Thanks for the very interesting comment, and discussion generally!
My understanding, from what YC has been seeing from its Work at a Startup initiative of the last few years (sort of a hiring pool made available to YC startups as a whole) is that there is a population of really good engineers who just don't want to work at a FAANG. That seems to contradict what you're saying to some extent. I mean, I can relate to this a little, because I would find it really hard to drag my ass back to a big company. I never worked for a big tech co, but I did have a stint in the software wing of a big company. Would I squeeze myself back into that sclerosis for 2x my current compensation? Probably not. Would I do it for 10x? Well...at some multiple, one considers anything. But we're talking closer to 2x than 10x in the startup/FAANG dichotomy at present.
The question is how big this population—let's call them "A-team engineers whom externalities tilt to startups rather than FAANG"—really is. Unfortunately, that's not going to be very easy to examine objectively. From everything I've learned moderating HN, it's obvious to me how such a discussion would go: FAANG people will say "they can't be that good or they'd be at a FAANG" and startup people will say "I could totally do that, I just don't want to".
First of all, of course the number of A-team engineers willing to work for half the pay is small.
But staying out of FAANG means more than just 50% less initial total compensation.
FAANGs offer career growth, including pay growth, that simply doesn't exist in startup world. Even if reality won't hit you when you just accepted a $200k startup job when your college friend with the same experience got $400k, it will hit you 4-5 years later, when you're hunting for your next job for $200-250k while that friend is making $500-600k+ because your startup fizzled out or got acquired for peanuts while his FAANG just kept growing and carrying his career up with it.
Or it will hit when you try to get into your next startup and realize that startups are the first to look up to FAANG engineers. That engineers with FAANG experience get all the interviews, and are lavished with the best offers and most senior positions in startup-land. While the only reward you get for staying in startupland is... being considered a B-player.
Finally, let's profile the "FAANG-hating" engineer willing to work for startups for half the pay. As you said, this engineer is sacrificing most of their pay for a work environment in which they feel more comfortable. Is that great for the employer too?
Would that engineer agree to sacrifice other aspects of their comfort, such as WLB, to make the startup succeed?
Of course not. Their equity stake is negligible, they're unaligned with the company's goals. They work there for the fun, and once that fun stops, there are dozens of other startups waiting to hire them at the same (low) comp package.
Startups today don't just underpay - they completely fail to align their senior employees. The combination of minuscule equity stake, no career growth prospects, high risk and constant job-hopping means as a senior engineer you will not be rewarded for good performance. Much as we love to disparage "sclerotic big tech", I've seen more mission alignment there because employees expect ample reward - in pay and long-term promotions.
In fact the typical profile of an "A-team engineer who'd rather work at startups" is someone who spent several years in FAANG, acquired FU money there, and now looking at startup work as fun CoastFIRE if not a harmless retirement hobby that pays a bit of money as well.
On top of all this, let's not forget that even if you're absolutely obsessed with working at a small "non-sclerotic" company, there are still options for you, including unicorns and plenty of small successful shops that aren't startups.
My understanding, from what YC has been seeing from its Work at a Startup initiative of the last few years (sort of a hiring pool made available to YC startups as a whole) is that there is a population of really good engineers who just don't want to work at a FAANG. That seems to contradict what you're saying to some extent. I mean, I can relate to this a little, because I would find it really hard to drag my ass back to a big company. I never worked for a big tech co, but I did have a stint in the software wing of a big company. Would I squeeze myself back into that sclerosis for 2x my current compensation? Probably not. Would I do it for 10x? Well...at some multiple, one considers anything. But we're talking closer to 2x than 10x in the startup/FAANG dichotomy at present.
The question is how big this population—let's call them "A-team engineers whom externalities tilt to startups rather than FAANG"—really is. Unfortunately, that's not going to be very easy to examine objectively. From everything I've learned moderating HN, it's obvious to me how such a discussion would go: FAANG people will say "they can't be that good or they'd be at a FAANG" and startup people will say "I could totally do that, I just don't want to".