tim's journal

One scientist's defense - re: Money = Work / Knowledge

It has been said, that Time is Money, and Knowledge is Power. By substituting these into

Power = Work/Time

we quickly find that

Knowledge = Work/Money

leading us quickly to the infamous

Money = Work/Knowledge

which has presumably been used by VC's and CEO's to assuage their nighttime guilt about making so much mulah at the expensive of lesser paid scientists and engineers. Who can dispute a law of physics?

Let's take a closer look, to see if it makes sense. The common argument is that for a given amount of work, as knowledge tends towards zero, the money you make increases to infinity. Of course, we all know this shouldn't be the case. So where lies the logical flaw? It lies in the interpretation of work. Work is Power/Time. The more Power you expend, the less Time you need to achieve a given amount of Work. You can buy time by hiring help. So, substitute in Money. Instead spending Time, you are now spending Money. Now it should be clear that the Money in Money = Work/Knowledge does not have to do with the Money you make, but the Money you have to spend to do a given amount of work.

You get paid Money for the amount of Work you do. Taking a company from a seedling to a public company is a lot of Work. That's why VC's (and investment banks)get paid a lot of money. How does the equation fit into this? Everyone agrees that VC knowledge is typically infinitesimal*. Which means the money that must be spent to achieve this huge Work must be immense. Where does the Money come from? It comes from the Investor.

*If you are a VC with funding for a revolutionary brain-related medical device, this excludes you.

Posted by torque at December 4, 2004 8:44 PM | TrackBack