The thing to remember is that if he's paying $70k then everybody there needs to be worth $70k. If the "think people" there with MBAs believe they're worth more they can take their resumes down the street to Amazon or across the lake to Microsoft where they can certainly get twice that salary, but it will come at the expense of work-life balance.

I think it's a nice idea and ultimately he'll have a company filled with $70k employees.