FAANG & Co as Sport Clubs

IT organizations in germany (I would even say in whole europe) are infamous for the lack of best-in-their-league applications they produce. In contrast, the United States defended their pole position in the IT world for half a century (contest by China lately). How they reached and maintained this position is often reduced to their ability to pay insane salaries. I think there are two more steps in the process. One comes before the money truck and one after.

First, US companies are able to find and recruit the most talented people from around the world. In sports we would call this effective scouting. When a talent is scouted, it is lured in with an obscene amount of money (see above). Scouting and money are important, but not sufficient. Companies also need to keep the talents around for a certain amount of time. While keeping people in the organization requires a delicate mix of many small details, one crucial factor is prestige. Why does prestige matter? Again, this can be illustrated with a sports analogy.

Small football clubs know the problem of being reduced to mere stepping stones. They cannot compete with the big fishes on well-established players. They also do not have the resources to invest into global scouting. So the only chance they have is to take the stony path of training and educating lots of young players and hope that the effort yields a talent or two.

After years of grinding the club might come up with a high potential. This high potential will sooner or later (probably sooner) show up on the radar of bigger clubs. They will offer a generous amount of money to buy the talent. On the surface the money alone might explain the whole transfer process of players.

On a second look (or when you read the press release of the PR manager of the player) it is not just about money, but also about personal development. And this argument does make a lot of sense. Humans learn by imitating the behavior of others. The talent is probably the best player in his current team, so it becomes futile to imitate team-mates any longer. The bigger club owns more seasoned players, so the talent can expect to progress faster in this environment. That’s why it is fun to play with the big kids - they know stuff that you never heard of.

These transfer cycles might repeat a couple of times till the now established player reaches the highest level - a club that does not only offer boat loads of money, but has also the priceless aura of prestige. There might be some generics clubs that - thanks to a rich investor - are able to match or exceed the paycheck, but the player will request a big premium for the lack of prestige. So these soulless clubs normally end up with players past their prime and hope that some glory of the old stars stains on them. Which is at least a questionable strategy.

I would call this aura of prestige a key advantage of the ones at the top of the food chain. Due to the fuzzy nature of the aura, there is no clear way to replicate it for competitors. Even if the way would be known, it would take years to reach the point where the competitor is right now. Buying the competitor might also fail to transfer the aura, as others in the market will rather talk about the downgrade of the special one and less about the upgrade of the un-special one.

Coming back to the US IT giants, I would argue for a very similar pattern. Names like Amazon, Apple, Google and so on carry value beyond the paycheck. Working for them will upgrade each CV big time. Equipped with such medals of honor your opinions will carry much more weight on following endeavours. So even a developer who does not dream about working for FAANG has some very clear incentive to spend at least some time with them.

As long as they can keep up their aura, it will be very hard for european companies to compete for the best brains. Although, recent data scandals, repetitive products and ongoing anti-trust investigations start to produce cracks on their shiny reputation. Challenged with a mission that goes beyond clicking ads or rounding consumer gadgets, there might be a moneyball chance for new competitors.