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How People Get Rich Now

paulgraham.com

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Re: How People Get Rich Now

#491

Post by alpha_squared »

djrogers wrote: post #477
alpha_squared wrote: post #465

Earlier quoted context omitted.

> John Doe stacking pallets at the Coca Cola factory really won't produce much better top or bottom line results for the business if you offer him a stock bonus. His forklift only drives so fast. A counter-perspective would be that John Doe becomes incentivized to improve efficiency and innovate in the process. People are not machines or primitive animals. Humans are capable of creative problem-solving. Note: stock o…

> Note: stock options are not stocks. You're not given a share in the company, you're given the opportunity to invest in the company. You have to put money in to _potentially_ get money back. While pedantically true, in reality this is generally not the case. As long as you are still employed by the company that granted you the options, you do not have to exercise them ('invest') until you wish to sell them. What thi…

> As long as you are still employed by the company that granted you the options

I think that's the key, which makes them fundamentally different. So, in the _very_ narrow scenario in which you happen to join a company that will IPO and that you're there from pre-IPO until post-IPO, yes -- they're nearly the same; you really just benefit from the difference of the strike price and public price. If you've spent time at the company, vested your options, and want to leave for just about any reason, it's nothing at all the same. I posit that a vast majority of startup departures fall under the latter scenario.

Re: How People Get Rich Now

#492

Post by missedthecue »

eptcyka wrote: post #12

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.

There are a lot of freshly minted billionaires in Asia these days so I'd say yes.

Re: How People Get Rich Now

#493

Post by wing-_-nuts »

anonu wrote: post #451

This reminds me of a graph of breweries in America over the last 100+ years. 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. Of course, the story here is refrigeration. When refrigeration was not common place, you needed a lot of breweries near consumption. I'm also thankful for the variety of beer optio…

>Of course, the story here is refrigeration. When refrigeration was not common place, you needed a lot of breweries near consumption.

Uh beer doesn't have to be refrigerated? England has a long history of drinking warm beer. Hell, they even hopped it up to ship it all the way to india (months!) without it spoiling.

Re: How People Get Rich Now

#494

Post by Florin_Andrei »

missedthecue wrote: post #433
greatgib wrote: post #411

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. See this: https://www.theguardian.com/business/2018/aug/16/ceo-versus-... I quote: "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…

I hate this comparison. Stock based compensation didn't exist in 1965. It's an oranges to apples comparison. CEO salaries today are still about 20-1, depending on the business. For instance: - Doug McMillon of Walmart makes $1.2 million in salary. - James Quincy of Coca-Cola makes $1.5 million in salary. - JPMorgan's CEO Jamie Dimon has a $1.5 million salary. - Sundar Pichai of Google makes $2 million in salary. You…

TLDR: CEOs are wildly better paid nowadays, compared to decades ago, via mechanism X, as opposed to mechanism Y. Both X and Y ultimately deliver money.

Re: How People Get Rich Now

#495

Post by mattmanser »

zdragnar wrote: post #408
tyre wrote: post #357

Earlier quoted context omitted.

Could you point out where my comment implied that they shouldn't be allowed to do business? I didn't mean to (and don't believe that) so it would be helpful to see how I could adjust the way I communicate this. They should be allowed! It's just that maybe we need to adjust our society to this reality.

I think the language of the post was rather hyperbolic; I have quoted this line a few times now: > But this level of wealth concentration and inequality is detrimental to the fabric of a society. We’re not better off, we’re not more innovative, we’re not healthier or more cohesive or happier when this happens. When you give Airbnb as an example, I fixated on them mostly because it doesn't jive with the rest of your p…

Really don't get where you're coming from, that quote is two paragraphs after the mention of many other companies, where he's clearly implying the concentration of wealth in the hands of the founders and investors is the detriment.

Re: How People Get Rich Now

#496

Post by m___ »

Main substance left in the mist.

"Founders" 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 "investors" to u-p-p for free.

Loggerheads as Leon Musk might be "rich" but not in charge, and second tier as come to power. If one looks down to the Footlocker crowd, anything can mean "rich". The third dimension Sherlock of the article, time, how long will they last?

The author has a serious agenda to prone, or must be mentally incapacitated to not see ":)", 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!

Re: How People Get Rich Now

#497

Post by gonehome »

Retric wrote: post #348
gonehome wrote: post #287

Earlier quoted context omitted.

I think this is true in the common case, but I thought Bezos was raised by a single mom who had him at 17 and his step father was a cuban immigrant? https://www.aboutamazon.com/news/policy-news-views/statement... There's also the donut king: https://news.ycombinator.com/item?id=25241898 I'm not trying to just pick rare counter examples, but I'm skeptical of the claim that there's little demographic distance or the im…

The point about the demographic similarities doesn’t go away when you include outliers. Their are vastly more people with poor backgrounds so having them underrepresented doesn’t go away with a few exceptions sprinkled in. People talk about America as a meritocracy yet, the US has had vastly more presidents closely related to previous presidents than say Black, Hispanic, and or Female presidents combined. That’s to p…

I don't disagree really - and the president issue is somewhat separate given its political nature and obvious historical context.

As I said, I agree in the common case - I just see people generalize and include in their examples people that contradict them (Bezos, arguably Musk too).

Extreme outliers are often outliers in more ways than one.

Re: How People Get Rich Now

#498

Post by shkkmo »

missedthecue wrote: post #471
joshuamorton wrote: post #453

Earlier quoted context omitted.

> They come from diluting Wall Street. Yes, until the company offers a stock buyback (which these companies collectively spent more than 50 billion on in 2020)

ok. But then they're using cash from the business to get the share count back down to prior levels, and it's still a net loss for Icahn. There are only 100 percents. If the management team gets more ownership through dilution, it means Carl Icahn owns less.

Yes, and that cash is a part of the revenue that could be used to pay the workers who generated that revenue.

Thus CEO pay is absolutely the concern of workers, unions, and union supported politicians.

Re: How People Get Rich Now

#499

Post by medvezhenok »

whimsicalism wrote: post #406
anonu wrote: post #402

Earlier quoted context omitted.

Yes, EV. I certainly think tech entrepreneurs go into a startup opportunity impassioned by their ideas, but knowing they could IPO or exit at some point in the future for a sizeable amount of cash is certainly a motivating factor. EV = Probability * Outcome Probability is very low of an IPO outcome - but EV is probably still higher than FANG work.

Yeah, I don't think that is true.

Around 1% of seed-funded companies go on to become unicorns (>1B valuation).

Total market value of unicorns ~$2T (~600 unicorns). So average unicorn valuation ~3.3B USD.

Let's say you're the founder and your [ultimately diluted] share of the company is 10%. You have a 10Y runway. Your EV in startup case is 330M (10% of 3.3B) * 1% chance of success = $3.3M or $330K USD per year. This is only counting the extreme (unicorn cases) and will obviously vary with equity percentages.

https://news.crunchbase.com/news/private-unicorn-board-now-a...

Re: How People Get Rich Now

#500

Post by FabHK »

prostoalex wrote: post #164
nindalf wrote: post #71

It'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's a massive claim that isn't fully stated but implied. "Of course the Gini coefficient is increasing" translated means "income inequality is not a problem". Firstly, Gini coefficient is based on income, not wealth. That isn't stated clearly. Secondly, there's absol…

> "Of course the Gini coefficient is increasing" translated means "income inequality is not a problem". The book "The Great Leveler" https://www.goodreads.com/book/show/31951505-the-great-level... is probably the most comprehensive dive into history of inequality, and arrives at a fairly unexciting conclusion that periods of great inequality are correlated with significant economic growth (usually related to advances…

Hmmm. The traditional (1960's) view (Kuznet's "Inverted U") is that starting from low-tech societies where everyone has more or less the same, inequality rises with the advent of technology, then falls again as democracy and the welfare state kick in.

Thomas Piketty in his magnum opus Capital in the Twenty-First Century argues that the rise in inequality is inevitable (his famous r > g) and only interrupted by wars, depression, hyper inflation, and similar catastrophes that destroy a lot of wealth. That's rather more exciting than stagnation.

Branko Milanović’s more recent (2016) Global Inequality: A New Approach for the Age of Globalization (which originated the famous elephant graph [2]) notes that 1) inequality has risen recently within nations, but decreased among nations; 2) the Kuznet inverted-U needs to be replaced by Kuznet waves; 3) there does not seem to be an efficiency-equity trade-off in the long-term 4) social mobility seems to be falling (such that accidents of birth basically determine your station in life again, as in previous centuries).

> periods of great inequality are correlated with significant economic growth (usually related to advances in automation, which tend not to be universally distributed) whereas periods of equality can generally be attributed to stagnation.

Here, Milanović distinguishes "malign" equalisers, which reduce both inequality and average income (namely the ones noted by Piketty: wars, epidemics, depression, etc.), and "benign" ones: widespread education, greater social transfers, and progressive taxation. [3]

[1] https://en.wikipedia.org/wiki/Kuznets_curve

[2] https://en.wikipedia.org/wiki/The_Elephant_Curve

[3] https://economics.hse.ru/data/2015/12/23/1132608306/TOC_may....

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