We both know that it's not "easy" to get acq-hired for $30 million. It's also not easy to win the Powerball, even if any idiot has a chance.
It is, however, a sign of something wrong in the economy.
When a $6-million-per-engineer acq-hire (the team, not the product, is being bought) is going down, the company is paying about 50 years of an engineer's salary for an employment relationship. A job lasts, on average, 4.4 years according to BLS. Particulars to acq-hires only make that expected duration lower, but let's use 4.4 because we don't know what the "real number" here is.
Executives bitch until they're blue in the face about paying 25% for a normal recruiter. It seems inconsistent to complain that your headhunter's charging you 25%, then pay 5000% for an HR acquisition.
This means one of two things. The first is that, possibly, the employment relationship is worth that much. That is, it's worth $1.5 million per year (as opposed to the more typically cited figures, which are around $200,000) to employ an engineer. Well, then engineers are getting screwed. They're only getting ~7% of their total value-add (120k / 1620k) instead of 38% (120k / 320k).
The second possibility is that engineers aren't getting screwed, but that companies are so bad at discovering talent internally that the only way the executives and get their hands on someone good is to buy people on the market at a very high price. That's not saying that there aren't good people at a company like Yahoo; only that the middle-management filter is so dysfunctional that executives don't know what they have.
Let's say that in November, you pay $2000, out of desperation, for a new coat that's worth $175. When your lease ends in August and you're cleaning everything out, you find that you had an equally good coat in your apartment, just sitting there all winter. You couldn't spot it before because the place was such a pigsty. You'd feel like an idiot, then, wouldn't you?
That's how executives deserve to feel if they acq-hire talent for $6 million but have capable people within (and I'm sure they must have some) who are being underutilized on trivial features and fourth-quadrant nonsense. If you simply don't have talent, then go ahead and buy it at a high price. If you have it and can't find or use it, then you need to scorched-earth your whole management structure.
You're discounting the multiplicative value of the team.
A lone wolf programmer, even if he/she is an ace, is pretty limited. An entire team - spanning the entire stack from design, backend, frontend, etc, is many times more powerful than its individual constituent employees.
High-performing teams are also extremely rare, and extremely hard to build. It's not hard to build a team that can get its shit together long enough to ship a product. It's really hard to build a team that can ship at the top of the field, consistently, repeatedly.
I don't know enough about Summly to know if this is the case, but if they fit this description, then the acquisition doesn't strike me as completely ludicrous - just a little bit.
Of course, this logic doesn't fly in reality because it's practically a guarantee that the slow, stodgy, MegaCorp that acquired the lean, high-performing startup team is going to stomp all over whatever it was that made them tick. I've seen this happen too many times to believe that there is another possible outcome.
But it seems that every stodgy, slow MegaCorp believes they're different, and this time they'll adopt a hands-off approach and let the team work its magic. Then reality sets in, some middle manager crashes it all while fighting for his/her fiefdom, and the whole exercise is forgotten about until the next acqui-hire.
Anyway, theoretically an engineer can be worth $1.5mm a year if they're in a proven, performing team that's operating a couple of standard deviations above the norm, in a competitive field. That same engineer would be worth far less if they came alone.
Maybe it's not just about talent, you could certainly hire amazing talent for a lot less than $30 million.
I imagine this kid will disappear into Yahoo and emerge again in 3 years time more mature and having been groomed for a leadership role by Mayer etc.
He will be the "lead developer" for some new product they have spent $serious_R&D_budget on and will make another promotional video where he talks in a charming British accent and drinks cups of tea with Stephen Fry.
In other words "The wonderkid who turned the crusty old dotcom around".
Technology is a celebrity culture and Mayer knows this. Liken to manufactured "boy bands".
I'm an old fart (29) and don't have a British accent, but I'll do the three-year CEO-protege thing for a mere $10 million and kick it's ass (as long as you listen to me; if not, then you're wasting money).
Bidding war's on! (If you say $9.99 million, then you are a fucking asshole.)
If you had the connections that this guy (and Mayer, and Sandberg, and Zuckerberg, and...) has, you wouldn't need to auction yourself. That's how the system prefers to work.
The listening is obviously a part of the package. Before I can say, "You're doing it wrong" in good conscience, I have to make sure that you are doing wrong.
I know it must seem like I get off on pointing out Wrongness, but there's this thankless and time-consuming process of finding the Wrongness. It's exhausting work. Y'all just see the fun part.
We both know that it's not "easy" to get acq-hired for $30 million. It's also not easy to win the Powerball, even if any idiot has a chance.
It is, however, a sign of something wrong in the economy.
When a $6-million-per-engineer acq-hire (the team, not the product, is being bought) is going down, the company is paying about 50 years of an engineer's salary for an employment relationship. A job lasts, on average, 4.4 years according to BLS. Particulars to acq-hires only make that expected duration lower, but let's use 4.4 because we don't know what the "real number" here is.
Executives bitch until they're blue in the face about paying 25% for a normal recruiter. It seems inconsistent to complain that your headhunter's charging you 25%, then pay 5000% for an HR acquisition.
This means one of two things. The first is that, possibly, the employment relationship is worth that much. That is, it's worth $1.5 million per year (as opposed to the more typically cited figures, which are around $200,000) to employ an engineer. Well, then engineers are getting screwed. They're only getting ~7% of their total value-add (120k / 1620k) instead of 38% (120k / 320k).
The second possibility is that engineers aren't getting screwed, but that companies are so bad at discovering talent internally that the only way the executives and get their hands on someone good is to buy people on the market at a very high price. That's not saying that there aren't good people at a company like Yahoo; only that the middle-management filter is so dysfunctional that executives don't know what they have.
Let's say that in November, you pay $2000, out of desperation, for a new coat that's worth $175. When your lease ends in August and you're cleaning everything out, you find that you had an equally good coat in your apartment, just sitting there all winter. You couldn't spot it before because the place was such a pigsty. You'd feel like an idiot, then, wouldn't you?
That's how executives deserve to feel if they acq-hire talent for $6 million but have capable people within (and I'm sure they must have some) who are being underutilized on trivial features and fourth-quadrant nonsense. If you simply don't have talent, then go ahead and buy it at a high price. If you have it and can't find or use it, then you need to scorched-earth your whole management structure.