It's about supply and demand. If he really is the best person for the job, then there's nothing to be gained from paying him a higher fixed salary. But if there's someone else who's even marginally better that you can get for $10M, it's probably easily worth it - for the size of the fund, one person's pay is a negligible amount.

That's pure theory. How do you know who is marginally better?

That's the fundamental problem of hiring: you have to make educated guesses about who is going to make a better employee. And you should be willing to pay more to hire someone who you believe is better. For some companies, salaries are such a small part of their revenue that it makes sense to offer some candidates a lot more... and if your first choice happens to accept a lower salary, it doesn't really matter - you've saved a drop in the bucket.

What you're essentially saying is that there's no other person on earth that could generate better returns for the fund. The likelihood of that being true is vanishingly small.

No, I'm saying you can pay as much as you want, you cannot know which person will generate the best returns. What's your process for picking the person?

You could say the same thing about literally any job. Do you really think that paying more money doesn't find you better candidates? Do you think everyone should have the exact same salary and never get any raises?

Think about the logical conclusion of your assumptions. It doesn't make any sense.

You cannot take an argument I make at the extremes and apply it to the whole salary curve. It's way easier to predict performance at the lower, middle and even reasonably higher salary ranges. If you believe otherwise I'd like you to tell me about the process of determining the future success.