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This is the entire foundation of capitalism. The idea is that people who own capital only reward other people for their time who help add to their capital. If c

This is the entire foundation of capitalism. The idea is that people who own capital only reward other people for their time who help add to their capital. If companies distributed all of the gains in terms of stock awards to employees, you will see very different asset distribution in our society.

gojomo 5y ago
'Capitalism' is neither theoretically, nor in practice, limited to "only reward people for their time". Some industries where the labor is low-skilled trend that way.
- SequoiaHope 5y ago
  The basic concept of capitalism is that there are capital owners, and they hire workers who use that capital to generate value. The capital owners receive all of that value and then pay the workers for their time. This is not a comprehensive description of capitalism but it is the low level idea. Obviously there is a distribution of real world behaviors.
  - AYBABTME 5y ago
    Capitalism is about trade and industry being done by private owners, instead of by the state. It's a decentralized economic system that acknowledges a state's inability to fully plan the economy due to imperfect information. It's not anchored in labor exploitation.
    - SequoiaHope 5y ago
      > Capitalism is about trade and industry being done by private owners, instead of by the state. It's a decentralized economic system that acknowledges a state's inability to fully plan the economy due to imperfect information. > The basic concept of capitalism is that there are capital owners, and they hire workers who use that capital to generate value. The capital owners receive all of that value and then pay the workers for their time. These are both true.
    - deleted 5y ago
      [deleted]
    - davmar 5y ago
      capitalism cannot differentiate between efficiency and exploitation
    - heavyset_go 5y ago
      State capitalism exists.
    - kqr 5y ago
      This is incorrect. You can have state capitalism as well as non-state non-capitalism (worker-owned cooperatives are a common example of private non-capitalism). As the person you're responding to said, capitalism is the philosophy that concentration of capital should be rewarded. It's that simple. Whether the state or private magnates concentrate the capital and get rewarded for it is irrelevant.
  - gojomo 5y ago
    That's only the 'basic concept of capitalism' at a reductionist Fischer-Price level-of-understanding by its detractors. That's just as impoverished a model of the real world, in its own way, as simple microeconomics analyses of 'perfect competition'.
    - SequoiaHope 5y ago
      I disagree. The description I used is helpful in distinguishing capitalism from previous modes of production like feudalism or alternatives like communism. I explicitly said the description is not comprehensive, but it is one aspect of capitalism.
    - TaylorAlexander 5y ago
      > a reductionist Fischer-Price level-of-understanding By the way I got this from Richard Wolff. Here is his education history: B.A. History magna cum laude Harvard 1963 M.A. Economics Stanford 1964 M.A. Economics Yale 1966 M.A. History Yale 1967 Ph.D. Economics Yale 1969
      - gojomo 5y ago
        Ideology can make even the highly-credentialed pretty dumb. But did Mr. Wolff really say – "The basic concept of capitalism is that there are capital owners, and they hire workers who use that capital to generate value. The capital owners receive all of that value and then pay the workers for their time." – ? Where?
qsort 5y ago
You would also see much fewer companies to begin with. Maybe there's a better way to reward highly skilled people than beating this extremely dead horse?
- deleted 5y ago
  [deleted]
- sytelus 5y ago
  Capitalism has nothing to do with fewer or more companies. A founder can currently be rewarded as much as 1000000X than an average employee simply because the arrangement is that employee gets paid for time (a highly limited quantity) while founder gets paid for capital (virtually unlimited quantity). Assume that you forced founders not to capture all of the capital gains generated by employees such that the founder was rewarded "only" 1000X more than average employee. I don't think this is so badly under-rewaeded that founders will just stop being founders.
  - zozbot234 5y ago
    A founder that's rewarded 1000000X is cashing in on a lottery ticket. That's all there is to it. Just as in most lotteries, even most founders are losers.
tonyedgecombe 5y ago
>If companies distributed all of the gains in terms of stock awards to employees Then there would be no incentive for investment.
- AnimalMuppet 5y ago
  Exactly. And investment includes buying the tools that lets the worker be productive enough to create a surplus. There's three people (or entities) in this: the one who makes the tool, the one who buys the tool, and the one who uses the tool. All of them need some of the rewards from the increased productivity that the tool empowers, otherwise we stop getting tools that let us be more productive, and we're all worse off. So you have to pay both the capitalists and the workers. Now, you can argue that the pendulum has swung too far in the direction of the capitalists. That's a defensible position. But the answer is not to move to "the workers get 100% of the gains". That's going to leave everyone worse off, including the workers.
- heavyset_go 5y ago
  There would be if employees themselves were worker-owners.
tw600040 5y ago
That would be fair if companies can also distribute losses if any and are able to get money back from employees
- steveylang 5y ago
  Maybe so, but stockholders aren't responsible for company losses either.
  - tw600040 5y ago
    They are. They lose their money / investment if companies go bankrupt or don't do well.
    - sfblah 5y ago
      Not in the past 5-10 years...
      - umeshunni 5y ago
        Huh? A gentle look at WSB will tell you a lot about stockholders who lost money.
    - sumedh 5y ago
      > They lose their money / investment if companies go bankrupt or don't do well. The CEOs of such companies get multi million dollar packages for leaving.
- 6gvONxR4sf7o 5y ago
  Would it? As I understand it, most companies don't distribute losses to owners either. I believe that's the core of "limited liability" corporations. Except for capital losses for shareholders, but employees are already paid in RSUs too, so I think that's relatively moot.
deleted 5y ago
[deleted]
rmbyrro 5y ago
Problem is the employees aren't willing to bear the risk that early investors were willing to. If the entire society had a similar level of appetite for risk, we'd see a different asset distribution in society. Since most people are terribly averse to losing anything, they also shut down the perspective of winning big.
- noncoml 5y ago
  It’s not about being willing, it’s about being able too. Imagine there is a lottery where for every 10 million tickets you buy you get one that is giving you 20 millions back. No brainer, right? Except if you don’t have the 10 million to spare, buying lottery tickets instead of food doesn’t make sense. Labor/job is your single lottery ticket. Investors can afford to buy all tickets to make sure they win.
  - robrenaud 5y ago
    Make a lot of friends, buy up the tickets together, and split the winnings. Applied another way, everyone in a given class of YC should share a bit of ownership with everyone else in their YC class, and then everyone of them is likely to end up a millionare.
    - twojacobtwo 5y ago
      This is where the analogy fails, I think, because it assumes a static market price, or a lack of competition for the tickets. Where the price changes or competition changes availability, we run into the same issues where those who already have power/money are more able to exploit the system than those who have to collude just to have a shot.
    - robocat 5y ago
      FYI this is an analysis of your average returns at YC: https://80000hours.org/2014/05/how-much-do-y-combinator-founders-earn/ https://80000hours.org/2014/05/how-much-do-y-combinator-foun... I still wish that YC would provide some more concrete figures, and ideally include separate figures for first employees as well as founders. From link: “Most of the returns have gone to a tiny minority of super-successes. The founders of AirBnB, Dropbox and Stripe are worth about US$7 billion, about 80% of all founders’ equity, although they account for 0.5% of the companies. Outside of the most successful companies, it was still possible to earn significant returns. 12% of companies from the first five years of Y Combinator are now worth US$40 million or more, and a further 10% have sold for US$5-40 million. The remainder probably earned little more than their (low) salaries.”.
mrh0057 5y ago
It’s suppose to be the value you added. The investors get payment for the risk they take by investing in or loaning money to the company. If a company has monopoly power and/or gets bailed out by the government consistently there is no risk to investors. What ends up happening is rent seeking a behavior by theses companies and they will also take unnecessary risks since they are incentivized to.

gojomo 5y ago

'Capitalism' is neither theoretically, nor in practice, limited to "only reward people for their time". Some industries where the labor is low-skilled trend that way.

SequoiaHope 5y ago
The basic concept of capitalism is that there are capital owners, and they hire workers who use that capital to generate value. The capital owners receive all of that value and then pay the workers for their time. This is not a comprehensive description of capitalism but it is the low level idea. Obviously there is a distribution of real world behaviors.
- AYBABTME 5y ago
  Capitalism is about trade and industry being done by private owners, instead of by the state. It's a decentralized economic system that acknowledges a state's inability to fully plan the economy due to imperfect information. It's not anchored in labor exploitation.
  - SequoiaHope 5y ago
    > Capitalism is about trade and industry being done by private owners, instead of by the state. It's a decentralized economic system that acknowledges a state's inability to fully plan the economy due to imperfect information. > The basic concept of capitalism is that there are capital owners, and they hire workers who use that capital to generate value. The capital owners receive all of that value and then pay the workers for their time. These are both true.
  - deleted 5y ago
    [deleted]
  - davmar 5y ago
    capitalism cannot differentiate between efficiency and exploitation
  - heavyset_go 5y ago
    State capitalism exists.
  - kqr 5y ago
    This is incorrect. You can have state capitalism as well as non-state non-capitalism (worker-owned cooperatives are a common example of private non-capitalism). As the person you're responding to said, capitalism is the philosophy that concentration of capital should be rewarded. It's that simple. Whether the state or private magnates concentrate the capital and get rewarded for it is irrelevant.
- gojomo 5y ago
  That's only the 'basic concept of capitalism' at a reductionist Fischer-Price level-of-understanding by its detractors. That's just as impoverished a model of the real world, in its own way, as simple microeconomics analyses of 'perfect competition'.
  - SequoiaHope 5y ago
    I disagree. The description I used is helpful in distinguishing capitalism from previous modes of production like feudalism or alternatives like communism. I explicitly said the description is not comprehensive, but it is one aspect of capitalism.
  - TaylorAlexander 5y ago
    > a reductionist Fischer-Price level-of-understanding By the way I got this from Richard Wolff. Here is his education history: B.A. History magna cum laude Harvard 1963 M.A. Economics Stanford 1964 M.A. Economics Yale 1966 M.A. History Yale 1967 Ph.D. Economics Yale 1969
    - gojomo 5y ago
      Ideology can make even the highly-credentialed pretty dumb. But did Mr. Wolff really say – "The basic concept of capitalism is that there are capital owners, and they hire workers who use that capital to generate value. The capital owners receive all of that value and then pay the workers for their time." – ? Where?

qsort 5y ago

You would also see much fewer companies to begin with. Maybe there's a better way to reward highly skilled people than beating this extremely dead horse?

deleted 5y ago
[deleted]
sytelus 5y ago
Capitalism has nothing to do with fewer or more companies. A founder can currently be rewarded as much as 1000000X than an average employee simply because the arrangement is that employee gets paid for time (a highly limited quantity) while founder gets paid for capital (virtually unlimited quantity). Assume that you forced founders not to capture all of the capital gains generated by employees such that the founder was rewarded "only" 1000X more than average employee. I don't think this is so badly under-rewaeded that founders will just stop being founders.
- zozbot234 5y ago
  A founder that's rewarded 1000000X is cashing in on a lottery ticket. That's all there is to it. Just as in most lotteries, even most founders are losers.

tonyedgecombe 5y ago

>If companies distributed all of the gains in terms of stock awards to employees Then there would be no incentive for investment.

AnimalMuppet 5y ago
Exactly. And investment includes buying the tools that lets the worker be productive enough to create a surplus. There's three people (or entities) in this: the one who makes the tool, the one who buys the tool, and the one who uses the tool. All of them need some of the rewards from the increased productivity that the tool empowers, otherwise we stop getting tools that let us be more productive, and we're all worse off. So you have to pay both the capitalists and the workers. Now, you can argue that the pendulum has swung too far in the direction of the capitalists. That's a defensible position. But the answer is not to move to "the workers get 100% of the gains". That's going to leave everyone worse off, including the workers.
heavyset_go 5y ago
There would be if employees themselves were worker-owners.

tw600040 5y ago

That would be fair if companies can also distribute losses if any and are able to get money back from employees

steveylang 5y ago
Maybe so, but stockholders aren't responsible for company losses either.
- tw600040 5y ago
  They are. They lose their money / investment if companies go bankrupt or don't do well.
  - sfblah 5y ago
    Not in the past 5-10 years...
    - umeshunni 5y ago
      Huh? A gentle look at WSB will tell you a lot about stockholders who lost money.
  - sumedh 5y ago
    > They lose their money / investment if companies go bankrupt or don't do well. The CEOs of such companies get multi million dollar packages for leaving.
6gvONxR4sf7o 5y ago
Would it? As I understand it, most companies don't distribute losses to owners either. I believe that's the core of "limited liability" corporations. Except for capital losses for shareholders, but employees are already paid in RSUs too, so I think that's relatively moot.

deleted 5y ago

[deleted]

rmbyrro 5y ago

Problem is the employees aren't willing to bear the risk that early investors were willing to. If the entire society had a similar level of appetite for risk, we'd see a different asset distribution in society. Since most people are terribly averse to losing anything, they also shut down the perspective of winning big.

noncoml 5y ago
It’s not about being willing, it’s about being able too. Imagine there is a lottery where for every 10 million tickets you buy you get one that is giving you 20 millions back. No brainer, right? Except if you don’t have the 10 million to spare, buying lottery tickets instead of food doesn’t make sense. Labor/job is your single lottery ticket. Investors can afford to buy all tickets to make sure they win.
- robrenaud 5y ago
  Make a lot of friends, buy up the tickets together, and split the winnings. Applied another way, everyone in a given class of YC should share a bit of ownership with everyone else in their YC class, and then everyone of them is likely to end up a millionare.
  - twojacobtwo 5y ago
    This is where the analogy fails, I think, because it assumes a static market price, or a lack of competition for the tickets. Where the price changes or competition changes availability, we run into the same issues where those who already have power/money are more able to exploit the system than those who have to collude just to have a shot.
  - robocat 5y ago
    FYI this is an analysis of your average returns at YC: https://80000hours.org/2014/05/how-much-do-y-combinator-founders-earn/ https://80000hours.org/2014/05/how-much-do-y-combinator-foun... I still wish that YC would provide some more concrete figures, and ideally include separate figures for first employees as well as founders. From link: “Most of the returns have gone to a tiny minority of super-successes. The founders of AirBnB, Dropbox and Stripe are worth about US$7 billion, about 80% of all founders’ equity, although they account for 0.5% of the companies. Outside of the most successful companies, it was still possible to earn significant returns. 12% of companies from the first five years of Y Combinator are now worth US$40 million or more, and a further 10% have sold for US$5-40 million. The remainder probably earned little more than their (low) salaries.”.

mrh0057 5y ago

It’s suppose to be the value you added. The investors get payment for the risk they take by investing in or loaning money to the company. If a company has monopoly power and/or gets bailed out by the government consistently there is no risk to investors. What ends up happening is rent seeking a behavior by theses companies and they will also take unnecessary risks since they are incentivized to.