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Kevin Systrom made around $400M before tax when he sold Instagram. After 15% CGT, there's $340M left in cash. Whether this is a "fair" reward or not is a politi

by chiaro 11y ago

Kevin Systrom made around $400M before tax when he sold Instagram. After 15% CGT, there's $340M left in cash. Whether this is a "fair" reward or not is a political opinion. I'll put forward mine here: 1. Equity stake is a poor proxy for share of value added, or risk assumed. One man alone did not create $400M worth of value. 2. Massive payouts provide incentives, but is $340M such a greater incentive than, say, $100M? If founders knew they could not make more than $100M, they would work just as hard. 3. The amount of money gained exceeds both the value created and the amount required to be sufficiently motivating. The remaining $300M, could therefore more equitably be used to save around 60,000 lives with negligible ill effect. This is one case (sorry Kevin) but I think it illustrates how out of whack things can seem. The whole pg post came off as very defensive, almost kind of persecuted. Which is understandable, that's the knee-jerk reaction to criticism levelled at one's moral standing. Here's hoping he'll be a little more analytical and take his ego out of the analysis in future.

argonaut 11y ago
> Massive payouts provide incentives, but is $340M such a greater incentive than, say, $100M Yes, it can be. At least the general principle of not capping upside. For someone with $0, sure, I'd agree that $100M is approximately within the same region of desire as $340M, and maybe even $1B. But if a founder had already made $100M, the prospect of making only another $100M will ensure that you'll have fewer repeat founders. You'll still have people like Elon Musk, who I think would have started SpaceX/Tesla even if he knew he couldn't become a billionaire for tax reasons, but some founders would be dissuaded from starting new companies after their initial $100M gain, if there wasn't the prospect of making billions on their next venture. Ironically, at some point in time Elon Musk went broke spending his money on his post-PayPal ventures, and was borrowing money from friends. If he had made less money from PayPal, we would not have Tesla/SpaceX, or at least he would have sold them early.

by chiaro 11y ago

argonaut 11y ago

> Massive payouts provide incentives, but is $340M such a greater incentive than, say, $100M Yes, it can be. At least the general principle of not capping upside. For someone with $0, sure, I'd agree that $100M is approximately within the same region of desire as $340M, and maybe even $1B. But if a founder had already made $100M, the prospect of making only another $100M will ensure that you'll have fewer repeat founders. You'll still have people like Elon Musk, who I think would have started SpaceX/Tesla even if he knew he couldn't become a billionaire for tax reasons, but some founders would be dissuaded from starting new companies after their initial $100M gain, if there wasn't the prospect of making billions on their next venture. Ironically, at some point in time Elon Musk went broke spending his money on his post-PayPal ventures, and was borrowing money from friends. If he had made less money from PayPal, we would not have Tesla/SpaceX, or at least he would have sold them early.