I've come to the conclusion that there is no good way to solve the compensation problem -- of how to reward outstanding performers and teams without the unintended consequences that the article talks about -- inside standard corporate structures. Besides, the compensation offered under these schemes is almost always so tiny as to be nearly a joke. I think many people here would agree, though, that there is a simple solution: if you want greater compensation, make something and let the market decide. Markets don't have the limiting beliefs that middle managers do.
Markets, on the other hand, have a nasty habit of paying people nothing at all for failures. It's hard to feed a family in that kind of risk environment. I'm all for startup fever, but we have to be realistic here. The libertarian ideal of paying people the precise market value of their labor would lead to an awful lot of starving IT workers...
Hacking might be all or nothing because the marginal cost of software is zero, but marginal costs in most other industries are a lot higher. Just compare software to working toilet. Selling another copy of software is essentially free. Selling another working toilet is not really free. In the libertarian world you describe, plumbers would have no trouble making a living off the precise market value of their labor. This is especially true for credence goods of all kinds; wages are very similar for different plumbers and mechanics, because nobody pays high prices for high quality (since it's impossible to recognize), and nobody buys the low-priced option because it's perceived (in the absence of other information) of being of lower quality.
Your theory is interesting, but not hard and fast.
The firms that hire them are mediators between the raw market and the labor market. And those firms almost always pay for the expected average productivity for that position. Which leads to ... the Team Compensation issue.
I think that attending meetings and writing memos are work. Startups do eventually grow beyond the startup phase, and nobody has figured out a better way to manage large companies than bureaucracy. Middle managers, memos, interminable meetings...
You're right, organization and management are important.
It's just that there are so few good managers; at all the large companies where I worked, it was an open secret who was contributing and who was just taking up space.
Ain't that a good thing for human race? In history when kings hired incompetent generals, disloyal subordinates, bullying common people, they paid the price with their own lives. Farmers who failed to tend their crop and bad luck due to harsh climates died of famine. Vikings, pirates who pillaged wrong targets got annihilated. Why should we put ourselves as a special caste?
There is also the case with the good surgeons and the bad surgeons....
Well a good surgeon would always take a safe & sure case, where he would almost succeed.
A "bad" surgeon would take the impossible (to save life, limb, etc.) cases, and he would fail way more...
Now really - who's good and who's bad?
If your child or you has something really terrible that's almost impossible (but still there is chance) to cure, whom of the "good" surgeons is going to help you?
Am I to assume that you are volunteering to be the test pilot for our new "if the deadline is missed or there are too many bugs the dev team is executed" zero-defect policy?
Not to mention the principal/agent problem where people working independently have different incentives than people who are part of the firm.
I had to explain this to my boss the last time I had a full time job. He came up with the brilliant idea of using only contractors. The sad thing is that he majored in economics.
Generally, if you make things people want and value, monetisation often occurs naturally, and the rewards derived from being excellent on the open market often out weights that of being excellent within a company environment.
