If the entire society had a similar level of appetite for risk, we'd see a different asset distribution in society.
Since most people are terribly averse to losing anything, they also shut down the perspective of winning big.
Imagine there is a lottery where for every 10 million tickets you buy you get one that is giving you 20 millions back.
No brainer, right? Except if you don’t have the 10 million to spare, buying lottery tickets instead of food doesn’t make sense.
Labor/job is your single lottery ticket.
Investors can afford to buy all tickets to make sure they win.
Applied another way, everyone in a given class of YC should share a bit of ownership with everyone else in their YC class, and then everyone of them is likely to end up a millionare.
I still wish that YC would provide some more concrete figures, and ideally include separate figures for first employees as well as founders.
From link: “Most of the returns have gone to a tiny minority of super-successes. The founders of AirBnB, Dropbox and Stripe are worth about US$7 billion, about 80% of all founders’ equity, although they account for 0.5% of the companies. Outside of the most successful companies, it was still possible to earn significant returns. 12% of companies from the first five years of Y Combinator are now worth US$40 million or more, and a further 10% have sold for US$5-40 million. The remainder probably earned little more than their (low) salaries.”.
Employees take on considerable risk by joining early startups, and they take on opportunity risk when working for other companies, as well.
An early employee risks their ability to house and feed themselves and their family, along with their ability to afford medical care or retirement, by working at a company that could fold or fire them at any moment. An investor might experience some capital loss they can write off at tax time.
I'd bet in most early stage startups nowadays developers are paid way more than the founders themselves. And they work way less hours, with way less stressful problems than the founders.
The difference in pay, hours dedicated and stress (along with damages to health and life in general) represents the founders' risk appetite for future earnings.
Employees are not at all open to bear this level of risk and they should not be compensated for not bearing this risk. Founders and investors deliver value to society by bearing higher risks. We have better and cheaper services as a result. They should be compensated accordingly, so we keep them motivated to continue servicing us in increasingly better ways.
Then there would be no incentive for investment.
There's three people (or entities) in this: the one who makes the tool, the one who buys the tool, and the one who uses the tool. All of them need some of the rewards from the increased productivity that the tool empowers, otherwise we stop getting tools that let us be more productive, and we're all worse off. So you have to pay both the capitalists and the workers.
Now, you can argue that the pendulum has swung too far in the direction of the capitalists. That's a defensible position. But the answer is not to move to "the workers get 100% of the gains". That's going to leave everyone worse off, including the workers.
The CEOs of such companies get multi million dollar packages for leaving.
This is not a comprehensive description of capitalism but it is the low level idea. Obviously there is a distribution of real world behaviors.
It's not anchored in labor exploitation.
> The basic concept of capitalism is that there are capital owners, and they hire workers who use that capital to generate value. The capital owners receive all of that value and then pay the workers for their time.
These are both true.
As the person you're responding to said, capitalism is the philosophy that concentration of capital should be rewarded. It's that simple.
Whether the state or private magnates concentrate the capital and get rewarded for it is irrelevant.
By the way I got this from Richard Wolff. Here is his education history:
B.A. History magna cum laude Harvard 1963
M.A. Economics Stanford 1964
M.A. Economics Yale 1966
M.A. History Yale 1967
Ph.D. Economics Yale 1969
But did Mr. Wolff really say – "The basic concept of capitalism is that there are capital owners, and they hire workers who use that capital to generate value. The capital owners receive all of that value and then pay the workers for their time." – ? Where?