Basically, it's not about piles of cash. It's about the rate at which those piles are changing, and how you can allocate capital to min-max those rates of chang

Basically, it's not about piles of cash. It's about the rate at which those piles are changing, and how you can allocate capital to min-max those rates of change. In an environment where the "risk-free rate of return" is secularly-higher, the floor of minimal necessary productivity goes up. Let's say the ROIC of investing $300k "into" an employee is $310k (3.33% rate of return). If the risk free rate of return is 1%, you take that employee. If it's 5%, you fire that employee. I think the reality is that the typical ROIC was above the typical salary, but that there was an inflection point that they crossed in the hiring spree of 2019-2021. If you're a capital allocator (CEO), your responsibility is to maximize ROIC for shareholders over the long run. In environments where you're not absolutely confident that your eventual, steady-state employee ROIC will trounce (i.e. 2-5x's) the risk free rate of return, you should generally favor returning capital to shareholders (with dividends or buybacks) instead of putting good money after bad.