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How People Get Rich Now

779 pointsby prakhargurunaniabout 4 years ago

105 comments

benzorabout 4 years ago
There&#x27;s some nuggets of truth in here, but I am disappointed that this article sidesteps what I feel is the most important reason for startup success in 2020: easy and abundant access to cheap capital.<p>- Interest rates are at all time lows, borrowing is cheap<p>- The Fed&#x27;s balance sheet is at an all-time high. The economy is flush with cash, particularly the investor &#x2F; VC class<p>- This excess cash creates an (arguably artificial) wealth effect and drives an appetite for risk<p>- Large unicorn startups that are perpetual money losers continue to operate only because they are effectively subsidized by regular capital raises. Look no further than all the Silicon Valley darlings such as Uber, Netflix, AirBnb, Tesla, and so on. All of them would cease to exist without continued capital injection from secondary share offerings or VC raises<p>- These companies achieve growth and put pressure on the competition by offering their services below the real cost that would be needed to achieve profit, hence driving huge share price growth<p>- This share price growth attracts new investment from the momentum-chasing crowd, increasing appetite for subsequent secondaries, and then the cycle repeats<p>I don&#x27;t mean to be cynical, but it&#x27;s hard to see this ending well for some of the nouveau riche. Tech has been a great avenue to riches by offering real innovation in some cases, but the article&#x27;s error-by-omission really gives the wrong impression.
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qzwabout 4 years ago
I&#x27;m rather disappointed PG would think that the Forbes wealth list could support any kind of conclusion whatsoever. One of the biggest reasons that the top of the list is filled with tech billionaires is that their wealth is relatively transparent, being mostly in the form of stock holdings in publicly traded companies and often directly disclosed. This makes it much easier for Forbes to estimate their net worth with some degree of confidence. Older wealth is often more opaque and diffuse, hidden behind various complex financial structures or stored in assets that are difficult to value or rarely change hands. Whether Forbes is aware of how much wealth there is and in what form, depends largely on the desire of the possessor to make it known. Some would want to disclose (or even inflate) their wealth for ego or branding reasons. Others would likely prefer to remain off the Forbes list altogether. So the Forbes list is a poor starting point even for a discussion soley about the wealthiest people. To draw any kind of inference from it to the broader economy is just downright ridiculous.
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purple_ferretabout 4 years ago
&gt;So it&#x27;s not 2020 that&#x27;s the anomaly here, but 1982. The real question is why so few people had gotten rich from starting companies in 1982...a wave of consolidation was sweeping through the American economy<p>Microsoft, Oracle, Apple, Bloomberg, etc were all started in the late 70&#x27;s&#x2F; early 80&#x27;s. Their founders are the richest people in the world.<p>Seems like the question he&#x27;s asking, though, is why weren&#x27;t they obscenely wealthy after only 5 years, but that requires a different thesis than PG&#x27;s.<p>Every time I read one of PG&#x27;s posts, it seems like he&#x27;s working from a narrative that he&#x27;s trying to conform facts to.
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rlandabout 4 years ago
It&#x27;s really interesting to see the world through PG&#x27;s eyes. Kudos to him, I guess, for actually saying out loud what most of the mega-rich are unwilling to.<p>Everyone who isn&#x27;t like PG (so, 100% of the population) is finding it difficult to make enough money to have a life in the most basically fulfilling sense: education, retirement, support for loved ones, and good health.<p><a href="https:&#x2F;&#x2F;academic.oup.com&#x2F;qje&#x2F;article&#x2F;129&#x2F;4&#x2F;1553&#x2F;1853754?login=true" rel="nofollow">https:&#x2F;&#x2F;academic.oup.com&#x2F;qje&#x2F;article&#x2F;129&#x2F;4&#x2F;1553&#x2F;1853754?logi...</a><p>So, PG: great news about the Forbes 100, I guess?
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domkabout 4 years ago
This essay feels really dishonest. It tries to simplify the vastly complex problem of income inequality, on which there is a sea of existing, detailed research, into a simple &quot;it&#x27;s easier to start companies now&quot; argument. And it doesn&#x27;t even explore that argument in that much depth.<p>What about bottom incomes? Why have those barely increased in real terms in the last 30 years, while the top 1% of incomes has been shooting steadily up? Surely that&#x27;s nothing to do with people starting companies.
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dcolkittabout 4 years ago
&gt; It&#x27;s easier now to start and grow a company than it has ever been. That means more people start them, that those who do get better terms from investors, and that the resulting companies become more valuable.<p>This may be a quibble, because I think Paul Graham really means a certain type of high-growth startup in mind when he says &quot;start a company&quot;. But the rate of new business formation in the US has fallen off a cliff in the past few decades.[1] The number of new companies as a percent of total businesses is 44% lower in 2012 than it was in 1978.<p>Again, I think this is different than what Paul Graham is talking about. When he says &quot;many more people are starting companies&quot;, I think he&#x27;s thinking more about a SaaS startup than a McDonalds franchise. Obviously that fits in much more with the theme of how people generate massive fortunes. Nobody becomes a billionaire from starting a landscaping service or an auto body shop.<p>But still, I think it&#x27;s important to keep the context in mind. In the larger sense, entrepreneurship in America is very much dead. That doesn&#x27;t mean that it isn&#x27;t thriving in a specific Silicon Valley subculture, that to be fair makes massive contributions to the broader economy. But it should make us question what makes the Valley so different from Main Street, USA. If not just to figure out how to export the model from Palo Alto to Oklahoma.<p>[1]<a href="https:&#x2F;&#x2F;www.inc.com&#x2F;magazine&#x2F;201505&#x2F;leigh-buchanan&#x2F;the-vanishing-startups-in-decline.html" rel="nofollow">https:&#x2F;&#x2F;www.inc.com&#x2F;magazine&#x2F;201505&#x2F;leigh-buchanan&#x2F;the-vanis...</a>
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hospadarabout 4 years ago
While I think this is in general interesting, a couple things stand out to me:<p>&gt; And there&#x27;s a reason why: these are mostly companies that win by having better technology, rather than just a CEO who&#x27;s really driven and good at making deals.<p>Really? Always? Are we sure that some companies [which are funded by giants like softbank and have names that rhyme with schmuber] don&#x27;t [at least] sometimes win because of massive capital injections which allow them to subsidize consumer-facing pricing and stomp all over the competition? Having &quot;better technology&quot; wouldn&#x27;t allow you to beat uber, you&#x27;d also need to subsidize rides for years to choke out uber on pricing. This is true for a lot of big modern companies - they can leverage their capital to crush early competition and wait till they&#x27;re the only game in town to raise prices and cover their costs (or hope that economies of scale will catch up). I realize that PG isn&#x27;t saying this _doesn&#x27;t_ happen, just seems like he&#x27;s painting a glossy &quot;it&#x27;s because meritocracy and innovation&quot; picture over things that often have a lot more to do with simply having access to insane amounts of capital (i.e. <i>being good at making deals</i>)<p>&gt; Of course the Gini coefficient is increasing. With more people starting more valuable companies, how could it not be?<p>I think this is a really deceptive statement - it kinda sounds like &quot;more people are getting rich&quot; when in fact fewer people are getting [even] richer. The details of _who_ is getting richer are interesting and I think well covered by this post (and I&#x27;m not arguing that), I just have a personal beef with the presentation that maybe it&#x27;s somehow OK (or good?) that income inequality is getting worse because... tech?<p>A reframing of this story about how the combination of tech &amp; the modern world of VC enables the ultra-wealthy to more effectively concentrate and grow their wealth (even if sometimes a startup founder gets to win the lottery and join the club) could be just as factually correct and a little less rosy.
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brudgersabout 4 years ago
Alternative hypothesis: old wealth has become more adept at maintaining discretion via trusts and fictitious persons such as LLC&#x27;s and off-shore investment vehicles.<p>CEO&#x27;s of new companies can&#x27;t be discreet. Their job requires the opposite.<p>Lack of discretion always distinguishes new money from old.<p>With the collapse of well funded investigative reporting, it is well nigh impossible to track down wealth that seeks not the spotlight.<p>Forbes has 54 full time employees. <a href="https:&#x2F;&#x2F;www.dnb.com&#x2F;business-directory&#x2F;company-profiles.forbes_media_llc.5b5aef396e9a4c15dbcaf4791d6e4e53.html" rel="nofollow">https:&#x2F;&#x2F;www.dnb.com&#x2F;business-directory&#x2F;company-profiles.forb...</a>
greatgibabout 4 years ago
Strangely, an explanation for the increased number of wealths coming from new, tech companies and investments that is ignored in his post is the disturbing fact it was taken from the average employee cut of the profits.<p>See this:<p><a href="https:&#x2F;&#x2F;www.theguardian.com&#x2F;business&#x2F;2018&#x2F;aug&#x2F;16&#x2F;ceo-versus-worker-wage-american-companies-pay-gap-study-2018" rel="nofollow">https:&#x2F;&#x2F;www.theguardian.com&#x2F;business&#x2F;2018&#x2F;aug&#x2F;16&#x2F;ceo-versus-...</a><p>I quote: &quot;The 2017 CEO-to-worker compensation ratio of 312-to-1 was far greater than the 20-to-1 ratio in 1965, and more than five times greater than the 58-to-1 ratio in 1989&quot;
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aqme28about 4 years ago
I don&#x27;t think that the top 100 richest people is a good dataset. You can be extremely rich without making it anywhere near that list.<p>While a lot of those top 100 people made it to that list by starting companies, I&#x27;m curious how many of them did so by leveraging family or inherited wealth.
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drtzabout 4 years ago
I don&#x27;t think this article makes the argument the author thinks it does.<p>If I take the author at his word that more people are creating large new fortunes at a higher rate, and I assume that the large fortunes of 1982 have not become significantly smaller (I admittedly don&#x27;t have a citation for this, although I feel it&#x27;s a safe assumption), and finally take into account that wealth inequality has been steadily increasing in the USA [1] since 1982, I come a reasonable conclusion:<p>&quot;Winners&quot; from the middle class are being promoted to super-wealthy status by consolidating wealth from their peers in the middle and lower classes, and it&#x27;s happening at a much higher rate than it was 30 years ago.<p>[1] <a href="https:&#x2F;&#x2F;www.pewresearch.org&#x2F;social-trends&#x2F;2020&#x2F;01&#x2F;09&#x2F;trends-in-income-and-wealth-inequality&#x2F;" rel="nofollow">https:&#x2F;&#x2F;www.pewresearch.org&#x2F;social-trends&#x2F;2020&#x2F;01&#x2F;09&#x2F;trends-...</a>
norswapabout 4 years ago
I&#x27;m not sure what the intent of this post is.<p>Seemingly, it&#x27;s to encourage people to start a company, because it&#x27;s so easy now and you can get rich (look at all these people in the top 100 that got there by starting a company!)<p>But I&#x27;m not sure looking at the top 100 is a compelling argument. That&#x27;s for the 0.0001%. How does the top 10% do? The top 25%? What about the median outcome?<p>More than that, what are the trade-offs? (hint: <a href="https:&#x2F;&#x2F;danluu.com&#x2F;startup-tradeoffs&#x2F;" rel="nofollow">https:&#x2F;&#x2F;danluu.com&#x2F;startup-tradeoffs&#x2F;</a>)<p>Now, I&#x27;m all for encouraging people to start their own companies. But this just strikes me as a not very good argument for it. Hell, using similar logic, there is a better case to be made to buy bitcoins and HODL (everyone that bought in 2012 an held made 1000x return!)
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CivBaseabout 4 years ago
&gt; There were no fund managers among the 100 richest Americans in 1982. Hedge funds and private equity firms existed in 1982, but none of their founders were rich enough yet to make it into the top 100. Two things changed: fund managers discovered new ways to generate high returns, and more investors were willing to trust them with their money.<p>PG brushes past this to talk about tech company founders, but I thought this part was actually kind of interesting. Why <i>is</i> there so much money in hedge fund management? My understanding is that their profits come from skimming off the top of the proceeds generated by investing their customers&#x27; money. What&#x27;s stopping hedge fund management firms from racing to the bottom by competing for customers?
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neilkabout 4 years ago
There are a lot of people who have already taken pg to task over the rather thin chain of reasoning (anecdata about the Forbes 100 -&gt; grand societal conclusion)<p>But what about the initial claim, that inherited wealth now means very little? Tech founders have always come from at least the upper-middle class (I&#x27;d say that&#x27;s roughly where I hail from). But that seems to be trending upwards. Increasingly, &quot;tech&quot; founders have only limited tech skills themselves but hail from a class where they have access to investors, often with a significant cash injection from their own families.
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analyte123about 4 years ago
I am skeptical of any &quot;top X wealthiest&quot; lists especially for an analysis like this which claims that people are no longer getting rich through inherited wealth. Inequality has gone up a lot since the 1980s and to me a smart person who inherits wealth is not going to flaunt it and probably not going to want to be in any kind of Forbes list. There are plenty of ways to move wealth off of your personal ledger while keeping it in the family, ways that don&#x27;t even count as &quot;hiding&quot; and I just know casually as a peasant who will never encounter a single one: foundations, generation-skipping trusts, CLATs (maybe the &quot;charity&quot; is your foundation!).
Certhasabout 4 years ago
It&#x27;s an interesting read, and not entirely new information, but I find this leap pretty unconvincing:<p>&gt; So it&#x27;s not 2020 that&#x27;s the anomaly here, but 1982. The real question is why so few people had gotten rich from starting companies in 1982.<p>It seems more likely to me that industrialization and mass-production in the late 19th century, and information technology in the late 20th century were inflection points at which the gradual progress of new technologies enabled revolutionary businesses across a wide spectrum of the economy. There is no reason to assume that this is always possible, or to extrapolate into the future.<p>&gt; we should expect both the number and wealth of founders to grow, because every decade it gets easier to start a startup.<p>Non-sequitur. If the technology that there is is sufficiently well exploited by Google, Amazon, Facebook, then where is your supposed opening? We are not at the end of the IT tech revolution now, but we are also nowhere near the beginning. The best VR experience right now is engineered by Facebook, not by some plucky start up acquiring new customers.<p>It&#x27;s easy to imagine that tech will enter a consolidation and comodization phase in the next decades, if it hasn&#x27;t already.<p>In fact, if the forces that are claimed to be behind the resurgence of founders getting rich were really correct, we should see lots of new manufacturing start ups. Yet those are extremely rare, and not terribly disruptive in the grand scheme of things.<p>Edit:<p>The Gini coefficient bits are also pure ideology dressed up as data. Sweden has more billionares per capita than the US, has a better per capita start up rate than the US, and yet because it never followed the disastrous right turn on economic policy, it has far far far lower inequality (though rising somewhat recently it&#x27;s still lower than France for example).<p>[1] <a href="https:&#x2F;&#x2F;www.oecd-ilibrary.org&#x2F;science-and-technology&#x2F;no-country-for-young-firms_5jm22p40c8mw-en" rel="nofollow">https:&#x2F;&#x2F;www.oecd-ilibrary.org&#x2F;science-and-technology&#x2F;no-coun...</a> [2] <a href="https:&#x2F;&#x2F;data.worldbank.org&#x2F;indicator&#x2F;SI.POV.GINI?locations=SE-US-FR" rel="nofollow">https:&#x2F;&#x2F;data.worldbank.org&#x2F;indicator&#x2F;SI.POV.GINI?locations=S...</a>
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SavantIdiotabout 4 years ago
I wish he had listed his classifications. I&#x27;m looking at the list now and all I see are tech monopolies, hired C-level names, inheritance, and financiers. A bit different picture than the pro-scrappy-startup narrative Paul has been pushing for over a decade.
claudiulodroabout 4 years ago
Im curious, if we wait, say, 40 more years, I wonder will the richest people again be heirs (of today&#x27;s current crop of tech billionaires)? If so, what does that mean for Paul&#x27;s hypothesis?
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Ericson2314about 4 years ago
I&#x27;m really glad even Hacker news is calling out PG&#x27;s bullshit now.
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geofftabout 4 years ago
&gt; <i>But at the moment at least, there is definitely something they share in common that distinguishes them. What retailer starts AWS? What car maker is run by someone who also has a rocket company?</i><p>If you went back a century and tried to figure out who would be running both a car company and a rocket company, the answer would almost certainly be the guy running Standard Oil.<p>And abstracting &quot;AWS&quot; a bit, if you went back a century and looked for a company that was both a giant logistics business as well as a giant provider of stuff you need to run a business, you&#x27;d find Andrew Carnegie, who owned the trains that ran on railroads as well as the factories that built the steel for the railroads.<p>Amazon and Tesla and SpaceX are &quot;tech&quot; companies in the sense that they make effective use of new technologies just as US Steel and Standard Oil did. But history does not remember those as tech companies; history remembers them as industrial consolidations, as vertically-integrated conglomerates, as trusts.<p>I think you need a little more data than 1982 to make this comparison meaningful. I suspect there was a time during the last century in which trusts were much harder to build, when there was effective competition, and where the economy was working well for everyone, and during that time, the people with unnatural amounts of wealth only had it because it was previously accumulated and made available to them as an inheritance. I suspect we are now <i>back</i> to the economic&#x2F;political conditions that made trusts and robber barons possible.
rubiquityabout 4 years ago
Given the massive concentration of capital to a small pool of behemoths that seem to be paying their employees to not start a competitor and the amount of debt being carried around by the majority of public companies, I&#x27;d say it&#x27;s far more likely we&#x27;re headed towards a period like 1982 but with new players than we are heading towards the 2000s and 2010s again. Companies saddled in debt will have a hard time innovating but their market presence is worth buying.
m___about 4 years ago
Main substance left in the mist.<p>&quot;Founders&quot; and their trailers, are picked up and trusted to the sun because there is nothing else left to do with worthless money, to ride the inequality of the &quot;investors&quot; to u-p-p for free.<p>Loggerheads as Leon Musk might be &quot;rich&quot; but not in charge, and second tier as come to power. If one looks down to the Footlocker crowd, anything can mean &quot;rich&quot;. The third dimension Sherlock of the article, time, how long will they last?<p>The author has a serious agenda to prone, or must be mentally incapacitated to not see &quot;:)&quot;, after hoovering that long above the evidenced. Forbes?! what gives. Hard assets in time are still the only measure of value as to any group, cast, clan in existence!
taurathabout 4 years ago
So in the 1960s the rest of the world was rebuilding their bombed out cities. The US had no competition to speak of and provided “mature” at the time manufacturing to the rest of the world. There’s a lot of cracks and hand waving in this article, it’s a very roundabout way to say that income inequality isn’t a problem. It is a problem, and PG is so far removed from it he’s just thinking about how to justify keeping his and his friends’ money.
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ClumsyPilotabout 4 years ago
Making economic recommendations based on top 100 richest people is like making dieting reccomendations based on top 100 anorexia sufferers.<p>Any statistician jnows that your sample neess to be representarive of the population. Define your &#x27;rich&#x27; and take a random sample.
anonuabout 4 years ago
&gt; Of course the Gini coefficient is increasing. With more people starting more valuable companies, how could it not be?<p>The conclusion in the last 2 sentences feels like a non-sequitur. The article forms a cogent idea of how we&#x27;re back in the age of startups like we were 100+ years ago - and then ends in &quot;yes this is why we have inequality&quot;.<p>Inequality is a lot more complicated concept than &quot;people are starting tech companies and theyre highly valued&quot;. A lot of it has to do with government policy, education, etc...
PragmaticPulpabout 4 years ago
I&#x27;ve been noticing an increasingly bimodal distribution of success among startup founders, at least locally. I see more stories of unbelievably large funding rounds online every day. I read non-stop Tweets about how easy it is to secure funding. Locally, we have a few lucky founders tapping into this easy capital and raising valuations that would have seemed impossible a few years ago.<p>Yet outside of the lucky few founders securing this money, I see a lot of founders struggling to even get the attention of VCs. I know several otherwise successful local startups with good founders that have been failing to raise for months or even years because they don&#x27;t fit the mold of a potential rocketship startup. In some ways, having established customers and a working business model with self-sustaining revenue is a negative sign for investors looking for the next 100x investment or quick flip opportunity.
harshawabout 4 years ago
I don&#x27;t want to derail this too much with personal anecdotes, but I suspect you are much more likely to build wealth with the more established tech companies - and that wealth is &quot;rich enough&quot;.<p>Maybe I am just unlucky or unskilled, but I spent roughly 20 years working at startups or innovation labs. I was &quot;close&quot; to some big events where I could have made big $$ but made 0. Both at my own startup and being at early stage duds. Its kind of like I was the tech guy in &#x27;life of Brian&#x27;. However, in the last three years I have built more wealth at a FAANG than I have in the previous 20 years. YMMV.<p>Back to the thesis, I think pg is saying wealth is built by startups - I am just here to say that&#x27;s it still really rare unless you get lucky. But maybe you create your own luck by living in SF - I am a Bostonian.
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eptcykaabout 4 years ago
I wonder if it really is easier than ever for the bottom 95% of US citizens (or bottom 95% of the developed western countries) to become rich by starting a business these days.
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mortenjorckabout 4 years ago
<i>&gt; And there&#x27;s a reason why: these are mostly companies that win by having better technology, rather than just a CEO who&#x27;s really driven and good at making deals.</i><p>I&#x27;m not entirely sure how pg arrives at this point when he should know better than nearly any of us just how critical a factor the latter is, <i>in support of</i> (and sometimes in spite of, c.f. Neumann or Holmes) the former. Isn&#x27;t the entire point of YC to build the networks of support, advisory, and dealmaking required to turn what would otherwise be good technology in isolation into a high-growth business?<p>Superior technology by itself is just potential energy. It still takes old-world business skills to harness that energy into something productive.
ablekhabout 4 years ago
&gt; It&#x27;s easier now to start and grow a company than it has ever been.<p>Arguing that, due to being easier now to start and grow a company, more wealth gets created, is &quot;conveniently&quot; seeing only one [the positive] side of the coin. Because, considering the alarmingly low ratio of success in the startup world, growth in the overall number of startups also means growth of startup failures (which often means destruction of wealth, however small, instead of its creation). But, for obvious reasons, VCs don&#x27;t like to talk much - at least, publicly - about it ... And this essay is just one more example of that trend.
ihyfhgyfhthabout 4 years ago
I don&#x27;t think anyone has mentioned this.<p>The Forbes list of 100 wealthiest people will exclude people that ask to be excluded. All of the excluded people have inherited their wealth and all of them are so wealthy they would push out anyone without inherited wealth.
corpMaverickabout 4 years ago
I don&#x27;t always agree with PG. But this is the first time I feel disappointed by one of his posts. He is thinking about the rich of the rich. The 0.001% . May be he can make the case that intellectual capital is as important as assets capital. But that doesn&#x27;t make it any better for the millions of people struggling in the middle classes or the billions of people living in poverty.
StavrosKabout 4 years ago
Two things bother me about this article: One is the message that &quot;&#x27;the richest people got rich by winning the lottery, therefore buying lottery tickets is good&#x27; says rich lottery ticket seller&quot;.<p>The other is the unspoken (and thus unchallenged) assumption that getting rich is what you should strive for in life, which I personally disagree with.
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wiremineabout 4 years ago
As usual, it&#x27;s a well-written article. I wonder about a few things:<p>1. Why look at the top 100 people? It&#x27;s an incredible small sample size. Those 100 people represent a huge amount of wealth, but a small number of people. What are the trends is we zoom out to, say, the top million wealthiest people? Does his thesis play out?<p>2. By extension, looking at the top 100 makes Graham feel myopic and elitist, which is what I think a lot of the comments in this thread allude to. By definition there can only be 100 richest people. The odds of breaking into that group are extremely small.<p>3. Graham&#x27;s job is to convince people they have a chance to making it big. That&#x27;s not a bad thing: we need those people. But it doesn&#x27;t speak to broader needs of society.<p>So, honest question, because I haven&#x27;t researched his essays in recent years: does Graham write about the situation of the bottom 100 million, in addition to the top 100?
boringgabout 4 years ago
What I find really striking. (1) The outcome being measured as success is building wealth quickly. I think we should measure success instead of building business of lasting quality and value. I think if I lived in a country where everyone was trying to get on the forbes 100 list life would be deeply depressing and nothing innovative would really be done. Maybe its more that people who build valuable businesses and products are making money much quickly (building a product a good reason to start business, trying to get onto top 100 terrible reason to chase business). (2) The costs of business have dropped, but also the ability to enter and capture market share quickly has also made it easier for companies to grow fast (in pure tech as opposed to something like a cleantech&#x2F;climate tech space).
de_keyboardabout 4 years ago
There are clearly jobs that require high talent and have a shortage of labour that pushes up salaries. This includes things that require mathematical talent, like quantitative finance, but it also includes skills like motivational speaking or playing sports to a very high level.<p>However, I think most jobs are ones that, frankly, anyone could do if given the opportunity and a bit of training, but access to these jobs is controlled via gateways such as fancy schools, culture, family connections, your accent, etc. There&#x27;s a kind of mediocre upper-middle class filling seats at large organizations but not really doing much. These are sometimes referred to as bullshit jobs.<p>But this is just speculation... I would like to see some data around it.<p>The number of people doing start-ups is a blip. This is not how most people accumulate wealth.
cblconfederateabout 4 years ago
&gt; Of the 40 new fortunes in 1982, at least 24 were due primarily to oil or real estate<p>In 1982, oil and real estate was technology. Information technology was still research and not ready for big business. One could argue that those two were based on exploiting natural resources, but so is tech, it&#x27;s exploiting the natural resources of human attention and information, it&#x27;s not making flying cars. In that sense , the way people make money has not changed much: make something people want that exploits and indefensible resource, rinse, repeat. Like big oil, the big tech of today can keep on making billions without building any new tech. I really dont enjoy this hero worship of tech, it&#x27;s 2020 those days are gone.
didibusabout 4 years ago
As an aside, it always frustrates me when people say that someone got rich from investing, when really they got rich from running an investment firm and doing investment managing. It gives the wrong impression that people are getting rich from their own investment.
brianmorris10about 4 years ago
This is bullshit.<p>Source: I started a company and am still poor.
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anoncowabout 4 years ago
Twitter thread: <a href="https:&#x2F;&#x2F;twitter.com&#x2F;paulg&#x2F;status&#x2F;1381638769967837193" rel="nofollow">https:&#x2F;&#x2F;twitter.com&#x2F;paulg&#x2F;status&#x2F;1381638769967837193</a>
ed25519FUUUabout 4 years ago
&gt; <i>This trend has been running for a long time. IBM, founded in 1896, took 45 years to reach a billion 2020 dollars in revenue. Hewlett-Packard, founded in 1939, took 25 years. Microsoft, founded in 1975, took 13 years. Now the norm for fast-growing companies is 7 or 8 years.</i><p>How much of this can be directly attributed to actions of the federal reserver?<p>Besides, when the federal government passes a $2T spending bill, isn&#x27;t that basically <i>guaranteed</i> to create more billion dollar companies?
nindalfabout 4 years ago
It&#x27;s a classic PG article. Many true facts in there, lots of good analysis with just a few questionable claims thrown in here and there. At the end, there&#x27;s a massive claim that isn&#x27;t fully stated but implied. &quot;Of course the Gini coefficient is increasing&quot; translated means &quot;income inequality is not a problem&quot;.<p>Firstly, Gini coefficient is based on income, not wealth. That isn&#x27;t stated clearly. Secondly, there&#x27;s absolutely no data on what proportion of income flows to which decile. The conclusion (income inequality isn&#x27;t a problem) is simply based on an assumption that the rise in the Gini coefficient is based entirely on the wealth accumulated by founders, and that this is a good thing.<p>I think this post boils down to &quot;people like me are creating a lot of value, please acknowledge it. Also there are no downsides to this accumulation of wealth&quot;. This would be fine if PG also didn&#x27;t argue that policies like wealth taxes are harmful (<a href="http:&#x2F;&#x2F;www.paulgraham.com&#x2F;wtax.html" rel="nofollow">http:&#x2F;&#x2F;www.paulgraham.com&#x2F;wtax.html</a>). It just seems like a desperate play to keep his wealth intact.
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kadomonyabout 4 years ago
So, &quot;start your own company&quot;. Or, trickle down wealth from VCs.<p>To be honest, a lot of people don&#x27;t WANT to run a business. Business ventures are expensive in terms of time and money. I wish there was a quicker, more passive answer to &quot;how people get rich now&quot; than &quot;invest in VTSAX and let it compound&quot;. A lot of people want the money to do the work for them.
csbartusabout 4 years ago
&gt; In 1982, 84% of the richest 100 people got rich by inheritance, extracting natural resources, or doing real estate deals. Is that really better than a world in which the richest people get rich by starting tech companies?<p>Google, Facebook, Amazon are extracting human resources. More precisely they are exploiting it.<p>Which one is better? Doesn&#x27;t matter. Once something is exploited it will disappear.
loklabout 4 years ago
How People Find Fulfillment Now<p>The post we actually need. I want to know about innovations in this space. Who has a disruptive way to bring fulfillment to lives at scale, using blockchain or whatever other buzzwords you need to attract investment. Because that&#x27;s what&#x27;s actually worth investing in. If you&#x27;re starting a company to get rich, you&#x27;re missing out on life.
vmceptionabout 4 years ago
&gt; In 1982, 84% of the richest 100 people got rich by inheritance, extracting natural resources, or doing real estate deals. Is that really better than a world in which the richest people get rich by starting tech companies?<p>Data is a natural resource and is being extracted. It is not better. It has nominal differences and doesn&#x27;t cause as much pollution.
jeffbeeabout 4 years ago
I don’t think I can take seriously the claim that people did not start companies in mid-20th century America, because of high taxes. I’m thinking of the whole Fairchild diaspora, Intel, Microsoft, Apple just in the computer industry, then there’s Wal-mart etc. all of these predate Reagan’s low-tax philosophy.
JohnJamesRamboabout 4 years ago
&gt;In 1982, 84% of the richest 100 people got rich by inheritance, extracting natural resources, or doing real estate deals. Is that really better than a world in which the richest people get rich by starting tech companies<p>I&#x27;m not sure. I feel like the tech companies are just valued where they are currently based on &quot;extracting natural resources&quot; from willing investors and our privacy and sense of well-being. We need another downturn like in 2000 before we know what is worth what. Internet companies were worth a lot in 2000 too. Turns out a lot of those valuations were bunk.<p>US venture capital funding at 2000 levels again- <a href="http:&#x2F;&#x2F;cdn.statcdn.com&#x2F;Infographic&#x2F;images&#x2F;normal&#x2F;11443.jpeg" rel="nofollow">http:&#x2F;&#x2F;cdn.statcdn.com&#x2F;Infographic&#x2F;images&#x2F;normal&#x2F;11443.jpeg</a>
jeffreyrogersabout 4 years ago
It&#x27;s a bit disingenuous to say 1&#x2F;4 are getting rich from investing. They are getting rich because of the leverage embedded in the standard 2-and-20 payment agreement where the hedge fund managers get 2% of assets under management and 20% of profits above some threshold. Plenty of not particularly good hedge fund managers get really rich because they can convince wealthy institutions to give them money.<p>The VC industry is the same way. Most funds&#x27; returns are poor, though there are obvious exceptions, just as there are in the hedge fund industry.<p>Edit: the leverage is that the GPs (general partners) usually only put up 5% max of the total assets under management (the rest comes from the LPs (limited partners), the pension funds, endowments, high-net worth individuals, etc. invested in the fund) but get 20% of the profits.
benjaminjosephwabout 4 years ago
One implicit idea here is that companies are now also different kinds of things now - they are much smaller and leaner while also making a lot more money - that gives them a very different character to the large, dense and slow moving corporations of a few decades ago (and maybe a lot less accountability too).<p>Perhaps these big shifts warrant a renewed discussion about the role of new large and lean mega companies in society. Market success can&#x27;t be the only metric we use to measure the societal value of a company. If it were, tech domination would be the name of the game and companies would devolve into creating software that manipulates users for more revenue in whatever way possible&#x2F;necessary. On a resource constrained planet, that would be absolute madness.
azinman2about 4 years ago
&gt; If you only look back as far as the mid 20th century, it seems like people getting rich by starting their own companies is a recent phenomenon. But if you look back further, you realize it&#x27;s actually the default. So what we should expect in the future is more of the same.<p>First, he pointed to one other point in time. Maybe this is true (although I doubt it), but the argument would benefit from many more data points if you&#x27;re going to establish that &#x27;startups are the default&#x27;.<p>Secondly, of course future here isn&#x27;t disambiguated so it&#x27;s hard to argue with. But past performance is only a guess for future prediction. Given the rise of populism globally, I think we&#x27;re in for some big big changes at the societal level.
anonuabout 4 years ago
This reminds me of a graph of breweries in America over the last 100+ years.<p>I think the line started around 3k or 4k breweries across America around 1900, reached an all-time low in the 1970-1990s and now were back up to where we started.<p>Of course, the story here is refrigeration. When refrigeration was not common place, you needed a lot of breweries near consumption.<p>I&#x27;m also thankful for the variety of beer options we have today.<p>edit: this might have been the image I remember - but theres no data source mentioned: <a href="https:&#x2F;&#x2F;vinepair.com&#x2F;wp-content&#x2F;uploads&#x2F;2015&#x2F;11&#x2F;historical-breweries-chart.png" rel="nofollow">https:&#x2F;&#x2F;vinepair.com&#x2F;wp-content&#x2F;uploads&#x2F;2015&#x2F;11&#x2F;historical-b...</a>
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mensetmanusmanabout 4 years ago
“ But the main reason it&#x27;s easier to start a startup now is that it&#x27;s cheaper. Technology has driven down the cost of both building products and acquiring customers.<p>The decreasing cost of starting a startup has in turn changed the balance of power between founders and investors. Back when starting a startup meant building a factory, you needed investors&#x27; permission to do it at all. But now investors need founders more than founders need investors, and that, combined with the increasing amount of venture capital available, has driven up valuations. [8]”<p>This is true for software companies, but not for materials companies that have to build stuff out of atoms. (e.g. cheaper to move electrons than atoms).
splithalfabout 4 years ago
Is it possible that we just don’t know about people inheriting great wealth nowadays? Is there a world registry of wealth somewhere to track this stuff or does Forbes just search public information sources? Maybe the richest people are secretive.
tw600040about 4 years ago
Top 100 richest people etc is an outlier by definition. Chasing that phantom isn&#x27;t going to get one anywhere. For those seeking to build meaningful wealth (think ~10M etc and not billions) it&#x27;s better to be grounded and focus on the simple more predictable things one can control and build systems for good side income, passive income, do the np brainers like 401K, Roth IRAs etc. But unfortunately one can only read about the Bill Gates of the world and there is hardly anything written about the guys in 10M range that have 3 Valeros and 2 subways and a motel.
thayneabout 4 years ago
&gt; How are people making these new fortunes? Roughly 3&#x2F;4 by starting companies and 1&#x2F;4 by investing.<p>One thing that is ignored in this essay is that you need initial capital to get rich by either of those methods.
ekanesabout 4 years ago
You can&#x27;t look at the richest 100 people and say anything at all that&#x27;s useful to regular people or even super smart tech folks, because they&#x27;re outliers of the largest magnitude.
gonationalabout 4 years ago
Coining a term: *The Social Limit*<p>At any given moment, this is the income&#x2F;wealth level of the medium social media account owner. Naturally, as those with fewer means come online, this limit decreases.<p>The purpose of this limit is to define the level of income&#x2F;wealth, above which one will have to send an inordinate amount of time trying convincing everyone below the limit that it is not one&#x27;s fault that the rest are currently below the limit. Everyone below that limit will be angry.<p>Once everyone in the world is online this limit will be defined as 0.
vmceptionabout 4 years ago
&gt; Of the 73 new fortunes in 2020, 56 derive from founders&#x27; or early employees&#x27; equity (52 founders, 2 early employees, and 2 wives of founders)<p>0 husbands of founders<p>An observation. Maybe it ought to say spouse to avoid the meaty bait of several different flavors that supports this reality. As at least 1 of these is an ex-spouse it also brushes against divorce expectations in various jurisdictions, where the unpaid contributions toward the union fit an O(log n) level of efficacy instead of linear O(n).
decebalus1about 4 years ago
&gt; You would think, after having been on the side of labor in its fight with capital for almost two centuries, that the far left would be happy that labor has finally prevailed. But none of them seem to be. You can almost hear them saying &quot;No, no, not that way.&quot;<p>As always, completely removed from reality, ivory tower bullcrap. Only a subset of the workforce has the luxury to be able to start a company. It is cheaper now and for good reason. There&#x27;s not a whole lot of demand.
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analog31about 4 years ago
&gt;&gt;&gt; Indeed, we should expect both the number and wealth of founders to grow, because every decade it gets easier to start a startup.<p>In my view, this isn&#x27;t guaranteed. I don&#x27;t think there&#x27;s any inherent reason why the &quot;tech&quot; industry can&#x27;t consolidate itself into a few huge &quot;gatekeeper&quot; companies, and make it harder to start startups that are actually successful.<p>At any moment, we could be at the beginning of an era, or at the end of one.
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skybrianabout 4 years ago
From the headline, I had guessed this article would be about how people become millionaires rather than billionaires, but that would be a whole different article.
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rmasonabout 4 years ago
As someone who was an adult during the Carter and Reagan administrations Jimmy Carter started the deregulation debate and he set in motion money to study the idea. He was definitely in support of it, but faced significant opposition in his own party<p>But it was Reagan who actually executed on it. The unions and a significant amount of Democrats opposed both of them. Some jobs were lost but consumers greatly benefited.
jonnycomputerabout 4 years ago
And real income growth has precipitously declined in the same period, and that is not some statistical artifact, but a widely acknowledged econometric fact.
rangewookieabout 4 years ago
&quot;This trend has been running for a long time. IBM, founded in 1896, took 45 years to reach a billion 2020 dollars in revenue. Hewlett-Packard, founded in 1939, took 25 years. Microsoft, founded in 1975, took 13 years. Now the norm for fast-growing companies is 7 or 8 years.&quot;<p>Shouldn&#x27;t inflation be taken into account here? A speed increase is still apparent, but at a slower rate overall.
codegladiatorabout 4 years ago
And how many people got poor starting a new company ?
rossdavidhabout 4 years ago
I like reading PG&#x27;s essays, but...I read a book on pretty much the same phenomenon (&quot;Capital in the Twenty-First Century&quot; by Thomas Piketty) a few months ago. It took a lot longer to cover the same ground, but it also covered it a lot better, and a lot more persuasively. Not unsurprisingly, it is also a lot less sanguine about the impact of recent wealth trends.
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rvn1045about 4 years ago
I think one of the most disturbing things about how people get rich in technology startups today is that they get chosen by rich vcs to become successful.<p>Let’s say there are a few different teams of people working on some promising space that requires a new solution, vcs basically decide the winner by injecting massive amounts of capital into them and make the rest fail.
Tychoabout 4 years ago
An interesting exercise is to go through the wikipedia lists of the richest people in different countries. Follow the links for the the top 5 or 10 individuals listed, and see how they made their fortune. It&#x27;s a rather high-entropy information dump - you can infer a lot about different parts of the world, from not much reading.
simonebrunozziabout 4 years ago
By the way, confounding income with wealth is as bad as confounding market cap of a company and GDP of a country, e.g. GDP of India vs Apple&#x27;s market cap [0].<p>[0]: <a href="https:&#x2F;&#x2F;www.profgalloway.com&#x2F;scarcity-cred&#x2F;" rel="nofollow">https:&#x2F;&#x2F;www.profgalloway.com&#x2F;scarcity-cred&#x2F;</a>
chrisbrandowabout 4 years ago
He doesn’t address another possibility. That the inherited wealth, as evidenced by DuPont heirs, was carried over from earlier era that lacked the progressive taxation structure of the 50s and 60s that may have prevented accumulation of wealth. That was largely dismantled in the 80’s and 90’.
tribuneabout 4 years ago
Note that the <i>Forbes</i> list doesn&#x27;t necessarily reflect how people are getting rich at the moment, but how people in the more recent past <i>have gotten</i> rich. The catalyzing events that launch the fortunes of the wealthiest were already happening a while ago
backtoyoujimabout 4 years ago
Also about about money managers: in 1982 pensions existed. Now there is only the 401k. Now money managers get to invest other people&#x27;s pensions.<p>If I was a money manager for a 401k I would prolly start investing other people&#x27;s money into money management and it accouterment.
scottiousabout 4 years ago
Okay yeah, but that&#x27;s like &quot;Forbes 400&quot; level rich, which is almost nobody. What about &quot;acquire $10M by 50 years old&quot; level of wealth? To me, that seems like a much more interesting story because it captures many more people.
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giantg2about 4 years ago
I just wish I was financially independent.<p>When I buy a Powerball ticket (maybe every other year), I don&#x27;t hope for the jackpot. I just hope for the million dollar prize.<p>Edit: why downvote? This is how I feel. This is my only opportunity to make &quot;real money&quot;.
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sjg007about 4 years ago
I enjoyed reading this. We are in a tech growth phase where the cloud, SaaS and AI are eating up both businesses and antiquated business processes (aka digital transformation). Find a niche and help them evolve.
arminiusreturnsabout 4 years ago
Wow, its nice to see something I&#x27;ve strategized for years articulated well. While I would like a larger dataset, and mostly focus on the non-billionares in my more reasonable target wealth, it generally matches my analysis.<p>&quot;Roughly 3&#x2F;4 by starting companies and 1&#x2F;4 by investing.&quot;<p>Some people have given me a hard time for not being too attached to companies, especially startups, but one of the things I&#x27;ve learned by seeing the internals of hundreds of companies, both as a contractor and as an employee, is that there are so many lessons to be learned at the business level <i>if you learn how to pay attention and think about those problems</i>. I found that as a sysadmin I was around these kinds of discussions a lot, but that other sysadmins just tuned most of it out. Instead I exploited the fact that so many C&#x27;s viewed me as a &quot;janitor&quot;, and soaked up the knowledge about what to do right and what not to do... and I continue to do so.<p>Now, I finally got my foot in the door in finance, and my two main strategies match (starting a business and investing).<p>&quot;There were no fund managers among the 100 richest Americans in 1982. Hedge funds and private equity firms existed in 1982, but none of their founders were rich enough yet to make it into the top 100. Two things changed: fund managers discovered new ways to generate high returns, and more investors were willing to trust them with their money.&quot;<p>This is because put options weren&#x27;t even a thing until, what, 1977, and more complicated options weren&#x27;t removed from the moratorium until 1980. It was a very new field even for the existing hedge fund managers.<p>&quot;of the 73 new fortunes in 2020, 4 were due to real estate and only 2 to oil.&quot;<p>Again, this is a very limited dataset, especially as someone who has been inside at least one oil boom, with family in the industry. I&#x27;ve seen quite a few many-millionares created by oil, they just don&#x27;t show up in the forbes lists. They are still extremely wealthy, of course it&#x27;s very sad to see so many of them piss it all away on hookers drugs trucks and houses, only to end up destitute when the bust cycle hits... (and a little infuriating)<p>The real crux is in defining the word &quot;rich&quot; it seems. To me, building up enough that I can retire early and live off my investements without penny pinching to much is &quot;rich&quot;. I only need a few mil for that, and it&#x27;s achieveable. To others, especially with high expenses because they live in places like SV&#x2F;NY, their required &quot;rich&quot; is many more millions.
pjfin123about 4 years ago
&gt; fund managers discovered new ways to generate high returns, and more investors were willing to trust them with their money.<p>Is the first part of this true? Most funds underperform the S&amp;P.
mempkoabout 4 years ago
Mr Graham writes &quot;You would think, after having been on the side of labor in its fight with capital for almost two centuries, that the far left would be happy that labor has finally prevailed. &quot;<p>Unfortunately Mr. Graham has an outdated view about the &quot;far left&quot;. I recommend anyone interested in what a modern &quot;far left&quot; looks like learn about Richard Wolff and the Democracy at Work movement. A startup in a garage where everyone is an owner building great stuff is pretty much it.<p>He did a Google Talk here: <a href="https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=ynbgMKclWWc" rel="nofollow">https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=ynbgMKclWWc</a>
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sgt101about 4 years ago
The way that the Gini coeffient could be reduced in the face of start-up wealth is via the introduction of progressive taxation. That, Mr. Graham is how it could be.
Tychoabout 4 years ago
If it’s so much easier to start a new company, market a new technology, and generate a new fortune, why is our reported GDP growth so anaemic?
mikesabbaghabout 4 years ago
I wonder if this statistics hold for the people making 10 millions or more. I wonder if it would be a tech business or some other side hustle
lawnabout 4 years ago
Tell me, why are people still willing to listen to PG? He&#x27;s clearly justifying an existing belief here by cherry picking.
hunter-2about 4 years ago
Took too many words to state the obvious fact - that it is extremely easy to start a company today than it was in 1982.
iamleppertabout 4 years ago
Dude is obsessed with money and wealth. Why?
TheRealDunkirkabout 4 years ago
&gt; The tech companies behind the top 100 fortunes also form a well-differentiated group in the sense that they&#x27;re all companies that venture capitalists would readily invest in, and the others mostly not. And there&#x27;s a reason why: these are mostly companies that win by having better technology, rather than just a CEO who&#x27;s really driven and good at making deals.<p>I&#x27;m sorry, but this is utter bullshit, told to one&#x27;s self to feel better about the real facts on the ground. What we&#x27;re seeing in &quot;tech,&quot; over and over, is NOT an effort to come up with &quot;better technology,&quot; but the play to capitalize on some particular niche, and then MONOPOLIZE it. This is key.<p>It&#x27;s not good enough to provide nice co-working spaces; the goal is to own every rentable building in a city. It&#x27;s not good enough to provide a ride sharing solution; the goal is to run taxis out of business, and own the ONLY ride share in town. It&#x27;s not good enough to run a respectable social media site; you have to be the only one that people use for a particular purpose.<p>VC&#x27;s are NOT looking for the next big idea; they&#x27;re looking for the next MONOPOLY. That&#x27;s where all the money is going. It&#x27;s what our government and society has now optimized for. Other companies (like the latest $20B Microsoft gobble) are scrambling to own a monopoly vertical workflow stack of their own, but it&#x27;s all the same idea in play.<p>We&#x27;re heading directly for the cyberpunk, citizens-of-multinational-corporations future that people have been writing about for decades.
cupofcoffeeabout 4 years ago
&gt;That&#x27;s why founders sometimes get so rich so young now.<p>It is true. Sometimes young people get really rich while they are really young. Sometimes you can toss a coin 30 times and you can get all heads. I don&#x27;t see why deceptively call it &quot;sometimes&quot; when in reality saying almost never would be heck of a lot truer.<p>&gt;You could get rich from starting your own company in 1890 and in 2020, but in 1960 it was not really a viable option. You couldn&#x27;t break through the oligopolies to get at the markets.<p>I am guessing by PG&#x27;s definition having an internet connection is &quot;getting at the market&quot;. To create a startup at 2021 in tech sphere you need to have a ridiculously unique skill-set. I haven&#x27;t heard of any recent succesful start-ups that just does writes to DB and renders something on the screen. If there was such a low-hanging fruit big companies would simply copy the best features overnight and make you obsolete.<p>When tons of people are getting at a market it means lots of competition which means you need to further reduce the competition space by using geography, connections or wealth.<p>Tl;dr: You almost never get rich from starting a company.
AlexandrBabout 4 years ago
It&#x27;s funny how this post subtly buries the lede:<p>&gt; In 1892, the New York Herald Tribune compiled a list of all the millionaires in America. They found 4047 of them. How many had inherited their wealth then? Only about 20% — less than the proportion of heirs today. And when you investigate the sources of the new fortunes, 1892 looks even more like today. Hugh Rockoff found that &quot;many of the richest ... gained their initial edge from the new technology of mass production.&quot;<p>I agree with PG, 1892 <i>is</i> a lot like today. And just like today it was characterized by the formation of huge monopolies that consolidated control of new technologies, as well as rampant inequality and exploitation of workers[1]. The reaction among those that didn&#x27;t get to benefit from the excesses of this era is also notable - Communism - and not the kind where hipsters complain on the internet but rather the kind where people were willing to violently overthrow governments.<p>[1] <a href="https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Gilded_Age" rel="nofollow">https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Gilded_Age</a>
timoth3yabout 4 years ago
I used to really enjoy PG&#x27;s articles, but these days he seems to be trying to publicly talk himself into something he already believes.<p>His conclusions jumped out at me:<p>&gt; You would think, after having been on the side of labor in its fight with capital for almost two centuries, that the far left would be happy that labor has finally prevailed. But none of them seem to be. You can almost hear them saying &quot;No, no, not that way.&quot;<p>There may be some assumptions under which this makes sense, but they are not expressed in the article.<p>The power of labor in terms of pay, working conditions, political influence, or any measure I can think of is at a 50-year low in the US. And since labor makes up the vast majority of jobs, it&#x27;s not just the &quot;far left&quot; who needs to be concerned about them.<p>Being able to raise money from a capitalist (venture or otherwise) who will then own part of the enterprise is pretty much the definition of capitalism. It&#x27;s a good thing, but the success of capitalism is not automatically a victory for labor.
levinbabout 4 years ago
Advice straight out of The Onion, 18 years ago:<p><a href="https:&#x2F;&#x2F;local.theonion.com&#x2F;i-should-start-some-sort-of-huge-corporation-1819583886" rel="nofollow">https:&#x2F;&#x2F;local.theonion.com&#x2F;i-should-start-some-sort-of-huge-...</a><p>&quot;Working security at Rite Aid for $6.55 an hour is just not cutting it the way it used to. But I&#x27;m not worried, because last night, as I was standing there staring at the rows of shampoo bottles and disposable razors, the answer hit me: I should start some sort of huge corporation!&quot;
TurkishPoptartabout 4 years ago
The Rothschild family is not included in the Forbes 100 richest list.
onlyrealcuzzoabout 4 years ago
It&#x27;s hard to take this article seriously. People get rich now from companies because multiples have been artificially pushed higher by low interest rates.<p>If that weren&#x27;t the case, the top 100 would still likely be dominated by heirs.<p>All that&#x27;s changed is the Fed is manipulating the market more now than before, and that&#x27;s benefiting growth stocks and fund managers of growth stocks... among other things.
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yroc92about 4 years ago
Is there a reason this blog isn’t using HTTPS?
ulisesrmzrocheabout 4 years ago
I thought Peter Gregory died in a safari
tmilardabout 4 years ago
Good to know : PG is not alone
alexashkaabout 4 years ago
Let me guess, start-ups is how people get rich?<p>When all you have is a hammer, everything looks like a nail.
kontxtabout 4 years ago
Classic PG. Summary &#x2F; TLDR: <a href="https:&#x2F;&#x2F;www.kontxt.io&#x2F;document&#x2F;d&#x2F;q4Jpm8Kft2ZNa5I5wzdNonRuaCFdgZyC7UrXVGYtYIiHW&#x2F;summary" rel="nofollow">https:&#x2F;&#x2F;www.kontxt.io&#x2F;document&#x2F;d&#x2F;q4Jpm8Kft2ZNa5I5wzdNonRuaCF...</a>
SuboptimalEngabout 4 years ago
How people get rich in the future: social media
theptipabout 4 years ago
&gt; In 1892, the New York Herald Tribune compiled a list of all the millionaires in America. They found 4047 of them. How many had inherited their wealth then? Only about 20%... So it&#x27;s not 2020 that&#x27;s the anomaly here, but 1982.<p>This is an oversimplification. Go back 100 more years to 1782 and I bet you&#x27;d find the dominant paradigm is inherited wealth. Go back another 100 years and it&#x27;s still inherited wealth. I&#x27;d assume that below a certain tribal size you stop seeing much inherited wealth, and so the starting point for groups of humans is more like a meritocracy, where the strongest tribe member gets to keep the most stuff, but &quot;inherited wealth dominates&quot; is probably the default mode for most of what we&#x27;d recognize as &quot;civilization&quot;.<p>More generally it&#x27;s extremely dubious to attempt to extrapolate a historical trend from the datapoints 1892,1992, 2020, especially given that your first two datapoints are different; if you saw a consistent trend going backwards in time you&#x27;d be more justified in extrapolating from that.<p>A more nuanced model would be to think in terms of cycles; this is a very well-established concept in both history and economics. Technological paradigm shifts allow innovators to overturn the status quo. Over time power accumulates, monopolies form, big companies figure out how to exploit the new technology, the winners of the cycle entrench, and opportunities for upwards mobility decreases again. The industrial age is one such paradigm shift. The &quot;information age&quot; is another. Inside the latter, you can make the case for smaller cycles of innovation that still have large economic consequences, like mainframe computing, desktop computing, and cloud computing. Each of these paradigm shifts minted new titans of industry.<p>When a new paradigm arises, the cycle repeats again. We see this with the railroad barons and other industrial innovators, the progenitors of a generation of inherited wealth. We&#x27;ll probably see this again with the Zuckerberg lineage. It seems entirely possible to me that in 20 years&#x27; time, there are essentially no new tech multi-billionaires, and instead the big-5 tech companies just buy any startup that grows big enough to be a potential competitor. This would mint plenty of tech millionaires, but leave the &quot;100 richest&quot; unchanged. Of course, anti-trust laws exist, and so this outcome is far from a certainty. But it would at least be consistent with how previous paradigm shifts have played out.<p>A potential counter-argument to this line of reasoning would be to look at the cycle period and argue that the troughs of ossification&#x2F;consolidation between cycles are shortening, and we should expect the existing dominant companies to get unseated by whoever comes up with the next paradigm shift. This is a very interesting subject for discussion; I&#x27;d just note that it is a much more nuanced argument than Graham&#x27;s point, which is essentially claiming historical homogeneity prior to 1892 and using that to imply that things will stay the same as they are now going forwards.
rndmizeabout 4 years ago
I find this essay frustrating for a number of reasons, but the biggest one is that it feels like a rehash of his &quot;Inequality and Risk&quot; essay from 2005 - except this one is less direct and buries the lede until the end (&quot;Of course the Gini coefficient is increasing&quot;).<p>Because here&#x27;s the thing that&#x27;s wrong with most of the thinking in this essay and in the last one: measuring the success of your economic system based on outliers tells us very little about whether that&#x27;s a good economic system. For the majority of people in a given country, whether the wealth of the top .001% is inherited or built through some sort of ability to scale doesn&#x27;t matter, it&#x27;s still a bad system. If ten thousand people try to do something and only the one that succeeds gains anything from it, we are looking at a non-viable economic system for 99.99% of people.<p>And I see this all the time now, in all places. It&#x27;s like when people say &quot;Look, this guy makes huge amounts of money from Twitch&#x2F;Youtube&#x2F;Patreon (with the older standards being music&#x2F;hollywood and pg&#x27;s focus being startups). These are winner-take-all systems. <i>That&#x27;s</i> why there&#x27;s people without inherited wealth at the top of the charts - they won, and somewhere out there are tens of thousands of people that lost. This doesn&#x27;t mean those people are destitute or homeless, mind you; people that &quot;lose&quot; in the software ecosystem go work for the winners, and things sort-of work out (its worth noting that things don&#x27;t work out as well in other spaces). But consider - if I have a half a dozen people that start companies in the same space, and 5 of them drop for various reasons - bad marketing, bad design, bad customer support, whatever - does the guy who wins really deserve to be not just 10x, or 100x richer, but 1000000x richer? Is this a just system? Is it even an <i>effective</i> one? Are we really incapable of imagining an economic structure where people don&#x27;t lose motivation to do great work without the possible reward of billions of dollars?<p>There&#x27;s further complaints to be made - looking back only to the industrial revolution to consider 1982 the anomaly, when since the dawn of civilization inheritance has been the standard form of wealth transfer; the social impact of high inequality and how the massively wealthy have a tendency to warp society around them (this was at least examined to some degree in the other essay); and so on.<p>The future I see from pg&#x27;s inequality essays is one of increased separation: one in which rather than having an accountant or travel agent in every town, these services are provided by a single company that serves to funnel that money from hundreds of thousands of local areas across the world to a single business, probably somewhere in SV - and a few hundred thousand middle class jobs disappear into the void. And as our technology increases in capability, it happens again, and again, until we&#x27;re largely left with a few groups - the founders and funders that own everything; the few remaining high-skill jobs that make and manage the systems for huge winner-take-all tech companies; and the rest, which spend their lives doing work directed and optimized by computers until a point is reached where that work can be automated cost-effectively. I&#x27;m not sure that&#x27;s a world I look forward to.
internetslaveabout 4 years ago
I think there’s a different reason, companies just aren’t paying enough. Wages, even at 150-200k just really aren’t that much. 200k now is a lot less than 200k in 2010. The younger generation intuitively knows this. I don’t know anyone jockeying to climb the corporate ladder, and my social circle spans Stanford grads to no college degree at all. People are starting businesses because working for a corporation day in and out is slavery, you never make enough money to escape the debt of your mortgage. Sure, some FAANG employees do, but the number is small, and with a family, 300k compensation still doesn’t cut it, you will be working forever.<p>People are getting “rich” from startups because they’re actually capturing the value of their labor, which I argue, used to happen at corporations.
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knownabout 4 years ago
Related to <a href="https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=26770562" rel="nofollow">https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=26770562</a>
tpmxabout 4 years ago
What this post looks like on a 40&quot; 4k screen (which btw is an awesome investment for productivity):<p><a href="https:&#x2F;&#x2F;i.imgur.com&#x2F;gPHT5hI.png" rel="nofollow">https:&#x2F;&#x2F;i.imgur.com&#x2F;gPHT5hI.png</a>
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gurumeditationsabout 4 years ago
This guy’s rant against liberals&#x2F;ode to tech startups is illiterate and contradicted by his own notations. There’s practically a second separate essay down there explaining how he ‘creatively’ interprets data to mean what he wants it to mean. If you have to do that, you’ve written something really quite sloppy.
lvsabout 4 years ago
Paul Graham is a charlatan. He has no great insights into the way the world works that aren&#x27;t fatally colored by his own self-sense of success. In large part, the purpose of articles of this ilk is little more than to seek self-justification for the status quo, so you can sleep better at night. If that&#x27;s what you seek, then this is the charlatan for you.