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It's not disingenuous, it's simply a description of the market reality of both capital and labor and why they both have prices. Supplying capital is compensate
by fighterpilot 5y ago
It's not disingenuous, it's simply a description of the market reality of both capital and labor and why they both have prices.
Supplying capital is compensated by the market because it's a scarce factor of production. It is a scarce factor of production because (i) there are risks associated with its provision, (ii) there's an opportunity cost. Nobody would invest in a startup if there wasn't an expectation of an ROI. Because it's risky, that ROI is high. The ROI is high because the cost base is deflated by the market. This is a risk premium, and it's built into the cost base by supply and demand. This basic mechanism underpins all capital markets and is the reason capital markets function at all.
Your statement about the scalability of capital is of course true. Capital offers the owner intense amounts of leverage and scale. The same can in general not be said about labor except in domains where that labor is scaled by technology (e.g. dev), media (e.g. instagram influencer), or being in a managerial position (e.g. decisions impact 1000-person org), which probably covers about 2% of the workforce.
- rorykoehler 5y agoWhat’s disingenuous is mentioning both as if they are somehow equivalents
- fighterpilot 5y agoSince when are different factors of production equivalent? They're different factors of production for a reason.
- rorykoehler 5y agoI think we’re generally in agreement. Another consideration is that capital creation is controlled by the federal reserve or equivalent so supply is only as scarce as they say it is.