[jchendy]

> Well, my own experience is that the $1.49 million would more likely be reinvested in the company as a whole: hire more developers, more salespeople, expand the office, etc

A lot of it also goes to essential business expenses: HR, legal, the AWS bill, the new feature that's currently losing money but will pay off in the long term.

And the person who made the $1.5mm code fix didn't do it on their own. They wouldn't have been able to improve the code if somebody else hadn't already written the first version. And neither of them would have been able to get their code into production if somebody hadn't set up the build and release process for the company. And they never would have been in the position to make the $1.5mm fix if their manager hadn't identified the need for an additional engineer on the team and recruited them. And the company wouldn't exist if the founder hadn't had the idea in the first place. And the company would have blown up last year if the lawyers hadn't made sure the company was protected from a frivolous lawsuit. Et cetera, et cetera.

[rad88]

Yep, a great division of labor created that wealth for the company, and the developer is not entitled to 15% of it's revenue (or even profit) just for that work. This isn't a practical issue though. The everyday situation is not that a undeserving worker is granted a large ownership stake, it's that an undeserving financier/executive/founder is.

[sokoloff]

I read this line of argument fairly regularly and am continually amazed that more people making this argument aren't off starting their own companies to scoop themselves up a heaping helping of this easy and undeserved money.

(As text is a poor medium to communicate tone, I'm positing that it's not nearly as easy as it seems, therefore nor are the profits for the successful as undeserved as they seem.)

[rad88]

I didn't say it's easy, or that there shouldn't be compensation! All those people add value and some of their work is very difficult. But difficulty of work is not the basis upon which they have large ownership stakes. Many jobs are not nearly as easy as they seem, but most merely pay a wage or fixed salary.

The founder controls the legal business entity and contributes capital assets and real or intellectual property. The financier purchases ownership directly. This is why they "deserve" to appropriate the value created by the company in perpetuity.

The founder may have done a lot of hard work in creating that intellectual property (including brand) in the first place, but it is the legal ownership of it that he trades for ownership in the company, not his hard work. In other instances it's possible to simply purchase IP or brand outright in the formation of a business. The commonality in these cases is legal ownership and the trade of capital assets, not hard work, whether their job is one I could not do personally, etc.

[sokoloff]

You threw me off then with the use of the word undeserving. What did you mean by that word?

[rad88]

> I'm not especially interested in whether or not it's cosmically fair when deciding whether or not it's deserved.

The argument about the "risk-tasking investors" rightfully owning the work of the "risk-free employees" is an appeal to fairness (the investors could lose their investment while the employees still gain their salaries), so by the way it does seem that you are interested in that.

Early efforts in organizing the company and navigating difficult waters are work and those employees should be compensated with ownership. I don't think that subsequent work by subsequent employees should not be compensated in this same way. Mark Zuckerberg and half a dozen friends created a company valued at $98M by Accel in 2005 and enjoyed ownership of that. Today he and 15,000 others create a company valued at $360 billion, of which he enjoys 25% ownership while the combined ownership of the rest is miniscule.

[rad88]

If you own a large amount of value or wealth that you did not create, I would say that is undeserved.

Founders and early employees contribute work and are hopefully rewarded for that work with ownership stakes in the company. Rightly so. But as the company grows, and to the degree that it necessarily hires additional employees, the proportion of ownership held by these early employees becomes undeserved (in the simple above sense of the word). Their large ownership positions remain, even as it becomes clearer and clearer that the value of the company is created by its hundreds/tens of thousands of employees.

So if you start a business and make a profit (a hard thing to do!), that is not undeserved. But if business grows and eventually the value is created by 15,000 people all together, you don't deserve 25% of it.

[sokoloff]

IMO, you do since you created the company and navigated it through the difficult early waters. If you were able to do so and maintain a 25% ownership share (astoundingly unlikely/uncommon IME), then you "deserve" it partly as a founder and partly as an ongoing investor (by virtue of not selling your shares).

There's a genuine argument that the investors and risk-takers "created" a portion of the wealth by virtue of bankrolling and hiring those 15K employees and paying them a risk-free salary.

I'm not especially interested in whether or not it's cosmically fair when deciding whether or not it's deserved. Warren Buffett "deserves" every bit of Berkshire Hathaway that he owns; Bill Gates every bit of Microsoft, Mark Z every bit of Facebook, etc. (Again, all in my opinion. I'm sure there are others who disagree, but even among them probably differ on how [or whether] to correct the "undeserved" ownership.)