4 ms·

No, many people believe the value of money in non-linear but most of those people believe that the marginal utility of each additional dollars diminishes as you

by rlanday 10y ago

No, many people believe the value of money in non-linear but most of those people believe that the marginal utility of each additional dollars diminishes as your wealth increases, rather than increasing. I.e. even if you might earn more money on average at a startup (which the article claims isn’t the case), it still wouldn’t be worth it because it’s better to earn a decent salary from a big company with high probability. Who seriously believes that the marginal value of money increases as you have more?

zachsnow 10y ago
Interesting that while I agree that the marginal value decreases I also feel (literally feel) that somehow having say an order of magnitude more would somehow be qualitatively different (and better). Funny to see my own biases play tricks (?) on me!
- phamilton 10y ago
  I think one could define a metric in which average result is higher for startup employees than for BigCo employees. Someone with $100M has access to politics/investments/etc that most people earning $250k/yr don't. So while the average monetary payout is smaller (1% chance at $100M is equal to a 50% chance at 2M), average social currency is much higher. (1% chance at the social power that comes with $100M vs 0% chance in the BigCo job).
  - jwatte 10y ago
    You'll only make $100M of you're a founder of one of the very few really large, successful companies. It's a 1 in 10,000 chance or worse, not 1 in 10. (And mean value of $100M at 0.01% right now is only $10k)
- djur 10y ago
  Paradoxically, I think that you feel that way _because_ of the decreasing marginal value of money. Superfluous income is disposable income, and spending money in a way entirely of your choosing is pleasurable. Especially if you're already making enough to get by, the value of the money you're already making is "priced in" to your subconscious analysis. Thus, the next order of magnitude of income really is qualitatively different.
  - superuser2 10y ago
    > Superfluous income is disposable income Only if you don't rent a nicer/closer apartment. (OTOH, lower commute times are associated with happiness).
  - zachsnow 10y ago
    Of course, this is a good interpretation! Cheers.
- arcticfox 10y ago
  Unless you think that marginal value decreases at quite an exponential rate, an order of magnitude more would probably be noticeably better. That's a huge difference (e.g. the difference between minimum wage and well-to-do, between well-to-do and rich). Until maybe ~$100M net worth, for me personally, I think an order of magnitude difference would indeed be qualitatively different / better.
arcticfox 10y ago
I also believe that the marginal utility of additional dollars decreases, but I prefer the startup value prop for me. My personal calculation is something like this, where "value" is some personal average of marginal utility: Big co: $50k extra from $100k -> $150k = $50k * 1 value / dollar * 100% = 50k value Startup: $10M extra from $100k -> $10M = $10M * 0.25 value / dollar = 2.5M value * 5% chance of success = 125k value There's also the intangible value of having hope for big success.
- thedufer 10y ago
  The entire point of the article in question is that startup employees make less on average, so forgive me if I'm a bit skeptical of your claim that the startup job will pay on average a full order of magnitude more.
jwatte 10y ago
With $1M net worth (expect $40k/year annuity,) you'd have to live frugally to be truly independent, especially of you have a family. With $5M net worth, you could live well, independently. A 9-5 is unlikely to let you save $1M, much less $5M, unless you're high level in a big company. If you're very early in a big success, you can get there. However, in many ways, employee 15 and up is the worst of both worlds. Small stock grant, sub market salary and benefits.
- deleted 10y ago
  [deleted]
- AstralStorm 10y ago
  Caveat lector: author is talking about USA.
orangecat 10y ago
Who seriously believes that the marginal value of money increases as you have more? There are plausible arguments that money can often have increasing marginal utility for poor people. Google "bee sting theory of poverty".
- ojbyrne 10y ago
  That's not really the relevant range for this discussion.

by rlanday 10y ago

zachsnow 10y ago

Interesting that while I agree that the marginal value decreases I also feel (literally feel) that somehow having say an order of magnitude more would somehow be qualitatively different (and better). Funny to see my own biases play tricks (?) on me!

phamilton 10y ago
I think one could define a metric in which average result is higher for startup employees than for BigCo employees. Someone with $100M has access to politics/investments/etc that most people earning $250k/yr don't. So while the average monetary payout is smaller (1% chance at $100M is equal to a 50% chance at 2M), average social currency is much higher. (1% chance at the social power that comes with $100M vs 0% chance in the BigCo job).
- jwatte 10y ago
  You'll only make $100M of you're a founder of one of the very few really large, successful companies. It's a 1 in 10,000 chance or worse, not 1 in 10. (And mean value of $100M at 0.01% right now is only $10k)
djur 10y ago
Paradoxically, I think that you feel that way _because_ of the decreasing marginal value of money. Superfluous income is disposable income, and spending money in a way entirely of your choosing is pleasurable. Especially if you're already making enough to get by, the value of the money you're already making is "priced in" to your subconscious analysis. Thus, the next order of magnitude of income really is qualitatively different.
- superuser2 10y ago
  > Superfluous income is disposable income Only if you don't rent a nicer/closer apartment. (OTOH, lower commute times are associated with happiness).
- zachsnow 10y ago
  Of course, this is a good interpretation! Cheers.
arcticfox 10y ago
Unless you think that marginal value decreases at quite an exponential rate, an order of magnitude more would probably be noticeably better. That's a huge difference (e.g. the difference between minimum wage and well-to-do, between well-to-do and rich). Until maybe ~$100M net worth, for me personally, I think an order of magnitude difference would indeed be qualitatively different / better.

arcticfox 10y ago

I also believe that the marginal utility of additional dollars decreases, but I prefer the startup value prop for me. My personal calculation is something like this, where "value" is some personal average of marginal utility: Big co: $50k extra from $100k -> $150k = $50k * 1 value / dollar * 100% = 50k value Startup: $10M extra from $100k -> $10M = $10M * 0.25 value / dollar = 2.5M value * 5% chance of success = 125k value There's also the intangible value of having hope for big success.

thedufer 10y ago
The entire point of the article in question is that startup employees make less on average, so forgive me if I'm a bit skeptical of your claim that the startup job will pay on average a full order of magnitude more.

jwatte 10y ago

With $1M net worth (expect $40k/year annuity,) you'd have to live frugally to be truly independent, especially of you have a family. With $5M net worth, you could live well, independently. A 9-5 is unlikely to let you save $1M, much less $5M, unless you're high level in a big company. If you're very early in a big success, you can get there. However, in many ways, employee 15 and up is the worst of both worlds. Small stock grant, sub market salary and benefits.

deleted 10y ago
[deleted]
AstralStorm 10y ago
Caveat lector: author is talking about USA.

orangecat 10y ago

Who seriously believes that the marginal value of money increases as you have more? There are plausible arguments that money can often have increasing marginal utility for poor people. Google "bee sting theory of poverty".

ojbyrne 10y ago
That's not really the relevant range for this discussion.