Sure, my question was more about using the returns to capital as a way to estimate the returns to labor. I see no particular reason why these should be the same (though I understand that if you do make this assumption, leveraged index funds are a reasonable thing to use.)
I’m not entirely sure I understand what you’re saying but this is how I think about it:
You have two options (really more, but just two that are relevant): you can start a startup or you can earn to give at a salaried job. If you start a startup, you expect to get paid $X in N years, and you get nothing (or not much) until then. If you work a salaried job, you get paid $Y per year. You can invest that money in public equities. To compare entrepreneurship vs. salaried job, you can look at the expected payoff from entrepreneurship vs. how much money you’d have if you took your salary at the salaried job and invested it in a leveraged index fund, where you add enough leverage to match the risk level of entrepreneurship. These two choices are equally risky, so you can compare them directly in terms of which one has better expected return.
I don’t know what you mean about return on capital vs. labor but I hope that makes sense.
Sure, but the salaried job has the added confusion that you get paid annually. It’s not the same as investing $X for N years (or (1−d)NX dollars for N years).
Sure, my question was more about using the returns to capital as a way to estimate the returns to labor. I see no particular reason why these should be the same (though I understand that if you do make this assumption, leveraged index funds are a reasonable thing to use.)
I’m not entirely sure I understand what you’re saying but this is how I think about it:
You have two options (really more, but just two that are relevant): you can start a startup or you can earn to give at a salaried job. If you start a startup, you expect to get paid $X in N years, and you get nothing (or not much) until then. If you work a salaried job, you get paid $Y per year. You can invest that money in public equities. To compare entrepreneurship vs. salaried job, you can look at the expected payoff from entrepreneurship vs. how much money you’d have if you took your salary at the salaried job and invested it in a leveraged index fund, where you add enough leverage to match the risk level of entrepreneurship. These two choices are equally risky, so you can compare them directly in terms of which one has better expected return.
I don’t know what you mean about return on capital vs. labor but I hope that makes sense.
Sure, but the salaried job has the added confusion that you get paid annually. It’s not the same as investing $X for N years (or (1−d)NX dollars for N years).