The Incentive Mismatch

For every action there is an equal and opposite reaction.

I had dinner with K. last week. He's one of those people who makes you think harder about things you thought you already understood. We talked about the usual stuff—what to do outside of tech, what life looks like beyond work—but as always, I found myself steering toward my favourite topic: incentives.

I've been obsessed with incentives for years. Not because they're particularly glamorous, but because they explain almost everything. Show me a company's compensation structure, and I'll tell you what actually gets built there.

Here's what I believe: if you want people who can create new revenue streams to stay at your company, you have to make them rich. Not comfortable. Rich. You have to give them a real percentage of what they build.

This seems obvious to me. Some people can build new things. Some people can optimise existing things. Some people just want a paycheque and minimal hassle. If you're a company that wants the builders to stick around instead of leaving to start their own thing, you need to pay them like founders.

K listened to this and said something that stopped me and force to think for the last days: "Ivan, I understand that, but big tech companies don't work like that."

He's right, and I've been thinking about why.

In the US, there's a clear default path for builders: if you want to create something new and potentially valuable, you leave. You start a company. You raise money, build a team, and either get acquired or go public or pivot until you find something that works. The system assumes that real innovation happens outside big companies.

This creates a strange equilibrium. Companies get good at optimising existing products and bad at creating entirely new ones. The people who could create new things leave to do exactly that. Everyone accepts this as normal.

In Europe, the dynamic is different. The emphasis is on work-life balance, regulation, stability. The culture doesn't celebrate getting "hefty rich" the way Silicon Valley does. Even if you build something valuable and get acquired for tens of millions, after taxes you're comfortable but not truly wealthy. So why take the risk?

Both systems funnel builders away from big companies, just for different reasons and to do a different things.

But here's what struck me, drinking wine and thinking about our conversation: what seems normal to me is completely alien to most people. I've spent my career either in startups where your performance directly translates to your returns, or in big tech companies back home where the culture was different—where companies actively looked for people who could build new verticals and were happy to make them hefty rich if they could make the company rich.

It was always a simple win-win. The idea of "climbing the ladder" as the primary career path felt foreign to me.

This is one of those moments where you realise your assumptions about how the world works are just artefacts of your particular experience. What I thought was obviously the right way to structure incentives turns out to be unusual, maybe even rare.

The question this raises is interesting: are we stuck with these systems, or could they change?

I think about companies like Google in their early days, giving engineers 20% time to work on whatever they wanted. Some of that turned into Gmail, Chrome. But even then, the engineers didn't get a meaningful piece of the new revenue streams they created. They got performance bonuses and promotions.

What if they had gotten 1% of Gmail's revenue? Would Google have even more innovative products today? Would fewer talented people have left to start their own companies?

I don't know the answer, but I suspect the current equilibrium isn't stable. As building new things becomes easier—better tools, AI assistance, lower barriers to entry—the cost of forcing builders to choose between staying at a big company and getting properly rewarded for their work gets higher.

Maybe we'll see experiments. Maybe some company will try giving real equity stakes in new verticals to the people who build them. Maybe it will work spectacularly and others will copy it. Or may be not.

But I think we'll find out. Because the people who can build new things have more options than ever, and the companies that figure out how to keep them will have a significant advantage.

The incentives, as always, will tell the story.