Latest / The Career Change Podcast with Fexingo: Switching Fields, Bootcamps, and Reskilling / The Hidden Cost of Internal Mobility in Tech
Transcript
- Lucas: We talk a lot about the bravery it takes to leave a good job for a better one, but today I want to talk about the quiet trap of staying too long in the same company, specifically within the tech sector. Luna: Right, because the narrative is always 'jump ship,' but what happens when the ship is actually sinking slowly and you just keep polishing the brass? Lucas: Exactly. It's not about the ship sinking; it's about the salary band. Most mid-level engineers hit a wall around year three or four where their internal raise potential drops to barely inflation-adjusted levels, while the external market has moved on. Let's look at a concrete example: a software engineer at a major platform making one hundred and eighty thousand dollars base plus equity. They've been there three years, they're solid, they know the codebase inside out. Now, their manager comes in with a performance review and offers a standard four percent increase. On the surface, that looks like a reward. But if you look at the market rate for someone with that exact skill set in October twenty twenty-six, the going rate for that same role is closer to two hundred and forty thousand dollars. That employee is effectively taking a pay cut every single year by staying put. Luna: That is a brutal way to frame it, but it makes sense because internal raises are budgeted against previous compensation, not market value. Lucas: Precisely. And here is the kicker: it isn't just about the base salary. It is about the equity refresh. When you join a company, you get a initial grant. If you stay for five years, you might get a small refresh, but it rarely matches the dilution effect of new hires coming in at higher valuations. So you end up owning less percentage of the company over time, even if the dollar amount stays flat. This is what I call the loyalty tax. You are being paid in stability and familiarity, which are nice things, but they do not show up on a tax return. Luna: So the argument is that loyalty is financially penalized in high-growth sectors. Lucas: It is structurally penalized. Companies know this. They know that if you have been there for three years, you are productive, you are low-maintenance, and you are less likely to leave because you have sunk costs in your network and your knowledge. So they optimize for retention using minimal cash outlay. The problem is that this optimization works against the individual employee's wealth accumulation. Now, before we dive deeper into the mechanics of how to spot this early, I want to mention something real quick. A handful of listeners chip in monthly through buy me a coffee dot com slash fexingo — that's F. E. X. I. N. G. O. — and that is literally what funds making these episodes ad-free. If we've helped you think through a career move or decision, that support keeps the lights on. No ads, just honest conversations. Luna: Yeah, and it is great to have that direct line of support so we can keep digging into these unglamorous but critical topics. Lucas: Thanks for that. Back to the trap. The reason this is so hard to see is because internal mobility looks like progress. You might get promoted from Senior Engineer to Staff Engineer. But if that promotion only comes with a ten percent bump and no significant change in scope, you are essentially buying a title, not a future. Let's look at the data from the last quarter. We saw a significant divergence between internal promotion rates and external hiring bonuses. External hires were seeing signing bonuses ranging from twenty to thirty thousand dollars just to offset relocation and transition costs. Internal promotions? Often zero cash upfront, just a title change. It creates a false sense of advancement. Luna: It’s like being given a participation trophy that costs you money in lost opportunity. Lucas: Exactly. And here is where it gets really interesting for career switchers who are already outside the traditional pipeline. They often avoid this trap entirely because they don't have the luxury of waiting for the annual review cycle. They are forced to be aggressive about their market value. But the people inside the system? They get comfortable. They start optimizing for ease rather than growth. They stop interviewing. They stop knowing what they are worth. By the time they realize the market has shifted, they are locked into a compensation band that is now irrelevant. I spoke to a former engineering director recently who stayed at the same firm for eight years. He thought he was climbing the ladder. He was actually just walking on a treadmill that was slowly slowing down. His final exit package was substantial, but his cumulative earnings over those eight years were roughly fifteen percent lower than if he had made two lateral moves to different companies during that period. Luna: That fifteen percent gap is huge, especially when you compound it with the fact that equity values often lag behind public market corrections. Lucas: Right, and equity is the second part of the trap. When you leave a company, you usually have to decide whether to exercise your vested options or let them expire. If you stay too long, you might hold onto a large block of stock that becomes illiquid or drops in value. Meanwhile, a competitor is offering fresh grants at a higher valuation. It is a classic case of holding onto past promises instead of securing current ones. The smartest engineers I know treat their employment as a series of two-year contracts. Not because they are disloyal, but because they recognize that the maximum value extraction window for any single role is usually twenty-four months. After that, the marginal gain of staying diminishes rapidly. Luna: Is there any scenario where staying longer than two years actually makes financial sense? Lucas: Yes, but it is rare. The exception is when you are in a leadership track that requires deep institutional knowledge to access the upper echelons of compensation. If you are aiming for C-suite roles or partner tracks in consulting, you cannot jump ship every two years. You need the tenure. But for the vast majority of individual contributors in tech, that path does not exist. You are paid for output, not history. And history depreciates faster than skills. Luna: So the strategy is not necessarily to jump constantly, but to constantly benchmark yourself against the market regardless of where you sit. Lucas: Spot on. The most dangerous thing you can do is assume your current manager knows what the market rate is. They usually do not. They are bound by HR policies and budget caps. You have to be the one to bring that data to the table. And that brings us to the negotiation aspect. When you ask for an internal raise, you are not asking for a merit increase based on performance alone. You are asking for a market correction. And most people fail at this because they frame it as 'I deserve more because I worked hard.' The market does not care about your effort. It cares about scarcity and replacement cost. You have to frame it as 'If I left tomorrow, how much would it cost to replace me?' That is the only leverage you have internally. Luna: That is a powerful shift in perspective. It turns the conversation from gratitude to economics. Lucas: It does. And it forces your manager to confront the reality of their retention strategy. Often, when you lay out the numbers clearly, they will either match you or they won't. If they won't, you have your answer. You have confirmed that the company views your replacement cost as lower than your current value. That is a clear signal to start looking externally. But many people ignore that signal because they fear the disruption of a new job. They prefer the known hell to the unknown heaven. But as we discussed, the known hell is costing them money every single day. Luna: It is interesting how risk aversion plays into career decisions. People think staying is safe, but financially it is the riskier bet. Lucas: Absolutely. Staying is a bet on the company's ability to accurately assess and compensate market dynamics. And historically, companies are terrible at that. They are slow, bureaucratic, and reactive. The market is fast, fluid, and precise. Betting against the market is almost always a losing proposition. Now, let's talk about the practical steps. How does someone identify if they are falling into this trap? First, check your compensation band. Most companies publish ranges for seniority levels. Where do you fall? Are you at the top of the band? If you are at the top and still getting minimal raises, you are capped. Second, look at your peer group. Are people who joined after you making more than you? If yes, you are in a negative wage spiral. Third, assess your skill depreciation. Are you learning new technologies or just maintaining old ones? Maintenance roles have lower market value than innovation roles. Luna: Those are very tangible metrics. I like the idea of checking if newer hires are earning more than you. That is a quick red flag. Lucas: It is a massive red flag. Because it means you are being underpaid relative to your experience level. It is inefficiency on the part of the employer, but it is also inefficiency on the part of the employee. You are letting free money sit on the table. Now, for those listening who are considering a move, I want to address the fear factor. Leaving a job feels risky. You lose your standing. You lose your familiarity. But remember that your skills are portable. Your network is portable. Your ability to solve problems is portable. What is not portable is your loyalty to a specific spreadsheet or dashboard. Those are assets of the company, not of you. Protect your portable assets fiercely. Luna: And your reputation follows you. If you leave for a better offer, you are not burning a bridge; you are building a better road elsewhere. Lucas: Exactly. And employers understand this. They expect you to leave. The question is when. If you leave too early, you look flighty. If you leave too late, you look complacent. The sweet spot is usually eighteen to twenty-four months for individual contributors. For managers, maybe twenty-four to thirty-six. But anything beyond that requires a very compelling reason, such as a change in role type or a significant expansion of scope. Otherwise, you are just delaying the inevitable. Luna: It seems like the key is to view your career as a portfolio of experiences rather than a linear climb up a single corporate ladder. Lucas: I love that framing. A portfolio. You want diversification. You want exposure to different cultures, different technologies, different markets. Each move adds a new asset class to your professional portfolio. Staying in one place is like putting all your eggs in one basket and hoping the basket never drops. It is statistically unsound. The goal is to maximize the yield on your human capital. And the highest yields come from strategic exits, not passive holding. Luna: So the advice is to plan your exit before you even start the job, or at least set a calendar reminder for the two-year mark. Lucas: Set the reminder. Check the market. Negotiate aggressively. If the market doesn't respond, leave. It is that simple. It is not personal. It is just business. And in business, loyalty should be reciprocal. If the company is not investing in your growth, you have to invest in yourself. And sometimes that investment looks like walking out the door and finding a new employer who values your time and talent at its true worth. Luna: It is a tough pill to swallow for many, but financially, it is the only rational choice. Lucas: It is. And for those who are currently sitting on the fence, wondering if they should stay or go, I hope this gives you a framework to make that decision based on data rather than emotion. Look at the numbers. Look at the market. Look at your own trajectory. If the math doesn't add up, it is time to move. The world is big, and there are plenty of ships sailing right now. You just have to be willing to board one. Luna: And remember, the best time to plant a tree was twenty years ago, but the best time to update your resume is today. Lucas: I like that. So, as we wrap up, I want to leave you with this question: If you knew exactly what your skills were worth in the open market today, would you stay in your current role or walk away? Luna: That is a question worth sitting with for a while. Lucas: It is. Think about it. And if the answer is walk away, start planning your exit strategy now. Don't wait for the annual review. Don't wait for the market to crash. Take control of your career. Thank you for listening to The Career Change Podcast. We will see you next week. Luna: Take care, everyone. Keep moving forward.