> “You get paid in direct proportion to the difficulty of problems you solve”
No, you really don't. Your "pay" is a function of the market size, your market share, the budget of your customers, the amount of perceived value you create for them, your ability to sell, your costs, and probably some other minor factors. The difficulty of the problems you solve is – if at all – only indirectly related to some of those factors.
All those functions all lead back to how difficult of a problem you are solving for them. A difficult problem means there are less competitors and more market share for you, with a high chance that the competition's solution doesn't even deliver on its promises.
Less competition naturally leads to a higher premium you can charge. Businesses typically set aside a static budget for software that solves a "low-hanging fruit problem" (e.g. invoicing software). Because a business doesn't have a set budget for problems that they themselves aren't used to having solved, this also feeds back into being able to charge a higher premium. It's also much easier to get traction when solving a hard problem, which is another function of getting paid. Of course, this is all dependent on actually solving the hard problem :)
> All those functions all lead back to how difficult of a problem you are solving for them.
No. 1) The market size is independent of the hardness of the problem. 2) The hardness of the problem is independent of the customer's pressure to solve the problem [1]. 3) Even if a customer has a pressing problem, their budget for your product has a hard upper bound: their revenue. In reality it's nearly always several orders of magnitude lower than that. 4) Good marketing and sales has a strong influence on the perceived value your product creates for the customer, which in turn is the primary factor to determine the price you can ask from a specific customer; the perceived hardness of solving that problem is irrelevant to them.
[1] For example, solving the Travelling Salesman Problem in polynomial time is generally incredibly hard, probably even impossible, and yet solving it would be pretty inconsequential for logistics companies, because they have heuristic algorithms which are good enough.
1) I mentioned your market share increases, not market size. Increasing market share has the same effects as increased TAM. I 100% agree that value is not always directly related to the difficulty of problem you are solving. I think we are talking past each other here. When I say hard problem, it's also assuming this hard problem is a big enough problem for the customer to pay for, not for something "pretty inconsequential"
2) A problem is still a problem that your customer is looking to solve. Because it's a hard problem, it's unlikely they have a solution for it. I wouldn't call it pressure–opportunity sounds better which leads to you getting paid
3) That is correct but what's relevant here is what percentage of that revenue the customer is willing to give up
4) It does but marketing/sales is a lot easier when you are solving a hard problem. You don't need to invest as much into marketing/sales when solving a hard problem because there is less noise and competition. Word gets around much easier
No, you really don't. Your "pay" is a function of the market size, your market share, the budget of your customers, the amount of perceived value you create for them, your ability to sell, your costs, and probably some other minor factors. The difficulty of the problems you solve is – if at all – only indirectly related to some of those factors.