It is important to point out that this is only possible for the consumer app economy or a self-service type of software app or digital marketplace (like craigslist). Everything else requires more headcount (could be outsourced to 3rd parties or consultants). And in the whole economy this is a sliver of companies.
This is a great business of course but there are not many of them given the scale of the whole economy.
Before the Internet, the closest to this was creators or inventors living off of patents, license or copyright fees.
Maybe it wasn't clear but I was referring to low-touch SaaS as well with "self-service type of software app". There are low-touch SaaS apps and offerings serving the developer and some "enterprise" market segments. The problem with certain enterprise SaaS is that they are high-touch by the very nature of the sales process involving big-ticket items. Once you are in the territory of high ACV there are many sales "gatekeepers" ranging from pay-to-play analyst coverage, Vegas conferences and outings, tickets to NFL games, to compliance and regulatory hurdles.
I should have also mentioned hedge funds who manage billions with relatively few head count and they use automation tools extensively starting with the spreadsheet in the 1980s.
And chasing down purchase orders and higher expectations for customer support and, once you have direct sales, you need training for sales, and you have to generate qualified leads for them, and you have to respond to RFPs...
Just so you know, you don't have to mention that you upvoted, it's actually recommended that people don't do that here, so that we don't get tons of comments like "thanks" which can make it frustrating for others to wade through such comments for the value added ones, as you mention.
Not really. Any business can now use tools that make jobs redundant. It is having its effect everywhere. Anyone whose job is to copy information between mails, spreadsheets, and some webapp will eventually be replaced.
There are more "psychological gotchas" among non-software people about what "real jobs" are and what it means to create value, but time catches up with everyone.
I’m still in stealth mode. My startup is super simple in concept - I gather a particular type of data, clean it, process it, and serve it to subscribers.
Some of my data sources are free, some are paid API’s.
All the processing is done in code. You would need an army of people to read all that text, a layer of bureaucracy to manage and check them.
This is the end state I envision: I offer a bunch of value for free in exchange for an email.
Value is delivered on web and per email. There is no marketing over email, it just serves as a regular touchpoint (where I email them free value) to keep the relationship alive until my client is ready to upgrade.
Then there’s a couple of paid tiers which is the same but with more and different features. Starting at $10/month, up to $50 - $100 per month.
For perspective, the service can be worth many thousands of times this much in dollars gained for the client, so it may be the wrong model altogether.
I’ve test-driven different aspects of this to see if people would be interested. I might announce it here when I officially launch it, but probably not.
https://loodio.com - Hardware company - Solo founder - No employees and same here; I don't see the need for any in the forseeable future. Don't even need capital as my burn rate is ~$50/month except when I order new stock. Weird times.
Based on his argument: Fewer people are doing a lot more thanks to being good at automation. It's the automation that's making it possible to be successful, not the engineers doing the automation.
The past three years, the YC crowd has really tried hard to justify wealth disparities, gentrification and generally treating employees like garbage, as part of their Objectivist agenda.
Paul, employees do the automation, not the founders.
His whole point is: There is a lot of great free open source software being exploited by small technical teams to run faster. This means the people doing the integration deserve less $$ because they can do the same amount with less. Founders deserve all the money, everybody else should be happy to be employed.
1920s robber baron bs.
Ignore the ethics that every single startup would be impossible without standing on the heads of those who have dedicated many hours of their lives building this free software.
Where do you think all of that automation comes from? I promise you, every single start-up you know of is violating somebody's copyrights on their open source. I've seen this in every company I've worked with for the past 30 years. There is always code inside of private applications which was copied and pasted from GPL'd code.
Have you ever copied and pasted anything from StackOverflow? Did you ask them if they copied it, if they had permission to copy it, or where it was copied from so you could attribute properly? If so, my hat is off to you Sir.
I did have a discussion recently with some friends as to their ethical reasons against GPT and co-pilot generated code.
Unless that code is under the AGPL specifically and the software isn't cloud-based (and the vast majority of start-ups these days are doing SaaS) then there's no license violation there.
What are you talking about? There is not always code copy and pasted from GPL'd code. Giant amounts of open source software is not released under GPL, and automation is moving fast enough that there's a huge amount that's not released under GPL precisely because if it is then people don't use it.
“I’ve already got the prize. The prize is the pleasure of finding things out, the kick in the discovery, the observation that other people use it - those are the real things, the honors are unreal to me.”
-Richard Feynman
This assumes that there is no financial intent in the work. My favorite example of this is that many thousands of Google's engineers used an app (Homebrew I think), but Google wouldn't hire him, thus letting him share in wealth partially created by his life's work.
I made this exact argument in the early 2000s when open source starting getting popular and many in the tech community thought I was ridiculous.
I think it's ridiculous that open source developers give out their hard work willingly and then seem to think big companies are 'taking advantage' by not hiring them or funding the project.
It has nothing to do with ethics. Startups didn't steal anything. The developers gave it out willingly.
This sort of attitude has soured me to the entire open source community. They want to be able to give their work out for free, but then have a say in who uses it and how it's used, which is exactly the opposite of free and open.
Open source software is often funded by big corporations once it hits critical mass because it's a nice way to stamp out competing small businesses who might be have been able to charge $ for a small chunk of software functionality.
OSS creators can choose their license. If I make something MIT licensed, I can't then complain that people are "stealing" my work. Just make proprietary software at that point.
Pretty clear that these are people who want to fuck you over. Silicon Valley elites have accumulated enough power to come mask off. Entitled dirtbags who profited off government funded science and technology who've never created an ounce of value in their lives.
Thank you. Nobody ever seems to mention how much founders get to stand on the heads of engineers and scientists who were paid with tax dollars. Kind of how the libertarian musk fans ignore how much aid his companies have gotten from the t taxpayers.
In the heads of somebody who believed The Fountain Head and Atlas Shrugged were bibles, there are 1 or 2 people doing 99% of all work in the companies.
Most progress has come from universities, defense and government funding. These losers build an app and proclaim themselves gurus on the future. It's insane that people fall for it.
> Sure progress comes from scientists , not from idiots building b2b saas apps.
Progress comes from all sorts of places. Scientific progress come from scientists. That doesn't result in things better in my life without a huge number of other people doing things well and efficiently. Both of which includes anything people will pay for, including b2b saas apps. Try having a pandemic lockdown without Amazon-level fulfillment in place. Thankfully we didn't have to.
No not all work is equal. Progress is a rare thing. Do not equate all forms of work to progress. People will pay good money for women to fart on their faces. That's not valuable work. Neither is building shitty apps.
Who would you like to appoint as an arbiter for what "valuable work is"? If certain people enjoy and pay women to fart in their faces - would you like to ban that? How about other "useless" activities that humans enjoy like video games or massages or fashion or fancy restaurants - would you like to ban those as well?
Who's saying anything needs to be banned. We're talking about who can reasonably claim to be contributing to the progress of society. Go ahead and smell the farts my friend
I'm not equating all forms of work to progress. That'd be a category error. It's the inverse: you saying only progress comes from scientists is a category error.
Corporations seem to do a good job of avoiding taxes in a way that people cannot replicate. The ultra-rich founders also do a great job of making sure they pay a lower tax rate than the rest of us.
I think Keynes said "The worst form of capitalism is in which the public holds all the risk, and the private sector realizes all the rewards".
> Corporations seem to do a good job of avoiding taxes in a way that people cannot replicate. The ultra-rich founders also do a great job of making sure they pay a lower tax rate than the rest of us.
Focusing on the latter is fair enough. Thinking that a corporation having lots of money is bad seems completely pointless. That money ends up as dividends or higher salaries or lower prices. Tax the first two and celebrate all three.
Progress comes from individuals. MIT did not endow Claude Shannon with divine knowledge of Boolean algebra and information theory. He discovered it himself.
Claude Shannon was able to do what he was able to do because of the ample research funding and the academic environment. I have great respect for people like Claude Shannon but they require an ecosystem to be able to do their work.
There were plenty of electrical engineers at MIT working on differential analyzers when Shannon worked on his paper. Why Shannon and not them? Funding and ecosystems don't make technological revolutions anymore than they make cures for diseases. After all, the four papers that revolutionized physics in the early 20th century were composed by a 24-year old patent clerk. Someone has to do the job of thinking and putting those ideas to paper. This is a requirement of any great idea irrespective of funding or people. Thinking is an individual pursuit for an individual reward.
There is both an individual contribution and a societal contribution. No one is denying the individual contribution. But none of YC types had anything to do with inventing the internet but feel like they are the only ones who deserve it's rewards. They haven't created anything like information theory. It's mostly been about fleecing retail investors. More SBF and less Shannon
It does seem a bit tone-deaf for pg to be making this argument at the precise moment tens of thousands of people are being laid off in the tech industry. Definitely a "mask off" moment. Either that, or he has a large equity stake in a manufacturer of pitchforks.
> It's the automation that's making it possible to be successful, not the engineers doing the automation.
That's like saying anyone who thinks hammers are a good idea is really saying a hammer makes a builder successful, not the builder. It's just a tool, and he's saying tools mean one person can do more. You don't need to straw man a philosophy on to it to then have something to argue against.
> employees do the automation, not the founders
Founders normally are employees. For the phase or type of company pg is talking about, they may be the only employees.
Can you explain how Founders are employees in this context?
I read this as pg being focused on justifying post-acquisition wealth. It seemed to be a justification for the founders receiving 100s if not 1,000s of times the level of compensation as the workers.
I would be curious to hear more justifications from him for this. Founders really take far less risk than employees. I say this as someone who missed out on about $75 million from a YC start-up when an unnamed higher-up told them to fire me two weeks before my first vesting, because I had the most amount of non-founder stock in the company (a compensation for which I took a 66% salary cut).
Yeah no one has anything to say about this, probably they read it and run to check their agreements sweating buckets. That's messed up, sorry to hear it.
Many of my friends and colleagues became wealthy thanks to winning the YC lottery, some as founders some as employees. The way they changed afterwards drove me away from the pursuit of money entirely. I'm sure the me in this timeline would not like the me in an alternate timeline where I lasted there two more weeks and achieved wealth status.
> Can you explain how Founders are employees in this context?
When founders start, unless they're hands-off directors, they'll be CEO/CTO/etc, which are employee positions. They'll get a salary, because they're employees.
> I read this as pg being focused on justifying post-acquisition wealth.
I don't see why. It makes more sense to focus on founders if he's talking early stage, where you can string a load of systems together to produce a business process. As you get bigger you'll probably regress to the mean of driving processes through admin and management staff, unless you stay laser-focused on keep automation around.
> I would be curious to hear more justifications from him for this.
Not sure I understand you. Why do post-acquisition wealth need an justification at all?
> Founders really take far less risk than employees.
If it would be true, why aren't you a founder? You know, blaming other people for wealth/startup/marriage or government/party/boss/partner is easy. But when it comes to actual execution, most of these people come up blank.
You have worked for a startup. Well, you was aware of the risks. But I'm pretty sure the founder had more risks than you. I say this as someone who founded a company recently.
> Not sure I understand you. Why do post-acquisition wealth need an justification at all?
Did you read the tweets, or just the headline?
> You have worked for a startup. Well, you was aware of the risks. But I'm pretty sure the founder had more risks than you. I say this as someone who founded a company recently.
I have helped start 4 companies with 1 gracefully neutral exits, 1 sold, 1 gracefully neutral, and 2 nose dives. After every exit I walked into a job making more $$ than at the job I worked at before the previous startup. The only "risk" a startup founder takes is the potential for a below-market salary for a short period of time.
~20 years ago I failed at a music start-up, royally failed. We burned through $2.5m in about 11 months with nothing of value having been produced, then the dot bomb exploded while we were raising our A round. The same investors funded my next failed startup and offered to fund the one after that.
Once you get to say "I'm a founder and names you might know from vc insider have given me amounts of $$" you have a golden ticket.
The idea that the fruits of automation should be awarded to the single guy on top is ridiculous, and that's not communist thinking.
The idea of automation is that we should advance as society. The very point of it is that we need to work less, but it never turns out that way because the benefits of automation are seized by the few.
Hence, we forcefully invent new labor regardless of purpose. Half of our economy is keeping each other busy with bullshit to keep this going.
And if that wasn't perverted enough, now the message is: actually, we don't need you. At all.
I've been around YC for 80% of its existence and have never observed anything that could remotely be described as an "Objectivist agenda". I'd remember it too, if I had.
As for "treating employees like garbage", that's just a baseless smear.
If founding work is so simple then founders should be interchangeable? Where is the moat that ensures what two handful of people cobbled together is not replicated? Isn't it that the real moat and the real propelling force becomes more and more the capital leveraged?
Most Founders are interchangeable. The entire business of YC is paying for a ton of people to found a ton of companies and hoping one hits. Luck is a huge factor. The issue is the 1 guy that does hit has an outsize impact on society. Sometimes it's positive but often it's not.
Because of the competitive nature of business (and humans).
If you can build a factory that can build products more efficiently, it means you can sell them cheaper then your competitors, meaning you can move more volume and thus make more profit. So you are definitely not going to run that new shiny factory for only 3 days a week.
Eventually, competitors will notice your improved output and react with their own improved factory. If you sit still in your shiny new factory, you will eventually be outpaced by competitors as they catch up.
In the end though, the throughput per human is greatly increased as computers and machines do (most of) the work. This has increased prosperity greatly.
Unless you can accept living with less then the competition, you are not going to work less then your competitors.
Nobody is forcing you to work a 40h week, but because 40 hours is about the average of how many hours people work, you'll need to match that to stay 'competitive'. It's a very primitive instinct in natural selection.
For people earning average wage, they often cannot afford to work less hours, as prices of commodities (housing, food, energy) are naturally regulated by what people can afford. Because most of their peers work 40 hours, they need to do the same in order to be able to pay their bills.
Those that make more than average wage could afford to work less, yet most people chose not to do that. Because now that you make a lot of money, you could still work 40 hours and get a bigger house then your neighbor! And a faster car! You could impress a potential partner with that, which increases your chance of reproduction and creating (w/h)ealthy offspring.
No amount of automation, computers, machines or whatever technology will prevent people from staying competitive.
edit: replaced 'minimum wage' with 'average wage', because cost of living is highly location dependent.
People making minimum wage typically have to work well above 40 hours, and even then often find their earnings difficult to live off of. See also: all the calls for paying low-level employees a "living wage".
This is the question I see way too few people asking: how do we want end-game capitalism to look. Should it be Banks' "The Culture", or should it be neo-feudal with the populace at large acting as serf to capital.
Without discussing the vision, discussing the strategy becomes sort of meaningless.
As awesome as The Culture sounds I find it unsettling that Humans basically become the exceptionally pampered pets of the Minds and at least right now it's unlikely we will create AIs as benign and benevolent as they are.
This isn't new. There's been 4 industrial revolutions.
But the most obvious example is electricity. People's output in certain roles immediately compounded and the long tail of this never really stopped (it was a precursor to the internet and AI ofc)
Where fields had to be toiled there was space for little else. But now people can scale their impact in interesting new ways
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.
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.
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.
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.
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.
That would be illegal in my country. Dividend is considered an unearned income and is taxed differently as well.
They could perhaps give the worker a minimum wage and the rest pay in dividends, but mind that dividends need to be distributed among all the shareholders equally, so you can't say you would pay $100,000 unless you allocate shares so that when dividend pay out is decided, worker's shares will yield that exact amount.
Also this is not about a dystopian village with one single employer that exploits workers that cannot move. Startup employees agree with free choice to work somewhere for the agreed upon profit share, be that % based or fixed, or mixed.
Hunter-gatherer bands don't exactly survive without families to continue the cycle of reproduction, someone to take care of the children, someone to tend to the wounded and sick, someone to build the houses while the hunter-gatherers are out hunting, someone to grow crops when it's cold and food is harder to hunt for, someone to track how much food everyone is getting...
I did not read the original reply to mean that "hunter-gatherer band" only consists of hunters and gatherers.
And while there is certainly division of labour as you describe it, it does not necessarily imply that these are distinct social classes (even today, we have different job roles in a single social class).
But it only takes one spark of someone thinking they "put more effort in than everyone else" to demand more food, and suddenly you have societal classes that drift further apart over time.
> in the US a hunter gatherer band a century and a half ago provides for their own needs
Such hunter gatherer band was much worse dystopia village. You were dependent with your life on the band and if you disagreed with others, you could not just switch bands as easily as you can switch employers today.
Such bands had very flat hierarchies. Your opinion was weighted on merit (i.e. the best hunter's word was trusted in that activity and the best farmer on theirs). Different bands absolutely exchanged people. Young people heading out to find their way and tribe was practically a right of passage.
If you said we have greater material comforts today, I couldn't disagree with you. If you said we're happier? I'm not so sure. There is something so damned compelling about a tight knit family and tribe.
The argument he is arguing against is that the workers create the wealth, and profit is that unpaid surplus labor time that the LPs/VCs/founders expropriate from the workers creating wealth. You can't "share" profits with workers when workers are creating all the wealth, the LPs/VCs etc. expropriate profits from workers.
So if the people providing the funding weren't there, where would the salary for the workers who are currently getting their surplus labor expropriated come from? If these workers are getting unjustly exploited, then what's to keep them from starting a co-op together where they share all profits? Plenty of co-ops exist in modern day capitalist societies, including several successful ones like WinCo in the US and Mondragon Corporation in Spain. No one is forcing these employees to give up their "surplus labor" to investors.
Look at the cost of Zuckerberg's metaverse push to Meta, and Musk's work to Twitter: sure, that's currently sitting at a lot more than that, but they are hoping to turn that around in a number of years.
Which is to say that cost/value proposition is never simple. I've been at companies where people were paid simply not to jump to competitors.
It isn't even limited to high profile cases like those. Same goes for a lot of hiring (in junior positions especially), it often takes some time for the employee to learn the ropes, during which time their cost (both in terms of direct costs like salary, benefits and equipment and indirect costs like the time of the people bringing them up to speed) is almost definitely higher than the value they're bringing to the business.
Not disagreeing; but for clarity you'd want to refer to generating surplus value rather than value, i.e. net of costs. i.e. if my work can be construed as having created $1M of revenue, but $990,000 of cost (say some low-commission dropship affiliate sales structure, or online payments with a small transaction fee), I've only created $10,000 of surplus value, out of which I can make a case for a different distribution scheme based on an update (read: agitation) of normative values.
If you can convincingly demonstrate that you singlehandedly generate $1m revenue for a company, then I'm confident that you have the negotiating power to demand a share.
The problem is that in most cases you can't do that. You might have been the person who made the last push to make the revenue possible, but you were building on the work of everyone else who was working for that company and you were leveraging someone else's resources to make it happen.
We have to have some way to agree what portion of that profit can reasonably be attributed to you. To avoid complicated math and guesswork every quarter, most of us agree to a fixed salary as a reasonable estimate for a fair share of the value we're creating.
I want to start an agency that does everything digital, but also some mrr micro SaaS projects.
I want it to be an equal equity corp basically every hour invested earns you shares based on your senior and tenure.... Sr dev multiplier x 2 years with company for example.
Then we'd earmark like 30 percent of revenue to go into profit sharing and each state gets a reward.
The shares also calculate your voting threshold.
Senior team will be given an edge so there's an ethical dictator but not an insurmountable thing.
It might take 10 people to out vote the execs but you can't buy shares it's all earned by actions and time investment etc...
I also want to build an ERP system that can actually run a co-op like this with multiple streams of income, multiple point pools to reward employees or even customers etc....
It'd also network with other co-ops to build symmetry like Amazon marketplace does for sellers, everyone would be invested in every other syndicated companies success.
Well, sure. But people are not programmed like that.
Sales people often can get up to or more than 50% of the profits (after all expenses) as commission. I've seen up to 80 or 90 percent for companies with extreme growth focus.
Programmers don't generate value directly the same way, but often you can attribute value to products they create and compensate them fairly.
Personally, I don't envy the salespeople their commission-based compensation. Having my compensation directly tied to demonstrable value created would be overly stressful for me.
The bargain I've made instead is that I get a very good base salary and call it a day. When the company grows because of my contributions, I negotiate a higher salary, but I don't have to think about it from month to month.
I'm not implying that companies don't bring value by their nature. They absolutely do. I'm also not implying that I could generate this value on my own, though I have before.
I'm just saying, if I have an employee and he makes me $1m a year, I'm going to pay him well - I'll pay that employee what is fair in the context of what value we enable him to generate for us.
That usually means the employee is worth at least 50% of that in compensation, btw.
This is why if you bring a deal to a company as a sales person commissions are around that number (50% of profit).
Are you familiar with "debt bondage"? Technically, the brick kiln workers of India and Pakistan are paid a wage [1]. Closer to home, Amazin warehouse workers probably wouldn't consider themselves as sharing in Amazon's profits. Let me summarize:
1. Debt is built into your existence (student, medical, housing, etc);
2. The system is designed to extract (exploit) value from labor; and
And that revenue wouldn’t exist without labor. That’s the point. So offering to “share” that in the form of mostly fixed wages both betrays a presumption of ownership and gives a false appearance of charity or benevolence.
This is a fun semantic game but Profits are not the cost of doing business. When you have an employee sign a contract for $X dollars per year, that's a cost. Conflating Revenue and Profit for the sake of an argument is bad faith.
My Assumption here is that the common usage of profit is, "Money after all expenses paid", which employee compensation is clearly outside of that definition.
Don't assume bad faith: that their framing is unorthodox doesn't make it misleading.
Money is fungible and what we identify as "expenses" versus "profit shared" is arbitrary. Economic value is created by the enterprise, and that value is then split between the owner, the employees, the suppliers, and the customers.
We can argue about whether the distribution is fair, but complaining about the specific accounting method by which the value is distributed is myopic. Either you're getting a fair share of the economic value or you aren't—whether your share comes of the pre- or post-tax portion of the pie is the government's concern, not yours.
I think people are largely arguing over whether or not the share of economic value is proportional to contributions and when they talk about that share they typically refer to profits. I think redefining/reframing what profit means in this conversation is intentionally misunderstanding/redirecting the argument.
Workers: "We should see more of the profits the company makes and we are making the case that collectively we produce a larger portion of the value we're asking for"
Poster: "Your pay is part of the profit, the more money you make the less that goes to the owner"
You're right. I shouldn't assume a framing is misleading just because its unorthodox, I'm attempting to make a case for the framing being misleading with supporting statements.
At best the parent comment isn't saying anything of substance at all (in response to ITS parent comment), and in my view, at worst its an attempt to redirect the concept of 'profit' to make the argument seem less credible.
I don't agree that jerrre isn't saying anything of substance. It could have been fleshed out better, but what they say is a reasonable counter to their parent's argument.
ceronman's thought experiment was "if you have employees, you have to share your profits ... If [they] don't produce any value, easy, fire them all, you get everything."
jerrre's response, which I think is fair, is that we're already running this experiment. If businesses did not think employees produce value, they would not pay them wages or salaries, because every dollar paid to an employee is a dollar less of profit for the company. Companies already acknowledge the value that employees create value by the very fact that they pay them anything.
In other words, what's actually at stake isn't whether employees create value but how much, and ceronman's comment doesn't contribute anything to that discussion.
I disagree with your interpretation of ceronman's experiment and the premise that we're already conducting it.
I believe they were making the case that Employees need the company as much as the company needs the employees. The experiment is to split the profits evenly amongst those who created the value in the first place - The people that work inside the company. If they can't produce the value, get rid of them (And if that's the case there's more profit for everyone right?)
They could also mean that the profits are distributed amongst the employees based on individual contribution when they conclude that there wouldn't be any self-made billionaires because no single individual produces that much value.
I still disagree with the conflation of wages/cost of business and profits, even though more mages means less profit - Profit is still surplus after all has been paid. The distinction is important for more than just the scope of this conversation.
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.
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.
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
> 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).
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.
Hell, one can support the median household income at a reasonable SWR on ~ 2M.
Underlying all of this seems to be paulg's assertion that billionaire founders 'deserve' their wealth and therefore our inequality and their relatively small contribution to the public purse is justified.
I have no problem with founders being rich, but once you're earning 1%er income? You should be paying a hefty amount of taxes to support social spending. Think ~ 2/3rds, like it used to be before the regans and thatchers of the world gutted the social contract in the 80s.
$10M does get you a nice time, and you would never have to say no to any reasonable expense, but it's also definitely possible to overspend. There's some higher threshold where you really can be 'wild and crazy' and the only way to run out of money would be through bad investments.
There's a difference between always flying first class, always flying on a jetshare, and always having your plane fueled up and ready to go. Also, between driving yourself to the airport, taking a car service, having your driver take you, or having your helicopter pick you up.
10M would give you a safe withdrawal rate somewhere between 300-400k a year. A fairly common household income for people on HN. It affords a very nice quality of life but you're certainly not living the lifestyle that most people think of as "rich."
That's the average? There's no way to measure it, but that's around five times the US median household income, at a percentile of 97%. It could not be close to the median for HN just by probability, and it's a rich man's income.
I have to remind myself that there are people comfortable with such a 'wild and crazy' lifestyle.
While I wouldn't mind being very well off, I have a visceral gut reaction to any of the sort of flashy spending that draws attention to myself. I also find that it isolates you from the experience of the common man, and life is lonely enough as it is.
it's interesting that it's very common to have a disdain / discomfort with showing that you have that money, but no such corresponding problem with just having it. if you're not going to give the money away, i don't see how there's any benefit to not spending. you're still way richer.
Because it changes your experience in such a way that you will not fit in as well with your fellow humans, something many of us conscipusly enjoy and most of us somewhat need.
Eh, any money you have invested generates income. That income can be used for your expenses or given to charity, depending on what your needs are for a given year.
After I hit my 'retirement number', if I can find a job that will give me the flexibility I want in retirement, I plan on continuing to work 2-3 days a week and donating half my salary to charity.
God knows local charities can use my money far more than they can use me as a volunteer. I like coding, and if I get paid and do good in the world, so much the better.
typically 1% of portfolio value a quarter = 4% a year i am guessing?
theory is if your portfolio is invested in funds (mutual or ETF) tracking a broad-market index (S&P500) aka equities, and these equities go up 8-10% a year (return before inflation) on average over the long term
and if you have a $2m portfolio basically 100% in equities
sell off 4% = $80k/yr worth pre-tax (only taxes would be... long-term capital gains?)
because your portfolio is appreciating 8-10% a year, it'll stay at $2m despite you sell off $80k/year because it's tracking the US stock market/"economy" which is supposed to be growing 8-10% a year and they "offset each other"
with $10m this becomes $10m * 0.04 = $400k/yr pre-tax
i too would like to have $10m so that I could live off $400k/yr and not need to work :)
I am very far from being a billionaire, but as soon as I made it to upper-middle-class, I realized that the hedonistic treadmill would never end, even if I was a billionaire.
It's a never ending fantasy world where everyone looks up and wants to be as rich as the next tier, even though that's rarely possible, and just like the scene in WarGames, "the only winning move is not to play".
While there is some of that, eventually you reach a point where you don't really know what to do with more money. That is you fly first class, and you see no reason to upgrade to the next level (shared jet, owned jet). Maybe you try a cruise and decide an inside cabin is just as good as the largest balcony room (or something inbetween) and are not interested in owning your own ship at all - perhaps a cruise isn't for you and you still prefer primitive camping in the backwoods with the minimum you can take with you.
Of course you can always spend more money. However I have known rich people who decided their mansion was too large and so they downsized (their master bedroom after the downsize was the size of my whole house!) Eventually what you need is time to enjoy what you have not more luxury. Fly coach or have a private jet on call - end the end you get there, and the jet only saves you a bit of time at the airport.
> 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.
> Y Combinator created a new model for funding early stage startups.
> Twice a year we invest $500,000 per company in a large number of startups.
> We work intensively with the companies for three months, to get them into the best possible shape and refine their pitch to investors. Each cycle culminates in Demo Day, when the startups present their companies to a carefully selected, invite-only audience.
YC is creating venture-backed startups, where the nature of power-law returns necessitates aiming for "grand slams" (i.e. 100x outcomes following SeriesA funding). If successful, this creates billionaires. So in a sense (though I wouldn't conflate cause & effect): Yes, YCombinator is looking for people who want to create companies that could reasonably result in the founders becoming billionaires.
Worth noting: Not all companies can or should target this trajectory -- which just means VC might not be the right funding source.
Check paulg’s tweet history. A few weeks ago he lamented how fake things are in the US, pointing at things like Kraft singles.
I don’t have a Twitter account but almost went to sign up to reply “billionaires whose wealth is based on mathematical inference not possession of tens of billions of real dollars.”
I say let’s automate away book smart, street stupid easily deluded normal humans who end up optimizing for themselves while roleplaying something more egalitarian is afoot with their games.
Letting a minority monopolize agency is not a greater good as there are no greater goods. It’s typical political corruption.
Automate away politicians, VCs, C*O level; organizing life in line with religious traditions is not sacrosanct. Why is organizing life under the prior 60-70 years so special? Ooh right; cause that cohort is where all the wealth is captured. Silly me.
Looks like it’s time to revisit Reagan’s policy of expropriating retirement for the youth to invest.
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...
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.
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...
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.
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?
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?
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?
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.
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.
What I'm trying to get for an answer is straight percentages, because there's always this latent hate towards founders or bosses so I'm trying to see what would be fair in the scenario I presented.
The "boss bad, worker good" is getting really boring and disgusting, just like not all bosses are evil - not all workers are good. I presented a scenario where there's no investors and where the founder did majority of the work.
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.
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.
> 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.
Usually driven by existing majority owners, with the goal still being to increase their own absolute wealth even if their relative ownership decreases.
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.
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.
All things equal I don't think they should. The reality is probably a combination of early employees not being as skilled as the founders and behaving irrationally/ not understanding the value of their equity.
> 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.
Is this always true though? I've worked with a grand total of one company where, if the company went bust, it would mean the end of the founders' life savings. Every other startup/company I've seen, the founder was already very well off. Yes, they put a big chunk of capital and/or time into the start-up. Yes, they were highly motivated to make it succeed. But if it failed, they would... be sad, fall back to family money for a while, and then later do another start-up (or go back to their previous career in Investment Banking). I think this idea that the founder must be singularly taking a huge amount of "risk" is a romantic, stereotypical take, not always true.
Start-up employees, however are shouldering risk. They are by and large not already wealthy so if the start-up fails, there goes their livelihood until they line up another job. I think we should stop thinking that "risk" is exactly the same as "how much of the company's raw dollar equity did you contribute".
I agree with you 100% and am not afraid of vocalizing similar things to a hyper capitalist audience.
However, I don’t see the way out unless the social safety net is strengthened (not gonna happen) or we just ban rich people from starting companies (lol, lmao even)
Edit: maybe there shouldn’t be a way out. Maybe the solution is just to educate and make transparent that rich founders have better odds and less to lose and bust conceptions around successful at business == higher quality individual.
I’ve been toying with an idea where blockchain actually is interesting: imagine all currency is on the ledger - all of it. And every coin had an (rather short) expiry!
You need to create value continously or fall back to UBI.
> there goes their livelihood until they line up another job.
This risk exists with any employment arrangement. So arguably the risk is merely the greater likelihood of the startup failing vs big corp laying you off.
For employees, there is employment risk, reduced compensation, potential increased difficulty of finding next job. For founders there is the first two but generally finding next job is easier (because you get lots of managing/etc experience potentially faster than you would normally).
When they talk about risk they mean capital risk, not personal risk.
So someone with 10 million dollars who puts up 1 million has put more capital at risk than someone who puts up 100,000 even if that is everything they own.
And paying out on personal risk doesn't make sense. Imagine doing a seed round and the share of equity each investor gets is not related to how much they invest but what % of their networth they invest.
Also in every startup I've worked for(3) the founders were not rich before starting the company.
The straw man here is the family money you've assumed. I've done 6 startups as founder or early employee. I assure you I had no "family money" to fall back on. It's only my most recent company that had an exit that really put a cushion under me, and that's after more than 20yrs of startups.
People who assume there's family money to fall back on are generally themselves in a privileged position. They are projecting that onto everyone else and it's an excuse to not build anything and discouraging anyone to do anything.
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.
"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.
I'm curious why the downvotes? I'm a technical founder running a devtools/security startup. After experimenting with ChatGPT for a few hours, it's clear to me that given the right prompts and model tuning, it's already capable of doing the following tasks at an above average skill level:
- Writing cold emails and responding to questions asked in replies
- Writing a script for sales calls
- Writing a pitch deck
- Writing marketing page copy
- Writing ad copy
- Responding to customer support requests
- Writing promotional social media posts
I have more confidence in its ability to do these tasks given its current level of sophistication than to meaningfully contribute to engineering tasks (though it can certainly help there too).
I wouldn't trust it with accounting or administrative tasks yet, but it doesn't seem far off.
That's true, but while it is definitely helpful and can accelerate development, I don't generally see writing working functions to do simple, discreet tasks as a bottleneck to engineering in the context of a nontrivial system. But writing quality cold emails tailored to each prospect is definitely a bottleneck to sales--they are time consuming/tedious to write, and you usually need to write tons of them to get results. Same story with marketing copy, ads, social media posts, etc. having the time and energy to produce this content on an ongoing basis is a major bottleneck to marketing.
On the receiving end, being able to rip though thousands of words of AI drivel and pick out the actual content (if any) is going to become a major skill in itself. Not that skim reading and summarisation isn't a skill now, but the noise floor is about to rise by many decibels.
Probably there will be AI tools to de-AI messages, like reverse semantic companders[1], coming soon.
It really appears to have a default style or bland, corporate nothing-speak to it. It can write perfect emails crammed with every platitude and all in completely sterility, unless prompted otherwise.
It can already write better HR-friendly pap than I ever could, and it can churn it out by the thousands of words.
I'm very impressed by the power of "mere statistics" to construct dead-eyed language like the aliens in Blindsight. But, more than that, I'm grateful that I'm not employed to write such text in the first place. While there's an incoming boon for slackers who can just fire off a prompt email with a little bit of proofreading, there's a long run pinch on people who are employed just to talk nothings all day. Those who remain will have to watch over hundreds of thousands of words spraying out per day.
> 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.
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.
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.
> 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
> 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.
> 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.
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.
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.
Automation always reminds of this quote from Jurassic Park:
"
John Hammond: You're right. You're absolutely right. Hiring Nedry was a mistake, that's obvious. We're over-dependent on automation. I can see that now. Now, the next time, everything is correctible...
"
I would state fewer named employees, not fewer employees as the people creating the infrastructure automation was still employees of you in both focus and impact, etc.
Saying that they do not exist is just inviting being blind-sided by movements in that automation beyond your control.
Given the current market I'd say you have to achieve some basic success before hiring anyone, at least if you're bootstrapping. From my experience it's quite difficult to find early-stage employees that are both affordable and good enough to handle the breadth of technical tasks needed in the early phase of a business.
So, yeah, automation can take away a lot of pain, and how far you can get really depends on how well you automate specific aspects of your business. My takeaway after several SaaS products is that you have to optimize for minimal customer interaction from the start, otherwise you'll drown in support requests once you hit product-market fit. Stuff like billing, subscription management etc. should be solvable in self-service processes for customers, and if you see a speficic support issue more than 5 times in a given week you should ask yourself if you can automate it away or change the product so it won't happen again.
I automated my e-commerce business and turned that into a SaaS. Found customers organically and have become my own “customer” multiple times. Solo founders like me are on the rise and you’d be surprised how far a little automation can take a business.
Why do you think the output elasticity for labor is low? Is it a case of having to work a certain number of hours to get medical care? Is it the price of medical care? It seems like modern tools and automation would help it be higher?
I always find this take that innovation wouldn’t happen in a non-capitalist society very strange, as if humanity hadn’t produced countless innovations before modern constructs like the corporation existed.
I also think its incredulous to focus on one (admittedly, very) positive outcome of capitalism without acknowledging its externalities, like pollution, inequality, etc. I suppose pg believes the current system will lead to a post-scarcity society in which none of those exist. Perhaps that’s true, but I hope the planet survives long enough to get there.
It's not like a socialist country could invent things like a satellite, and be the society that figures out how to send a man into space, probes to the moon and other planets - oh yaa, a socialist country is the first country to figure out those things.
Actually Marx talked a lot about automation. Marx's prediction was this would lead to a lower rate of profit for invested capital which - mainstream establishment sources say is what has been happening.
Yes I have no idea why Paul would say this. I guess he realised he was wrong and thus he deleted it, but he won’t admit that. So many people online who make fun of Marx haven’t read any of Capital
It's a strawman argument for founders, but I am fairly sure it is made out of ignorance.
Let's say a sole founder buys $100,000 worth of Amazon Cloud, Nvidia cards, smartphones etc. Yes, one person is at the company, but others made those goods. The founder may not have directly exploited the person who made the smartphone they're using, but someone did.
Also, let's say I sell my small company which is well positioned in a fast growing market. The buyers are not buying based on what happened before, but on the future work and revenues that will be acquired from people working on the product.
At the end of the day there are people who work and create wealth and get a wage or salary, and there are idle class heir LPs who do not work or create wealth. The heirs survive on the wealth created in expropriated, unpaid surplus labor time of workers who do work. VCs front for the LPs, and founders deal with the VCs.
I don't think Graham even knows what he is arguing with. I'm not trying to make a convincing argument for the other side, but a clarifying one.
Incidentally, pretty much every economist up until the mid 19th century agreed with my view in some form - Adam Smith, Benjamin Franklin, David Ricardo - all the people who made economic arguments which economists still use. They said they studied political economy. It wasn't until the 1870s that arguments against new value being created by labor were started in full swing, although some of the ideas go back to the 1830s.
His apparently original post, "automation is an inductive proof that Marx was wrong," along with that recent pseudophilosophical essay about "wanting what you want (to want)^n," concerns me as to whether he's jumped the shark.
That’s a very short term vision. The founders and VCs are not any less automatable than their employees. I guess we’ll se how dearly they hold those beliefs when the AIs will own all the wealth
A capitalist fever dream to justify how valuable he is to society. Of course, he completely ignores the labour going into the entire supply chain that enables this level of automation. It's full of underpaid workers likely including some living under slavery-like conditions or in authoritarian dictatorships that don't even live up to his free-market ideals.
Totally, you still hear that feudals didn't deserve to be rich, because serfs created all the value. But the falsity of this claim become obvious as enclosures enabled feudals to use fewer and fewer serfs on their land.
If we're going to devalue and degrade the labour of anybody who isn't "founder" because of its ability to be automated, then let's follow the thread to its logical conclusion and say that it's the only VCs who really "create value". Just as AI will be able to take the legwork out of turning a concept into code, coming up with these concepts might well be an even easier task to automate. Of course though, it takes a wise human to know which AI generated concept to fund, and in that spirit, let's all put our hands together for the billionaires who will define this future for is. Really give it up!
Why not go all the way and replace the fallible, gullible, arrogant human VCs with much smarter AI VCs who can determine which AI generated companies are likely to succeed with higher fidelity?
I think the more social/political/financial power possessed by the individual threatened by AI, the more resistance there will be to them being disrupted by it. Like look at tech's smug responses to truckers concerned about self driving, and contrast that to the perspective this tweet has toward everybody in tech except for founders. He's literally just insulating a ruling class. This class dynamic is so deeply ironic coming from someone who literally said that "automation is inductive proof that Marx was wrong". It's the opposite!
Which is hilarious, because one of Marxism's core tenets is that new technologies and industrialization lead to the deskilling of workers, resulting in the need for fewer of them.
Probably why PG deleted his original tweet and rewrote it.
I feel like he’s missing the second order effect. If everyone can automate everything, then there would have been (or will be) 900 Instagrams and 1 (or 20) that would have had a $1000 exit.
More fever dreams from the pus filled mind of PG. Imagine thinking employees create no value for a startup. The guy has been drinking his own piss for far too long.
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[ 2.9 ms ] story [ 350 ms ] threadThis is a great business of course but there are not many of them given the scale of the whole economy.
Before the Internet, the closest to this was creators or inventors living off of patents, license or copyright fees.
This is a very good point to emphasize. Most readers here on HN work in IT and are thus inherently biased.
The reality is that the majority businesses rely on having a workforce of humans.
The CapEx spend of tens/hundreds of engineers that built the SaaS is offset by 1 company to remove the needed engineers from each company.
Companies used to: build their own authentication layers, databases, infrastructure, code repositories,etc, etc.
What starts in consumer always moves to Enterprise. So will AI and automations.
I should have also mentioned hedge funds who manage billions with relatively few head count and they use automation tools extensively starting with the spreadsheet in the 1980s.
There are more "psychological gotchas" among non-software people about what "real jobs" are and what it means to create value, but time catches up with everyone.
What would have taken an army of clerks in the past is now a (lot) of code. Whole departments are replaced by API’s that cost less than $100/month.
It’s really incredible.
I’m still in stealth mode. My startup is super simple in concept - I gather a particular type of data, clean it, process it, and serve it to subscribers. Some of my data sources are free, some are paid API’s.
All the processing is done in code. You would need an army of people to read all that text, a layer of bureaucracy to manage and check them.
Value is delivered on web and per email. There is no marketing over email, it just serves as a regular touchpoint (where I email them free value) to keep the relationship alive until my client is ready to upgrade.
Then there’s a couple of paid tiers which is the same but with more and different features. Starting at $10/month, up to $50 - $100 per month.
For perspective, the service can be worth many thousands of times this much in dollars gained for the client, so it may be the wrong model altogether.
I’ve test-driven different aspects of this to see if people would be interested. I might announce it here when I officially launch it, but probably not.
Asking because I might start selling hardware soon too and the prospect of turning my garage into a customer fulfillment center doesn't sound fun.
The past three years, the YC crowd has really tried hard to justify wealth disparities, gentrification and generally treating employees like garbage, as part of their Objectivist agenda.
Paul, employees do the automation, not the founders.
1920s robber baron bs.
Ignore the ethics that every single startup would be impossible without standing on the heads of those who have dedicated many hours of their lives building this free software.
It's not hard to read the licenses, and I have a fiduciary duty not to open up my company to unnecessary liability
I did have a discussion recently with some friends as to their ethical reasons against GPT and co-pilot generated code.
Although we have a type system so they are probably adjusting things to fit
But none of our supply chain has restrictive licenses attached, and good faith errors are usually easy to correct way before they go to trial
I know because I have had to sign off on using worse packages when our use case doesn't comply with the license on the best in class package
“I’ve already got the prize. The prize is the pleasure of finding things out, the kick in the discovery, the observation that other people use it - those are the real things, the honors are unreal to me.” -Richard Feynman
I think it's ridiculous that open source developers give out their hard work willingly and then seem to think big companies are 'taking advantage' by not hiring them or funding the project.
It has nothing to do with ethics. Startups didn't steal anything. The developers gave it out willingly.
This sort of attitude has soured me to the entire open source community. They want to be able to give their work out for free, but then have a say in who uses it and how it's used, which is exactly the opposite of free and open.
In the heads of somebody who believed The Fountain Head and Atlas Shrugged were bibles, there are 1 or 2 people doing 99% of all work in the companies.
Progress comes from all sorts of places. Scientific progress come from scientists. That doesn't result in things better in my life without a huge number of other people doing things well and efficiently. Both of which includes anything people will pay for, including b2b saas apps. Try having a pandemic lockdown without Amazon-level fulfillment in place. Thankfully we didn't have to.
Who would you like to appoint as an arbiter for what "valuable work is"? If certain people enjoy and pay women to fart in their faces - would you like to ban that? How about other "useless" activities that humans enjoy like video games or massages or fashion or fancy restaurants - would you like to ban those as well?
Depends entirely upon the quality of the fart.
I think Keynes said "The worst form of capitalism is in which the public holds all the risk, and the private sector realizes all the rewards".
Focusing on the latter is fair enough. Thinking that a corporation having lots of money is bad seems completely pointless. That money ends up as dividends or higher salaries or lower prices. Tax the first two and celebrate all three.
Not that anyone listens to him, but Noam Chomsky has been saying this for his whole career.
https://youtu.be/a4ZIhW5ZpaE
That's like saying anyone who thinks hammers are a good idea is really saying a hammer makes a builder successful, not the builder. It's just a tool, and he's saying tools mean one person can do more. You don't need to straw man a philosophy on to it to then have something to argue against.
> employees do the automation, not the founders
Founders normally are employees. For the phase or type of company pg is talking about, they may be the only employees.
I read this as pg being focused on justifying post-acquisition wealth. It seemed to be a justification for the founders receiving 100s if not 1,000s of times the level of compensation as the workers.
I would be curious to hear more justifications from him for this. Founders really take far less risk than employees. I say this as someone who missed out on about $75 million from a YC start-up when an unnamed higher-up told them to fire me two weeks before my first vesting, because I had the most amount of non-founder stock in the company (a compensation for which I took a 66% salary cut).
(edit, typos and turned 100s into 1,00s)
When founders start, unless they're hands-off directors, they'll be CEO/CTO/etc, which are employee positions. They'll get a salary, because they're employees.
> I read this as pg being focused on justifying post-acquisition wealth.
I don't see why. It makes more sense to focus on founders if he's talking early stage, where you can string a load of systems together to produce a business process. As you get bigger you'll probably regress to the mean of driving processes through admin and management staff, unless you stay laser-focused on keep automation around.
Not sure I understand you. Why do post-acquisition wealth need an justification at all?
> Founders really take far less risk than employees.
If it would be true, why aren't you a founder? You know, blaming other people for wealth/startup/marriage or government/party/boss/partner is easy. But when it comes to actual execution, most of these people come up blank.
You have worked for a startup. Well, you was aware of the risks. But I'm pretty sure the founder had more risks than you. I say this as someone who founded a company recently.
Did you read the tweets, or just the headline?
> You have worked for a startup. Well, you was aware of the risks. But I'm pretty sure the founder had more risks than you. I say this as someone who founded a company recently.
I have helped start 4 companies with 1 gracefully neutral exits, 1 sold, 1 gracefully neutral, and 2 nose dives. After every exit I walked into a job making more $$ than at the job I worked at before the previous startup. The only "risk" a startup founder takes is the potential for a below-market salary for a short period of time.
~20 years ago I failed at a music start-up, royally failed. We burned through $2.5m in about 11 months with nothing of value having been produced, then the dot bomb exploded while we were raising our A round. The same investors funded my next failed startup and offered to fund the one after that.
Once you get to say "I'm a founder and names you might know from vc insider have given me amounts of $$" you have a golden ticket.
The idea of automation is that we should advance as society. The very point of it is that we need to work less, but it never turns out that way because the benefits of automation are seized by the few.
Hence, we forcefully invent new labor regardless of purpose. Half of our economy is keeping each other busy with bullshit to keep this going.
And if that wasn't perverted enough, now the message is: actually, we don't need you. At all.
As for "treating employees like garbage", that's just a baseless smear.
I think this delusion is on par with Marie Antoinette and her "eat cakes if you don't have bread".
If you can build a factory that can build products more efficiently, it means you can sell them cheaper then your competitors, meaning you can move more volume and thus make more profit. So you are definitely not going to run that new shiny factory for only 3 days a week.
Eventually, competitors will notice your improved output and react with their own improved factory. If you sit still in your shiny new factory, you will eventually be outpaced by competitors as they catch up.
In the end though, the throughput per human is greatly increased as computers and machines do (most of) the work. This has increased prosperity greatly.
Unless you can accept living with less then the competition, you are not going to work less then your competitors.
3/8 is a thing in factories, so you could have just hired more employees part/lower time. It’s a cultural artefact that we work 40 hours a week.
Nobody is forcing you to work a 40h week, but because 40 hours is about the average of how many hours people work, you'll need to match that to stay 'competitive'. It's a very primitive instinct in natural selection.
For people earning average wage, they often cannot afford to work less hours, as prices of commodities (housing, food, energy) are naturally regulated by what people can afford. Because most of their peers work 40 hours, they need to do the same in order to be able to pay their bills.
Those that make more than average wage could afford to work less, yet most people chose not to do that. Because now that you make a lot of money, you could still work 40 hours and get a bigger house then your neighbor! And a faster car! You could impress a potential partner with that, which increases your chance of reproduction and creating (w/h)ealthy offspring.
No amount of automation, computers, machines or whatever technology will prevent people from staying competitive.
edit: replaced 'minimum wage' with 'average wage', because cost of living is highly location dependent.
Without discussing the vision, discussing the strategy becomes sort of meaningless.
(Edit: typo)
But the most obvious example is electricity. People's output in certain roles immediately compounded and the long tail of this never really stopped (it was a precursor to the internet and AI ofc)
Where fields had to be toiled there was space for little else. But now people can scale their impact in interesting new ways
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.
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.
They could perhaps give the worker a minimum wage and the rest pay in dividends, but mind that dividends need to be distributed among all the shareholders equally, so you can't say you would pay $100,000 unless you allocate shares so that when dividend pay out is decided, worker's shares will yield that exact amount.
And while there is certainly division of labour as you describe it, it does not necessarily imply that these are distinct social classes (even today, we have different job roles in a single social class).
Such hunter gatherer band was much worse dystopia village. You were dependent with your life on the band and if you disagreed with others, you could not just switch bands as easily as you can switch employers today.
If you said we have greater material comforts today, I couldn't disagree with you. If you said we're happier? I'm not so sure. There is something so damned compelling about a tight knit family and tribe.
Which is to say that cost/value proposition is never simple. I've been at companies where people were paid simply not to jump to competitors.
The problem is that in most cases you can't do that. You might have been the person who made the last push to make the revenue possible, but you were building on the work of everyone else who was working for that company and you were leveraging someone else's resources to make it happen.
We have to have some way to agree what portion of that profit can reasonably be attributed to you. To avoid complicated math and guesswork every quarter, most of us agree to a fixed salary as a reasonable estimate for a fair share of the value we're creating.
I want it to be an equal equity corp basically every hour invested earns you shares based on your senior and tenure.... Sr dev multiplier x 2 years with company for example.
Then we'd earmark like 30 percent of revenue to go into profit sharing and each state gets a reward.
The shares also calculate your voting threshold.
Senior team will be given an edge so there's an ethical dictator but not an insurmountable thing.
It might take 10 people to out vote the execs but you can't buy shares it's all earned by actions and time investment etc...
I also want to build an ERP system that can actually run a co-op like this with multiple streams of income, multiple point pools to reward employees or even customers etc....
It'd also network with other co-ops to build symmetry like Amazon marketplace does for sellers, everyone would be invested in every other syndicated companies success.
Sales people often can get up to or more than 50% of the profits (after all expenses) as commission. I've seen up to 80 or 90 percent for companies with extreme growth focus.
Programmers don't generate value directly the same way, but often you can attribute value to products they create and compensate them fairly.
The bargain I've made instead is that I get a very good base salary and call it a day. When the company grows because of my contributions, I negotiate a higher salary, but I don't have to think about it from month to month.
I'm just saying, if I have an employee and he makes me $1m a year, I'm going to pay him well - I'll pay that employee what is fair in the context of what value we enable him to generate for us.
That usually means the employee is worth at least 50% of that in compensation, btw.
This is why if you bring a deal to a company as a sales person commissions are around that number (50% of profit).
1. Debt is built into your existence (student, medical, housing, etc);
2. The system is designed to extract (exploit) value from labor; and
3. There is no value without labor.
[1]: https://www.antislavery.org/what-we-do/past-projects/india-d...
My Assumption here is that the common usage of profit is, "Money after all expenses paid", which employee compensation is clearly outside of that definition.
Money is fungible and what we identify as "expenses" versus "profit shared" is arbitrary. Economic value is created by the enterprise, and that value is then split between the owner, the employees, the suppliers, and the customers.
We can argue about whether the distribution is fair, but complaining about the specific accounting method by which the value is distributed is myopic. Either you're getting a fair share of the economic value or you aren't—whether your share comes of the pre- or post-tax portion of the pie is the government's concern, not yours.
Workers: "We should see more of the profits the company makes and we are making the case that collectively we produce a larger portion of the value we're asking for"
Poster: "Your pay is part of the profit, the more money you make the less that goes to the owner"
You're right. I shouldn't assume a framing is misleading just because its unorthodox, I'm attempting to make a case for the framing being misleading with supporting statements.
At best the parent comment isn't saying anything of substance at all (in response to ITS parent comment), and in my view, at worst its an attempt to redirect the concept of 'profit' to make the argument seem less credible.
ceronman's thought experiment was "if you have employees, you have to share your profits ... If [they] don't produce any value, easy, fire them all, you get everything."
jerrre's response, which I think is fair, is that we're already running this experiment. If businesses did not think employees produce value, they would not pay them wages or salaries, because every dollar paid to an employee is a dollar less of profit for the company. Companies already acknowledge the value that employees create value by the very fact that they pay them anything.
In other words, what's actually at stake isn't whether employees create value but how much, and ceronman's comment doesn't contribute anything to that discussion.
I believe they were making the case that Employees need the company as much as the company needs the employees. The experiment is to split the profits evenly amongst those who created the value in the first place - The people that work inside the company. If they can't produce the value, get rid of them (And if that's the case there's more profit for everyone right?)
They could also mean that the profits are distributed amongst the employees based on individual contribution when they conclude that there wouldn't be any self-made billionaires because no single individual produces that much value.
I still disagree with the conflation of wages/cost of business and profits, even though more mages means less profit - Profit is still surplus after all has been paid. The distinction is important for more than just the scope of this conversation.
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..."
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.
Hell, one can support the median household income at a reasonable SWR on ~ 2M.
Underlying all of this seems to be paulg's assertion that billionaire founders 'deserve' their wealth and therefore our inequality and their relatively small contribution to the public purse is justified.
I have no problem with founders being rich, but once you're earning 1%er income? You should be paying a hefty amount of taxes to support social spending. Think ~ 2/3rds, like it used to be before the regans and thatchers of the world gutted the social contract in the 80s.
$10M does get you a nice time, and you would never have to say no to any reasonable expense, but it's also definitely possible to overspend. There's some higher threshold where you really can be 'wild and crazy' and the only way to run out of money would be through bad investments.
There's a difference between always flying first class, always flying on a jetshare, and always having your plane fueled up and ready to go. Also, between driving yourself to the airport, taking a car service, having your driver take you, or having your helicopter pick you up.
I think maybe you're missing the perspectives of ...almost everyone outside of a very select few in VHCOL locations.
Tech workers in SF don’t.
While I wouldn't mind being very well off, I have a visceral gut reaction to any of the sort of flashy spending that draws attention to myself. I also find that it isolates you from the experience of the common man, and life is lonely enough as it is.
After I hit my 'retirement number', if I can find a job that will give me the flexibility I want in retirement, I plan on continuing to work 2-3 days a week and donating half my salary to charity.
God knows local charities can use my money far more than they can use me as a volunteer. I like coding, and if I get paid and do good in the world, so much the better.
for anybody not familiar
safe-withdrawl rate
typically 1% of portfolio value a quarter = 4% a year i am guessing?
theory is if your portfolio is invested in funds (mutual or ETF) tracking a broad-market index (S&P500) aka equities, and these equities go up 8-10% a year (return before inflation) on average over the long term
and if you have a $2m portfolio basically 100% in equities
sell off 4% = $80k/yr worth pre-tax (only taxes would be... long-term capital gains?)
because your portfolio is appreciating 8-10% a year, it'll stay at $2m despite you sell off $80k/year because it's tracking the US stock market/"economy" which is supposed to be growing 8-10% a year and they "offset each other"
with $10m this becomes $10m * 0.04 = $400k/yr pre-tax
i too would like to have $10m so that I could live off $400k/yr and not need to work :)
heck, i might even settle for $5m!
Of course you can always spend more money. However I have known rich people who decided their mansion was too large and so they downsized (their master bedroom after the downsize was the size of my whole house!) Eventually what you need is time to enjoy what you have not more luxury. Fly coach or have a private jet on call - end the end you get there, and the jet only saves you a bit of time at the airport.
https://news.ycombinator.com/
-> https://www.ycombinator.com/
->
> Y Combinator created a new model for funding early stage startups.
> Twice a year we invest $500,000 per company in a large number of startups.
> We work intensively with the companies for three months, to get them into the best possible shape and refine their pitch to investors. Each cycle culminates in Demo Day, when the startups present their companies to a carefully selected, invite-only audience.
-> https://www.ycombinator.com/topcompanies/public
Sometimes I guess we just forget where we are :-)
So I guess yes, it's the wannabes.
I'm sure I'm years behind the curve on that idea, though.
Worth noting: Not all companies can or should target this trajectory -- which just means VC might not be the right funding source.
I don’t have a Twitter account but almost went to sign up to reply “billionaires whose wealth is based on mathematical inference not possession of tens of billions of real dollars.”
I say let’s automate away book smart, street stupid easily deluded normal humans who end up optimizing for themselves while roleplaying something more egalitarian is afoot with their games.
Letting a minority monopolize agency is not a greater good as there are no greater goods. It’s typical political corruption.
Automate away politicians, VCs, C*O level; organizing life in line with religious traditions is not sacrosanct. Why is organizing life under the prior 60-70 years so special? Ooh right; cause that cohort is where all the wealth is captured. Silly me.
Looks like it’s time to revisit Reagan’s policy of expropriating retirement for the youth to invest.
This seems to be the trend in "Western" societies, and the middle class enthusiastically votes for those who pursue that agenda.
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...
1: https://en.wikipedia.org/wiki/Markus_Persson
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?
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?
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?
Economy isn’t so hot anymore, folks with obligations will absolutely settle and take it on the chin. You have all the power here.
The "boss bad, worker good" is getting really boring and disgusting, just like not all bosses are evil - not all workers are good. I presented a scenario where there's no investors and where the founder did majority of the work.
> 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.
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.
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.
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.
Why would anyone ever be an early employee when they can be a founder instead?
Is this always true though? I've worked with a grand total of one company where, if the company went bust, it would mean the end of the founders' life savings. Every other startup/company I've seen, the founder was already very well off. Yes, they put a big chunk of capital and/or time into the start-up. Yes, they were highly motivated to make it succeed. But if it failed, they would... be sad, fall back to family money for a while, and then later do another start-up (or go back to their previous career in Investment Banking). I think this idea that the founder must be singularly taking a huge amount of "risk" is a romantic, stereotypical take, not always true.
Start-up employees, however are shouldering risk. They are by and large not already wealthy so if the start-up fails, there goes their livelihood until they line up another job. I think we should stop thinking that "risk" is exactly the same as "how much of the company's raw dollar equity did you contribute".
However, I don’t see the way out unless the social safety net is strengthened (not gonna happen) or we just ban rich people from starting companies (lol, lmao even)
Edit: maybe there shouldn’t be a way out. Maybe the solution is just to educate and make transparent that rich founders have better odds and less to lose and bust conceptions around successful at business == higher quality individual.
You need to create value continously or fall back to UBI.
Just something to play around with. :)
Basically we’ll end up in a totalitarian society governed by an AI.
That train of thought escalated quickly.
This risk exists with any employment arrangement. So arguably the risk is merely the greater likelihood of the startup failing vs big corp laying you off.
So someone with 10 million dollars who puts up 1 million has put more capital at risk than someone who puts up 100,000 even if that is everything they own.
And paying out on personal risk doesn't make sense. Imagine doing a seed round and the share of equity each investor gets is not related to how much they invest but what % of their networth they invest.
Also in every startup I've worked for(3) the founders were not rich before starting the company.
Unless the providers of said ability have to compete for business on price. One should not underestimate how hard it is to replace them.
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.
- Writing cold emails and responding to questions asked in replies
- Writing a script for sales calls
- Writing a pitch deck
- Writing marketing page copy
- Writing ad copy
- Responding to customer support requests
- Writing promotional social media posts
I have more confidence in its ability to do these tasks given its current level of sophistication than to meaningfully contribute to engineering tasks (though it can certainly help there too).
I wouldn't trust it with accounting or administrative tasks yet, but it doesn't seem far off.
Probably there will be AI tools to de-AI messages, like reverse semantic companders[1], coming soon.
[1]: https://en.wikipedia.org/wiki/Companding
It can already write better HR-friendly pap than I ever could, and it can churn it out by the thousands of words.
I'm very impressed by the power of "mere statistics" to construct dead-eyed language like the aliens in Blindsight. But, more than that, I'm grateful that I'm not employed to write such text in the first place. While there's an incoming boon for slackers who can just fire off a prompt email with a little bit of proofreading, there's a long run pinch on people who are employed just to talk nothings all day. Those who remain will have to watch over hundreds of thousands of words spraying out per day.
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.
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.
I expect $1B solo founder startups to become normal pretty soon
https://twitter.com/amasad/status/1600143003607105537
(I honestly don't know -- not my area of expertise, just putting it up for discussion)
Very Musk-y of you
Satoshi Nakamoto is (most probably) a solo billionaire
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.
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
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.
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.
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.
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.
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.
" John Hammond: You're right. You're absolutely right. Hiring Nedry was a mistake, that's obvious. We're over-dependent on automation. I can see that now. Now, the next time, everything is correctible... "
Saying that they do not exist is just inviting being blind-sided by movements in that automation beyond your control.
So, yeah, automation can take away a lot of pain, and how far you can get really depends on how well you automate specific aspects of your business. My takeaway after several SaaS products is that you have to optimize for minimal customer interaction from the start, otherwise you'll drown in support requests once you hit product-market fit. Stuff like billing, subscription management etc. should be solvable in self-service processes for customers, and if you see a speficic support issue more than 5 times in a given week you should ask yourself if you can automate it away or change the product so it won't happen again.
source?
Y = A * L^β * K^α
Value of your work depends on how well you wield capital (K) and labor (L).
Code, Cloud and AI have massively improved α while β is at generational lows.
Where are the new examples of that kind of startup? 13 employees selling for 1bn USD.
Ilari Kaila
@IlariKaila
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1h
Replying to
@paulg
Why did you delete this banger?
<Screenshot of a now deleted tweet by @paulg with the words: “Automation is an inductive proof that Marx was wrong”>
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Paul Graham
@paulg
·
1h
Replying to
@IlariKaila
I forgot that mentioning Marx attracts angry fools. Since I could make my point without mentioning him, I just reposted it without.
I also think its incredulous to focus on one (admittedly, very) positive outcome of capitalism without acknowledging its externalities, like pollution, inequality, etc. I suppose pg believes the current system will lead to a post-scarcity society in which none of those exist. Perhaps that’s true, but I hope the planet survives long enough to get there.
Let's say a sole founder buys $100,000 worth of Amazon Cloud, Nvidia cards, smartphones etc. Yes, one person is at the company, but others made those goods. The founder may not have directly exploited the person who made the smartphone they're using, but someone did.
Also, let's say I sell my small company which is well positioned in a fast growing market. The buyers are not buying based on what happened before, but on the future work and revenues that will be acquired from people working on the product.
At the end of the day there are people who work and create wealth and get a wage or salary, and there are idle class heir LPs who do not work or create wealth. The heirs survive on the wealth created in expropriated, unpaid surplus labor time of workers who do work. VCs front for the LPs, and founders deal with the VCs.
I don't think Graham even knows what he is arguing with. I'm not trying to make a convincing argument for the other side, but a clarifying one.
Incidentally, pretty much every economist up until the mid 19th century agreed with my view in some form - Adam Smith, Benjamin Franklin, David Ricardo - all the people who made economic arguments which economists still use. They said they studied political economy. It wasn't until the 1870s that arguments against new value being created by labor were started in full swing, although some of the ideas go back to the 1830s.
Most of the "big tech" companies have surprising amount of employee, even pure players.
He really said that? Plugging it into Google yields no results.
That's a really dumb thing to say, a very tech billionaire misunderstanding of Marx.
Probably why PG deleted his original tweet and rewrote it.