Netflix CEO Explains Why He Pays Employees Insanely Huge Salaries

It all comes down to the theory of the “10x developer.”

For years, Netflix has maintained a reputation as a company that pays its technologists huge salaries. Data has backed up that assertion; for example, crowdsourced compensation numbers from levels.fyi suggest that Netflix’s software engineers can make nearly half a million dollars per year, well ahead of what they might earn at rivals such as Disney and Amazon. Why does the company pay so much?

In a posting on CNBC, Netflix CEO Reed Hastings walked through his reasoning, which is pretty straightforward: During Netflix’s relatively early days, he came to believe that “the best programmer doesn’t add 10 times the value” but “more like a 100 times.”

Moreover, Hastings thinks that an exceptional technologist’s abilities extend beyond coding or debugging faster than an “average” colleague: It’s also about the ability to tackle more abstract problems. “The reason the rock-star engineer is so much more valuable than his counterparts isn’t unique to programming,” he wrote. “The great software engineer is incredibly creative and can see conceptual patterns that others can’t.”

The focus on exceptional performers (and the budget they consume) also forces Netflix to embrace a “lean” workforce: “Managing people well is hard and takes a lot of effort,” he added. “Managing mediocre-performing employees is harder and more time consuming. By keeping our organization small and our teams lean, each manager has fewer people to manage and can therefore do a better job at it.”

Netflix has enjoyed a stratospheric rise over the past several years, coupled with burgeoning revenue. Hastings feels that those bottom-line results prove his theory correct. However, there’s a lot of debate in the tech industry about whether exceptional developers and engineers are actually multiple times more effective than other colleagues.

Back in 2017, a developer named Jonathan Solorzano-Hamilton wrote a Medium posting that went super-viral within the tech industry. In that posting, he described working with an enormously talented developer (dubbed “Rick”) who did everything from architecting software products to solving troublesome bugs…