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> Assuming all of the risk is useful. I've never seen a multi-millionaire, let alone a billionaire actually take the cost of failure on personally. Risk extern

> Assuming all of the risk is useful. I've never seen a multi-millionaire, let alone a billionaire actually take the cost of failure on personally. Risk externalization is the theme of the era.

SpicyLemonZest 7y ago
I think you may be misunderstanding - "risk" here is a financial thing, not a personal risk of being tossed on the street. If someone is worth $10 billion and will lose $2 billion if their company fails, that's still a lot of risk being covered, even though it won't really change their life to only have $8 billion.
- claudiawerner 7y ago
  Doesn't that mean that all the employees taken on a much greater personal risk? Personal risk seems to have higher stakes than financial risk - so it's unclear why financial risk is so prized. When you lose $2 billion because your company fails, workers are thrown out onto the streets. What makes the $2 billion risk more valuable than peoples' livelihoods? I'd rather be a multi-billionaire who loses $2 billion than a mid-level worker who loses their job (and for a proper comparison you'd have to aggregate all the trouble caused by all the job losses the closing of the company has caused), especially in a country with a smaller social safety net. That alone tells me enough about the value of this "risk" supposedly so greatly undertaken by the owners to entitle them to perpetual gains on it.
  - SpicyLemonZest 7y ago
    Financial risk isn't prized in some moral sense. It's just an instrumentally valuable service. If a factory costs $100m to build, someone has to put $100m at risk to build it; no matter how much the workers self-organize they won't be able to build the factory if they don't have the $100m.
    - claudiawerner 7y ago
      It is prized in the sense of providing justification for huge salaries, which is the point of discussion here. Just as you couldn't build a factory without $100M, you couldn't operate it without workers - and sometimes, because they self-organize. In a capitalist economy, one needs capital and labour. Capital without labour is unproductive, and labour without capital is (usually) the same. Each and every employee takes a risk by being employed at a company. At the moment, it seems they are only compensated for their labour. Why is the owner of the company compensated for risk, possibly in addition to being compensated for labour, but the employees aren't?
      - pathseeker 7y ago
        >It is prized in the sense of providing justification for huge salaries No it's not. Investors don't take salaries. Many stocks don't even pay a dividend (e.g. most tech stocks).
        claudiawerner 7y ago
        Switch "salaries" for "compensation", then. If the idea is that risk-taking is inherently useful and therefore deserving of constant income, it must be shown why that risk is compensated in some cases (investors, CEOs) but not in others (employees). The argument was as follows: * People who do nothing useful gain high compensation (Debs). * Acutally, the high compensation is due to taking on "all the risk" * But employees also take on a large amount of personal risk which is not compensated. * Ah, but the kind of risk being discussed isn't personal risk, it's financial risk. * But this means that when constructing an argument for high compensation, financial risk is prized and personal risk is not. Why? The fact that investors don't take salaries is irrelevant to the discussion. The justification for their profit is still "financial risk" without regard for "personal risk".
        SpicyLemonZest 7y ago
        Stock appreciation isn't really "compensation". When Bezos for example gets billions of dollars richer, that's an artificial number from multiplying a NASDAQ price by his holdings - there's no actual flow of billions of dollars which could be redirected to employee salaries. The only way for employees to get a piece of the pie would be to give them stock. And most large companies do try to give their employees stock; even Walmart part-timers have an ESPP.
- blattimwind 7y ago
  "The consequences of $X failing will have no impact" is quite literally the definition of risk-free.
  - pathseeker 7y ago
    Losing $2 billion is not 'no impact'. That's money that could have been pumped into the economy somewhere else and could have done much better for both the investor and society. The investor might get some extra tries, but going from 5 attempts down to 4 is still a big loss.
strictnein 7y ago
Probably because a lot of that risk was taken before the success and you're looking at a filtered selection of results (the ones who succeeded).
- claudiawerner 7y ago
  So if the risk was taken before, why does that entitle the risktaker to seek constant gains on it? If I wrote a program essential for the success of the company, before the success of a company, would it entitle me to a perpetual percentage of the company's profits? The benefits of that program, by current standards, belong to the company perpetually. Why does the risk, taken on behalf of the company, only belong to the person in charge? By looking at employees, you're also looking at a filtered selection of results (the ones who were able to gain employment). The person who took the initial risk (say, a founder) may often leave the company or sell it. Who in the company has then assumed all of the risk? The person who bought the company? Even then, we're not living in a just world. What's admirable, or a social justification, for taking a risk in a business that operates in immoral ways, or illegal ways? I'm not saying this applies to Kickstarter, but it certainly applies to a great many other companies. And when GP said "assuming all the risk", I can't think how that's possibly true. Workers in all professions assume some level of risk every day - either to their safety, career prospects, or continued employment.
nouveaux 7y ago
Elon Musk invested all of his funds. Let's be honest, tons of people believed Tesla and SpaceX was going to fail. https://venturebeat.com/2010/05/27/elon-musk-personal-finances/ https://venturebeat.com/2010/05/27/elon-musk-personal-financ...
- kick 7y ago
  According to the filing — part of his pending divorce case from sci-fi novelist Justine Musk — Elon Musk has been living off personal loans from friends since October 2009 and spending $200,000 a month while making far less. Musk confirmed this in an interview with VentureBeat. Personal—not Tesla—burn-rate of $200,000 a month, and he still owned property.
karatestomp 7y ago
Putting aside that if "I may get slightly less rich but still never have to do anything, whatsoever, that I don't want to, ever, and neither will the next two generations of my family" is the risk please fucking sign me up for taking that "consequence of failure", I don't even need the chance at up-side.

> Assuming all of the risk is useful. I've never seen a multi-millionaire, let alone a billionaire actually take the cost of failure on personally. Risk externalization is the theme of the era.

SpicyLemonZest 7y ago

I think you may be misunderstanding - "risk" here is a financial thing, not a personal risk of being tossed on the street. If someone is worth $10 billion and will lose $2 billion if their company fails, that's still a lot of risk being covered, even though it won't really change their life to only have $8 billion.

claudiawerner 7y ago
Doesn't that mean that all the employees taken on a much greater personal risk? Personal risk seems to have higher stakes than financial risk - so it's unclear why financial risk is so prized. When you lose $2 billion because your company fails, workers are thrown out onto the streets. What makes the $2 billion risk more valuable than peoples' livelihoods? I'd rather be a multi-billionaire who loses $2 billion than a mid-level worker who loses their job (and for a proper comparison you'd have to aggregate all the trouble caused by all the job losses the closing of the company has caused), especially in a country with a smaller social safety net. That alone tells me enough about the value of this "risk" supposedly so greatly undertaken by the owners to entitle them to perpetual gains on it.
- SpicyLemonZest 7y ago
  Financial risk isn't prized in some moral sense. It's just an instrumentally valuable service. If a factory costs $100m to build, someone has to put $100m at risk to build it; no matter how much the workers self-organize they won't be able to build the factory if they don't have the $100m.
  - claudiawerner 7y ago
    It is prized in the sense of providing justification for huge salaries, which is the point of discussion here. Just as you couldn't build a factory without $100M, you couldn't operate it without workers - and sometimes, because they self-organize. In a capitalist economy, one needs capital and labour. Capital without labour is unproductive, and labour without capital is (usually) the same. Each and every employee takes a risk by being employed at a company. At the moment, it seems they are only compensated for their labour. Why is the owner of the company compensated for risk, possibly in addition to being compensated for labour, but the employees aren't?
    - pathseeker 7y ago
      >It is prized in the sense of providing justification for huge salaries No it's not. Investors don't take salaries. Many stocks don't even pay a dividend (e.g. most tech stocks).
      - claudiawerner 7y ago
        Switch "salaries" for "compensation", then. If the idea is that risk-taking is inherently useful and therefore deserving of constant income, it must be shown why that risk is compensated in some cases (investors, CEOs) but not in others (employees). The argument was as follows: * People who do nothing useful gain high compensation (Debs). * Acutally, the high compensation is due to taking on "all the risk" * But employees also take on a large amount of personal risk which is not compensated. * Ah, but the kind of risk being discussed isn't personal risk, it's financial risk. * But this means that when constructing an argument for high compensation, financial risk is prized and personal risk is not. Why? The fact that investors don't take salaries is irrelevant to the discussion. The justification for their profit is still "financial risk" without regard for "personal risk".
        SpicyLemonZest 7y ago
        Stock appreciation isn't really "compensation". When Bezos for example gets billions of dollars richer, that's an artificial number from multiplying a NASDAQ price by his holdings - there's no actual flow of billions of dollars which could be redirected to employee salaries. The only way for employees to get a piece of the pie would be to give them stock. And most large companies do try to give their employees stock; even Walmart part-timers have an ESPP.
blattimwind 7y ago
"The consequences of $X failing will have no impact" is quite literally the definition of risk-free.
- pathseeker 7y ago
  Losing $2 billion is not 'no impact'. That's money that could have been pumped into the economy somewhere else and could have done much better for both the investor and society. The investor might get some extra tries, but going from 5 attempts down to 4 is still a big loss.

strictnein 7y ago

Probably because a lot of that risk was taken before the success and you're looking at a filtered selection of results (the ones who succeeded).

claudiawerner 7y ago
So if the risk was taken before, why does that entitle the risktaker to seek constant gains on it? If I wrote a program essential for the success of the company, before the success of a company, would it entitle me to a perpetual percentage of the company's profits? The benefits of that program, by current standards, belong to the company perpetually. Why does the risk, taken on behalf of the company, only belong to the person in charge? By looking at employees, you're also looking at a filtered selection of results (the ones who were able to gain employment). The person who took the initial risk (say, a founder) may often leave the company or sell it. Who in the company has then assumed all of the risk? The person who bought the company? Even then, we're not living in a just world. What's admirable, or a social justification, for taking a risk in a business that operates in immoral ways, or illegal ways? I'm not saying this applies to Kickstarter, but it certainly applies to a great many other companies. And when GP said "assuming all the risk", I can't think how that's possibly true. Workers in all professions assume some level of risk every day - either to their safety, career prospects, or continued employment.

nouveaux 7y ago

Elon Musk invested all of his funds. Let's be honest, tons of people believed Tesla and SpaceX was going to fail. https://venturebeat.com/2010/05/27/elon-musk-personal-finances/ https://venturebeat.com/2010/05/27/elon-musk-personal-financ...

kick 7y ago
According to the filing — part of his pending divorce case from sci-fi novelist Justine Musk — Elon Musk has been living off personal loans from friends since October 2009 and spending $200,000 a month while making far less. Musk confirmed this in an interview with VentureBeat. Personal—not Tesla—burn-rate of $200,000 a month, and he still owned property.

karatestomp 7y ago

Putting aside that if "I may get slightly less rich but still never have to do anything, whatsoever, that I don't want to, ever, and neither will the next two generations of my family" is the risk please fucking sign me up for taking that "consequence of failure", I don't even need the chance at up-side.