> I disagree, given the massive cash reserves the tech companies have.
They have massive cash reverses because the tax laws have encouraged that rather than paying it to shareholders as dividends. And that level of return is necessary because of the nature of the industry -- you have to spend millions of dollars trying to create the next tech giant before you know whether you've succeeded or not, and most of the time you haven't. The returns to success have to be enough to overcome the high failure rate.
Most of the employees aren't taking the same level of risk. If you work for a company for five years taking home a six figure salary and that company fails, you don't have to give back your salary and in a few months you're working for another company making the same amount of money.
If you think you can do better on your own, risking your own time and money instead of taking outside investment, go right ahead -- but then shouldn't it be you who gets more of the reward if you succeed rather than the people you hire in after you're already an established success?
On the one hand it sounds like you're saying that software engineers are paid enough already, then on the other hand you're saying you think the compensation given to the software engineers that founded the company - which is much MUCH higher than that of the average company engineer is appropriate.
It feels like what you're saying is that the risk of failing in a startup is massive enough for a founder that they deserve literally billions of dollars.
Could you let me know exactly what risks you think a failing startup founder faces that would entitle them to say, a thousand times more dollars than the average salaried employee? Are you saying that because a founder may go bankrupt they are entitled to thousands of times more money? Does this mean that any individual that takes out a loan larger than their assets to start a business is entitled to thousands of times more money than their average employee? Could you help me understand what makes you think that?
> On the one hand it sounds like you're saying that software engineers are paid enough already, then on the other hand you're saying you think the compensation given to the software engineers that founded the company - which is much MUCH higher than that of the average company engineer is appropriate.
Of course, because the level of risk is different. $100,000 guaranteed is worth more than a <50% chance at $200,000, much less a <1% chance. A very high reward is inherently necessary to offset the very low probability of major success, otherwise people aren't going to do it.
> Could you let me know exactly what risks you think a failing startup founder faces that would entitle them to say, a thousand times more dollars than the average salaried employee?
The less than one in a thousand chance of making that much.
> Does this mean that any individual that takes out a loan larger than their assets to start a business is entitled to thousands of times more money than their average employee?
There are many ways to turn a thousand dollars into a 0.1% chance at a million dollars. Then 99.9% of the time you lose the thousand dollars -- and it's your time/money, not the bank's. Nobody is going to give you an unsecured loan to gamble with.
But if you bet on your own horse at 1000:1 odds and win, how are you not entitled to the proceeds?
I'm assuming that you don't think risking making no money is enough to entitle a founder to their entire employees wage. How much does it entitle them to?
> I'm assuming that you don't think risking making no money is enough to entitle a founder to their entire employees wage. How much does it entitle them to?
The amount they mutually agree upon. The employee wouldn't agree to work indefinitely for no pay.
The high compensation of successful founders is actually one of the things keeping salaries up, because any of the salaried employees has the option to quit and found their own company. The existing company has to pay well enough to compete with that -- because if what they're paying wasn't actually competitive with that alternative given the relative risk between them, why would anybody accept the salary?
1) The collusion has presumably stopped now that they're caught.
2) It is possible for both to be true at the same time, because the industry is much larger than Apple, Google, Intel and Adobe. Even if they didn't compete with each other, they still have to outbid Facebook, Microsoft, Amazon, etc. -- and pay enough to prevent the workers leaving to found their own companies. It's not unreasonable to expect that the effect on wages was marginal even when it was occurring.
The successful entrepreneur makes his money by capital gains in the share or venture capital markets and not by extracting it from his employees. Employees compete with each other for salaries. Employer competes with other employers for both a)market share b) hiring employees -bidding up their prices.
By comparing gains from entrepreneurship with regular salaries, you are comparing a stock variable with a flow variable. Even Marx got this part correct
> The successful entrepreneur makes his money by capital gains in the share or venture capital markets and not by extracting it from his employees.
Incorrect, that value is only sustained and increased by the efforts of company workers.
> Employer competes with other employers for both a)market share b) hiring employees -bidding up their prices.
Incorrect. Companies that don't have significant oversight in the form of government regulation or strong unions tend to collude to keep salaries low - which is exactly what has happened in the valley, and has meant that these companies have gigantic cash reserves that they aren't leveraging to hire the best talent.
> By comparing gains from entrepreneurship with regular salaries, you are comparing a stock variable with a flow variable.
No, I'm merely saying that the differences and risks suffered by investors and founders versus regular salaried employees are not a justification for the sometimes ridiculous difference between the compensation of the two.
They have massive cash reverses because the tax laws have encouraged that rather than paying it to shareholders as dividends. And that level of return is necessary because of the nature of the industry -- you have to spend millions of dollars trying to create the next tech giant before you know whether you've succeeded or not, and most of the time you haven't. The returns to success have to be enough to overcome the high failure rate.
Most of the employees aren't taking the same level of risk. If you work for a company for five years taking home a six figure salary and that company fails, you don't have to give back your salary and in a few months you're working for another company making the same amount of money.
If you think you can do better on your own, risking your own time and money instead of taking outside investment, go right ahead -- but then shouldn't it be you who gets more of the reward if you succeed rather than the people you hire in after you're already an established success?