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Comment by ceronman | Hacker News Reader

He is implying that founders can create a lot of value without employees, and that the claim that employees also create value is false.

If that's true, then what about a social experiment: If you are a solo founder, you get all your profits for yourself. But if you have employees, you have to share your profits with your employees. If employees don't produce any value, easy, fire them all, you get everything. But if they do, share your profits fairly.

I'm curious to see how many solo billionaires will appear. My estimated guess: zero.

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His assertion is made worse by automation. Every skill the founder can automate they should. That’s efficiency. Every skill they can’t, that’s a crucial skill the founder depends on. The more crucial the skill, the more leverage the employee should have over the founder and the more incentive the founder has in sharing equity. This becomes magnified if the founder doesn’t have the skill to produce and operate the automation their business depends on, but even if they did have the skill - I think this is a population that understand the sheer amount of time and energy automation requires to simply oversee, operate, and maintain. The founder can’t be on call 24/7 for every function of every part of any but the most trivial of operations. Finally, typical ownership rules makes the founder highly enriched in equity unless they trade equity for capital or talent to the point they lose control. That controlling equity is the founders reward for the founding. Their share of growing profits is their reward whether they personally grow the profits or their employees do. A smart founder doesn’t try to do it all just so they can squeeze out some other people. They delegate responsibility to employees who in turn find ways to outsize the growth of profits and the value of the equity. Nothing says the founder needs to treat them well or provide them incentive to succeed - but everyone who has ever grown a company knows the best talent is attracted to where they are a “part” of the success, which includes sharing in the reward of their labor not just the labor.

> The more crucial the skill, the more leverage the employee should have over the founder and the more incentive the founder has in sharing equity

Unless the providers of said ability have to compete for business on price. One should not underestimate how hard it is to replace them.

"This becomes magnified if the founder doesn’t have the skill to produce and operate the automation their business depends on"

While that's true, I think it also pushes the profile of the ideal founder much more to the technical side than where it is now.

Creating and maintaining automations is inherently difficult-to-impossible to fully automate, and will likely always require some level of engineering skill.

Conversely, many of the most important skills a "business founder" brings to the table are also the most ripe for automation. Marketing, sales, administrative tasks, investor pitches, support, accounting: all have the potential to be automated to a large degree by AI.

I'm curious why the downvotes? I'm a technical founder running a devtools/security startup. After experimenting with ChatGPT for a few hours, it's clear to me that given the right prompts and model tuning, it's already capable of doing the following tasks at an above average skill level:

- Writing cold emails and responding to questions asked in replies

- Writing a script for sales calls

- Writing a pitch deck

- Writing marketing page copy

- Writing ad copy

- Responding to customer support requests

- Writing promotional social media posts

I have more confidence in its ability to do these tasks given its current level of sophistication than to meaningfully contribute to engineering tasks (though it can certainly help there too).

I wouldn't trust it with accounting or administrative tasks yet, but it doesn't seem far off.

Adding to that ChatGPT can also generate working function code for many different programming languages given the right description in your prompt

That's true, but while it is definitely helpful and can accelerate development, I don't generally see writing working functions to do simple, discreet tasks as a bottleneck to engineering in the context of a nontrivial system. But writing quality cold emails tailored to each prospect is definitely a bottleneck to sales--they are time consuming/tedious to write, and you usually need to write tons of them to get results. Same story with marketing copy, ads, social media posts, etc. having the time and energy to produce this content on an ongoing basis is a major bottleneck to marketing.

On the receiving end, being able to rip though thousands of words of AI drivel and pick out the actual content (if any) is going to become a major skill in itself. Not that skim reading and summarisation isn't a skill now, but the noise floor is about to rise by many decibels.

Probably there will be AI tools to de-AI messages, like reverse semantic companders[1], coming soon.

[1]: https://en.wikipedia.org/wiki/Companding

It really appears to have a default style or bland, corporate nothing-speak to it. It can write perfect emails crammed with every platitude and all in completely sterility, unless prompted otherwise.

It can already write better HR-friendly pap than I ever could, and it can churn it out by the thousands of words.

I'm very impressed by the power of "mere statistics" to construct dead-eyed language like the aliens in Blindsight. But, more than that, I'm grateful that I'm not employed to write such text in the first place. While there's an incoming boon for slackers who can just fire off a prompt email with a little bit of proofreading, there's a long run pinch on people who are employed just to talk nothings all day. Those who remain will have to watch over hundreds of thousands of words spraying out per day.

What's with that obsession about "billionaires"? If somebody can make a nice living with their business, isn't that good enough? Personally I think we are perfectly fine without billionaires.

Unfortunately they still crop up, with increasing frequency.

a "nice living" is actually quite hard for small businesses. competition is brutal, all sorts of risks can be fatal etc. the "billionaire adoration" phenomenon is actually putting lipstick on oligopolistic market arrangements and pretending they are still entrepreneurial

> If somebody can make a nice living with their business, isn't that good enough?

I think the allure of being a billionaire is it's "one and done". As in, once you achieve it, you can live the craziest life possible filled with lots of grandeur and not need to run any kind of business whatsoever after.

It's mainly a fantasy for people who are tired, overworked, underpaid, under-appreciated (which is like 85% of America I'm guessing).

"Wouldn't it be nice..."

or if you have something, the response is "must be nice"

I feel like this accelerates class segregation. like, going from talking about the new condo in a nice neighborhood changes from "must be nice" to "my friend lives there and says the Tesla charging stations are broken but I'll talk to the leasing office about it tomorrow", just immediately more depth that some groups of people can't contribute to and are dismissive about.

You can do that with $10m or less. 4% safe withdrawal rate, $400k a year is a hell of a lifestyle in the vast majority of locations.

The thing is, this is achievable even at 10M.

Hell, one can support the median household income at a reasonable SWR on ~ 2M.

Underlying all of this seems to be paulg's assertion that billionaire founders 'deserve' their wealth and therefore our inequality and their relatively small contribution to the public purse is justified.

I have no problem with founders being rich, but once you're earning 1%er income? You should be paying a hefty amount of taxes to support social spending. Think ~ 2/3rds, like it used to be before the regans and thatchers of the world gutted the social contract in the 80s.

> The thing is, this is achievable even at 10M.

$10M does get you a nice time, and you would never have to say no to any reasonable expense, but it's also definitely possible to overspend. There's some higher threshold where you really can be 'wild and crazy' and the only way to run out of money would be through bad investments.

There's a difference between always flying first class, always flying on a jetshare, and always having your plane fueled up and ready to go. Also, between driving yourself to the airport, taking a car service, having your driver take you, or having your helicopter pick you up.

10M would give you a safe withdrawal rate somewhere between 300-400k a year. A fairly common household income for people on HN. It affords a very nice quality of life but you're certainly not living the lifestyle that most people think of as "rich."

That's the average? There's no way to measure it, but that's around five times the US median household income, at a percentile of 97%. It could not be close to the median for HN just by probability, and it's a rich man's income.

I never said average. I said it's a fairly common household income on HN– which is true.

>It affords a very nice quality of life but you're certainly not living the lifestyle that most people think of as "rich."

I think maybe you're missing the perspectives of ...almost everyone outside of a very select few in VHCOL locations.

It’s the other way around. Most people think of it as rich.

Tech workers in SF don’t.

I have to remind myself that there are people comfortable with such a 'wild and crazy' lifestyle.

While I wouldn't mind being very well off, I have a visceral gut reaction to any of the sort of flashy spending that draws attention to myself. I also find that it isolates you from the experience of the common man, and life is lonely enough as it is.

it's interesting that it's very common to have a disdain / discomfort with showing that you have that money, but no such corresponding problem with just having it. if you're not going to give the money away, i don't see how there's any benefit to not spending. you're still way richer.

Because it changes your experience in such a way that you will not fit in as well with your fellow humans, something many of us conscipusly enjoy and most of us somewhat need.

Eh, any money you have invested generates income. That income can be used for your expenses or given to charity, depending on what your needs are for a given year.

After I hit my 'retirement number', if I can find a job that will give me the flexibility I want in retirement, I plan on continuing to work 2-3 days a week and donating half my salary to charity.

God knows local charities can use my money far more than they can use me as a volunteer. I like coding, and if I get paid and do good in the world, so much the better.

> SWR

for anybody not familiar

safe-withdrawl rate

typically 1% of portfolio value a quarter = 4% a year i am guessing?

theory is if your portfolio is invested in funds (mutual or ETF) tracking a broad-market index (S&P500) aka equities, and these equities go up 8-10% a year (return before inflation) on average over the long term

and if you have a $2m portfolio basically 100% in equities

sell off 4% = $80k/yr worth pre-tax (only taxes would be... long-term capital gains?)

because your portfolio is appreciating 8-10% a year, it'll stay at $2m despite you sell off $80k/year because it's tracking the US stock market/"economy" which is supposed to be growing 8-10% a year and they "offset each other"

with $10m this becomes $10m * 0.04 = $400k/yr pre-tax

i too would like to have $10m so that I could live off $400k/yr and not need to work :)

heck, i might even settle for $5m!

I am very far from being a billionaire, but as soon as I made it to upper-middle-class, I realized that the hedonistic treadmill would never end, even if I was a billionaire. It's a never ending fantasy world where everyone looks up and wants to be as rich as the next tier, even though that's rarely possible, and just like the scene in WarGames, "the only winning move is not to play".

While there is some of that, eventually you reach a point where you don't really know what to do with more money. That is you fly first class, and you see no reason to upgrade to the next level (shared jet, owned jet). Maybe you try a cruise and decide an inside cabin is just as good as the largest balcony room (or something inbetween) and are not interested in owning your own ship at all - perhaps a cruise isn't for you and you still prefer primitive camping in the backwoods with the minimum you can take with you.

Of course you can always spend more money. However I have known rich people who decided their mansion was too large and so they downsized (their master bedroom after the downsize was the size of my whole house!) Eventually what you need is time to enjoy what you have not more luxury. Fly coach or have a private jet on call - end the end you get there, and the jet only saves you a bit of time at the airport.

> What's with that obsession about "billionaires"? If somebody can make a nice living with their business, isn't that good enough? Personally I think we are perfectly fine without billionaires.

https://news.ycombinator.com/

-> https://www.ycombinator.com/

> Y Combinator created a new model for funding early stage startups.

> Twice a year we invest $500,000 per company in a large number of startups.

> We work intensively with the companies for three months, to get them into the best possible shape and refine their pitch to investors. Each cycle culminates in Demo Day, when the startups present their companies to a carefully selected, invite-only audience.

-> https://www.ycombinator.com/topcompanies/public

Sometimes I guess we just forget where we are :-)

So is the premise that Y Combinator is only for billionaire-wannabes?

The irony is the only person I personally know who founded a startup (he's the CTO) which is valued at more than $1b never looks at HN.

So I guess yes, it's the wannabes.

It might be useful to have a billionaire-wannabe honey pot . . .

I'm sure I'm years behind the curve on that idea, though.

YC isn't just HN though. Was he funded by YC at all?

YC is creating venture-backed startups, where the nature of power-law returns necessitates aiming for "grand slams" (i.e. 100x outcomes following SeriesA funding). If successful, this creates billionaires. So in a sense (though I wouldn't conflate cause & effect): Yes, YCombinator is looking for people who want to create companies that could reasonably result in the founders becoming billionaires.

Worth noting: Not all companies can or should target this trajectory -- which just means VC might not be the right funding source.

Check paulg’s tweet history. A few weeks ago he lamented how fake things are in the US, pointing at things like Kraft singles.

I don’t have a Twitter account but almost went to sign up to reply “billionaires whose wealth is based on mathematical inference not possession of tens of billions of real dollars.”

I say let’s automate away book smart, street stupid easily deluded normal humans who end up optimizing for themselves while roleplaying something more egalitarian is afoot with their games.

Letting a minority monopolize agency is not a greater good as there are no greater goods. It’s typical political corruption.

Automate away politicians, VCs, C*O level; organizing life in line with religious traditions is not sacrosanct. Why is organizing life under the prior 60-70 years so special? Ooh right; cause that cohort is where all the wealth is captured. Silly me.

Looks like it’s time to revisit Reagan’s policy of expropriating retirement for the youth to invest.

He's not implying that employees don't create value.

Startups share equity with employees. The earlier you are there, the more you get, in part because of the inherent risk.

This is why founders get the most equity and the most upside if it succeeds. They took on the most risk and it wouldn't otherwise exist.

If the company ends up being valued at 100B dollars, guess what, the founder and maybe some early employees are billionaires or hundred millionaires.

Maybe there is an imbalance of risk taken or value added among founders and early employees. I think that's debatable, but assume it's true. It's never reasonably accounted for in the equity distribution.

It would be one thing for a founder to have 3x the equity of an early hire, but it is commonly more like 60x or 300x. Instead of a dozen people being able to cash out and support their families for the rest of their lives, one or maybe two people get to have many multiples of that and the rest barely make progress towards retirement.

I agree 100%. Also, I don't see a substantial difference in risk between a founder and an early employee at all. Founders typically have little invested in the startup other than their own time but they compensate for that by paying themselves a salary with investor money.

It sounds like you're saying that early employees and founders have a similar level of rush, but vastly different levels of reward.

Why would anyone ever be an early employee when they can be a founder instead?

Access to capital

All things equal I don't think they should. The reality is probably a combination of early employees not being as skilled as the founders and behaving irrationally/ not understanding the value of their equity.

> This is why founders get the most equity and the most upside if it succeeds. They took on the most risk and it wouldn't otherwise exist.

Is this always true though? I've worked with a grand total of one company where, if the company went bust, it would mean the end of the founders' life savings. Every other startup/company I've seen, the founder was already very well off. Yes, they put a big chunk of capital and/or time into the start-up. Yes, they were highly motivated to make it succeed. But if it failed, they would... be sad, fall back to family money for a while, and then later do another start-up (or go back to their previous career in Investment Banking). I think this idea that the founder must be singularly taking a huge amount of "risk" is a romantic, stereotypical take, not always true.

Start-up employees, however are shouldering risk. They are by and large not already wealthy so if the start-up fails, there goes their livelihood until they line up another job. I think we should stop thinking that "risk" is exactly the same as "how much of the company's raw dollar equity did you contribute".

I agree with you 100% and am not afraid of vocalizing similar things to a hyper capitalist audience.

However, I don’t see the way out unless the social safety net is strengthened (not gonna happen) or we just ban rich people from starting companies (lol, lmao even)

Edit: maybe there shouldn’t be a way out. Maybe the solution is just to educate and make transparent that rich founders have better odds and less to lose and bust conceptions around successful at business == higher quality individual.

I’ve been toying with an idea where blockchain actually is interesting: imagine all currency is on the ledger - all of it. And every coin had an (rather short) expiry!

You need to create value continously or fall back to UBI.

Just something to play around with. :)

So... the role (controlled) inflation plays in an economy?

Good point. I guess this need to be expanded with limits on other types assets as well.

Basically we’ll end up in a totalitarian society governed by an AI.

That train of thought escalated quickly.

> there goes their livelihood until they line up another job.

This risk exists with any employment arrangement. So arguably the risk is merely the greater likelihood of the startup failing vs big corp laying you off.

For employees, there is employment risk, reduced compensation, potential increased difficulty of finding next job. For founders there is the first two but generally finding next job is easier (because you get lots of managing/etc experience potentially faster than you would normally).

When they talk about risk they mean capital risk, not personal risk.

So someone with 10 million dollars who puts up 1 million has put more capital at risk than someone who puts up 100,000 even if that is everything they own.

And paying out on personal risk doesn't make sense. Imagine doing a seed round and the share of equity each investor gets is not related to how much they invest but what % of their networth they invest.

Also in every startup I've worked for(3) the founders were not rich before starting the company.

The straw man here is the family money you've assumed. I've done 6 startups as founder or early employee. I assure you I had no "family money" to fall back on. It's only my most recent company that had an exit that really put a cushion under me, and that's after more than 20yrs of startups.

People who assume there's family money to fall back on are generally themselves in a privileged position. They are projecting that onto everyone else and it's an excuse to not build anything and discouraging anyone to do anything.

Paying a wage = sharing your profits, just not on a % base, but a fixed amount. But in the end it's still: less profits for the founder, and more profit for the employee.

Wage is a cost and profit comes after costs. If owner want's to share profit, they need to give company shares to the employees and pay dividends.

A cost that cuts into what would otherwise be profits. It's all fungible so you're quibbling about an accounting issue here. If an owner made a contract with an employee that they will pay them a $0 salary but will pay them a fixed annual dividend of $100,000 (broken up into convenient bi-weekly payments) would that fix your concern? I'm getting the impression that it wouldn't.

This is disingenuous. Money is fungible but the flow of money is not. My buying weekly groceries is not the same as my putting a down payment on a new car: they're two different activities that use the same fungible source as a medium of exchange. Likewise, if I run a business, paying a fixed wage to an employee is not the same as distributing profit in the form of dividends to shareholders: the fungible medium of exchange is weighted differently, comes from different sources, and is used for different purposes.

You're right, that wouldn't fix it.

Fixing the problem would mean that instead of the 'owner' hiring an 'employee,' they instead form an equal partnership as co-owners. Because the business serves the interest of the owners, it will seek to maximize their compensation as the ultimate goal, rather than to minimize their salary as a way of reducing expenses.

That would be illegal in my country. Dividend is considered an unearned income and is taxed differently as well.

They could perhaps give the worker a minimum wage and the rest pay in dividends, but mind that dividends need to be distributed among all the shareholders equally, so you can't say you would pay $100,000 unless you allocate shares so that when dividend pay out is decided, worker's shares will yield that exact amount.

Also this is not about a dystopian village with one single employer that exploits workers that cannot move. Startup employees agree with free choice to work somewhere for the agreed upon profit share, be that % based or fixed, or mixed.

The argument he is arguing against is that the workers create the wealth, and profit is that unpaid surplus labor time that the LPs/VCs/founders expropriate from the workers creating wealth. You can't "share" profits with workers when workers are creating all the wealth, the LPs/VCs etc. expropriate profits from workers.

So if the people providing the funding weren't there, where would the salary for the workers who are currently getting their surplus labor expropriated come from? If these workers are getting unjustly exploited, then what's to keep them from starting a co-op together where they share all profits? Plenty of co-ops exist in modern day capitalist societies, including several successful ones like WinCo in the US and Mondragon Corporation in Spain. No one is forcing these employees to give up their "surplus labor" to investors.

No not really. If I generate $1m of value for a company and they pay me $90k a year that isn't really sharing profit.

But if you cost the company $1m you still get your $90k.

More likely you get fired.

Hopefully you do not have many employees that are costing you $1m a year...

Look at the cost of Zuckerberg's metaverse push to Meta, and Musk's work to Twitter: sure, that's currently sitting at a lot more than that, but they are hoping to turn that around in a number of years.

Which is to say that cost/value proposition is never simple. I've been at companies where people were paid simply not to jump to competitors.

It isn't even limited to high profile cases like those. Same goes for a lot of hiring (in junior positions especially), it often takes some time for the employee to learn the ropes, during which time their cost (both in terms of direct costs like salary, benefits and equipment and indirect costs like the time of the people bringing them up to speed) is almost definitely higher than the value they're bringing to the business.

Definitely: I was just putting out obvious extreme cases to illustrate the point.

Not disagreeing; but for clarity you'd want to refer to generating surplus value rather than value, i.e. net of costs. i.e. if my work can be construed as having created $1M of revenue, but $990,000 of cost (say some low-commission dropship affiliate sales structure, or online payments with a small transaction fee), I've only created $10,000 of surplus value, out of which I can make a case for a different distribution scheme based on an update (read: agitation) of normative values.

Sure, yeah. Agreed.

If you can convincingly demonstrate that you singlehandedly generate $1m revenue for a company, then I'm confident that you have the negotiating power to demand a share.

The problem is that in most cases you can't do that. You might have been the person who made the last push to make the revenue possible, but you were building on the work of everyone else who was working for that company and you were leveraging someone else's resources to make it happen.

We have to have some way to agree what portion of that profit can reasonably be attributed to you. To avoid complicated math and guesswork every quarter, most of us agree to a fixed salary as a reasonable estimate for a fair share of the value we're creating.

I want to start an agency that does everything digital, but also some mrr micro SaaS projects.

I want it to be an equal equity corp basically every hour invested earns you shares based on your senior and tenure.... Sr dev multiplier x 2 years with company for example.

Then we'd earmark like 30 percent of revenue to go into profit sharing and each state gets a reward.

The shares also calculate your voting threshold.

Senior team will be given an edge so there's an ethical dictator but not an insurmountable thing.

It might take 10 people to out vote the execs but you can't buy shares it's all earned by actions and time investment etc...

I also want to build an ERP system that can actually run a co-op like this with multiple streams of income, multiple point pools to reward employees or even customers etc....

It'd also network with other co-ops to build symmetry like Amazon marketplace does for sellers, everyone would be invested in every other syndicated companies success.

Well, sure. But people are not programmed like that.

Sales people often can get up to or more than 50% of the profits (after all expenses) as commission. I've seen up to 80 or 90 percent for companies with extreme growth focus.

Programmers don't generate value directly the same way, but often you can attribute value to products they create and compensate them fairly.

Personally, I don't envy the salespeople their commission-based compensation. Having my compensation directly tied to demonstrable value created would be overly stressful for me.

The bargain I've made instead is that I get a very good base salary and call it a day. When the company grows because of my contributions, I negotiate a higher salary, but I don't have to think about it from month to month.

in that case you should bet on yourself and start your own company. It comes down to risk and reward

I'm not implying that companies don't bring value by their nature. They absolutely do. I'm also not implying that I could generate this value on my own, though I have before.

I'm just saying, if I have an employee and he makes me $1m a year, I'm going to pay him well - I'll pay that employee what is fair in the context of what value we enable him to generate for us.

That usually means the employee is worth at least 50% of that in compensation, btw.

This is why if you bring a deal to a company as a sales person commissions are around that number (50% of profit).

Are you familiar with "debt bondage"? Technically, the brick kiln workers of India and Pakistan are paid a wage [1]. Closer to home, Amazin warehouse workers probably wouldn't consider themselves as sharing in Amazon's profits. Let me summarize:

1. Debt is built into your existence (student, medical, housing, etc);

2. The system is designed to extract (exploit) value from labor; and

3. There is no value without labor.

[1]: https://www.antislavery.org/what-we-do/past-projects/india-d...

What is your point? OP's comment was about how revenue - (other employees wages) = profit, not the actual details surrounding working for a wage.

And that revenue wouldn’t exist without labor. That’s the point. So offering to “share” that in the form of mostly fixed wages both betrays a presumption of ownership and gives a false appearance of charity or benevolence.

This is a fun semantic game but Profits are not the cost of doing business. When you have an employee sign a contract for $X dollars per year, that's a cost. Conflating Revenue and Profit for the sake of an argument is bad faith.

My Assumption here is that the common usage of profit is, "Money after all expenses paid", which employee compensation is clearly outside of that definition.

Don't assume bad faith: that their framing is unorthodox doesn't make it misleading.

Money is fungible and what we identify as "expenses" versus "profit shared" is arbitrary. Economic value is created by the enterprise, and that value is then split between the owner, the employees, the suppliers, and the customers.

We can argue about whether the distribution is fair, but complaining about the specific accounting method by which the value is distributed is myopic. Either you're getting a fair share of the economic value or you aren't—whether your share comes of the pre- or post-tax portion of the pie is the government's concern, not yours.

I think people are largely arguing over whether or not the share of economic value is proportional to contributions and when they talk about that share they typically refer to profits. I think redefining/reframing what profit means in this conversation is intentionally misunderstanding/redirecting the argument.

Workers: "We should see more of the profits the company makes and we are making the case that collectively we produce a larger portion of the value we're asking for"

Poster: "Your pay is part of the profit, the more money you make the less that goes to the owner"

You're right. I shouldn't assume a framing is misleading just because its unorthodox, I'm attempting to make a case for the framing being misleading with supporting statements.

At best the parent comment isn't saying anything of substance at all (in response to ITS parent comment), and in my view, at worst its an attempt to redirect the concept of 'profit' to make the argument seem less credible.

I don't agree that jerrre isn't saying anything of substance. It could have been fleshed out better, but what they say is a reasonable counter to their parent's argument.

ceronman's thought experiment was "if you have employees, you have to share your profits ... If [they] don't produce any value, easy, fire them all, you get everything."

jerrre's response, which I think is fair, is that we're already running this experiment. If businesses did not think employees produce value, they would not pay them wages or salaries, because every dollar paid to an employee is a dollar less of profit for the company. Companies already acknowledge the value that employees create value by the very fact that they pay them anything.

In other words, what's actually at stake isn't whether employees create value but how much, and ceronman's comment doesn't contribute anything to that discussion.

I disagree with your interpretation of ceronman's experiment and the premise that we're already conducting it.

I believe they were making the case that Employees need the company as much as the company needs the employees. The experiment is to split the profits evenly amongst those who created the value in the first place - The people that work inside the company. If they can't produce the value, get rid of them (And if that's the case there's more profit for everyone right?)

They could also mean that the profits are distributed amongst the employees based on individual contribution when they conclude that there wouldn't be any self-made billionaires because no single individual produces that much value.

I still disagree with the conflation of wages/cost of business and profits, even though more mages means less profit - Profit is still surplus after all has been paid. The distinction is important for more than just the scope of this conversation.

No, negating “employees created all the value” does not mean, “founders create all the value”. It means employees didn’t.

So who is the magical missing third party that created value?

The exploited consumers that give up all their sweet sweet data to the surveillance capitalism complex?

Who said anything about a third party?

re-read the comment you're replying to: employees didn't create ALL the value. In other words, founders created some as well. :)

While it's true he's saying that founders can create a lot of value without employees, he's certainly not suggesting employees don't also create value. Obviously they do, or founders wouldn't hire anyone.

> if you have employees, you have to share your profits with your employees

Needless to say, this already happens via equity and options. There's a reasonable debate to be had over what constitutes "fair" profit-sharing. But the market clears where it clears, and individual tech employees definitely have meaningful leverage even under current macro conditions.

> He is implying that founders can create a lot of value without employees, and that the claim that employees also create value is false.

I agree that Paul is severely overstating his case here (as is his wont), but only the first half of your summary is true to his tweet. He's saying that founders create a lot of (even most of) the value in a company, but he is not saying that employees create no value.

His argument is essentially this: If employee jobs can in theory all be automated away while a company still produces value, that means the startup founder's role must produce a huge amount of the value in any company.

This is a pretty fragile argument that has a lot wrong with it (that a job can be automated today doesn't mean it wasn't extremely valuable yesterday), so there isn't really a need to erect a straw man.

What if I'm a founder who's also a developer, I have the idea, customer base and I've done ~80% of the code of the product but I need help with deploying and scaling the product.

How much of the profit do I share with the employees? What does the society deem fair in the case where founder comes up with the product, identifies the problem and works with the customer to configure the product? Do I get to take 5 salaries or 1 salary?

How much value do you place on "scaling"?

You wrote 80% of the code (who wrote the rest?) and you got it deployed. You're making a decent living on 15.000 users. "Scaling" guy comes in and "scales" you to 150.000 users. Do they get an order of magnitude more profit than you?

That's what I'm asking. What does the "scaling" guy get? What's the fair distribution of wealth?

I'm not placing any value on "scaling", I'm asking what it should be valued at.

> Who wrote the rest

For argument's sake, let's say there's 10 devs who wrote the rest.

Let's say that in span of 12 months, after paying yearly gross salary of $150 000 to each person in equation (10 devs, 1 scaling/devops guy, 1 founder), $2 800 000 is left and we're dividing it.

How much goes to each of the 12 people in the equation?

They get what they negotiate for, no? I worked for startups before and I would press for more equity, but I wasn't under any delusion that if there were 4 employees and I was just joining that I'd get 20% equity. They were there first, had to take on the risk, etc.

The only sensible move is to payback investors and yourself first. So, as little as they will accept. If you can afford to (maybe) loose them, give them $0 extra.

Economy isn’t so hot anymore, folks with obligations will absolutely settle and take it on the chin. You have all the power here.

What I'm trying to get for an answer is straight percentages, because there's always this latent hate towards founders or bosses so I'm trying to see what would be fair in the scenario I presented.

The "boss bad, worker good" is getting really boring and disgusting, just like not all bosses are evil - not all workers are good. I presented a scenario where there's no investors and where the founder did majority of the work.

Isn't Notch [1] a solo billionaire? Not sure if he had help running Minecraft (I guess so), but you could say he created a billion-dollar company single-handedly.

1: https://en.wikipedia.org/wiki/Markus_Persson

Mojang had employees.

He wasn't even working on Minecraft when Mojang sold to Microsoft. Jens Bergensten was the lead developer for years before the sale went through.

Even better: let's see how many billioaire entrepreneurs will appear in a society where few or no people are there to buy their products and services, because they've made redundant and are out of jobs or in new lower-paying forced careers...

Eliminating the middle class (except for those who directly serve the billionaires) and having a huge industrial reserve army (Marx) that does jobs that cannot be automated could work. It works for the super rich in Brazil.

This seems to be the trend in "Western" societies, and the middle class enthusiastically votes for those who pursue that agenda.

>It works for the super rich in Brazil

I guess that could be the vision for the US to: a developing country style society, with utral-nice fenced areas for the rich, a supporting 10-20% class, and "skid-row lite" welfare land for the rest, with crumbling infrastructure...

And if things end up worse, the rich have already bought houses in New Zealand and elsewhere anyway...

FWIW the reply by the founder of repl.it explicitly takes the other side of the bet

I expect $1B solo founder startups to become normal pretty soon

https://twitter.com/amasad/status/1600143003607105537

(I honestly don't know -- not my area of expertise, just putting it up for discussion)

I think it could happen. AI and automation have the tendency of amplifying ability. The ideal company has zero employees. Similarity, the ideal world has zero employees and everyone does want they want. If that scares you, give your head a shake.

Yeah if work was so great you wouldn't have to pay people to do it

My experience is that employees just for the sake of employees are of no use and a lot of companies have too much fat just because they could hire. Great employees though are worth every penny and a whole lot more.

As a small company, I have hired and fired few people over the years. When I made the wrong hire, it cost a lot not just in terms of money but the overhead, mental anguish and loss in productivity. Sometimes I got lucky and hired some exceptional people. They have made life 2x better and yes they do get rewarded accordingly at least in my company.

Not all employees produce equal (even if same job title and experience on paper) and it is a fact.

> He is implying that founders can create a lot of value without employees, and that the claim that employees also create value is false.

It seems like he definitely believes founders create a lot of value, but I don't think he is making the second claim that employees don't create value. Just making the argument that the outsized return to founders is fair because they are creating far more value as evidenced by automation.

I believe what you’re describing is a worker-owned co-op. Workers get a vote in business decisions.

They have some interesting properties and I wonder how they would stack up against a top-down structure like in a corporation or university. Specifically I wonder if they would be able to resist bureaucratic bloat and the growth of the managerial class that plagues mature companies and organizations.

Seems like he took the red pill right after elno.

> and that the claim that employees also create value is false

The claim he says is false is "their employees created all the value".

Replacing "all" with "also" produces almost the opposite statement. I don't mean to be pedantic but that's an extreme misinterpretation.

For value creation, you need both workers and capital (provided by founders and investors). The value is created by both together, not each independently. The compensation for created value is based on market rate for both work and capital.

> The compensation for created value is based on market rate for both work and capital.

This equivalence doesn't make much sense unless there's a widespread phenomenon of businesses "firing" owners in favor of other capital-providers who will accept lower returns.

Isn't this basically what a recapitalization is?

Usually driven by existing majority owners, with the goal still being to increase their own absolute wealth even if their relative ownership decreases.

> If employees don't produce any value, easy, fire them all

Very Musk-y of you

>I'm curious to see how many solo billionaires will appear. My estimated guess: zero.

Satoshi Nakamoto is (most probably) a solo billionaire

Not unless they start converting their bitcoins into actual money, when lots of it might go down in value. If they even have access to secret keys that control these funds.

And obviously, even if they were a billionare, their ultimate goal was not to develop a business where they become one, but they were probably supporting their idea by being an early miner.

Aren't we just back to rehashing vapid Marxist arguments? In your experiment a brilliant computer scientist working on a breakthrough invention will be forced to do menial tasks like data entry and accounting him/herself rather than split the profits evenly with a laborer. This is not going to work, a society where geniuses spend most of their days using Quickbooks, cleaning the bathroom etc, will be outcompeted by ones where they can specialize.

> This is not going to work, a society where geniuses spend most of their days using Quickbooks, cleaning the bathroom etc, will be outcompeted by ones where they can specialize.

Which is exactly why Marx makes his “vapid” argument: cleaners and other menial jobs contribute as much to society as any geniuses (evidently, as societies without those menial jobs got outcompeted). And the way society currently evaluate those values seems to be incorrect.

The issue with Marxist is that the solution he proposed is troublesome, not that the problem doesn’t exist. And until the next genius figures out a different solution, we should at least try to limit the problem as much as possible

> cleaners and other menial jobs contribute as much to society as any geniuses (evidently, as societies without those menial jobs got outcompeted)

Scarcity is clearly an important component of value. This is essentially the "why is gold more valuable than water when I need water to live." question. I don't see the point in rehashing this stuff as if it's new.

It's funny because so many acquisitions are built around getting the employees.

Many are also built around acquiring the market share/user base.

> But if they do, share your profits fairly.

How do you determine how much profit an employed CTO makes versus a customer service rep? What's fair there? My estimated guess: you have no idea.

Here's another experiment: All employees share the losses as well. Company makes a huge loss, employees are liable.

And I'm curious to know, in your model, if the employees are willing to work without salary and bear the cost of running the company?

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