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Peter Thiel: Best Predictor of Startup Success Is Low CEO Pay
- jlogic77 18y agoCEO pay is a very good indicator. You should also pay attention to perks. Not all compensation is in terms of pay. A CEO to taking a lower compensation says to me they are taking the company seriously. It's another way they have skin in the game. If they aren't willing to sacrifice a little for the end game, may mean they are either purely in it for themselves or don't have confidence in the company. Either one is not so good for the company.
- jamiequint 18y agoI hope you're not suggesting you should sacrifice healthcare though... bad idea.
- jlogic77 18y agoI really talking more about expense accounts and other fringe benefits that don't necessarily benefit the business.
- DabAsteroid 18y agoIf your CEO requires a healthcare-nanny in order to stay healthy during a ~4-year start-up run, perhaps you should be shopping for a new CEO. IQ codes for both business-competency and self-healthcare competency. High-IQ individuals with little money and no health insurance tend to be healthier than the average person. Linda Gottfredson details this further: http://www.udel.edu/educ/gottfredson/reprints/pubtopics.htm#health http://www.udel.edu/educ/gottfredson/reprints/pubtopics.htm#...
- streety 18y ago"Tend to" is a nice statistic on a population level but has little relevance to you or me as individuals. I live in the UK were basic health care is free so perhaps I don't have the experience to comment but healthcare wouldn't be somewhere I would be trying to save a few pennies/cent.
- byrneseyeview 18y agoI live in the UK were basic health care is free No, you like in the UK, where basic healthcare is paid for by taxpayers. It doesn't become free because the money is taken rather than given.
- petercooper 18y agoBy that argument, it's not "free" to just walk down the street, because your tax dollars are paying to maintain that street - and reading a book at the library isn't "free" because you're paying for it through taxes. Heck, almost nothing's "free" by those criteria.
- DanielBMarkham 18y agoLots of stuff is free. Come couch surf at my place. I pay for it, but you enjoy it: it's free to you. Here's an ice cream cone. Once again, I paid, but you enjoy it. To you, it's free. Now -- use the powers of government to force people to pay taxes to buy you an ice cream cone? It's not free to you any more. The danger is that you start feeling like I'm going to give you ice cream cones anytime. I can correct you of that assumption pretty quickly. But when the giver is some anonymous blob, starts looking like free money.
- byrneseyeview 18y agoThe marginal cost of walking down the street is nearly zero. Likewise, the marginal cost of reading a book is minimal. But since we're discussing an industry with very high marginal costs (doctors' time is expensive!), not to mention higher depreciation (libraries have plenty of books that are more than fifty years old; hospital equipment ages a little faster). You're right. Almost nothing is 'free' by those criteria. Economists like to say that "There ain't no such thing as free lunch."
- pietro 18y agoAbsolutely. There's no such thing as a free lunch.
- 18y ago
- andrewf 18y agoI suspect the odds of a healthy person getting cancer are higher than the odds of a particular startup making it truly big.
- jamiequint 18y agoFooled again by the normal distribution I see. Too bad the outliers are what matter here. That is the whole point of health insurance. You don't get health insurance because you expect to get sick, you get it in case you get sick. Moreover the benefits far outweigh the cost. There are many non-sickness-related healthcare issues that may affect you as a startup founder. I know a number of people with really bad RSI and no health insurance who sure wished they had it right now.
- Protophore 18y agoIt's quite interesting how this has morphed from a discussion on the pay rate of a CEO being a good predictor of the success of a start-up to health coverage. One of the interesting ideas that many of the state-based health care systems have (Sweden for example) that the US should adopt is small out-clinic centers. The centers tend to have 1-2 doctors on staff and several nurses. People can either call in for a consult or walk in to the center. If they call in, the nurse will provide treatment options over the phone when possible or either ask the patient to come into the center or send a doctor out for a home visit. The centers have been very effective at reducing cost and giving people an alternative to going to the emergency room for things that do not require emergency treatment. While I tend to believe that private industry can do things more efficiently (cost-wise and man power required) than the government there are some things that really should be available universally, like health care. Removing the need for all of the currently uninsured people from going to the emergency room to receive care would probably save the industry a large amount of money and bring down costs significantly. I don't see private industry stepping forward to find a solution for this issue anytime soon so we'll most likely need the government to step in.
- axod 18y agoCould always start the company is a country where healthcare is provided ;)
- pc 18y agoVideo: http://www.ustream.tv/flash/video/698620 http://www.ustream.tv/flash/video/698620
- nishantmodak 18y agoStay Hungry, Stay Foolish! - Thats all matters I think. Steve Jobs Speech: http://in.youtube.com/watch?v=D1R-jKKp3NA http://in.youtube.com/watch?v=D1R-jKKp3NA
- boredguy8 18y agoIs there a difference between a "startup" and "starting a company"? I ask because, "In Startupland, everybody should be working towards the same goal: that big juicy exit," couldn't be further from my mind. I know what that means to me (as does my team) in terms of access to venture funding, but I'm not particularly interested in an "exit". I want to build a service that's beneficial and worth paying for and that is responsive to my customer's needs. Am I missing something, or do I need to change how I think about what I'm doing?
- alaskamiller 18y agostartups => exits company => provides services and products
- fallentimes 18y agohaha which is why all companies were startups at some point but not all startups will be companies.
- jon_dahl 18y agoWhy not startup => company => provides services and products => exit?
- axod 18y agoWell one reason would be that the startup needs to be bought by someone in the right position to exploit it before it can become profitable. So in that case, you could create a startup that in itself cannot be profitable, but when purchased by a larger company can become wildly profitable for them. I don't think that's an unusual case.
- ojbyrne 18y agoThat's TechCrunch editorializing - they're all about publicizing big exits. It makes for more page views.
- vizard 18y agoWhat about performance related pay? For example, pay directly tied to profits?
- jon_dahl 18y agoI think this is probably pre-profit pay. If your startup is cash-flow positive, then by all means, pay yourself a market rate!
- morbidkk 18y agoBy YC equation (5kn founders + 5k) 4 = 1 year bare minimum salary for founding team $100-125k is pretty good for funded startup then i.e. as good as corporate salary
- ScottWhigham 18y agoI think the article either leaves out a critical part of the speech or Peter just didn't cover it. That approach may be the right approach for CEOs of new companies that haven't taken big investment (like the TC50) or for first or second time CEOs of low capital requirement companies. I know he doesn't believe that for VC-backed companies or for companies in which the CEO brings huge value to the table in terms of past performance/experience/contacts. Bottom line: you aren't going to be able bring in a proven CEO for $100-$125k a year. I don't care whether you're in Cincinnati, Boston, Austin, Silicon Valley - you can't expect someone who has a $15,000/month mortgage (as a proven CEO would likely have) and expect him to work for $8k/mth. "Hmmmm - over the next four years of my life, I can make $600k a year plus bonuses/benefits working for ACME Corp or I can make $100k a year with the chance to take home a $3m-$5m payoff..."
- ojbyrne 18y agoMaybe the best CEOs for startups aren't "proven." I.e. first-time CEOs. I'm pretty sure I've read another VC saying that's exactly what they look for.
- far33d 18y agoYou are assuming a non-founder CEO. I think he would agree that founder-CEOs are also a good predictor of success.
- staunch 18y agoIf he's "proven" wouldn't he be wealthy enough to live off a measly $125k/yr for a couple years at least?
- ScottWhigham 18y agoI think you didn't read this: "Hmmmm - over the next four years of my life, I can make $600k a year plus bonuses/benefits working for ACME Corp or I can make $100k a year with the chance to take home a $3m-$5m payoff..."
- staunch 18y ago
- fallentimes 18y agoThiel was definitely nervous, but what he did say was awesome and interesting. I wish Arrington wouldn't have interrupted him EVERY OTHER SENTENCE. Christ. I wanted to hear what Thiel had to say, not Arrington's cheap shots about Slide and Chess.
- ardit33 18y agoFrom pictures and hearing about him I thought he would be more of a jock, but he was more of a ultimate geek.
- fallentimes 18y agoI wish I could find the link to the quote by him, but when he was at Paypal they actively tried to not hire jocks.
- steveplace 18y agoIf the interviewee played pickup basketball in his spare time, he would be out.
- rrf 18y agoInteresting that this is not a question on younoodle, a Thiel portfolio company (although previous salary is considered).
- diego 18y agoWhat he probably meant is that high CEO pay is a good predictor of failure. If the CEO of a startup that is looking for a big exit demands a high salary, that means he/she is not too convinced about the big payoff to come.
- mattmaroon 18y agoIn that case, I think I'm going to be the next Bill Gates.
- sgrove 18y agoIf the CEO sets the ceiling pay, and an acceptable range is $100-125k, what then constitutes acceptable pay for (non-CEO) founders? Is $60k too high (given reasonable funding, pre-profitability)? $80k? Just curious at what the usual funding agreements end up at.
- comatose_kid 18y agoI don't know the answer, but if I were CEO, I wouldn't care if I wasn't the highest paid person - as long as I am happy with the % of the company I owned. So if this view is reasonable, I don't think that the CEO's salary is a ceiling.
- comatose_kid 18y agoAn aside, but I wonder what the stats are on the signal to noise ratio (as judged by upvotes?) vs. average indentation depth of a particular discussion thread....