Tuesday, January 15, 2008

Intellectual Equity

[This was originally posted at http://timstall.dotnetdevelopersjournal.com/intellectual_equity.htm]

There are two common ways to get financial compensation: equity (you get a percent of the final profit), and fixed-rate (such as an hourly rate). Equity has the potential to pay far more because the actual revenue could be unlimited, whereas an hourly rate is (A) limited by a finite number of hours, (B) limited to an average, market value rate. Successful startups become rich because they have equity in the company. Of course, if the business flops, then equity becomes useless. This also relates to risk vs. reward: usually equity is more risky, and hence the potential for higher reward.

These same principles also apply to learning. "Equity" corresponds to understanding the core concepts involved, not just what it takes to solve your immediate task. This can yield a huge intellectual reward. "Hourly rate" corresponds to just doing what it takes to get your job done. While the hourly rate is "safe", it doesn't give you much in return compared to the equity approach.

For example, one developer spends their time just doing data entry forms, another presses to also learn about the data access layer, the architecture, and how to code generate everything. 3 years down the road, the second developer will likely run circles around the first.

The truly "rich" (i.e. intellectually knowledgeable) developers are the ones going after "intellectual equity".

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