"The market says x so it must be true" is a lousy argument. Markets get distorted all the time by unequal bargaining positions, one side having better information than the other, etc.

If markets were even close to accurate, consider that the range of pay for professional software developers would vary by at least a factor of 10 just around the middle of the bell curve. And if you're hiring employee #1 to join a small team of founders, you want someone who is at least at the top of that range.

"If markets were even close to accurate, consider that the range of pay for professional software developers would vary by at least a factor of 10 just around the middle of the bell curve."

That's ludicrous, because you're taking a narrow (and objectively wrong) definition of 'market' and 'market value'. The spread in pay is much lower than you suggest it should be because the market discounts for the difficulty in quantifying the marginal added value between programmers that you suggest exists - in other words, it's too hard for employers to find out about this difference, and hence there is less room in willingness to pay (well that's talking from assumptions that are favorable to your argument - I think the much more rational explanation is that the '10 times difference' myth is a programmer circle jerk) (I'm a programmer myself)

No, I'm just suggesting that 'market value' has little relevance to 'actual value of contributions'.

> The spread in pay is much lower than you suggest it should be because the market discounts for the difficulty in quantifying the marginal added value between programmers that you suggest exists - in other words, it's too hard for employers to find out about this difference

The thing is, if that were true, employers wouldn't be willing to spring for huge pay rises when they realise they are otherwise sure to lose a key developer. However, in my experience, they often are willing to go to those lengths.

I think there is a much simpler explanation for the discrepancy between performance and compensation for programmers: too many good programmers don't realise how much more productive they are than the bad ones, and they often don't have the kind of mindset and/or training to fight for better compensation alone, and in the absence of professional bodies/unions/whatever they will just accept what they are given. This doesn't mean they aren't worth more, it just means that as a profession software developers tend to be lousy negotiators compared to the people who do it for a living.

As for the 10x thing, it's actually much worse than that, because there are a lot of programmers out there who are clearly (to the rest of the programmers on their team) making a net negative contribution. They drain more from other positive contributors than they contribute themselves. In short, you would be better off firing them. This often doesn't happen, whether because employment laws make it prohibitively difficult in your jursdiction or just because management are too incompetent to measure and understand the problem so they can deal with it.

(I always find it odd that managers in software development groups seem convinced of their own worth and that it is higher than most people working under them, yet they rather consistently fail to measure and control even basic productivity and progress within their groups. If managers can't figure out which developers are the 10x guys and who to fire, maybe the managers need to take a pay cut to their own true and very small value until they can.)

Sure, and all I'm saying is that it won't necessarily remain the case if the obvious distortion in the market today is fixed by better informing software developers (or early employees generally, for that matter) of their true worth. That seems to be exactly what this article is trying to do.

(a) That depends on where you are.

(b) You are ignoring the opportunity cost to the employee (though admittedly this is consistent with the original article).

(c) You are ignoring the potential adverse consequences on the employee's future career of being associated with a failed start-up, leaving a job early to chase dreams, etc. (Please don't tell me that it's better to have a CV showing you worked at several failed start-ups than it is to have a solid track record of demonstrable good results at established companies. That is the kind of fiction that only people in the start-up community manage to believe.)

Fair point - the value invested by the employee should be discounted, but:

"usually with no ability to take their money back"

Actually, the investors have more ability to take their money back than the employee. The investors can at least sell what's left of the company, while the investment by the employee is unrecoverable.

I also agree with the other posters: "paycheck" employees are not good hires early on in a startup.

The market says the employee could make twice as much elsewhere. Just sayin.