> If you pay the California rate then you will be putting way more money into salaries then needed, which could drown your company in hard times.
This doesn't follow. You can still be profitable by hiring people who add value, and paying them a consistent percentage for that value, regardless of location. Assuming of course that everyone is working remotely regardless of location, and time zones are a non-issue. (remote vs. local could have legitimate salary impacts, as well as time zone availability, due to potential increased burden on the business).
If your business's profit is based on the ability to exploit reduced living costs, then your business is at least partially focused on trading in salary differences (arbitrage?). That has it's own problems (like splitting your focus), but is probably OK as long as the margin you're making from it is lucrative. As this margin decreases you're spending more and more time trading in salaries and less time focus on your product. That's perfectly fine business wise as long as you're still making a profit, although at some point you may turn into an agency / recruiter (pivot?!?).
If however, your business's profit is based purely on providing a valuable product, you still benefit from a much wider pool of talent (thus reducing overall salaries due to supply) even without exploiting living costs. You can ignore location (assuming again time zone isn't an issue) and pay based on percentage of value. Plus you can still focus primarily on your product, instead of becoming a salary trader!
> paying them a consistent percentage for that value
Except... there's a market. People want to be paid based on a market clearing rate, not on your appraisal of value. And what is value anyway? If a company is in build mode and not generating any value is nobody paid anything?
If your value percentage does't cover market rate, then you might need to rethink your business. Market rate is derived from value percentage across all companies that seek the same talent (and also negotiating strength etc.).
If a company is in build mode, there are other creative ways to compensate (stock, etc.) or you convince investors of future value so you can afford to build it (investors) by paying market rate. An investor who just gave you millions of dollars to build something, probably doesn't want to hear about how you're going to cut costs by hiring overseas talent.
If the only way you can succeed is by exploiting location based salaries, then your business isn't just competing in it's product market, but also competing with every other business that is trying to exploit location based salaries (and there's a lot).
I'm saying is that focusing your energies on trying to get location based cheap labour might not be the best use of your time. How am I arguing that people should starve?
If you're building, and paying people in stock, then people can't trade that stock, and they can't buy food with it. So they'll go elsewhere where they get compensation they can buy food with.
Why is that a problem though? Businesses fail every day. Are you saying that paying less for 3rd world talent is going to make or break this business?
What I'm hearing is a bit contrived:
1. You only have enough cashflow to pay exploitative location based salaries.
2. You need talent (can't do it yourself).
3. You can't convince anyone to invest in it.
4. You can't attract talent with a low pay + ownership / stock deal.
This doesn't follow. You can still be profitable by hiring people who add value, and paying them a consistent percentage for that value, regardless of location. Assuming of course that everyone is working remotely regardless of location, and time zones are a non-issue. (remote vs. local could have legitimate salary impacts, as well as time zone availability, due to potential increased burden on the business).
If your business's profit is based on the ability to exploit reduced living costs, then your business is at least partially focused on trading in salary differences (arbitrage?). That has it's own problems (like splitting your focus), but is probably OK as long as the margin you're making from it is lucrative. As this margin decreases you're spending more and more time trading in salaries and less time focus on your product. That's perfectly fine business wise as long as you're still making a profit, although at some point you may turn into an agency / recruiter (pivot?!?).
If however, your business's profit is based purely on providing a valuable product, you still benefit from a much wider pool of talent (thus reducing overall salaries due to supply) even without exploiting living costs. You can ignore location (assuming again time zone isn't an issue) and pay based on percentage of value. Plus you can still focus primarily on your product, instead of becoming a salary trader!