The other aspect that's not factored in here is that often founders can spend years in search mode, living on savings or some early stage pre-seed VC, with zero guarantee of success or ever even finding something to work on.

Took you 5 years to get to a concept that finally justified hiring someone to help you grow it? Equity is the only form of compensation you have for all that work, and it might still be worth $0 another 5 years later. In the meantime the ICs are getting paid, are getting benefits, are having a life beyond the company.

The rewards have to be deeply asymmetric for this system to work, otherwise nobody in their right mind would even consider it.