> For one thing, founders and employees don't share equally in the high growth rate of the company even though at most a founder is working let's say 2x longer hours than a salaried employee. You can do nothing wrong but you're still taking more of your fair share by the basic structure of how the business is setup.
What is fair? Obviously hours worked is one metric to determine what is fair. But another way to arrive at what is fair is through negotiation. Neither the founders nor potential hires are obligated to work with one another. The only way it happens is if an early employee believes the compensation they are offered by the founders is fair. If it was unfair, they would presumably reject the offer outright.
Most people need money to eat. I don't know if you can ever really have a fair negotiation with an employer when "the rent is due" is involved. You know those companies that buy settlements from people in exchange for a fraction of their value immediately? You could say that this is a fair trade in an econ 101 sense that body parties rationally entered into a mutual agreement. But you could also notice that one person just got laid off and doesn't have enough money to pay rent and is therefore pressured by circumstance to accept extremely unfavorable terms because the alternative is homelessness.
> Most people need money to eat. I don't know if you can ever really have a fair negotiation with an employer when "the rent is due" is involved.
Your definition of "fair" is questionable.
If you're negotiating from a position where you've taken on debts and rent that you can't afford to pay, and time has run out to the point where you're desperate for a paycheck as soon as possible, that's unfortunate. But that's not the fault of the person you're negotiating for a job with. Exceptional cases aside, 95% of the time that's likely due to your own risk-taking, neglect, poor decision-making, or financial mismanagement. And you had a "fair" chance to not get into that situation to begin with.
But regardless of blame, it's certainly not the fault of the counterparty in your employment negotiations in that you're in that spot. Nor is it their responsibility. Nor should we want it to be! What kind of system would that be, exactly? A brutal one where many more people fall through the gaps than would otherwise. A much better system is the one we have, where people pay taxes, and do so at higher rates the more fortunate they are, and that tax money goes into programs like unemployment, which helps people in exceptional situations.
What's so unfair about this, exactly?
Actually it's probably more 99.99% likely due to the family you're born in.
> What's so unfair about this, exactly?
We don't roll the same dices at birth.
No one's saying we roll the same dice at birth. That doesn't mean that people who are so desperate that they can't risk negotiating a job offer are 99.99% in that situation because of birth rather than decisions made subsequent to birth.
Especially because in America at least, over 200 million people are born middle class or above. An even lower class in America is doing much better than many other countries in the world.
At what point in your mind does personal accountability come into play? How prosperous does a nation have to be for people to have some responsibility for the consequences of their own actions? Or are people never responsible?
Regarding personal responsibility, at an individual's level it's your responsibility to improve your life, because that's the only lever you have and you don't have the time to wait for societal changes that take decades or centuries to arrive.
When we're discussing policy for our society however it's too easy to blame people for the choices they made so we don't have to think harder. The world's complexity is beyond what the humans brain can hold at any single time. Some people are dealt bad hands, born in a difficult family, born in a body that slow them down or drag them down. Some people make one bad choice (even something mild like a financially unprofitable carrer choice) at 18 because millions of parameters that played since their birth compulsed their brain to make that choice at that moment in their life. Not even mentioning meeting the wrong people. You can do everything well and cross the path of someone who breaks you.
Truly and without getting too philosophical,looking back and learning about people's stories I've come to realize that we have little agency and by the time we understand how the world works and what we should have done instead it's often too late to change the outcome drastically.
To tie it all back to the topic of this thread, the 19 year old who's been pushed by his parents all his life to get good grades, study well, get involved in the right extracurriculars, ends up at Stanford, starts a startup because that's what people do around him, is told to apply to YC, is accepted, is taken care of by YC, tell me how much is he responsible for his success?
I don't disagree with you. I think there's an even argument along these lines that we don't really have free will, since our initial biology and environmental circumstances aren't within our control, and yet every subsequent decision and choice follows inexorably from those initial conditions.
To me, this inspires empathy and care, and it's why I believe that society should have a very high floor. But discussions like these, and the current "eat the rich" zeitgeist seem to focus so much more on lowering the ceiling. Which to me is the wrong focus.
Not really? If the same value and wealth is being created - the redistribution of it raises the floor as well.
Capping the ceiling would be a tremendous mistake. It would eliminate the "if" in your scenario. The same value in wealth would not be created. You would be massively disincentivizing people to stay here and innovate, and that innovation would flow elsewhere or simply diminish.
Luckily, we've never actually capped the ceiling, and it's unlikely we ever will.
If there's no cap on a ceiling, is it fair or humanly okay when someone's wealth is Epstein-enough to own other people's lives? Wealth is a proxy for power, when someone has more power than legal systems or enough to swindle all of it, is that a better world?
There should be a ceiling or we reach the current state where accountability is nothing a million dollars can't buy.
Do you seriously believe the by limiting people's wealth, we'll solve problems like this? Humans used to have thousands of times less wealth than we do now, yet people still had power and influence, harems and slaves, cults and gangs.
Solve? Likely not. Improve? Of course. Policies that improve the state of problems even if they remain unsolved are good.
More than one million people die of TB annually. We have a cure for it. Elon Musk could pay for testing and treatment distribution for the entire world without noticing a change in his wealth.
A million people a year.
I feel like you should read about systems thinking. You're ignoring so many potential side effects, so much history, so many statistics, incentives, human psychology. The idea of capping wealth in order to try to prevent certain power imbalances like sex trafficking, is similar to firebombing your house to fix a leaky pipe. Not only would it mess up a ton of stuff, but it wouldn't even fix the problem.
Of course there are side effects. The question is whether those side effects are worth the benefits we'd get.
Millions dead every year from TB. A curable disease.
I have never met a founder who was motivated, even in part, by the possibility of being a mega billionaire.
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You can believe that’s fair. I don’t. I don’t believe that one party needs to be at fault for an economic transaction to be unfair.
I live in a country where “oopsy doopsy your insurance denied this so now you owe us 20,000” isn’t terribly uncommon and your employer can fire you without any warning or severance. “I need money for the rent this month” is not consistently some moral failing.
If you’re an early employee at a startup, you almost certainly had other options for employment
I don’t think you can assume this to be the case, especially outside of the Bay Area.
My first startup was one where I was hired because I was young and cheap. I could be paid in free lunches rather than 401k matching and decent healthcare plans.
Big companies often pay better salaries.
There are plenty of people who would consider themselves extremely lucky to work at a startup, even for cheap. I know many older people working much worse jobs. I think it's fair to assume that most startup workers have other options, and that generally those options are worse.
Could you imagine this perception you describe playing into being underpaid?
Your last sentence you’re saying it’s fair to make this assumption that most other jobs are worse.
So that means if a non-startup offered you a better pay package your assumption and bias might steer you away and take worse compensation to do the same job.
I ask you this question because I made a similar mistake in my youth. I took a pay and benefits cut for a startup because it sounded a lot more fun. 6 months later and the company was going under and I was out of a job.
There are also plenty of employees who just didn’t get a job offer elsewhere. When I took my first startup job I didn’t have a competing offer.
I too have worked for startups that failed. And when I took those jobs, I had many thousands of alternative opportunities I could've taken instead that I considered to be worse, or at least not worth pursuing compared to the startup jobs. What's your point?
Here's an example that could help make my point: Glimpse is hiring a Security and Compliance Lead in New York City and is only paying $150K - $225K.
Meta is paying a Security Engineer (not a lead) $271,000/year to $347,000/year + bonus + equity + benefits across the following locations: Bellevue, WA, Menlo Park, CA, Washington, DC, New York, NY
I find it hard to reconcile that salary difference, and I think the only way to explain it is that startups offer dreams of upside like a smoky Vegas casino.
Working for Meta [1] is "boring" and corporate, but it's also objectively a better financial decision unless Glimpse becomes the next Uber. My point is that I am hypothesizing that tech culture encourages people (especially young people) to prefer objectively worse financial outcomes to do the exact same work at a more "exciting" startup company.
At the time you joined those startups, you considered those other opportunities to be worse, but I wonder if that was true or if that was perception? Of course, I don't intend to tell you that you were wrong, in fact I think it's highly likely you were right. I only mean to say that it's worth introspecting on the concept.
[1] Or insert any other large and slightly more ethical company, if we want to disqualify working for Meta due to its "evil empire problem."
Yeah, I mean, when you put it that way, I don't disagree with you. I think it's a matter of perception. What's better or worse will always be subjective. And there will always be gaps in the market where people make genuine mistakes, because of a lack of knowledge, or an error in judgment due to inexperience, etc.
But there are also genuine advantages that others simply might not see. For example, many would rather apply to work at a startup because it's an easier job to get than one at Meta, Alphabet, Amazon, etc., and not having to study as hard for interviews is a genuine advantage to some that's worth the money left on the table. Or for others, maybe they want a more casual work environment. Or others might just want startup experience because they hope to start a startup someday. Etc.
> If it was unfair, they would presumably reject the offer outright.
My word do people actually believe this. What theoretical econ 101 textbook are you living in?
What if you think all of the available offers are unfair but you don’t have the means to start your own business?
Then the offers are fair and your assessment of your labor value is disproven by the market rate.
That’s one definition of fairness (market rate.)
There are many other definitions of fairness as well.
This comes back to the thread we’re discussing. What a fair wage means is a philosophical and moral question. Not just a math problem.
If someone inherits a business and earns higher wages than their workers is that fair? What did they do to earn that?
If the market rate is so fair why does the minimum wage and child labor laws exist?
Hey, that 8 year old was willing to work in the asbestos factory, that’s just fair market value!
If the argument is going to be “I exerted negotiation leverage over you” I think this feeds into my argument about the immorality of the whole setup.
We might as well just say “I exploited my structural power over my employees and got a better deal for myself.”
Of course the employees agreed to the deal presented to them, what other option did they have? They aren’t like all these founders that have the luxury of being unemployed because their dad will pay the rent.
That’s another point I forgot to bring up entirely: PG also hand-waved over the quantity of billionaires from his accelerator that came from families of very decent means where they have the luxury of risking failure. The quantity of true rags to riches billionaires is extremely slim.
> Of course the employees agreed to the deal presented to them, what other option did they have?
What? The employees had infinity other options! They could have negotiated harder. They could have declined the job. They could have taken a job somewhere else. They could have taken the risk to start their own startup, and been in the founder position, instead of choosing to be in the employee position and getting the security and reduced stress that comes along with it.
> That’s another point I forgot to bring up entirely: PG also hand-waved over the quantity of billionaires from his accelerator that came from families of very decent means where they have the luxury of risking failure. The quantity of true rags to riches billionaires is extremely slim.
Over 200M Americans come from middle class backgrounds are above. YC also provides founders with the funds to pay themselves while they start their company. I did YC when I had almost $0 to my name and no well-off family to rely on.
youre not going to negotiate your way to 40% ownership of the company with a strike price of $0.00001
Then go start your own company?
you have completely drank the kool aid
Why do you expect outsized rewards without taking outsized risks? Companies don't start themselves.
I totally recognize what you’re saying. We have to be able to encourage risk-taking if we want to have innovation. I get it.
But you said earlier that YC pays founders for living expenses. What risk are YC founders taking?
In contrast, every startup I’ve worked at has offered equity in the form of options where I had to stake my personal finances just to own company equity. None of them granted shares to me as a reward for my labor. I was taking more of a financial risk than the founder of the company just to own a stake!
VC-backed Startups are much different than small businesses where founders take personal financial risks. The VC itself is also not taking any kind of outsized risk as it has mitigated that risk by betting on dozens of companies. They expect most of their companies to fail and leave their employees high and dry, but that’s not their problem and is baked into the formula.
Essentially VCs have plenty of capital and no ideas, so they pay outsized equity compensation to founders for ideas. But the early employees are just interchangeable implementers and get basically nothing by comparison.
If I started a cupcake truck with my friends, they wouldn’t be my friends anymore if I decided I get 50x their equity stake just because it was my idea.
In my opinion, our business systems have been allowed to get away with much more inequality than should be legal. Each caste is orders of magnitude away from each other rather than being linear steps above each other.
Every day, there are trillions of prices that are set by sellers, and either accepted or rejected or counter-offered by buyers. Of course, sellers want higher prices, and buyers want lower prices. There is no one person who can determine what a fair price is. A fair price is one that both buyers and sellers agree on, that creates a successful transaction.
Importantly, people are free to walk away from a bad deal. If you don't like a store's wares, you can go to another store. If you don't like a job offer, you can apply to a different job. Freedom of choice creates competition, which puts pressure on buyers and sellers alike to actually come to terms.
Your post comes across as someone who is consistently in the seller position (selling your labor for compensation), and who's simply advocating for his own personal interests in wanting higher wages. But for some reason, you think your own personal opinion about exactly how much you should be paid is what the bar is for "fair", rather than the prices set by the market, that is, the repeated agreements by tens of thousands of people day after day for years.
And that perplexes me. Why are you so special? Why is your opinion or anybody else's opinion supposed to be the basis of what's fair? I've never met someone who's not just going to argue for their own interests here, exactly as you're doing.
If you don't think it's a good deal to work at a startup and get the equity that you're offered, then you can negotiate or you can just walk away from the deal and work somewhere else. There are many tens of thousands of jobs that I personally don't think are a good deal, or I wouldn't work there. But for other people, they are a good deal. I don't really understand where this belief comes from that, because you personally don't find it to be a good deal, that it's objectively unfair for everyone else, even as they're accepting it willingly.
> But you said earlier that YC pays founders for living expenses. What risk are YC founders taking?
I could have easily gone and gotten a job at Google and made a lot more money very easily. Instead, I spent a ton of time and effort trying to create something new in the world and take it from zero to one. That was a lot of personal sacrifice, giving up my nights and weekends and living off Ramen noodles and almost no money. Just that I could get something successful and useful enough to be in a position to realistically even apply to YC and hopefully get accepted. And I was still rejected twice before finally getting in.
If you think being a founder is so risk-free, so easy, and such a good deal because of how much equity you get to keep, then presumably what should happen is many more people should find the prospect attractive and become founders, relative to becoming early-stage employees, and that should drive up the prices that early-stage employees are able to charge.
I think the way we can summarize exactly what you said as:
Selling labor on the labor market, well, you can just go find whatever offer is on the labor market (e.g., your first five paragraphs)
You had to beat out a bunch of other people and get rejected twice in order to go the startup route. However, I think you are mistaking hard work and low pay for risk in this transaction.
There's no risk because, like you said, "I could have easily gone and gotten a job at Google and made a lot more money very easily." You can always go back to selling your labor on the market.
You aren't risking any personal property or savings. A college student is also living on ramen and giving up nights and weekends, but they are actually taking a bigger risk than a VC founder by paying tuition to the school.
What is happening here is that VCs/incubators are using scarcity as a quality filter since they're trying to buy good ideas/stake in early stage companies and dangle the founders' lottery ticket/casino jackpot to buy those ideas.
I think that startup founders are in weird sandwich between being exploited by VCs in the worst case and being unfairly over-compensated by them in the best case. I'm sure many of your early employees also worked nights and weekends just like you did, but they have less of an ownership stake than founders do.
Maybe the founder's scenario is similar to an NFL player, where average players have short careers and are left with broken bodies and dreams, while the star quarterbacks leave as billionaires. This is why the NFL has a players union.