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> People don't capture the full value of their labor Why would you expect people to capture the full value of their labor? Imagine you operate a business. You

> People don't capture the full value of their labor Why would you expect people to capture the full value of their labor? Imagine you operate a business. You do the math and determine that hiring a new employee will cost you $100K/year, but it will bring in $100K/year of revenue. In other words, the employee would capture the full value that they create (assuming nothing goes wrong). Do you hire that employee? Of course not. It doesn't make any business sense. It's more work for you, more risk for the company, and most importantly it provide $0 financial value to the company. It's an easy no. Now if you can hire someone for $100K and their addition will bring in $150K, that's a different story. You can't expect to capture the full value of your labor as an employee. However, you're also free from capturing the full value of the losses you might create. If you fail to ship your objectives or you accidentally drop the main DB and cost the company $100K, you don't receive a bill for the negative value you created. You get to keep your paychecks. > which leads to people not being incentivized to increase the value of their labor. This doesn't make sense at all. People increase the value of their labor all the time because it leads to more and better opportunities and gives more leverage in future negotiations. You don't have to capture the "full value" of your labor to have an incentive to improve.

deleted 5y ago
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AussieWog93 5y ago
>Do you hire that employee? Of course not. It doesn't make any business sense. It's more work for you, more risk for the company, and most importantly it provide $0 financial value to the company. It's an easy no. That's what the model predicts, but it's unfortunately not how companies beyond a certain size work in practice. Hiring decisions are not made by the business owner to increase profit, but middle-ranking members of the hierarchy who have their own parallel goals. Businesses can, and do, regularly hire employees that bring in zero or negative value. Often, these people will make up more than 50% of the company by headcount, and the only reason the company still turns a profit is because their existence is subsidised by a small minority of hyper-productive people.
- brokencode 5y ago
  There is usually no way to quantify how much value each developer is contributing. I mean, if your job for 6 months is to go through your company’s software and update to a new API since an old one is getting deprecated, how much business value did you produce? Yet you did something that needed to be done. There are people who take on big, flashy projects that generate a lot of measurable value, and there are people who do the boring stuff that needs to be done too. Without one, you don’t get the other.
- woadwarrior01 5y ago
  > Businesses can, and do, regularly hire employees that bring in zero or negative value. Often, these people will make up more than 50% of the company by headcount, and the only reason the company still turns a profit is because their existence is subsidised by a small minority of hyper-productive people. Or the company has a near monopoly over certain lucrative markets.
- ehnto 5y ago
  > Businesses can, and do, regularly hire employees that bring in zero or negative value. Often, these people will make up more than 50% of the company by headcount, and the only reason the company still turns a profit is because their existence is subsidised by a small minority of hyper-productive people. I think at this point it's unfair if we were to say the specific people are the issue. A big business has a lot of required components in order to keep running, and some of them are not directly revenue generating, but you still need most of them. That's a value of small companies, being so lean you can be hyper-focused and efficient. Bigger companies can perform at scales smaller ones can't, but that comes at the cost of inefficiencies of orchestrating the bigger operation. Just getting all the people aligned to do the things the business needs them to do is a huge and messy cost that smaller companies don't have, but it's required else your conglomerate would fall apart.
  - AussieWog93 5y ago
    Honestly, after working at my previous employer (Blackmagic Design in Port Melbourne, 500+ employees across many products), I just can't believe that. There was no HR, no management class, no purchasing agents or head of IT, maybe one hour of meetings a month and everything worked ridiculously, buttery smoothly. We built the products that needed building, everyone pitched in and morale was generally high. I could name one person who I'd consider had a "bullshit job", and another who's job was semi-bullshit. This is out of maybe 100 people I met across multiple departments.
whack 5y ago
There's a theoretical response and a practical response. In theory, if you had a competitive and fungible marketplace where a specific employee would boost profits by $100k, and you offered her a salary of $80k, someone else would outbid you with $90k, and someone else would outbid them at $95k etc. Even if the "margins" are low, no one is going to pass up on free money. In practice, the labor marketplace isn't nearly competitive or fungible enough to expect the above. However, there is still a very different problem. Even if the average salary is "fair", people get rewarded a tiny fraction of the value they generate. Imagine if I'm working at Google and I find a way to save Google $10M/year via improved hardware efficiency. Despite the fact that this isn't part of my job description. How much of that $10M would I get in the form of a salary increase or bonus? A pretty darn tiny amount. 1% if I'm lucky. Is it worth it? Probably not. I might as well just do what my manager asks me to do, and spend my extra time learning Haskell and going to happy hours. This is pretty much what GP was alluding to. If companies started giving people a significant fraction of the value they generate, corporate life would change dramatically.
- feral 5y ago
  > where a specific employee would boost profits by $100k This isn't a good model. Boosting your company's profit by 100k doesn't mean they can boost any company's profit by 100k. If they could, they'd capture a lot more of the 100k.
- IMTDb 5y ago
  > Imagine if I'm working at Google and I find a way to save Google $10M/year via improved hardware efficiency. The sole reason while your research generates millions of dollars of year of saving is because it would be applied at Google scale. So your work times google scale = $10M/year. As stated above, you deserve to be compensated for a part of your work. But pretending that your compensation should also include the "Google scale" factor - which you did not contribute to in any meaningful way - is not right. If you want your compensation to be based on the outcome of your work on the company as a whole, you need to work for equity and not for salary, and accept the associated risks - which might include getting nothing for a lot of efforts. Of course, your compensation will then also include the work made by others, which you might like or dislike. If you want to be able to precisely measure your own contribution, exclude any other factors, and capture almost all of it, you probably are better of creating your own solo-founder type of company and stay solo. When 1+1=3, it's hard to precisely pinpoint which "1" generated the extra value.

deleted 5y ago

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AussieWog93 5y ago

>Do you hire that employee? Of course not. It doesn't make any business sense. It's more work for you, more risk for the company, and most importantly it provide $0 financial value to the company. It's an easy no. That's what the model predicts, but it's unfortunately not how companies beyond a certain size work in practice. Hiring decisions are not made by the business owner to increase profit, but middle-ranking members of the hierarchy who have their own parallel goals. Businesses can, and do, regularly hire employees that bring in zero or negative value. Often, these people will make up more than 50% of the company by headcount, and the only reason the company still turns a profit is because their existence is subsidised by a small minority of hyper-productive people.

brokencode 5y ago
There is usually no way to quantify how much value each developer is contributing. I mean, if your job for 6 months is to go through your company’s software and update to a new API since an old one is getting deprecated, how much business value did you produce? Yet you did something that needed to be done. There are people who take on big, flashy projects that generate a lot of measurable value, and there are people who do the boring stuff that needs to be done too. Without one, you don’t get the other.
woadwarrior01 5y ago
> Businesses can, and do, regularly hire employees that bring in zero or negative value. Often, these people will make up more than 50% of the company by headcount, and the only reason the company still turns a profit is because their existence is subsidised by a small minority of hyper-productive people. Or the company has a near monopoly over certain lucrative markets.
ehnto 5y ago
> Businesses can, and do, regularly hire employees that bring in zero or negative value. Often, these people will make up more than 50% of the company by headcount, and the only reason the company still turns a profit is because their existence is subsidised by a small minority of hyper-productive people. I think at this point it's unfair if we were to say the specific people are the issue. A big business has a lot of required components in order to keep running, and some of them are not directly revenue generating, but you still need most of them. That's a value of small companies, being so lean you can be hyper-focused and efficient. Bigger companies can perform at scales smaller ones can't, but that comes at the cost of inefficiencies of orchestrating the bigger operation. Just getting all the people aligned to do the things the business needs them to do is a huge and messy cost that smaller companies don't have, but it's required else your conglomerate would fall apart.
- AussieWog93 5y ago
  Honestly, after working at my previous employer (Blackmagic Design in Port Melbourne, 500+ employees across many products), I just can't believe that. There was no HR, no management class, no purchasing agents or head of IT, maybe one hour of meetings a month and everything worked ridiculously, buttery smoothly. We built the products that needed building, everyone pitched in and morale was generally high. I could name one person who I'd consider had a "bullshit job", and another who's job was semi-bullshit. This is out of maybe 100 people I met across multiple departments.

whack 5y ago

There's a theoretical response and a practical response. In theory, if you had a competitive and fungible marketplace where a specific employee would boost profits by $100k, and you offered her a salary of $80k, someone else would outbid you with $90k, and someone else would outbid them at $95k etc. Even if the "margins" are low, no one is going to pass up on free money. In practice, the labor marketplace isn't nearly competitive or fungible enough to expect the above. However, there is still a very different problem. Even if the average salary is "fair", people get rewarded a tiny fraction of the value they generate. Imagine if I'm working at Google and I find a way to save Google $10M/year via improved hardware efficiency. Despite the fact that this isn't part of my job description. How much of that $10M would I get in the form of a salary increase or bonus? A pretty darn tiny amount. 1% if I'm lucky. Is it worth it? Probably not. I might as well just do what my manager asks me to do, and spend my extra time learning Haskell and going to happy hours. This is pretty much what GP was alluding to. If companies started giving people a significant fraction of the value they generate, corporate life would change dramatically.

feral 5y ago
> where a specific employee would boost profits by $100k This isn't a good model. Boosting your company's profit by 100k doesn't mean they can boost any company's profit by 100k. If they could, they'd capture a lot more of the 100k.
IMTDb 5y ago
> Imagine if I'm working at Google and I find a way to save Google $10M/year via improved hardware efficiency. The sole reason while your research generates millions of dollars of year of saving is because it would be applied at Google scale. So your work times google scale = $10M/year. As stated above, you deserve to be compensated for a part of your work. But pretending that your compensation should also include the "Google scale" factor - which you did not contribute to in any meaningful way - is not right. If you want your compensation to be based on the outcome of your work on the company as a whole, you need to work for equity and not for salary, and accept the associated risks - which might include getting nothing for a lot of efforts. Of course, your compensation will then also include the work made by others, which you might like or dislike. If you want to be able to precisely measure your own contribution, exclude any other factors, and capture almost all of it, you probably are better of creating your own solo-founder type of company and stay solo. When 1+1=3, it's hard to precisely pinpoint which "1" generated the extra value.