[yaps8]

This quote strikes me most: "Here I am walking around making $1 million a year, and I'm working shoulder to shoulder with people in her situation who are every bit as good and valuable as I am."

I wish more people would realize that those earning less than themselves are not necessarily less deserving but merely less valuable in a marketed job force.

[lujim]

I think what he is doing is pretty cool. Remember however that although he may be working with people every bit as smart and productive as he is, starting a business is massively risky. I believe in 3-5 years it amounts to a coin flip. He is earning a risk premium. If you buy a risk free US Treasury Bond you expect to earn (much) less yield than the dividends on a share of Exxon or Apple.

He is an entrepreneur/founder. He isn't just a company hopping CEO with soft landings and golden parachutes galore. I think an entrepreneur deserves a solid risk premium.

[yaps8]

I don't know how this company works financially but would it be possible that he is not risking much ?

They might be in a position where they don't have too much debt or it would not be tied to him and not put him in a difficult situation if it failed.

The bottom line might be that the risky part of founding the company is over.

[lujim]

That could very well be. That article does mention that he was nearly wiped out by the great recession in 2008. At one point he was putting it all on the line and the risk was very real. I think you are probably right in saying that the risk premium may change over time. I guess I don't know how much that reward should be and how long it should pay off for.

When comparing stocks and bonds you use the risk free interest rate and take a stocks volatility compared to the broad market into account. Maybe the volatility of the business should be a consideration.

[ams6110]

Except those other people are not risking their assets to create that employment opportunity. Most entreprenurial undertakings fail. The high reward for the ones that succeed is the carrot that entices people to take those risks and create the opportunity for a lot of other people to earn a more modest reward but for far less personal risk.

[binxbolling]

A massive number of people are making big salaries that have risked absolutely none of their assets. Then when they suck, not only did they not risk or lose anything materially, they'll get huge severance checks.

And if you require a carrot that takes you from, say, $2M to $2.5M salary, maybe re-consider what motivates you and try to find something more intrinsic to the work & company itself.

[hoorayimhelping]

>And if you require a carrot that takes you from, say, $2M to $2.5M salary, maybe re-consider what motivates you and try to find something more intrinsic to the work & company itself.

Who are you to tell someone their motivations are wrong? I agree with you for myself wholeheartedly but I'm not about to go dictate to people what they should be motivated by. How incredibly arrogant.

[seivan]

But is that such a massive number in comparison? It sounds like you're talking executive levels.

Not that I disagree with you, I just think the numbers don't add up to be called massive.

[RobertoG]

I'm a little sceptic about that narrative.

It's very common but do we have any proof?

Surely, personal circumstances are very important if you are going to try to start a business.

There is psychological circumstances like: did you grow up in a family or an environment where the idea of start a business was present?

And more practical like: Do you have technical abilities that you can sell if your project fail? Do you or your parents, wife, etc. have money that will stop your fall if the project goes wrong?

Was really Bezos or Gates or Page really "taking a risk"? And I mean a real risk.

Anyway, even if we, as a society, want to reward the "job creators", we probably don't want to live in winner take all world.

[lujim]

Half of all small business fail in the first 3 to 5 years. Imagine taking a job where you had to pay for your office, office supplies, computer, and every thing else out of pocket. And oh yeah, half the people are fired within 3 to 5 years without being reimbursed for their expenses. While some people have more resources or come from a more privileged background that is a social discussion. It's still pretty risky in terms of cash, assets, and time no matter who you are.

[fnordfnordfnord]

>Half of all small business fail in the first 3 to 5 years.

I'm curious about that statistic. A lot of these business could be hobby or other casual enterprises, tax avoidance schemes, and doomed businesses started by naive people. It doesn't mean a whole lot without some more context.

>Imagine taking a job where you had to pay for your office, office supplies, computer, and every thing else out of pocket.

Become a teacher!

>...that is a social discussion.

Social factors aren't irrelevant. People behave differently based upon socio-economic incentives. Not just entrepreneurs, either; take two engineers, one comes from a family with "fuck you" money, the other is a first generation college graduate. They both have started their own families and have young children at home. Now, imagine how their reactions might differ when placed in various ethical dilemmas.

[lujim]

> I'm curious about that statistic. A lot of these business could be hobby or other casual enterprises, tax avoidance schemes, and doomed businesses started by naive people. It doesn't mean a whole lot without some more context.

All models are wrong, but some are useful. That particular stat covers a pretty good cross section of legitimate small businesses. Some small businesses may be a cover for an underground marinara sauce operation used by the mafia to funnel dollars to a dog fighting operation..... Sure we could muddy it up more, but I don't think that stat is all that malicious or disingenuous.

> Become a teacher!

This claim does seem to be a bit disingenuous and exaggerated. Sure teachers cover an unfair amount of supplies and get paid very little. Do they really rent their classrooms, buy their own computers, and pay for 100% of everything out of pocket?

> Social factors aren't irrelevant.

My post was refuting the claim that entrepreneurs aren't taking real risk. Granted if you come from a wealthy family you aren't taking as much risk starting a business as someone taking a small business loan. I still contend that the risk to an individual (relative to them-self, not others) is greater when starting a business than taking a job.

[fnordfnordfnord]

>This claim does seem to be a bit disingenuous and exaggerated. Sure teachers cover an unfair amount of supplies and get paid very little. Do they really rent their classrooms, buy their own computers, and pay for 100% of everything out of pocket?

It was exaggerated a bit!

>Do they really rent their classrooms,

Of course not, but increasingly, my own resources are being put to use on behalf of my / my employer's students. Furthermore, remuneration in my field is easily several times what it is in education; and I think that's true for a lot of teachers. Sure, there are other benefits, but the pay is poor, approaching minimal, and that's not going to get you the best teachers.

>buy their own computers

Often enough, yes.

> and pay for 100% of everything out of pocket?

Far, far too much out of pocket.

[falcolas]

Most business owners are risking very little out-of-pocket money. Most are either funded via business loans against the business assets, or from investors.

Only a small number of bootstrapped companies (few of whom are represented on Hacker News) are risking their own money, and even then only the brave (or foolish) push it to the point where they can't sustain themselves if the business fails.

[lujim]

Don't forget about opportunity cost. It's common to discount opportunity cost and equity as "not as real as the money you spend on your credit card". However when the house payment keeps showing up every month and you decided to strike out on your own instead of taking that $6000 to $10000 per month you could have made in a stable software development job you are going out of pocket whether you realize it or not. That $300k you missed out on because you failed to cover expenses for 4 years when you could have been working as a software dev in some employers cubicle are real dollars.

Also some business owners do leverage some retirement savings when starting a business. It's a pretty good way to get low interest money. They can sustain if things fail, but they certainly feel it if they fail.

[serge2k]

Bezos was coming out a extremely well regarded company, Gates did drop out of harvard but isn't his family quite well off?

Kind of interesting to think about what the negative consequences actually would have been for Bezos if Amazon couldn't survive the dotcom bubble.

[manicdee]

In this case the CEO had been on a million-plus salary for a while, so he wasn't risking anything except the future performance of his staff.

[vtlynch]

First of all, there is not "far less personal risk" for employees. If the company you work for goes under, every employee is hurt by that, not just the founder.

The founder may have lost more money, but he had more money to gamble with. The employee does not, and losing his personal income stream is probably equally or more damaging to him.

[whatok]

So I'm a small business founder who had to take out a bank loan, mortgage the house, and forego a salary until business is good. That's somehow less risky than a standard employee who can likely walk away with no baggage after the business shutters?

[lujim]

Not everyone that starts a business is wealthy. They have take on debt or sold equity to finance their venture. They may have much less money in the bank than their employees. If you're financing your business with your retirement from a previous job or from personal savings you have much more at stake than lets say, a software dev that is getting non stop calls from recruiters for high 5 or 6 figure jobs that start tomorrow. Full disclosure, I'm the second guy who wishes I had the risk appetite to be the first guy.

[vtlynch]

"sold equity to finance their venture."

Oh yes, I forgot about the masses of un-wealthy people who have equity.

[lujim]

You can sell equity to anyone interested in buying it. Does your friends lower middle class uncle that retired from that factory job at Chrysler ten years ago have an extra 20 grand? You can sell him a chunk. You can't hold yourself out to the general public, but you can sell shares if that's what you want to do. There is a very real concept called cost of equity. It's a percentage comparable to loan interest. It's often much higher than the cost of taking a loan if your company is successful.

[whatok]

Equity in their business? You can create vtlynch LLC tomorrow if you wanted to and if you found someone to buy it, you could sell equity in it. What does that have to do with personal wealth?

[vtlynch]

Yes I'm sure thats exactly the situation lujim was describing

[caseysoftware]

I wish people would stop conflating salary and "goodness" or worth.

There are great and horrible human beings who make lots of money. There are great and horrible human beings just scraping by.

Income and goodness are orthogonal.

[yitchelle]

I had a similar conversation with my wife the other day. Before the kids, she was an elderly care attendant, providing care for the elderly folks who are in their sunset years of their lives, and I worked in tech. Although my salary is not high, it is still about 5x of hers. I feel rather embarrass during my discussion as I feel that she is contributing a lot more to people lives than I am, the essential services. The stuff that I make would not make much difference in everyday life if it did not exists.

She is much more valuable to society than I am.

edit: grammar

[lujim]

I wouldn't feel too guilty about "value". In a world of finite resources with alternative uses, your value (how much you are paid) is often your share of how much revenue you help generate. Value (pay) and value (worth) are not the same thing. Why does a pro athlete make 10 mil and a 3rd grade teacher make 30k? Because more tangible revenue is generated by a single pro athlete than a single 3rd grade teacher in a given year. It sucks, but hating it or feeling guilty about it doesn't change it.

[existencebox]

That may have a component to unequal pay, but I think trying to paint it as the whole picture (or even the major part) isn't quite fair.

I'd argue the huge pay differentials are often because humans are TERRIBLE at judging long term... anything. A pro athlete can fill a stadium at some $$ per seat, yes. If a pro athlete stops playing, what happens? the stadium stops filling as much, we potentially lose some ancillary jobs from decreased viewing population (but given the number of sports stars and the nature of teams, losing one outside of a very few likely won't cause much), but in the long term, what is the cost?

Now let's remove an equal number of teachers as could be paid with that single salary. Even if this is a low end athlete, given teacher pay, you're losing dozen/few dozen teachers. What is the long term cost to students who can no longer be educated, or get a much poorer education (or simply now have far bigger classes)?

I realize there are many holes in this argument as it asserts a lot about how money is distrbuted/what externalities exist, but I see it as one facet.

There are also the more well explored aspects of "we like to lionize celebrity/success" and "teachers don't have much political or social clout given their resources/our prioritization in society" (although this links back to my prior statements about long term value and society preferences.)

In summary, I think there's plenty of reason to hate/feel guilt about it, and work to change it. Yes, the feelings alone do nothing, but if no one is getting angry then certainly nothing will ever change.

[lujim]

I 100% agree. People are terrible at judging long term non tangible value. That's mainly because it's hard to quantify on a balance sheet. That's why I put the 1 pro athlete vs 1 teacher for 1 year stipulation on it.

[jazzyk]

Yes. It is the 'scalability' factor.

A star performer's pay is possible because millions of people can enjoy his/her performance at the same time, paying a relatively small amount of money (say, $80/ticket).

The software that the poster above developed can potentially be sold to a lot of customers with no extra work, so he makes an above average salary.

A teacher cannot teach millions of people at the same time, the limit is usually set at 20-25 students.

A care-provider can only take care of one person at a time, a few during the day.

[JoeAltmaier]

I hesitate to disagree. But ... the value of services can be easily calculated because they are so visible. Every interaction has an emotional link, and we count that highly.

The value to 'society' of improving a toaster by a small percentage, or the hits to a website by a larger one, are hard to calculate except by a bottom line. Any emotional impact is so indirect as to be invisible. Still exist; but we don't see them so can't count them.

Add to this: one-on-one services are limited by the time and attention one person can put into them - two hands, one heart, 24 hours in a day. Absolutely no leverage at all, in the economic sense. Exceeding that (admittedly large and important) impact happens at some point in less-direct exchanges (economic, technological) and can go up from there geometrically.

So I console myself, as a technician, that what I do affects those unseen people. And if successful, it affects millions, not just tens. It adds up to something important too.

[shalmanese]

Yeah, but this is just the classic Diamond-Water Paradox in Economics (https://en.wikipedia.org/wiki/Paradox_of_value). Value isn't assigned based on essentiality, it's based on the intersection of supply and demand.

[dragonwriter]

> She is much more valuable to society than I am.

Perhaps, but a natural effect of the way that capitalist economies work is that contributions aren't valued by social utility in a fair sense, but by utility weighted by the wealth of the people to whom that utility is provided.