Just realized the huge management fees charged by VC firms are an instance of the Baumol Effect. Good VCs could start their own startups if they wanted to, thus have to be paid enough not to.
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Those who complain about the high salaries paid to x or y never seem to grasp that the Baumol Effect means people are not paid for what they do, but for what else they could be doing.
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Those beneficiares of the baumol effect won't be doing much if inequality results in social collapse
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Sounds a bit self serving.
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Or that VC is easier. Or that VC is more rewarding with better opportunity to scale your talent across many companies.
End of conversation
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I think this logic applies to Big Techs salaries too. Entry level engineers are paid so much to prevent them from considering any startup gigs.
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What else could a soccer player be doing?
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Not even close. Senior Airline Pilots get paid over $200k. Airlines are hiring like mad. No self-governing income there. They have unions. Maybe above $1 million.
End of conversation
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How would one attract a Michael Jordan or LeBron to their team? You pay enough, but hopefully you have other factors to attract that talent. Like win propensity and a working environment. High salaries could indicate someone compensating for whatever other factors are lacking?
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