6 ms·

I have a hard time believing this.

22 points by kylebragger 16y ago

michaelcampbell 16y ago
There's probably a bit of truth to it; I don't know what the r value of CEO salary vs. "success" to be, and to be sure there's A LOT more that plays into it. But it could play a small role. There's an old rule of thumb in stock trading (although it may be only from the person that told it to me; I've not heard it before or since) that says if a non New York based company opens an office in New York, particularly a big fancy one, sell immediately. The theory being that the CEO is trying to build a monument to himself rather than keeping on with a good business strategy.
BigZaphod 16y ago
Useless data point: Apple's CEO Steve Jobs has a salary of just $1/year. They seem to be doing pretty well...
- jmonegro 16y ago
  So do Larry Page and Sergey Brin. I'm sure $1/year has extraordinary tax benefits.
TomOfTTB 16y ago
I don't know Mr. Thiel and have no inside information on his views. But having worked in a startup I think I can see where he's coming from. To understand his point I think you have to realize there are two types of workers in the Valley: The trail blazers and the maintainers. Trail Blazers are the guys who are willing to work night and day and basically kill themselves to start a company up. In order to make that ordeal worth while you need to have a big pay out at the end. Maintainers are the guys who come in afterwards. Smart people but people who have outside lives they aren't willing to destroy for the company. These are the guys who make a successful startup into a long term company In my experience you can't successfully create a startup with maintainers. There's just too much that needs to happen in too short a time period. I think that is what Mr. Thiel is saying. His rules help you avoid a company trying to startup with maintainers. (For the record I know there are odd exceptions to this rule that can seamlessly transition from one role to the other. But in my experience they're very rare)
philh 16y ago
Thiel says: "In practice we have found that if you only ask one question, ask that." Bragger hears: "that should be the only factor when evaluating a startup’s chances of success". How much the CEO makes might not be the best predictor of startup success, but it might be the best one that you can accurately judge by asking a single question. You can't ask "is your product solid?" and expect a meaningful answer. Of course, since noone would ever try to predict a startup's chancess of success on the basis of a single question, it's also possible Thiel was just using artistic license.
kqueue 16y ago
I think you are taking his words too literally. It is just an additional hint he looks at when evaluating a company.
- billswift 16y ago
  If you don't mean something literally, then don't write it in non-fiction, especially not in a tech forum that has more than its share of Aspies.
  - jasonlotito 16y ago
    Hyperbole, meet billswift. Billswift, meet hyperbole.
goodside 16y ago
Thiel says immediately afterward that the average CEO he funds makes $100K-$125K, so when he says CEO pay should be low he isn't exactly talking about ramen. I would be extremely suspicious of any CEO who makes more than this and still considers herself to be running a startup. (Also, an off-topic peeve: Informative headlines are always appreciated. I wouldn't have clicked if I didn't see your name there.)
dododo 16y ago
given the $100-125K figure, it seems like the message isn't "lower = better" but "frugal = better". perhaps a frugal CEO makes for an efficient company.
starkfist 16y ago
I think the article is wrong and Peter Thiel is right. I've worked for 4 startups, the first 3, the CEO paid himself exorbitantly and they all died horrible deaths. The fourth, where I now work, the CEO is paid $32K/yr and we make more money per day than the other startups made their entire existence, combined.
alanh 16y ago
This HN submission smacks of Reddit-style clickbait. Adding "(CEO salary #1 predictor of success)" to the end would have been sufficient.
dreadlabs 16y ago
While I do believe that a lower CEO salary is a good indicator that the company isn't going to be financially frivolous I don't view it as the most important thing. That point however isn't the thing I take umbrage with, this line from the TC article is absolutely ridiculous: "In Startupland, everybody should be working towards the same goal: that big juicy exit." Seriously? What the hell happened to actually building a successful business? I find it quite pathetic that the very small minority of start-ups go for this model and 37signals* are the best known for this stance. The "big juicy exit" should be the exception that proves the rule and the sensationalist story people love to hear, not the status quo. *I personally wouldn't class 37signals as a start-up, IMO they're a stable, mature, successful business.
bonaldi 16y ago
Dreadful post. Why, exactly, does he have a hard time believing it? The post doesn't say; it merely re-iterates that the author is incredulous. Closest you get is this: "What ever happened to looking at the team, their vision, their track record, how well they’re executing, is the product solid, etc." Which doesn't dismiss the point of the original. Say you look at those things ... exactly how good could they be to outweigh the fact that the CEO downwards are extracting exorbitant amounts of value from a fledging firm? The original article's point is: never good enough. There are similar truisms in many fields. (eg, the now well-cited example that the only thing that truly dooms a relationship is contempt). Finding them takes experience, and incredulity doesn't counter that.
abstractbill 16y ago
What about ... building a thriving business that generates — gasp — actual profit? Why would I as an equity-holder care if the company is generating a profit, unless that helps it exit? The only way I'm ever going to see a return is if the company exits. If it's profitable but cannot exit (from what I've heard, porn sites would be examples of this), then it's worthless to me.
jheriko 16y ago
Yeah, its not hard to grasp... spending less money on CEO automatically implies more profit, but more importantly it reveals some of their personality - if you want a business to succeed you don't want a large paycheck - you want that if you are greedy, and greed is a poor motivator. Its a shame most businesses rely on this - its no wonder that everyone everywhere seems to constantly complain about their managers etc. Would they have applied for the job if it didn't come with more money? What does that say about their suitability? Why offer more money? If you are employing your self the same logic applies.
joshu 16y ago
The bigger the CEO's house, the worse the performance of the company: http://www.slate.com/id/2162989 http://www.slate.com/id/2162989

22 points by kylebragger 16y ago

There's probably a bit of truth to it; I don't know what the r value of CEO salary vs. "success" to be, and to be sure there's A LOT more that plays into it. But it could play a small role. There's an old rule of thumb in stock trading (although it may be only from the person that told it to me; I've not heard it before or since) that says if a non New York based company opens an office in New York, particularly a big fancy one, sell immediately. The theory being that the CEO is trying to build a monument to himself rather than keeping on with a good business strategy.

BigZaphod 16y ago

Useless data point: Apple's CEO Steve Jobs has a salary of just $1/year. They seem to be doing pretty well...

jmonegro 16y ago
So do Larry Page and Sergey Brin. I'm sure $1/year has extraordinary tax benefits.

TomOfTTB 16y ago

I don't know Mr. Thiel and have no inside information on his views. But having worked in a startup I think I can see where he's coming from. To understand his point I think you have to realize there are two types of workers in the Valley: The trail blazers and the maintainers. Trail Blazers are the guys who are willing to work night and day and basically kill themselves to start a company up. In order to make that ordeal worth while you need to have a big pay out at the end. Maintainers are the guys who come in afterwards. Smart people but people who have outside lives they aren't willing to destroy for the company. These are the guys who make a successful startup into a long term company In my experience you can't successfully create a startup with maintainers. There's just too much that needs to happen in too short a time period. I think that is what Mr. Thiel is saying. His rules help you avoid a company trying to startup with maintainers. (For the record I know there are odd exceptions to this rule that can seamlessly transition from one role to the other. But in my experience they're very rare)

philh 16y ago

Thiel says: "In practice we have found that if you only ask one question, ask that." Bragger hears: "that should be the only factor when evaluating a startup’s chances of success". How much the CEO makes might not be the best predictor of startup success, but it might be the best one that you can accurately judge by asking a single question. You can't ask "is your product solid?" and expect a meaningful answer. Of course, since noone would ever try to predict a startup's chancess of success on the basis of a single question, it's also possible Thiel was just using artistic license.

kqueue 16y ago

I think you are taking his words too literally. It is just an additional hint he looks at when evaluating a company.

billswift 16y ago
If you don't mean something literally, then don't write it in non-fiction, especially not in a tech forum that has more than its share of Aspies.
- jasonlotito 16y ago
  Hyperbole, meet billswift. Billswift, meet hyperbole.

goodside 16y ago

Thiel says immediately afterward that the average CEO he funds makes $100K-$125K, so when he says CEO pay should be low he isn't exactly talking about ramen. I would be extremely suspicious of any CEO who makes more than this and still considers herself to be running a startup. (Also, an off-topic peeve: Informative headlines are always appreciated. I wouldn't have clicked if I didn't see your name there.)

dododo 16y ago

given the $100-125K figure, it seems like the message isn't "lower = better" but "frugal = better". perhaps a frugal CEO makes for an efficient company.

starkfist 16y ago

I think the article is wrong and Peter Thiel is right. I've worked for 4 startups, the first 3, the CEO paid himself exorbitantly and they all died horrible deaths. The fourth, where I now work, the CEO is paid $32K/yr and we make more money per day than the other startups made their entire existence, combined.

alanh 16y ago

This HN submission smacks of Reddit-style clickbait. Adding "(CEO salary #1 predictor of success)" to the end would have been sufficient.

dreadlabs 16y ago

While I do believe that a lower CEO salary is a good indicator that the company isn't going to be financially frivolous I don't view it as the most important thing. That point however isn't the thing I take umbrage with, this line from the TC article is absolutely ridiculous: "In Startupland, everybody should be working towards the same goal: that big juicy exit." Seriously? What the hell happened to actually building a successful business? I find it quite pathetic that the very small minority of start-ups go for this model and 37signals* are the best known for this stance. The "big juicy exit" should be the exception that proves the rule and the sensationalist story people love to hear, not the status quo. *I personally wouldn't class 37signals as a start-up, IMO they're a stable, mature, successful business.

bonaldi 16y ago

Dreadful post. Why, exactly, does he have a hard time believing it? The post doesn't say; it merely re-iterates that the author is incredulous. Closest you get is this: "What ever happened to looking at the team, their vision, their track record, how well they’re executing, is the product solid, etc." Which doesn't dismiss the point of the original. Say you look at those things ... exactly how good could they be to outweigh the fact that the CEO downwards are extracting exorbitant amounts of value from a fledging firm? The original article's point is: never good enough. There are similar truisms in many fields. (eg, the now well-cited example that the only thing that truly dooms a relationship is contempt). Finding them takes experience, and incredulity doesn't counter that.

abstractbill 16y ago

What about ... building a thriving business that generates — gasp — actual profit? Why would I as an equity-holder care if the company is generating a profit, unless that helps it exit? The only way I'm ever going to see a return is if the company exits. If it's profitable but cannot exit (from what I've heard, porn sites would be examples of this), then it's worthless to me.

jheriko 16y ago

Yeah, its not hard to grasp... spending less money on CEO automatically implies more profit, but more importantly it reveals some of their personality - if you want a business to succeed you don't want a large paycheck - you want that if you are greedy, and greed is a poor motivator. Its a shame most businesses rely on this - its no wonder that everyone everywhere seems to constantly complain about their managers etc. Would they have applied for the job if it didn't come with more money? What does that say about their suitability? Why offer more money? If you are employing your self the same logic applies.

joshu 16y ago

The bigger the CEO's house, the worse the performance of the company: http://www.slate.com/id/2162989 http://www.slate.com/id/2162989