An interesting long form piece in Aeon Magazine by James Somers – titled “Are coders worth it?” – aims to examine whether web developers are worth the six figure salaries that they currently command in their first year of employment.

I am a web developer, and there has never been a better time to do what I do. Here’s how crazy it is: I have a friend who decided, part way into his second year of law school, to start coding. Two months later he was enrolled in Hacker School in New York, and three months later he was working as an intern at a consultancy that helps build websites for start-ups. A month into that internship — we’re talking a total of six months here — he was promoted to a full-time position worth $85,000.

Although the article is well-written, Somers doesn’t really go deep into the question – he quickly settled into the comfortable and well-worn points that  the value and price of things are different, and that things of equal value might have very different prices because of supply and demand.  Price shouldn’t exceed value, but there can be a huge gap (see consumer surplus) or no gap depending on conditions.  And right now conditions are great for developers:

You can imagine what it does to the ego, to be courted and called ‘indispensable’ and in general treated like you’re the one pretty girl for miles. When a lot of your contemporaries don’t even have jobs. 

It’s interesting to be experiencing this second tech boom as a software development manager, responsible for recruiting, hiring and managing great tech talent.  I experienced the first boom as a programmer – I graduated in 2000 with a degree in Math and Computer Science during the peak of first big tech boom.  Companies were flying candidates across the country for interviews and recruiting weekends.  I could hardly believe it when I was offered a starting six figure salary and a signing bonus that would comfortably pay for a new car.  We’re thirteen years later and things feel the same, but now I’m on the other side of the table.

And are coders worth it?  Somers says …

We call ourselves web developers, software engineers, builders, entrepreneurs, innovators. We’re celebrated, we capture a lot of wealth and attention and talent. We’ve become a vortex on a par with Wall Street for precocious college grads. But we’re not making the self-driving car. We’re not making a smarter pill bottle. Most of what we’re doing, in fact, is putting boxes on a page. Users put words and pictures into one box; we store that stuff in a database; and then out it comes into another box.

There’s a couple things wrong there.  First of all, the web is a communication network.  Everything is going to have a web interface ‘with boxes on a page’ – even self-driving cars and pill bottles.  Secondly, software developers at a pre-eminent Web company are building the self-driving car.  The criticism of small companies pursuing small ideas is totally misguided:

Take Doormates, a failed start-up founded in 2011 by two recent graduates from Columbia University whose mission was to allow users ‘to join or create private networks for buildings with access restricted to only building residents’. For that they, too, raised $350,000. You wonder whether anyone asked: ‘Do strangers living in the same building actually want to commune? Might this problem not be better solved by a plate of sandwiches?’ (The founders have since moved on to ‘Mommy Nearest’, an iPhone app that points out mom-friendly locations around New York.)

The reason these ideas are worth pursuing, and that coders are worth it, is that the productivity of software and software developers continues to grow exponentially.  Open source libraries, tools, languages and operating systems – combined with the continually diminishing cost of computing means that two recent graduates can build something that reasonably might be worth $1/yr to a small fraction of the residents in an apartment building.  But since there are millions of apartment residents (just in the USA) then a couple smart young women might be able to create something worth a million or two per year.  Using a range of free or low cost marketing tools (Facebook, Twitter, Blogs, etc) they begin to reach their market and start selling.  And if they leverage some other good open-source tools they can internationalize their service and offer it in Europe and China too.  Now they’re making $10MM a year.  And two developers can do this.

Because of the incredible productivity of software, a few developers can support thousands or hundred of thousands of users:

(source: Pingdom)

Instagram, which isn’t in the chart above, had more than two million users per employee when it was purchased by Facebook.

An interesting measure of productivity is revenue per technical employee.  A software company also requires sales, accounting, support, HR, etc – but each software developer generally build software that supports revenue of 3x to 10x their salary.  Take a look at fully loaded revenue per employee (including non tech employees) at some leading web companies:

(source: Pingdom)

Without software developers to build the technology, there are no Sales, HR, Support etc.

Scalability.  Productivity.  International reach.  Low upfront capital requirements.  Near-zero marginal distribution costs.  This is why coders are paid so much.  And yes they’re worth it.