"If you look at companies that have made a lot of people rich, like Microsoft, Google, and Facebook, almost none of the employees who became rich had an instrumental role in the company’s success. "
The next sentence in the article does a better job at illustrating his point: "Conversely, the vast majority of startup option packages end up being worth little to nothing, but nearly none of the employees whose options end up being worthless were instrumental in causing their options to become worthless."
I interpret the point as being: the monetary outcome of a startup for the employee is a function of their individual contribution (which is what I think the author means by being "instrumental"), plus the contribution of the founders and other employees, plus luck. The magnitude of the individual contribution is small relative to the other factors, so it's difficult to say that a successful startup employee "deserves" a windfall and an unsuccessful one doesn't. The lower the correlation between individual contribution and monetary outcome, the less options should matter for motivating early employees.
This article[0] from almost 10 years ago estimated that the Google IPO resulted in 1,000 people having more than $5 million worth of Google shares.
So I guess it hinges on how you define "instrumental" and "almost none". It's a tautology to say that "instrumental" means "they contributed to the effort", so I would say "instrumental" means "it seems like no one else could have done it" and "almost none" means less than 5%. If you had to take a wild guess about Google, what percentage of that 1,000 would you estimate were instrumental? Furthermore, presumably there are more Google millionaires now, 10 years later. I wonder what percentage of those were also instrumental in Google's success?
I am not sure "it seems like no one else could have done it" applies to Nobel Prize type discoveries or Moon Landing like feats of engineering, much less to software companies.
Don't get me wrong, I don't mean to say that many employees at companies like Google are not brilliant or not extremely effective in their work, but "no one else could have done it" is a useless test that relies on mythologizing people. The way I figure out, the people getting rich (as employees) are those that: a) took the risk to get in early enough, b) performed their jobs competently enough to stay long term and to give the company a chance to succeed, c) got lucky enough in that all the imponderable external factors also resulted in that particular company succeeding. That doesn't mean they weren't "instrumental", in the sense of being the people who actually happened to get the work done. But that's different from "irreplaceable".
Yeah this claim I don't understand in an otherwise very good article.
At the startup I worked at, a bunch of people made some money based on equity, and while it wasn't necessarily a perfect correlation between equity and contributions (and how could it be?), roughly speaking, equity and "having instrumental roles in the success" were certainly highly correlated.
I'm not even sure what the idea is here. Are early employees generally considered undeserving of the success of their companies? Who is deserving? The founders? Later employees?
Yup. I came here to write this. You don't know about how those people helped because they're not the public face of the company; but often they started the seed of something that grew into something big (like you!) or solved some critical technical problem blocking scale, or helped land a key deal, or any of a hundred factors that, if they weren't done, would have severely hit the growth of the company, and couldn't have been easily done by someone else walking in off the street with a nice CV - things that required history with the company, its codebase or market or customers etc.
barleyworth|8 years ago
I interpret the point as being: the monetary outcome of a startup for the employee is a function of their individual contribution (which is what I think the author means by being "instrumental"), plus the contribution of the founders and other employees, plus luck. The magnitude of the individual contribution is small relative to the other factors, so it's difficult to say that a successful startup employee "deserves" a windfall and an unsuccessful one doesn't. The lower the correlation between individual contribution and monetary outcome, the less options should matter for motivating early employees.
defen|8 years ago
So I guess it hinges on how you define "instrumental" and "almost none". It's a tautology to say that "instrumental" means "they contributed to the effort", so I would say "instrumental" means "it seems like no one else could have done it" and "almost none" means less than 5%. If you had to take a wild guess about Google, what percentage of that 1,000 would you estimate were instrumental? Furthermore, presumably there are more Google millionaires now, 10 years later. I wonder what percentage of those were also instrumental in Google's success?
[0] http://www.nytimes.com/2007/11/12/technology/12google.html
lazaroclapp|8 years ago
Don't get me wrong, I don't mean to say that many employees at companies like Google are not brilliant or not extremely effective in their work, but "no one else could have done it" is a useless test that relies on mythologizing people. The way I figure out, the people getting rich (as employees) are those that: a) took the risk to get in early enough, b) performed their jobs competently enough to stay long term and to give the company a chance to succeed, c) got lucky enough in that all the imponderable external factors also resulted in that particular company succeeding. That doesn't mean they weren't "instrumental", in the sense of being the people who actually happened to get the work done. But that's different from "irreplaceable".
birken|8 years ago
At the startup I worked at, a bunch of people made some money based on equity, and while it wasn't necessarily a perfect correlation between equity and contributions (and how could it be?), roughly speaking, equity and "having instrumental roles in the success" were certainly highly correlated.
I'm not even sure what the idea is here. Are early employees generally considered undeserving of the success of their companies? Who is deserving? The founders? Later employees?
barrkel|8 years ago