It's not "where's the line." There is a line in the sand there, and the author is saying you shouldn't tell people when you've crossed it. That's debatable. But he goes beyond that: he says the line isn't there at all. Of course it is.

I don't often say this, but I've thought this through completely, and the people who say that people working for equity, options, etc, should be accounted for as though they were working for a straight market salary before you can say you're profitable, are simply wrong. I'm right and they're wrong. And it's important.

Let me put it this way. Say Facebook was already very profitable, making millions.

It had superstar elite ninja developers who worked a thousand times faster than a normal developer and any one of which was worth their weight in gold. To hire them on salary you would have to pay them a million dollars a year, because they don't want a salary, they want to be part of the next big thing.

So, like all Internet companies, Facebook gave out a lot of options and employee equity.

Now when Facebook was making millions and quite profitable, you're saying it wasn't REALLY profitable, since it didn't REALLY get to use the labor of those people who had equity as part of their compensation. But this is obviously completely wrong. THe founder's equity falls into the same category.

The fact that you're getting something below market rate doesn't mean you're not REALLY profitable.

This is like crying "Apple isn't REALLY profitable because they get their components below market rates by being good negotiators!! If they had to pay market rates they would be operating at a LOSS".

Well, too bad for the component sellers. Apple is still profitable.

Too bad for you if you could be making 200k per year and instead are giving it up for equity in a company that is worth less than that. The company is still profitable.

This would be like saying that back when Rackspace gave all YCombinator companies free hosting, if their hosting bills "would normally" be more than their profits, they weren't ACTUALLY profitable. Regardless of what they were making.

Well, that's obviously not true at all.

This is equivalent to saying that you can't be considered profitable unless you're paying through the nose for everything, including super-expensive managers who are able to single-handedly get a business off the ground and are easily worht 200k-500k to a fortune 500 company, and then STILL have left over.

why should anyone say that??? why should the line for "profit" be drawn anywhere other than whether the company pays more than it receives in revenue or pays less than it receives in revenue?

That is a real line, Facebook had every right to boast about it when it crossed it, the entire Internet startup sector depends on people having the right to work for equity and startups getting access to that labor by issuing shares and paying a low salary.

I mean, by this argument of what is a "natural" salary, you could say that there isn't a single profitable prostitute working in California, because the "true cost" of a job as a prostitute is firstly spending $1800 million dollars and four years fighting to legalize prostitution, and only afterward hiring a prostitute at a market (not black market) rate. Therefore, since they are empoying themselves only at a black-market rate (where a legal rate is $1800 million and four years of lobbying more expensive), they aren't actually profitable. Any prostitute in California would have to make another $1800 billion or so and spend it on hiring an actual prostitute at "market rate" not black-market or (in the startup analogy) equity rate.

That's nuts. Of course a business can be profitable without accounting for a DIFFERENT kind of rate. (one that doesn't include equity, for example).

the whole perspective of other people here is simply wrong. It's that simple.