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by xyzzyz
12 days ago
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It's probably easier to understand this concept if you forget about tech, and think about something like steel mill, or a mine. If you want to make money as a worker making steel, if you just start doing it in your backyard by yourself, you'll produce very little steel in an hour of your labor. If, instead, you obtain access to enormous, capital-intensive machinery, by joining a pre-established company that owns a blast furnace, and has pre-existing business relationships with ore and fuel suppliers, the hour of your labor will be made much more productive. You will be producing a lot of value by working in a steel mill, but only because the pre-existing capital investment, and process organization will enable you to do so. Therefore, the business will contribute to your productivity in an enormous way, making the idea that the profits are entirely your own contribution just silly. The same is, of course, true about Google or Apple. Working at Apple will make it much easier for you to be productive than working at your own company. The nice thing about our industry is that the latter, while more difficult, is actually possible -- unlike steel mill workers, software engineers don't need as much capital investment, and can run highly successful companies that employ just one or a handful of people. It's just hard and risky to try that, hence people prefer to pretend that the productivity enabled by working as part of established, successful company is entirely due to their own merit. |
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Both Capital and Labour invest in the company, in different ways. It's not at all clear to me that the optimal arrangement is that Capital reaps the bulk of the return from those investments.