 BC. To this day, the richest of the rich protect their assets from inflation using this monopoly. Most Shopping Centers, Condo Complexes and Skyscrapers are built by an army of skilled workers, but a single investment check from the Trust Funds of a billionaire that will continue to stay a billionaire.
But land is not the only monopoly. Examples of many semi-monopoly positions are rampant in our society. A typical doctor or lawyer in California on average makes about $1 Million per year, usually in a partnership. While becoming a doctor is open to everyone, the source of sheer determination to do two decades of school is a monopoly position that most of the society fails to tap into.
A salaried engineer makes anywhere from $25,000 to $250,000 per year depending on their geographical proximity to the centers of value-creation, their accumulated abilities, and their level of talent in leading the employer to new revenue streams rather than being led by the employer to maintaining existing cash-cows. On rare occasion, older employees of an accidental overnight success retain and monopolize so much institutional knowledge that their handcuffs are worth up to $500,000. But these are all short-lived monopolies. The precious resource, the skill itself, gets outdated every few decades as the center of infrastructure gravity changes to newer breakthrough frontiers in the universe.
To retain your true monopoly:
- You must always be sufficiently differentiated.
- You must correctly price your differentiation for the right buyer, at the right time and with the right escape plans.
Again, wrong question.
It’s amazing how many miseries in life we endure because we begin some thought processes with the wrong questions.
Most of us come from the middle-class and are used to an income ceiling. As a result, we’re constantly trained to optimize for cost and reduce waste. This by itself is quite noble.
What baffles me is the behavior of friends and relatives, whom I love dearly. They struggle at times to make ends meet. Once in a few years they raise their heads and say “this can’t be all there is; I’m not doing something right”; they call me up and ask “I see you’ve done so and so many things. It’s all very impressive. I’m trying to get out of this cycle of not going forward as much as I would have liked to. What should I do?”
The answer is often so simple that I could cry. You’re doing 9 out of 10 things right. You’re missing one key life experience to open up your eyes to that 10th epiphany that will absolutely accelerate your growth. But when I just tell you exactly what it is, it falls victim to the middle-class thought process that I’m all too familiar with.
The thought process goes like the following: Oh I see, to learn negotiation I need to read a couple of books on that subject, print a couple hundred resume, land at least 5 to 10 interviews and turn a few of them into offers at the same time? That seems … hard! It’s too much work. I’m too busy right now with all these other tasks I have to do, and my reading pipeline is already full of books I look forward to reading.
Plus, during interviews they always ask me “how much are you making” and “how much do you expect to make” and they often tell me what the job is going to pay and what my title and tier will be. So there’s very little benefit in going through all this hassle.
Yes. That’s exactly the 10th thing you don’t understand: All those walls are artificial and your free-will stops you from breaking them. Please watch the monkey video again.
What if the book you're postponing to read because you're too busy could show you how to make the same amount of money in half the time? Would saving 50% of your working lifetime compensate 5 hours of reading a book? Would making an extra ten thousand dollars every year be compensation for the trouble of distributing one hundred extra resumes? (that's $100 per resume, annually, for life)
In the same way people spend more time picking a pair of shoes than how they pick their 401K retirement funds, I'll guarantee that you're spending your time disproportionally on working hard vs. learning how to extract the value that you're generating. You live today in the limits of the walls of your imagination.
So then, let me tell you another anecdote, which raises the right question you should have asked instead.
In University of Waterloo, which is known for its work-study programs, there were three types of students:
- Those who had connections and experience, and knew how much to get paid as an intern
- Those who were happy to get paid anything that the employer would deem suitable for them
I didn’t know how much to ask for. But having grown up in an economically corrupt country, I trusted no entity but my own judgement to preserve my interests. So one day I walked into career services and asked a gentle woman at the lobby, whose expertise way too few people seek, “Hi. I have a question”.
“Yes, how may I help you?” she said. “I’m signing up for an internship. I know how to write programs but I have no official job experience to speak of. My resume looks pretty dim. I don’t have high hopes to get paid much for this internship, but I really envision a future for myself where I control my destiny; including my deals with employers and perhaps someday consulting clients. Anyway - You know how in Thomas Crown affair the doorman asks the guy ‘what?! you own the building?’ and Pierce Brosnan actually owns the building? I want to become that guy. How do I do that?” I asked all this with some jest of course. But I was serious. As I said first thing in this article, I was a professional daydreamer who went after the impossible.
She didn’t laugh. She smiled. And said “follow me”.
She took me, aged 19, to the Career Services library. She pulled out a 1987 book by Jack Chapman called “How to make a thousand dollars per minute”. That moment changed my life.
It was the afternoon. I sat there, right by the bookshelf, and devoured the book until night fell. Then I went back to my dorm room and my $1 disgusting microwave pizza. I knew that I was going to be the last pick among my peers due to language barriers, low starting grades and lack of prior experience. But I made a solemn promise to myself: To always exploit the current curve and never settle when I reached the top of it. I swore to one day look from above the mountain down at the many twists of courage that is demanded not just of those who start later, but of everyone. Let others have a head-start. It’s not about where you are — it’s about how far you’ll take your Quixotic quest, as the Don, not the esquire.
War is not about who is right. Only who is left.
Let me add to that quote, that “impossible desires” are like war. That who remains at the end of the journey of doubt still believing in the horizon will touch it. In my first full-time job negotiation, I raised my salary by $15K in a 15 minute negotiation ($1000 per minute). It seemed impossible while I was doing it. After a 10 second pause, the recruiter on the end of the line simply said "OK, we can do that. Can you start Monday?" ... (What?!)
I would tell you about improving that benchmark in future negotiations, but it wouldn't sound as impressive, because people forget a subtle thing about salaries: All your past negotiations are treated as the base-line for future negotiations. If you negotiate $15K above your baseline on three different job changes, you're in fact $45K per year ahead of your cohorts who never negotiated.
What's more, that delta in salary, made in negotiation alone, is nearly what the median American family nets per year. Who do you think has more time to sharpen their skills and do better in the next competitive job market?
But it doesn't end there. Better jobs come after higher-paid workers, because in the mind of the market, "this person clearly understands how to add and extract value". So in fact, when you ask for a higher price for your services, more interesting, better paying and less boring services are asked of you.
Engineers have the hardest time with this concept, because they believe in sharing (open-source) and merit (meritocracy). If it was up to Steve Wozniak who invented the Apple I, there would be no Apple today -- he wanted to give it away. Steve Jobs came along and put a price on a computer. And suddenly there was a market, asking for more interesting features. Suddenly there was value looping back into the company and funding the next improvement. Suddenly there was a new industry.
In the same way, when you ask the right price for your services, you retain more of the value. The value not only validates your services for the next client, but also grants you more time to educate yourself and get ahead of harder working peers. Working hard is overrated (See In Praise of Idleness by Bertrand Russell). You want to work on more interesting and valuable things instead.
As I mentioned, you need a kind of monopoly to maximize your earnings. There's a virtuous cycle in believing in yourself. Much like the doctors and lawyers who tap into the monopoly of sheer determination, strong negotiators find themselves after a while in a unique situation: the knowledge that there is virtually no competition for the most highly paid positions. The average worker is too busy to learn how to qualify for them.
And thus, my children, the caterpillar becomes a butterfly. Not by out-eating others (overtime work), but by negotiating the least-resistance way to become a butterfly. Once it has wings, it can reach many leaves. But then, what, with all the flowers and fruit, what butterfly would wish to go back to competing while crawling on leaves? And thus, the wing-powered monopoly is born.
I watched my mother in the late 90’s, after our immigration, work her butt off to feed us and keep us focused on education. Both my parents were highly educated, but couldn’t integrate into the corrupt post-revolution and anti-capitalistic culture of a radicalized Iran. My father simply quit trying. Once in a while he’d sign up for an independent project with friends, but from birth until I was 15, he went from one of the most successful persons in a country, responsible for its massive dams and tunnels, to one of the most disenfranchised, struggling to pay rent. When we immigrated to Canada, at his old age he couldn’t become fluent enough in English to integrate into the work force. So he’d fly back and forth for a while, making ends meet through odd Civil Engineering jobs.
His lessons imparted on me are: “keep me as an example. Life is ruthless. Don’t do favors today, wishing for the mercy of someone else tomorrow. Live everyday as if all material things are going to be taken away — so live up the moment! And when you put in time or money, do it assuming that all you’ll have to show for it later are the inner achievement and the memories.”
I wish this was an isolated cynical view. But I spend my Tuesdays with a mentor and a friend, in his 80s. And the lessons are all too familiar: “Whether you’ve worked at the most important place in the world or the least, when you reach retirement, nobody will remember what you’ve achieved. Only, who you are. So make sure you’re doing what you love.”
If the anecdote of reading the book and becoming manically excited seemed strange to you, now you know why. Even at 19 I was striving to control my independence and ascent. I wasn’t going to let the same asymmetrical balance of power subject me to the cruel hardships and mediocrity in return for a lifetime of service that my parents were now subject to.
My mother is my hero. But when you see a woman work so freaking hard to keep her children fed while her husband is hunting for the daily bread with no certainty and no faith in society, you cannot help but expand that image to the state of today’s American society. Even among the educated middle-class there are too many struggling mothers hauling children here and pulling off late shifts there. There are too many stressed out fathers squeezed between paycheck-to-paycheck lives and empty promises of inheriting the earth.
At long last, I must conclude my ode to negotiation through stating the following:
Your income, that stream of self-reliantly-earned daily value recognition that puts bread and wine on your table and clothes the children, is only a quarter of your livelihood.
The second quarter is negotiation: getting the second half of the wages that are rightfully earned by you but kept in the treasury of the corporation. I haven’t attempted to teach you how to negotiate here, but I hope I’ve taught you to want to learn it. Use it to improve your family’s life, and be respected by your negotiation opponent for doing it right.
And the 3rd and 4th quarters of your cash-flow come from financial investments — investments you’re not making, because after feeding the kids you have nothing left over to invest. These investments come from the second quarter of your cash-flow that you’re leaving on the table; and years later when you’re weaker and less able, will come to aid you.
Countries, like corporations and fallible men, take back under new philosophy what they granted for sweat and blood of their makers. Much like Steve Jobs denied compensation to early Apple co-founders (a sin that Steve Wozniak undid with his own money out of his kind nature), even at the national level services are de-valued and forgotten once they're performed.
Uncle Sam sends young men to fight its wars, but greets them after service with a massive Veteran Affairs healthcare claim backlog lasting longer than a decade. So even if you're backed by America the beautiful, you know the ugly truth about services performed without negotiation room.
I was raised by a father who had to endure his entire life's work ransacked by the country he helped build from the ground. Services, once performed, are of no perceived value. I have the burden of being one of my parents’ only investments for old age. In the third sentence of this article I mentioned their faith and time-investment in me as my primary element of luck in life.
But besides those things you’re blessed with at birth, don’t rely on luck.
Learn to negotiate for the other half of your salary.
Amin Ariana is a software entrepreneur in San Francisco.
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