Gesturing at a thing to mostly avoid. My personal opinion.
This topic has been discussed on the EA Forum before, e.g. Free-spending EA might be a big problem (2022) and The biggest risk of free-spending EA is grift (2022). I also wrote What’s Your Hourly Rate? in 2013, and Value of time as an employee in 2019. This piece mostly stands on its own.
There’s a temptation, when solving the world’s toughest and most-important problems, to throw money around.
Lattes on tap! Full-time massage team! Business class flights! Retreat in the Bahamas! When you do the cost/benefit analysis it comes out positive: “An extra four hours of sleep on the plane is worth four thousand dollars, because of how much we’re getting paid and how tight the time is.”
The problem, which we always underindex on, is that our culture doesn’t stand up to this kind of assault on normalcy. No altruistic, mission-oriented culture can. “I have never witnessed so much money in my life.” 1
What is culture? I often phrase it as “lessons from the early days of an org.” How we survive; how we make it work despite the tough times; our story of how we started with something small and ended up with something great. That knowledge fundamentally pervades everything we do. It needs upkeep and constant reinforcement. “It is always Day One” 2 refers to how Amazon is trying hard, even as they have grown huge, to preserve their culture of scrappiness and caring.
What perks say
Fancy, unusual, expensive perks are costly signals. They’re saying or implying the following:
- Your time is worth a lot of money
- You are special and important, you deserve this
- We are rich and successful; we are elite
- We are generous and you are lucky to be in our orbit
- You’re in the inner ring; you’re better than people who aren’t part of this
- We desperately want to keep you around
- You are free from menial tasks
- You would never pay for this on your own—but through us, you can have it anyway
- We’re just like Google!
Some of these things might be locally true, but when I zoom out, I get a villainous vibe: this story flatters, it manipulates, it promotes hubris, it tells lies you want to believe. It’s a Faustian trade: in exchange for these perks you “just” have to distort your reality, and we’re not even asking you to believe hard scary things, just nice ego-boosting things about how special, irreplaceable, on-the-right-track we all are.
Signals you might want to send instead
The work cultures I prefer would signal something like the following:
- We’re normal people who have chosen to take on especially important work
- We have an angle / insight that most people haven’t realized/acted on yet
- We might be wrong, and are constantly seeking evidence that would change our minds
- We should try to be especially virtuous whenever we find ourselves setting a moral example for others
- (We aren’t morally better by default, although we may have a bit more information; we are always learning as we go)
- We are focused on the long term good for the world
- Tons of people are suffering / will suffer in the future
- We remind ourselves of this regularly
- (We regularly acknowledge suffering in the world; we definitely don’t do things that are cushy)
- We invest a lot in our people and their relationships, and act to preserve that value
- Everyone works hard, sometimes they have to do things they don’t want to do
- We are in it for the long haul so don’t burn out
- (We might use money in various ways—to make our work relationships stronger or stave off burnout—but we aren’t profligate.)
Instantiations of this culture will vary a decent amount—but I expect that a lot of altruistic orgs have/want to promote at least some subset of these values. Fancy perks push (perniciously, temptingly) against them, eroding our culture.
What to do
I don’t have a prescription for what to do instead—the best ideas are certainly going to be specific to your team or organization’s goals and existing culture.
The first and most fundamental question is, should you pay people well, and if so how well? Really tough question. I don’t have a strong general opinion about this. The only clearheaded point I can make is that overpaying and underpaying both send powerful signals; sometimes those signals are what you want to be sending and other times they’re really not. Carefully consider what you’re signaling with your pay structure, e.g., high salaries might say: “everyone is equal” or “we hire only the best” or “we expect you are compromising your values to work here”. And low salaries might say: “everyone is equal” or “we’re all here because we care so much” or “we don’t value your work”.
I’d suggest making a cultural distinction between “perks” and “business expenses”. I can’t think of too many cultural reasons to limit business expenses; in fact it causes other problems if there’s too much paperwork around getting reimbursed for basic things like equipment, transportation and services. (What counts as a perk? Business class travel in most cases is a perk, but a restaurant might be a business expense or a perk depending on the context.)
One trick to try is pushing the decision making about a perk out to the recipient. Maybe bringing a massage therapist into the office is a good idea, but try charging the employee for the appointment instead of making it free. That blunts the “perkiness” a lot, in a way which might annoy people in the short term but doesn’t have most of the drawbacks of free perks. (I have seen this work particularly well in combination with slightly higher-than-usual salaries, e.g., to make a cultural point that we pay you well so you can make your own choices about perks.)
If the concept of carefully designing a culture is new to you, read this short post: Don’t Fuck Up the Culture by Brian Chesky. To design my own company’s culture, I talk (continuously) with my cofounder and the rest of the team about what works well about what we do, what surprises them; then I write those things down, and try to take it to logical extremes and think about the edge cases. Expect and embrace that your cultural choices have trade-offs. Leaders should exemplify the culture in their day-to-day.
For frugality in particular, I think you could land anywhere from “ultra frugal, no unnecessary stuff” to “spend money in the best interest of the org.” If you might be perceived as a leader or a visible example, pick a point on the scale that you can see yourself personally exemplifying for a long time.
A couple examples from my company Wave
Not too long ago, Wave would pay for an upgrade to business class travel if the upgrade was less than the cost of the economy ticket (which was often possible for flights to Africa using the bidding-based systems of many airlines). We stopped paying for these upgrades and this seems like a pretty clear win to me.
We also ran all-expenses-paid “retreats” in Africa, in very nice hotels, for our remote team. These were costing upwards of $3500 per person for a 5-day trip. The biggest problem with retreats was the cost and perkiness; but the second biggest problem in my view was that attendees weren’t getting a clear picture of the lives of the people we were ostensibly trying to help. We’ve basically stopped having retreats at all, which to me is not the greatest outcome, so I am still trying to figure out what to do instead that feels more frugal while getting our team a better sense of what life is like for our users.
We currently pay $550 per month for a coworking space membership per person for our remote team, which seems high and perks-y to me; some people probably benefit from coworking quite a lot though and their work could be greatly impacted by reducing this too much so it’s a tougher decision that I’m working through right now.
For our remote team, we cover whatever home office equipment they need, with spending guidelines-but-not-limits, with the hopes that people who need expensive equipment can feel the license to get it and those without particular needs will be nudged towards cheaper options. (I don’t really know how well this policy is working today though, and we are considering changing/simplifying it.)
(From early readers, or inspired by the comments on Free-spending EA might be a big problem.)
Q: Spending lots of money can be a positive signal to some: it says you’re willing to take reasoning seriously and put your money where your mouth is. If that is culturally important, can we keep that benefit?
I think we can preserve the benefit by choosing targeted ways of using money wisely. If you think that it’s very important to pay people highly, for example, then do that loudly and transparently—but get rid of the other perks. Basically, choose your spending wisely, explain your reasoning for it, and make it clear that it’s an exception to an otherwise-limited budget.
Q: Excessive frugality can lead to distraction, losing sight of the bigger goal in order to save a bit of money. For example, if you encourage people to cook their own food ahead of an event instead of feeding them there, aren’t they going to waste valuable time doing that work?
I agree with this concern and if you made me choose I would usually choose to offer free food! However, have you considered charging a nominal fee for the food? All things considered, any choice here seems reasonable (free food is hardly shocking), so maybe think about it and pick the culturally best one, and if you do give free food, make the quality of the food line up with the rest of the message you’re trying to send.
Q: Does it make sense to pay more for a fancier hotel if it has substantially better Wi-Fi and the person might do some work in the room?
I’m worried about this one. In most parts of the world, there’s a better way to get cheap good internet than paying premium hotel rates for it. I would like to see us goal factoring this type of decision more. Fancy hotel rooms definitely feels like a pernicious perk to me. Maybe you’ve thought about it a lot and decided it was worth it, but this is one of the examples I’m trying to push back against with this post.
Q: I’ve gotten large benefits from hiring cleaners, ordering food, paying money to alleviate bureaucracy hurdles, etc. Do I have to give all that up?
No, those may be sensible expenses—but these are mostly individual lifestyle choices. One of the things that I notice about “perks” is that they tend to shift individual lifestyle choices about how to spend your personal money into org-level decisions. I’m advocating for lots of these decisions to stay at the individual level rather than standardizing on them.
Q: Perks are tax efficient: paying someone $150k plus $50k in perks is more ‘take-home value’ than straight-up paying them $200k. How should I think about this?
It’s a small factor. I don’t think you should let tax efficiency override a potentially high-value cultural decision. I would usually rather pay more than offer more perks but I can see the tradeoff going other ways in some situations.
Q: How has your (Lincoln’s) opinion changed since your 2019 blog post, Value of time as an employee? This seems to be pushing in the opposite direction.
Interestingly, I still find myself mostly agreeing with what I wrote in that post. In 2019 I saw instances in my own company of people not feeling free enough to spend money on things that were important. In 2023 I see instances (both at Wave, and in EA) of over-spending. My 2019 post has a bunch of references to the cultural impact of visible spending, which is the whole point I’m trying to make here too, so I’m glad to see it there :). One thing from that piece I disagree with now is: “the company should basically always be willing to pay for any time savings that is cheaper than the person’s hourly wage”. I no longer think this is true, for cultural impact reasons, and I recommend being careful about what you visibly spend on. The 2019 example of spending money on coffee shops for employees is also something I would be inclined to argue against today, because of the third option: there might be ways to get the employees to pay for coffee shop visits on their own if they benefit from them, rather than subsidizing them.
Thanks to SM, RH and TF for comments on drafts.