Comment by zadkey
6 years ago
It seems like he has found the problem with companies.
"Even though these companies pay a lot of money, in real terms, what software is doing in society is creating a lot more value than what they pay you. Google's pure profit per employee is actually $1.6 million per year, after all costs."
"If you're in the engineering, product, design, marketing, sort of the builder's side of that organization, you've got to know that you're creating a lot more value than that, possibly 10 times, maybe 100 times that value, and the only way you can really access that is by owning equity, and that means either being a founder or working at an early stage startup that gives significant equity. "
In other words, companies either purposefully or absentmindedly fail to pay regular employees anywhere close to their real value. This is the real problem. Not getting in a profitable startup early on isn't the problem. It's the mindset that it's somehow okay to pay employees very small fractions of what they are really worth.
You would love this essay by James Altucher: https://jamesaltucher.com/blog/work-prison/
Key point: Other entities may capture up to 80% of the value you create.
1. Your boss, their boss, and their boss.
2. Shareholders.
3. Vendors.
4. Other employees in the company.
5. Taxes.
Better off working for your own self.
Eh. The same person can dig for oil in north dakota, or they can go dig for oil in nebraska. You'll get a lot more oil in dakota (big tech) than you would be getting at nebraska.
Go do the best thing you can do right now. Expenses don't matter, the total gross profit is what does.
Except tech is nothing like oil. It's a knowledge based industry and the pace of innovation rapidly keeps breaking barriers to entry. It effectively enables a lot of other industries to move swiftly and get a lot done with fewer resources [0]. A rising tide lifts all boats.
Instagram scaled to 30M users with 13 engs [1], and WhatsApp to half a billion with 32 [2]. Oculus was started by a then 17yr old Palmer Luckey [3] for who, later, the great Jon Carmack would go on to work for.
[0] https://a16z.com/2011/08/20/why-software-is-eating-the-world...
[1] https://time.com/4299297/instagram-facebook-revenue/
[2] https://www.sequoiacap.com/article/four-numbers-that-explain
[3] https://en.wikipedia.org/wiki/Palmer_Luckey#Oculus_Rift
2 replies →
> It's the mindset that it's somehow okay to pay employees very small fractions of what they are really worth.
The employee decides what they are “really worth” when they accept, reject, or negotiate an offer. His rejection of the check offered him was his doing precisely that.
That’s not an issue with companies, that is an attribute of human free association and free, consensual dealing in general.
If you offer services at $100/hour but I know I can sell those services for $1000/hour (with my involvement) and you voluntarily accept $100/hour and agree to work for me, I have turned opportunity into profit, and have exploited no one. Sales and marketing and connections to people in specialty markets have a value, too!
(Correspondingly, the hypothetical “you” in this example may have not been able to get or generate more than $100/hour alone. Sometimes the sum is greater than the parts, and the assembly is itself a value-generating activity.)
But ultimately this story illustrates very well that the final arbiter of what price a person places on their time and effort is themself. No one can force you to accept a certain wage, and, as was demonstrated, you can always tell a billionaire to go stuff it.
Seems to have worked out pretty well for OP in the end, even without the CIA-vendor equity.
This is a problem, no doubt.
And can VCs help address this problem?
I often encourage founders to be more generous with equity for recruits and early employee refresh grants. Care and feeding of the org also involves being thankful to the people who build the value.
> In other words, companies either purposefully or absentmindedly fail to pay regular employees anywhere close to their real value.
Purposefully. your comment is spot on, so i’m surprised you don’t get this aspect. It’s not the burden of companies (in capitalistic society) to pay employees their value. Companies are practically obligated to extract maximum value at the most competitive (ie, market) rate. And after all, you might do the exact same job at Google as you do at tinyCO but because it’s google (network effect and all that) you just arbitrarily happen to have more impact. You aren’t actually bringing that value.
If employees want to be paid for their value, they can take all their otherwise excess income and join the capitalists by buying the stock.
Well said. You’re also describing a fundamental tension between capitalism and socialism.
Yes, but not in the way I imagine you intended. In capitalism, perhaps 80% of the value you create as an employee is captured by others (see sibling comment.) You can also opt out -- by becoming self employed, by joining a commune or collective, or by becoming a vagrant.
In socialism, the percentage of value you create captured by others is nearly 100%, and opting out is illegal -- in many socialist countries, even talking about opting out gets you sent to a "re-education camp."
No, this argument you’ve made is question-begging.
What I was referring to has more to do with the labor theory of value https://en.m.wikipedia.org/wiki/Labor_theory_of_value
I understand why I got downvoted, it seemed like a political drive-by comment. I should’ve explained what I was referring to in the first place. But this implication that socialism somehow naturally leads to slavery/internment in ways capitalism doesn’t is a canard.
That is a weird definition of socialism...
Huh? Google makes $1.6 Million profit because of the Google Enterprise not because of the Employee.
According to your logic, if the Google Employee quits Google and goes somewhere else, will he create the same $1.6 Million Value? No.
You can determine how much value you are creating by using a very simple formula. Quit Google and see how much less revenue or profit Google made. That's exactly how much value you are providing Google.