[giantg2]

I have to admit, I find it a bit perplexing that the income differences can be that much. I mean, how can one person's idea and work be worth $1B when they can't execute on it without others, and those others that help make it happen make .01% of that. Maybe I was just raised on old values with the idea that as a leader I am just one of the people and they are who the ones making me successful and let them share in that wealth. Perhaps that's why I'll never be in such a position.

[AMerePotato]

In my opinion, the amount of risk taken on has a large role to play in the vast difference in outcomes. Starting a company would be like buying a bunch of lottery tickets. For every winner, there's a huge number of people who lost a ton of money or are just generally doing worse than if they had chosen a stable career. The key benefit of being an employee is protection from this risk. Contract work could be in between the risk/reward of a startup and the risk/reward of an employee. An employees could get paid significantly more doing the same kind of work on a contract basis, but a lot still choose the least risky option of being an employee. As an employee, you're not getting a million dollar check, but you do get consistency and a timely paycheck.

A fair wage doesn't necessarily have to be tied to the amount of money the founder receives.

[jjeaff]

Sure, risk reward is one way to look at it. But some people already have a bunch of money or family with money to fall back on. So they aren't really taking as much risk as say, someone who started out poor and has nothing to fall back on. In other words, risk is relative rather than absolute.

[AMerePotato]

Yup it's more like risk of investment. Someone wealthy can risk a lot more than someone poor can without worrying about putting food on the table. They can afford many more lottery tickets and the poorer person is probably gonna have to play it safe as an employee for a while. That's a good case for evening the playing field with something like UBI. No one gets a check according to how much they need the money

[kevinventullo]

“Should” has nothing to do with it. The owner starts with 100% stake in the company and doles it out as they see fit. If someone is willing to work 40 hours a week for .01% of that, then that’s what they’ve agreed to. Similarly if a VC is willing to spend $X for Y%.

[giantg2]

True. Then we have to examine the power dynamics and decide as a society if additional protections need to be given to workers. After all, there's way more pressure on a worker to provide food and shelter than on an employer to hire someone. It would be interesting to see what a union could come up with as an industry standard contract concerning equity distribution/compensation.

[BetaDeltaAlpha]

> It would be interesting to see what a union could come up with as an industry standard contract concerning capital distribution/compensation.

I think you mean equity distribution.

EDIT, Had another thought after posting:

Historically, if you had a world changing idea, you had to work your way up the ladder at GE/Bell/HP to get the resources to implement it, and the company didn't grant any equity. Bell Labs employees had a ceremonial signing away of their IP for $1 during onboarding. The idea that founders keep any equity is relatively new and if it's an indicator of a trend, it's likey that equity will be distributed more uniformly in future enterprises IMO.

[hemantv]

Employees are payed based upon market rate. No one pays you based upon value.

If you think you are more valuable that's when you start your own venture because there is no upper limit on how much you make.

[908B64B197]

> Employees are payed based upon market rate. No one pays you based upon value.

Really depends on how much value one can provide.

[throwaway636]

There are numerous jobs available. No one is forcing you to choose a specific job.

[UncleMeat]

> “Should” has nothing to do with it. The owner starts with 100% stake in the company and doles it out as they see fit.

This isn't a law of the universe. This is a property of our laws. So it is a question of "should", since the people are the ones deciding what laws to have.

[convolvatron]

its safe to say that if you express discomfort about exploiting your employees then its unlikely that the people with the purse will put you in such a position.

[missedthecue]

It's not as if they decide after the mega-ipo on how much each individual will take home.

It's based on how much percentage of equity you owned in a worthless startup years before it got big.

[toast0]

GP's discussion was a mega acquisition; there's a lot more ability to setup retention grants for each individual on those.

Even on a mega ipo, there's some opportunity to make stock grants before or after the event.

In both cases, team size matters. If there's a budget for retention or $1B and founders get 90%, that leaves $100M for regular employees; if you've got thousands of people to retain, the payouts won't be large. With a team of 100, the payouts will be nice.

[giantg2]

If it's really worthless, then what explains the unequal distribution of the equity? Clearly it's valued enough for people to be stingy with it.

[spiderice]

I'm just not sure why you think junior level employee #20 deserves more than what he agreed to when he got hired. Clearly he was making a full salary, probably with benefits, that compensated him for his work. He took no risk whatsoever.

I'm sure if junior level employee #20 said, "I'll work for half price if you include a bit more equity" there would be a lot of companies that would accept. However clearly he didn't want to take that risk at the time, so why should he get the reward?

[giantg2]

"I'm just not sure why you think junior level employee #20 deserves more than what he agreed to when he got hired."

I'm not saying that.

"However clearly he didn't want to take that risk at the time, so why should he get the reward?"

This assumes that was an option. Some places hold onto equity very tightly.

[hemantv]

So go join a company that gives more equity. There are thousands of companies to choose from

[UncleMeat]

Founders can pay themselves a salary without automatically giving away their equity.

[anonu]

Welcome to the capitalism. Long tail outcomes occur. Imagine they didn't... A 1000 ships would never have launched if it were not for the promise of outsized fortunes.

[jprafael]

It's not the idea that's worth $1B. It's the risk the founders/early employees take that make it so valuable. Possibly the founders could take a 9-to-5 job, that would pay them an above average salary. They allowed themselves to go without that steady income, job security to work 24/7 on a project that a few years later could be worth 0$ if it goes wrong. For it to make sense financially, if it is successful it has to pay big time. Probably, you have a few startup ideas yourself, but they are worthless until you put yourself into it.

[raffraffraff]

Founders who get VC capital to pay wages and compute costs are also taking a pay check. They're not going without.

[hemantv]

If it's so easy why don't you start a company and ask VC to pay your salary.

It's a free country no one is stopping you from doing that

[raffraffraff]

I'm not sure what you're getting at. "Just start a company and ask a VC..." Getting VC funding is the hard part. I'm not saying that it's easy. And obviously there are going to be some strings attached - VCs typically want board seats, significant input into company decision making, along with a chunk of the company. But are you telling me that it's common for a VC to stipulate that founders can't take a monthly pay check?

Really. Honest question: how common is that?

[giantg2]

I doubt those sacrifices and risks are worth $1B for a single person though.

[hemantv]

It's not based upon what's It's worth It's based what market is willing to pay.

How much vc want to pay for fundraising, how much employees will accept to work and ultimately how much acquiring company is willing to pay

This is what most people don't understand about capitalism, it's not about fair or just it's about what markets are willing to pay for it

[cthaeh]

If there is asymmetric risk and reward, then do what wall street does: exploit the shit out of it and make bank.

Oh wait, most people would rather complain about someone making a billion ("Hur dur he didn't work 1 million times harder than a factory worker Hur dur") than at least try to make your own billion.

[toomuchtodo]

When considering opportunity cost, it’s more time efficient, imho, to live a life well lived and buy lottery tickets than spend decades to “earn” a billion when it’s more luck than “hard work.” You can do everything right and still fail (startup failure, early employee dilution, etc). You can also fail your way to being a billionaire (Adam Neumann @ WeWork). Best to recognize the sham (most startups fail, most startup equity ends up worthless or at parity with what you would’ve earned as wages elsewhere) before you’ve spent too much precious time on it you can never buy back. Survivorship bias is rampant in the startup scene, Silicon Valley even more so.

One of my side projects is a website where you can convert startup equity offers to the number of lottery tickets you need to buy to have equal odds of financial success (while working a more stable and/or lucrative job), it’s just not done yet. I hope to share it soon!

TLDR Don’t work at a startup, get exposure to that asset class or equivalent returns via other means. You’re just making founders and investment funds wealthy with your precious time.

[cthaeh]

Your goal shouldnt be to work at at an early startup. As you mentioned it's not worth it.

Your goal is to be a founder at a startup, and for all of people's claims that startup success is entirely luck that is not true.

Luck certainly plays a role, hell being in the position to choose between being a founder vs employee of someone else startup requires incredible luck, on a global scale.

But, me and you, the privileged 0.1% of the world, are masters of our destiny. To claim otherwise is to accept mediocrity as inevitable and not the consequences of our decisions.

[toomuchtodo]

I’m at not so delusional as to believe in this level of exceptionalism. Strive for success, but humility is equally important.

[giantg2]

Your comment exemplifies my point. I don't think people should be exploiting their employees. Frankly, if I make $1B for myself and not at least 10% as much for each of my employees, then I'm not a good leader in my own opinion.

And, oh wait, I guess some people would rather complain about people complaining rather than make their own $1B...

[cthaeh]

Who says I'm not trying to make my own billion?

[giantg2]

I would say if you're wasting time browsing this site and engaging in conversation, then you're not really trying. That time would be spent on your company (look at other self-made billionaires).