Imagine there is a lottery where for every 10 million tickets you buy you get one that is giving you 20 millions back.
No brainer, right? Except if you don’t have the 10 million to spare, buying lottery tickets instead of food doesn’t make sense.
Labor/job is your single lottery ticket.
Investors can afford to buy all tickets to make sure they win.
Applied another way, everyone in a given class of YC should share a bit of ownership with everyone else in their YC class, and then everyone of them is likely to end up a millionare.
I still wish that YC would provide some more concrete figures, and ideally include separate figures for first employees as well as founders.
From link: “Most of the returns have gone to a tiny minority of super-successes. The founders of AirBnB, Dropbox and Stripe are worth about US$7 billion, about 80% of all founders’ equity, although they account for 0.5% of the companies. Outside of the most successful companies, it was still possible to earn significant returns. 12% of companies from the first five years of Y Combinator are now worth US$40 million or more, and a further 10% have sold for US$5-40 million. The remainder probably earned little more than their (low) salaries.”.
Employees take on considerable risk by joining early startups, and they take on opportunity risk when working for other companies, as well.
An early employee risks their ability to house and feed themselves and their family, along with their ability to afford medical care or retirement, by working at a company that could fold or fire them at any moment. An investor might experience some capital loss they can write off at tax time.
I'd bet in most early stage startups nowadays developers are paid way more than the founders themselves. And they work way less hours, with way less stressful problems than the founders.
The difference in pay, hours dedicated and stress (along with damages to health and life in general) represents the founders' risk appetite for future earnings.
Employees are not at all open to bear this level of risk and they should not be compensated for not bearing this risk. Founders and investors deliver value to society by bearing higher risks. We have better and cheaper services as a result. They should be compensated accordingly, so we keep them motivated to continue servicing us in increasingly better ways.
If the entire society had a similar level of appetite for risk, we'd see a different asset distribution in society.
Since most people are terribly averse to losing anything, they also shut down the perspective of winning big.