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He is implying that founders can create a lot of value without employees, and that the claim that employees also create value is false. If that's true, then wh

He is implying that founders can create a lot of value without employees, and that the claim that employees also create value is false. If that's true, then what about a social experiment: If you are a solo founder, you get all your profits for yourself. But if you have employees, you have to share your profits with your employees. If employees don't produce any value, easy, fire them all, you get everything. But if they do, share your profits fairly. I'm curious to see how many solo billionaires will appear. My estimated guess: zero.

jtgi 4y ago
No, negating “employees created all the value” does not mean, “founders create all the value”. It means employees didn’t.
- adamsmith143 4y ago
  So who is the magical missing third party that created value?
  - some_furry 4y ago
    The exploited consumers that give up all their sweet sweet data to the surveillance capitalism complex?
  - pyb 4y ago
    Who said anything about a third party?
  - deleted 4y ago
    [deleted]
  - achenet 4y ago
    re-read the comment you're replying to: employees didn't create ALL the value. In other words, founders created some as well. :)
deleted 4y ago
[deleted]
jerrre 4y ago
Paying a wage = sharing your profits, just not on a % base, but a fixed amount. But in the end it's still: less profits for the founder, and more profit for the employee.
- varispeed 4y ago
  Wage is a cost and profit comes after costs. If owner want's to share profit, they need to give company shares to the employees and pay dividends.
  - HideousKojima 4y ago
    A cost that cuts into what would otherwise be profits. It's all fungible so you're quibbling about an accounting issue here. If an owner made a contract with an employee that they will pay them a $0 salary but will pay them a fixed annual dividend of $100,000 (broken up into convenient bi-weekly payments) would that fix your concern? I'm getting the impression that it wouldn't.
    - sidlls 4y ago
      This is disingenuous. Money is fungible but the flow of money is not. My buying weekly groceries is not the same as my putting a down payment on a new car: they're two different activities that use the same fungible source as a medium of exchange. Likewise, if I run a business, paying a fixed wage to an employee is not the same as distributing profit in the form of dividends to shareholders: the fungible medium of exchange is weighted differently, comes from different sources, and is used for different purposes.
    - welshwelsh 4y ago
      You're right, that wouldn't fix it. Fixing the problem would mean that instead of the 'owner' hiring an 'employee,' they instead form an equal partnership as co-owners. Because the business serves the interest of the owners, it will seek to maximize their compensation as the ultimate goal, rather than to minimize their salary as a way of reducing expenses.
    - 4y ago
CrimsonRain 4y ago
And I'm curious to know, in your model, if the employees are willing to work without salary and bear the cost of running the company?
osigurdson 4y ago
I think it could happen. AI and automation have the tendency of amplifying ability. The ideal company has zero employees. Similarity, the ideal world has zero employees and everyone does want they want. If that scares you, give your head a shake.
- clevergadget 4y ago
  Yeah if work was so great you wouldn't have to pay people to do it
rqtwteye 4y ago
What's with that obsession about "billionaires"? If somebody can make a nice living with their business, isn't that good enough? Personally I think we are perfectly fine without billionaires.
- layer8 4y ago
  Unfortunately they still crop up, with increasing frequency.
- deleted 4y ago
  [deleted]
- college_physics 4y ago
  a "nice living" is actually quite hard for small businesses. competition is brutal, all sorts of risks can be fatal etc. the "billionaire adoration" phenomenon is actually putting lipstick on oligopolistic market arrangements and pretending they are still entrepreneurial
- MuffinFlavored 4y ago
  > If somebody can make a nice living with their business, isn't that good enough? I think the allure of being a billionaire is it's "one and done". As in, once you achieve it, you can live the craziest life possible filled with lots of grandeur and not need to run any kind of business whatsoever after. It's mainly a fantasy for people who are tired, overworked, underpaid, under-appreciated (which is like 85% of America I'm guessing). "Wouldn't it be nice..."
  - yieldcrv 4y ago
    or if you have something, the response is "must be nice" I feel like this accelerates class segregation. like, going from talking about the new condo in a nice neighborhood changes from "must be nice" to "my friend lives there and says the Tesla charging stations are broken but I'll talk to the leasing office about it tomorrow", just immediately more depth that some groups of people can't contribute to and are dismissive about.
  - 4y ago
coldtea 4y ago
Even better: let's see how many billioaire entrepreneurs will appear in a society where few or no people are there to buy their products and services, because they've made redundant and are out of jobs or in new lower-paying forced careers...
- hrgten 4y ago
  Eliminating the middle class (except for those who directly serve the billionaires) and having a huge industrial reserve army (Marx) that does jobs that cannot be automated could work. It works for the super rich in Brazil. This seems to be the trend in "Western" societies, and the middle class enthusiastically votes for those who pursue that agenda.
  - coldtea 4y ago
    >It works for the super rich in Brazil I guess that could be the vision for the US to: a developing country style society, with utral-nice fenced areas for the rich, a supporting 10-20% class, and "skid-row lite" welfare land for the rest, with crumbling infrastructure... And if things end up worse, the rich have already bought houses in New Zealand and elsewhere anyway...
ThePhysicist 4y ago
Isn't Notch [1] a solo billionaire? Not sure if he had help running Minecraft (I guess so), but you could say he created a billion-dollar company single-handedly. 1: https://en.wikipedia.org/wiki/Markus_Persson https://en.wikipedia.org/wiki/Markus_Persson
- pram 4y ago
  Mojang had employees.
- enragedcacti 4y ago
  He wasn't even working on Minecraft when Mojang sold to Microsoft. Jens Bergensten was the lead developer for years before the sale went through.
zmxz 4y ago
What if I'm a founder who's also a developer, I have the idea, customer base and I've done ~80% of the code of the product but I need help with deploying and scaling the product. How much of the profit do I share with the employees? What does the society deem fair in the case where founder comes up with the product, identifies the problem and works with the customer to configure the product? Do I get to take 5 salaries or 1 salary?
- JustSomeNobody 4y ago
  How much value do you place on "scaling"? You wrote 80% of the code (who wrote the rest?) and you got it deployed. You're making a decent living on 15.000 users. "Scaling" guy comes in and "scales" you to 150.000 users. Do they get an order of magnitude more profit than you?
  - zmxz 4y ago
    That's what I'm asking. What does the "scaling" guy get? What's the fair distribution of wealth? I'm not placing any value on "scaling", I'm asking what it should be valued at. > Who wrote the rest For argument's sake, let's say there's 10 devs who wrote the rest. Let's say that in span of 12 months, after paying yearly gross salary of $150 000 to each person in equation (10 devs, 1 scaling/devops guy, 1 founder), $2 800 000 is left and we're dividing it. How much goes to each of the 12 people in the equation?
    - satvikpendem 4y ago
      They get what they negotiate for, no? I worked for startups before and I would press for more equity, but I wasn't under any delusion that if there were 4 employees and I was just joining that I'd get 20% equity. They were there first, had to take on the risk, etc.
    - eulers_secret 4y ago
      The only sensible move is to payback investors and yourself first. So, as little as they will accept. If you can afford to (maybe) loose them, give them $0 extra. Economy isn’t so hot anymore, folks with obligations will absolutely settle and take it on the chin. You have all the power here.
edouard-harris 4y ago
While it's true he's saying that founders can create a lot of value without employees, he's certainly not suggesting employees don't also create value. Obviously they do, or founders wouldn't hire anyone. > if you have employees, you have to share your profits with your employees Needless to say, this already happens via equity and options. There's a reasonable debate to be had over what constitutes "fair" profit-sharing. But the market clears where it clears, and individual tech employees definitely have meaningful leverage even under current macro conditions.
zajio1am 4y ago
For value creation, you need both workers and capital (provided by founders and investors). The value is created by both together, not each independently. The compensation for created value is based on market rate for both work and capital.
- yamtaddle 4y ago
  > The compensation for created value is based on market rate for both work and capital. This equivalence doesn't make much sense unless there's a widespread phenomenon of businesses "firing" owners in favor of other capital-providers who will accept lower returns.
  - overrun11 4y ago
    Isn't this basically what a recapitalization is?
    - necovek 4y ago
      Usually driven by existing majority owners, with the goal still being to increase their own absolute wealth even if their relative ownership decreases.
memish 4y ago
He's not implying that employees don't create value. Startups share equity with employees. The earlier you are there, the more you get, in part because of the inherent risk. This is why founders get the most equity and the most upside if it succeeds. They took on the most risk and it wouldn't otherwise exist. If the company ends up being valued at 100B dollars, guess what, the founder and maybe some early employees are billionaires or hundred millionaires.
- rojobuffalo 4y ago
  Maybe there is an imbalance of risk taken or value added among founders and early employees. I think that's debatable, but assume it's true. It's never reasonably accounted for in the equity distribution. It would be one thing for a founder to have 3x the equity of an early hire, but it is commonly more like 60x or 300x. Instead of a dozen people being able to cash out and support their families for the rest of their lives, one or maybe two people get to have many multiples of that and the rest barely make progress towards retirement.
  - overrun11 4y ago
    I agree 100%. Also, I don't see a substantial difference in risk between a founder and an early employee at all. Founders typically have little invested in the startup other than their own time but they compensate for that by paying themselves a salary with investor money.
    - CallMeJim 4y ago
      It sounds like you're saying that early employees and founders have a similar level of rush, but vastly different levels of reward. Why would anyone ever be an early employee when they can be a founder instead?
      - ivalm 4y ago
        Access to capital
      - 4y ago
fnordpiglet 4y ago
His assertion is made worse by automation. Every skill the founder can automate they should. That’s efficiency. Every skill they can’t, that’s a crucial skill the founder depends on. The more crucial the skill, the more leverage the employee should have over the founder and the more incentive the founder has in sharing equity. This becomes magnified if the founder doesn’t have the skill to produce and operate the automation their business depends on, but even if they did have the skill - I think this is a population that understand the sheer amount of time and energy automation requires to simply oversee, operate, and maintain. The founder can’t be on call 24/7 for every function of every part of any but the most trivial of operations. Finally, typical ownership rules makes the founder highly enriched in equity unless they trade equity for capital or talent to the point they lose control. That controlling equity is the founders reward for the founding. Their share of growing profits is their reward whether they personally grow the profits or their employees do. A smart founder doesn’t try to do it all just so they can squeeze out some other people. They delegate responsibility to employees who in turn find ways to outsize the growth of profits and the value of the equity. Nothing says the founder needs to treat them well or provide them incentive to succeed - but everyone who has ever grown a company knows the best talent is attracted to where they are a “part” of the success, which includes sharing in the reward of their labor not just the labor.
- rbanffy 4y ago
  > The more crucial the skill, the more leverage the employee should have over the founder and the more incentive the founder has in sharing equity Unless the providers of said ability have to compete for business on price. One should not underestimate how hard it is to replace them.
- danenania 4y ago
  "This becomes magnified if the founder doesn’t have the skill to produce and operate the automation their business depends on" While that's true, I think it also pushes the profile of the ideal founder much more to the technical side than where it is now. Creating and maintaining automations is inherently difficult-to-impossible to fully automate, and will likely always require some level of engineering skill. Conversely, many of the most important skills a "business founder" brings to the table are also the most ripe for automation. Marketing, sales, administrative tasks, investor pitches, support, accounting: all have the potential to be automated to a large degree by AI.
mbesto 4y ago
> But if they do, share your profits fairly. How do you determine how much profit an employed CTO makes versus a customer service rep? What's fair there? My estimated guess: you have no idea.
JamesBarney 4y ago
> He is implying that founders can create a lot of value without employees, and that the claim that employees also create value is false. It seems like he definitely believes founders create a lot of value, but I don't think he is making the second claim that employees don't create value. Just making the argument that the outsized return to founders is fair because they are creating far more value as evidenced by automation.
chubot 4y ago
FWIW the reply by the founder of repl.it explicitly takes the other side of the bet I expect $1B solo founder startups to become normal pretty soon https://twitter.com/amasad/status/1600143003607105537 https://twitter.com/amasad/status/1600143003607105537 (I honestly don't know -- not my area of expertise, just putting it up for discussion)
xcambar 4y ago
> If employees don't produce any value, easy, fire them all Very Musk-y of you
pr337h4m 4y ago
>I'm curious to see how many solo billionaires will appear. My estimated guess: zero. Satoshi Nakamoto is (most probably) a solo billionaire
- necovek 4y ago
  Not unless they start converting their bitcoins into actual money, when lots of it might go down in value. If they even have access to secret keys that control these funds. And obviously, even if they were a billionare, their ultimate goal was not to develop a business where they become one, but they were probably supporting their idea by being an early miner.
diob 4y ago
It's funny because so many acquisitions are built around getting the employees.
- necovek 4y ago
  Many are also built around acquiring the market share/user base.
overrun11 4y ago
Aren't we just back to rehashing vapid Marxist arguments? In your experiment a brilliant computer scientist working on a breakthrough invention will be forced to do menial tasks like data entry and accounting him/herself rather than split the profits evenly with a laborer. This is not going to work, a society where geniuses spend most of their days using Quickbooks, cleaning the bathroom etc, will be outcompeted by ones where they can specialize.
- NhanH 4y ago
  > This is not going to work, a society where geniuses spend most of their days using Quickbooks, cleaning the bathroom etc, will be outcompeted by ones where they can specialize. Which is exactly why Marx makes his “vapid” argument: cleaners and other menial jobs contribute as much to society as any geniuses (evidently, as societies without those menial jobs got outcompeted). And the way society currently evaluate those values seems to be incorrect. The issue with Marxist is that the solution he proposed is troublesome, not that the problem doesn’t exist. And until the next genius figures out a different solution, we should at least try to limit the problem as much as possible
  - overrun11 4y ago
    > cleaners and other menial jobs contribute as much to society as any geniuses (evidently, as societies without those menial jobs got outcompeted) Scarcity is clearly an important component of value. This is essentially the "why is gold more valuable than water when I need water to live." question. I don't see the point in rehashing this stuff as if it's new.
downrightmike 4y ago
Seems like he took the red pill right after elno.
lolinder 4y ago
> He is implying that founders can create a lot of value without employees, and that the claim that employees also create value is false. I agree that Paul is severely overstating his case here (as is his wont), but only the first half of your summary is true to his tweet. He's saying that founders create a lot of (even most of) the value in a company, but he is not saying that employees create no value. His argument is essentially this: If employee jobs can in theory all be automated away while a company still produces value, that means the startup founder's role must produce a huge amount of the value in any company. This is a pretty fragile argument that has a lot wrong with it (that a job can be automated today doesn't mean it wasn't extremely valuable yesterday), so there isn't really a need to erect a straw man.
janalsncm 4y ago
I believe what you’re describing is a worker-owned co-op. Workers get a vote in business decisions. They have some interesting properties and I wonder how they would stack up against a top-down structure like in a corporation or university. Specifically I wonder if they would be able to resist bureaucratic bloat and the growth of the managerial class that plagues mature companies and organizations.
koonsolo 4y ago
Here's another experiment: All employees share the losses as well. Company makes a huge loss, employees are liable.
codegeek 4y ago
My experience is that employees just for the sake of employees are of no use and a lot of companies have too much fat just because they could hire. Great employees though are worth every penny and a whole lot more. As a small company, I have hired and fired few people over the years. When I made the wrong hire, it cost a lot not just in terms of money but the overhead, mental anguish and loss in productivity. Sometimes I got lucky and hired some exceptional people. They have made life 2x better and yes they do get rewarded accordingly at least in my company. Not all employees produce equal (even if same job title and experience on paper) and it is a fact.
neonate 4y ago
> and that the claim that employees also create value is false The claim he says is false is "their employees created all the value". Replacing "all" with "also" produces almost the opposite statement. I don't mean to be pedantic but that's an extreme misinterpretation.

jtgi 4y ago

No, negating “employees created all the value” does not mean, “founders create all the value”. It means employees didn’t.

adamsmith143 4y ago
So who is the magical missing third party that created value?
- some_furry 4y ago
  The exploited consumers that give up all their sweet sweet data to the surveillance capitalism complex?
- pyb 4y ago
  Who said anything about a third party?
- deleted 4y ago
  [deleted]
- achenet 4y ago
  re-read the comment you're replying to: employees didn't create ALL the value. In other words, founders created some as well. :)

deleted 4y ago

[deleted]

jerrre 4y ago

Paying a wage = sharing your profits, just not on a % base, but a fixed amount. But in the end it's still: less profits for the founder, and more profit for the employee.

varispeed 4y ago
Wage is a cost and profit comes after costs. If owner want's to share profit, they need to give company shares to the employees and pay dividends.
- HideousKojima 4y ago
  A cost that cuts into what would otherwise be profits. It's all fungible so you're quibbling about an accounting issue here. If an owner made a contract with an employee that they will pay them a $0 salary but will pay them a fixed annual dividend of $100,000 (broken up into convenient bi-weekly payments) would that fix your concern? I'm getting the impression that it wouldn't.
  - sidlls 4y ago
    This is disingenuous. Money is fungible but the flow of money is not. My buying weekly groceries is not the same as my putting a down payment on a new car: they're two different activities that use the same fungible source as a medium of exchange. Likewise, if I run a business, paying a fixed wage to an employee is not the same as distributing profit in the form of dividends to shareholders: the fungible medium of exchange is weighted differently, comes from different sources, and is used for different purposes.
  - welshwelsh 4y ago
    You're right, that wouldn't fix it. Fixing the problem would mean that instead of the 'owner' hiring an 'employee,' they instead form an equal partnership as co-owners. Because the business serves the interest of the owners, it will seek to maximize their compensation as the ultimate goal, rather than to minimize their salary as a way of reducing expenses.
  - 4y ago

CrimsonRain 4y ago

And I'm curious to know, in your model, if the employees are willing to work without salary and bear the cost of running the company?

osigurdson 4y ago

I think it could happen. AI and automation have the tendency of amplifying ability. The ideal company has zero employees. Similarity, the ideal world has zero employees and everyone does want they want. If that scares you, give your head a shake.

clevergadget 4y ago
Yeah if work was so great you wouldn't have to pay people to do it

rqtwteye 4y ago

What's with that obsession about "billionaires"? If somebody can make a nice living with their business, isn't that good enough? Personally I think we are perfectly fine without billionaires.

layer8 4y ago
Unfortunately they still crop up, with increasing frequency.
deleted 4y ago
[deleted]
college_physics 4y ago
a "nice living" is actually quite hard for small businesses. competition is brutal, all sorts of risks can be fatal etc. the "billionaire adoration" phenomenon is actually putting lipstick on oligopolistic market arrangements and pretending they are still entrepreneurial
MuffinFlavored 4y ago
> If somebody can make a nice living with their business, isn't that good enough? I think the allure of being a billionaire is it's "one and done". As in, once you achieve it, you can live the craziest life possible filled with lots of grandeur and not need to run any kind of business whatsoever after. It's mainly a fantasy for people who are tired, overworked, underpaid, under-appreciated (which is like 85% of America I'm guessing). "Wouldn't it be nice..."
- yieldcrv 4y ago
  or if you have something, the response is "must be nice" I feel like this accelerates class segregation. like, going from talking about the new condo in a nice neighborhood changes from "must be nice" to "my friend lives there and says the Tesla charging stations are broken but I'll talk to the leasing office about it tomorrow", just immediately more depth that some groups of people can't contribute to and are dismissive about.
- 4y ago

coldtea 4y ago

Even better: let's see how many billioaire entrepreneurs will appear in a society where few or no people are there to buy their products and services, because they've made redundant and are out of jobs or in new lower-paying forced careers...

hrgten 4y ago
Eliminating the middle class (except for those who directly serve the billionaires) and having a huge industrial reserve army (Marx) that does jobs that cannot be automated could work. It works for the super rich in Brazil. This seems to be the trend in "Western" societies, and the middle class enthusiastically votes for those who pursue that agenda.
- coldtea 4y ago
  >It works for the super rich in Brazil I guess that could be the vision for the US to: a developing country style society, with utral-nice fenced areas for the rich, a supporting 10-20% class, and "skid-row lite" welfare land for the rest, with crumbling infrastructure... And if things end up worse, the rich have already bought houses in New Zealand and elsewhere anyway...

ThePhysicist 4y ago

Isn't Notch [1] a solo billionaire? Not sure if he had help running Minecraft (I guess so), but you could say he created a billion-dollar company single-handedly. 1: https://en.wikipedia.org/wiki/Markus_Persson https://en.wikipedia.org/wiki/Markus_Persson

pram 4y ago
Mojang had employees.
enragedcacti 4y ago
He wasn't even working on Minecraft when Mojang sold to Microsoft. Jens Bergensten was the lead developer for years before the sale went through.

zmxz 4y ago

What if I'm a founder who's also a developer, I have the idea, customer base and I've done ~80% of the code of the product but I need help with deploying and scaling the product. How much of the profit do I share with the employees? What does the society deem fair in the case where founder comes up with the product, identifies the problem and works with the customer to configure the product? Do I get to take 5 salaries or 1 salary?

JustSomeNobody 4y ago
How much value do you place on "scaling"? You wrote 80% of the code (who wrote the rest?) and you got it deployed. You're making a decent living on 15.000 users. "Scaling" guy comes in and "scales" you to 150.000 users. Do they get an order of magnitude more profit than you?
- zmxz 4y ago
  That's what I'm asking. What does the "scaling" guy get? What's the fair distribution of wealth? I'm not placing any value on "scaling", I'm asking what it should be valued at. > Who wrote the rest For argument's sake, let's say there's 10 devs who wrote the rest. Let's say that in span of 12 months, after paying yearly gross salary of $150 000 to each person in equation (10 devs, 1 scaling/devops guy, 1 founder), $2 800 000 is left and we're dividing it. How much goes to each of the 12 people in the equation?
  - satvikpendem 4y ago
    They get what they negotiate for, no? I worked for startups before and I would press for more equity, but I wasn't under any delusion that if there were 4 employees and I was just joining that I'd get 20% equity. They were there first, had to take on the risk, etc.
  - eulers_secret 4y ago
    The only sensible move is to payback investors and yourself first. So, as little as they will accept. If you can afford to (maybe) loose them, give them $0 extra. Economy isn’t so hot anymore, folks with obligations will absolutely settle and take it on the chin. You have all the power here.

edouard-harris 4y ago

While it's true he's saying that founders can create a lot of value without employees, he's certainly not suggesting employees don't also create value. Obviously they do, or founders wouldn't hire anyone. > if you have employees, you have to share your profits with your employees Needless to say, this already happens via equity and options. There's a reasonable debate to be had over what constitutes "fair" profit-sharing. But the market clears where it clears, and individual tech employees definitely have meaningful leverage even under current macro conditions.

zajio1am 4y ago

For value creation, you need both workers and capital (provided by founders and investors). The value is created by both together, not each independently. The compensation for created value is based on market rate for both work and capital.

yamtaddle 4y ago
> The compensation for created value is based on market rate for both work and capital. This equivalence doesn't make much sense unless there's a widespread phenomenon of businesses "firing" owners in favor of other capital-providers who will accept lower returns.
- overrun11 4y ago
  Isn't this basically what a recapitalization is?
  - necovek 4y ago
    Usually driven by existing majority owners, with the goal still being to increase their own absolute wealth even if their relative ownership decreases.

memish 4y ago

He's not implying that employees don't create value. Startups share equity with employees. The earlier you are there, the more you get, in part because of the inherent risk. This is why founders get the most equity and the most upside if it succeeds. They took on the most risk and it wouldn't otherwise exist. If the company ends up being valued at 100B dollars, guess what, the founder and maybe some early employees are billionaires or hundred millionaires.

rojobuffalo 4y ago
Maybe there is an imbalance of risk taken or value added among founders and early employees. I think that's debatable, but assume it's true. It's never reasonably accounted for in the equity distribution. It would be one thing for a founder to have 3x the equity of an early hire, but it is commonly more like 60x or 300x. Instead of a dozen people being able to cash out and support their families for the rest of their lives, one or maybe two people get to have many multiples of that and the rest barely make progress towards retirement.
- overrun11 4y ago
  I agree 100%. Also, I don't see a substantial difference in risk between a founder and an early employee at all. Founders typically have little invested in the startup other than their own time but they compensate for that by paying themselves a salary with investor money.
  - CallMeJim 4y ago
    It sounds like you're saying that early employees and founders have a similar level of rush, but vastly different levels of reward. Why would anyone ever be an early employee when they can be a founder instead?
    - ivalm 4y ago
      Access to capital
    - 4y ago

fnordpiglet 4y ago

His assertion is made worse by automation. Every skill the founder can automate they should. That’s efficiency. Every skill they can’t, that’s a crucial skill the founder depends on. The more crucial the skill, the more leverage the employee should have over the founder and the more incentive the founder has in sharing equity. This becomes magnified if the founder doesn’t have the skill to produce and operate the automation their business depends on, but even if they did have the skill - I think this is a population that understand the sheer amount of time and energy automation requires to simply oversee, operate, and maintain. The founder can’t be on call 24/7 for every function of every part of any but the most trivial of operations. Finally, typical ownership rules makes the founder highly enriched in equity unless they trade equity for capital or talent to the point they lose control. That controlling equity is the founders reward for the founding. Their share of growing profits is their reward whether they personally grow the profits or their employees do. A smart founder doesn’t try to do it all just so they can squeeze out some other people. They delegate responsibility to employees who in turn find ways to outsize the growth of profits and the value of the equity. Nothing says the founder needs to treat them well or provide them incentive to succeed - but everyone who has ever grown a company knows the best talent is attracted to where they are a “part” of the success, which includes sharing in the reward of their labor not just the labor.

rbanffy 4y ago
> The more crucial the skill, the more leverage the employee should have over the founder and the more incentive the founder has in sharing equity Unless the providers of said ability have to compete for business on price. One should not underestimate how hard it is to replace them.
danenania 4y ago
"This becomes magnified if the founder doesn’t have the skill to produce and operate the automation their business depends on" While that's true, I think it also pushes the profile of the ideal founder much more to the technical side than where it is now. Creating and maintaining automations is inherently difficult-to-impossible to fully automate, and will likely always require some level of engineering skill. Conversely, many of the most important skills a "business founder" brings to the table are also the most ripe for automation. Marketing, sales, administrative tasks, investor pitches, support, accounting: all have the potential to be automated to a large degree by AI.

mbesto 4y ago

> But if they do, share your profits fairly. How do you determine how much profit an employed CTO makes versus a customer service rep? What's fair there? My estimated guess: you have no idea.

JamesBarney 4y ago

> He is implying that founders can create a lot of value without employees, and that the claim that employees also create value is false. It seems like he definitely believes founders create a lot of value, but I don't think he is making the second claim that employees don't create value. Just making the argument that the outsized return to founders is fair because they are creating far more value as evidenced by automation.

chubot 4y ago

FWIW the reply by the founder of repl.it explicitly takes the other side of the bet I expect $1B solo founder startups to become normal pretty soon https://twitter.com/amasad/status/1600143003607105537 https://twitter.com/amasad/status/1600143003607105537 (I honestly don't know -- not my area of expertise, just putting it up for discussion)

xcambar 4y ago

> If employees don't produce any value, easy, fire them all Very Musk-y of you

pr337h4m 4y ago

>I'm curious to see how many solo billionaires will appear. My estimated guess: zero. Satoshi Nakamoto is (most probably) a solo billionaire

necovek 4y ago
Not unless they start converting their bitcoins into actual money, when lots of it might go down in value. If they even have access to secret keys that control these funds. And obviously, even if they were a billionare, their ultimate goal was not to develop a business where they become one, but they were probably supporting their idea by being an early miner.

diob 4y ago

It's funny because so many acquisitions are built around getting the employees.

necovek 4y ago
Many are also built around acquiring the market share/user base.

overrun11 4y ago

Aren't we just back to rehashing vapid Marxist arguments? In your experiment a brilliant computer scientist working on a breakthrough invention will be forced to do menial tasks like data entry and accounting him/herself rather than split the profits evenly with a laborer. This is not going to work, a society where geniuses spend most of their days using Quickbooks, cleaning the bathroom etc, will be outcompeted by ones where they can specialize.

NhanH 4y ago
> This is not going to work, a society where geniuses spend most of their days using Quickbooks, cleaning the bathroom etc, will be outcompeted by ones where they can specialize. Which is exactly why Marx makes his “vapid” argument: cleaners and other menial jobs contribute as much to society as any geniuses (evidently, as societies without those menial jobs got outcompeted). And the way society currently evaluate those values seems to be incorrect. The issue with Marxist is that the solution he proposed is troublesome, not that the problem doesn’t exist. And until the next genius figures out a different solution, we should at least try to limit the problem as much as possible
- overrun11 4y ago
  > cleaners and other menial jobs contribute as much to society as any geniuses (evidently, as societies without those menial jobs got outcompeted) Scarcity is clearly an important component of value. This is essentially the "why is gold more valuable than water when I need water to live." question. I don't see the point in rehashing this stuff as if it's new.

downrightmike 4y ago

Seems like he took the red pill right after elno.

lolinder 4y ago

> He is implying that founders can create a lot of value without employees, and that the claim that employees also create value is false. I agree that Paul is severely overstating his case here (as is his wont), but only the first half of your summary is true to his tweet. He's saying that founders create a lot of (even most of) the value in a company, but he is not saying that employees create no value. His argument is essentially this: If employee jobs can in theory all be automated away while a company still produces value, that means the startup founder's role must produce a huge amount of the value in any company. This is a pretty fragile argument that has a lot wrong with it (that a job can be automated today doesn't mean it wasn't extremely valuable yesterday), so there isn't really a need to erect a straw man.

janalsncm 4y ago

I believe what you’re describing is a worker-owned co-op. Workers get a vote in business decisions. They have some interesting properties and I wonder how they would stack up against a top-down structure like in a corporation or university. Specifically I wonder if they would be able to resist bureaucratic bloat and the growth of the managerial class that plagues mature companies and organizations.

koonsolo 4y ago

Here's another experiment: All employees share the losses as well. Company makes a huge loss, employees are liable.

codegeek 4y ago

My experience is that employees just for the sake of employees are of no use and a lot of companies have too much fat just because they could hire. Great employees though are worth every penny and a whole lot more. As a small company, I have hired and fired few people over the years. When I made the wrong hire, it cost a lot not just in terms of money but the overhead, mental anguish and loss in productivity. Sometimes I got lucky and hired some exceptional people. They have made life 2x better and yes they do get rewarded accordingly at least in my company. Not all employees produce equal (even if same job title and experience on paper) and it is a fact.

neonate 4y ago

> and that the claim that employees also create value is false The claim he says is false is "their employees created all the value". Replacing "all" with "also" produces almost the opposite statement. I don't mean to be pedantic but that's an extreme misinterpretation.