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How People Get Rich Now

paulgraham.com

521–530 of 941 posts

Re: How People Get Rich Now

#521

> It'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. This may be a quibble, because I think Paul Graham really means a certain type of high-growth startup in mind when he says "start a company". But the rate of new business formation in the US has fallen off a cl…

He specifically addresses this in footnote [3].

When I say people are starting more companies, I mean the type of company meant to grow very big. There has actually been a decrease in the last couple decades in the overall number of new companies. But the vast majority of companies are small retail and service businesses. So what the statistics about the decreasing number of new businesses mean is that people are starting fewer shoe stores and barber shops.

The news has gone from bad to worse. Winner-take-all regulations, customs, and market manipulations are good for Bezos, but not for normal humans and not for the economy as a whole. It has been even worse in pandemic time, since the small shops just closed down while the bigger firms were somehow exempted from those requirements.

Re: How People Get Rich Now

#522

Earlier quoted context omitted.

The benefits should go to whoever is responsible for the success of the company. This obviously opens up a political can of worms: the Left will say the CEO can't get anything done without the workers, the Right will say the workers can't get organized without the CEO (eg: what was Apple doing before Steve Jobs came back?). The workers can obviously leave and seek employment elsewhere. So can the CEO. For better or w…

> The benefits should go to whoever is responsible for the success of the company. This obviously opens up a political can of worms: the Left will say the CEO can't get anything done without the workers, the Right will say the workers can't get organized without the CEO And a pragmatism can say that all kinds of CEOs have driven companies to the ground, reducing their valuation even 1/10 what it was, and destroying t…

A sharper metric: it tends to do with whoever is responsible for the success of the company at the least cost to shareholders.

Imagine a company starting out. If they need you to join or they fail, and they can get you for 1% of the company, that founder is rewarded incredibly for securing you with very minor cost to the company, making them rich and you not, even if you are responsible for the success of the company. The reason being: if you’re so integral why didn’t you start your own company and keep all the equity? Why didn’t you bargain for more?

Capitalism doesn’t make any prescriptions about what should happen, it’s just a system where individuals make consensual transactions and the chips fall where they do.

In the above scenario, whether the founder “deserved” to be rich or not doesn’t matter, because you “made” them rich with your consensual transaction. As long as we are all free to be the founders or the employees, I don’t see why there should be some moral issue there. If your effort is worth more to others, either you need to haggle harder, start your own company, or you’re lying to yourself.

Everyone is a stock in capitalism, that’s all that is true. Everyone sets the value of each other’s labor and capital. If your stock isn’t doing so hot it’s because others aren’t buying it.

Re: How People Get Rich Now

#523

Earlier quoted context omitted.

It's not just dishonest -- it's gross. Paul needs to spend less time on yachts. Being a mouthpiece to try to find a morality in increasing income inequality, when so many are suffering, more each year, is simply vile.

> 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 "No, no, not that way." This line is particularly disgusting. Labor has not prevailed. Labor in fact has been crushed by deregulation, union busting, automation, and most importantly…

He must be in some world where all labor gets rich on RSUs and not the one where they're worthless or have pensions defaulted to the PBGC.

Let them eat soylent.

Re: How People Get Rich Now

#524
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…

Paul Graham's articles always shoot immediately up to the top of HN, but I agree with you, they're generally cursory and pithy thoughts which don't convince my skeptical mind. I don't know, can someone explain why his work is so popular? Think of all the amazing writers across our civilization whose work is linkable, and we're worshipping these decent but not amazing blog posts?

"It turns out" (to use a popular pg phrase used when proof is too inconvet to produce) that pg is well liked among pg's fan club website users.

Re: How People Get Rich Now

#525
> 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's not 2020 that's the anomaly here, but 1982.

This is an oversimplification. Go back 100 more years to 1782 and I bet you'd find the dominant paradigm is inherited wealth. Go back another 100 years and it's still inherited wealth. I'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 "inherited wealth dominates" is probably the default mode for most of what we'd recognize as "civilization".

More generally it'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'd be more justified in extrapolating from that.

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 "information age" 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.

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'll probably see this again with the Zuckerberg lineage. It seems entirely possible to me that in 20 years' 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 "100 richest" 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.

A potential counter-argument to this line of reasoning would be to look at the cycle period and argue that the troughs of ossification/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'd just note that it is a much more nuanced argument than Graham'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.

Re: How People Get Rich Now

#526

Earlier quoted context omitted.

This is incorrect. HN is run by Y Combinator; yes, PG started YC, but he retired from YC 7 years ago.

Oh, I had thought he stepped down from the day to day role but still had significant investment and control. There are many firms where the owner is never present, but all employees know not to cross them. (E.g. Washington Post & Jeff Bezos).

WaPo is very critical of Amazon

Re: How People Get Rich Now

#527

It's hard to take this article seriously. People get rich now from companies because multiples have been artificially pushed higher by low interest rates. If that weren't the case, the top 100 would still likely be dominated by heirs. All that's changed is the Fed is manipulating the market more now than before, and that's benefiting growth stocks and fund managers of growth stocks... among other things.

Technology has changed things. Amazon generates twice as much revenue per employee as Walmart. So the bottom line is Tech can sell a hell of lot more of china's stuff per American worker than old retail.

I think that has less to do with technology and more to do with how much simpler it is to ship things out of about 100 distribution centers than it is to sell products from a few thousand brick-and-mortar stores.

Re: How People Get Rich Now

#528

Earlier quoted context omitted.

Unless it's changed recently, I believe there is exactly one person on the billionaires list that started life in the bottom quintile -- Oprah. So you have a good question is all I'm trying to say.

https://www.forbes.com/real-time-billionaires/ #1 was born to a teenage mom (and an alcoholic/deadbeat dad). Since she was still in high school, I assume she was probably in the bottom quintile of income. #7 was given up by his mother and adopted. #9 was born in the Soviet Union. It's likely his family's income (in rubles) was in the bottom quintile of the United States at the time. (Sources I've found suggest that t…

When I look at that list, Jeff Bezos is #1. The first woman on the list is at #10 and inherited her wealth. Are you looking at a different list?

Also, people born in foreign countries had completely different experiences, and more importantly, what is relevant is if they were in the bottom quintile in their own country.

If you're super rich in your own country then you have a lot of opportunity. For example Sergey Brin may have been born in Russia, but his family managed to come to the US when he was a kid and he was clearly middle class as a teen.

Re: How People Get Rich Now

#529

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…

> If there is outrage over CEO pay, it doesn't make sense to come from the unions or left politicians, it should be coming from activist hedge fund billionaires, which it does.

One doesn't have to be a shareholder or even a direct stakeholder in a specific company to claim the right to outrage over this growing inequality in pay.

Re: How People Get Rich Now

#530

Earlier quoted context omitted.

In standard American English, 'praxis' is a Marxist shibboleth. For a non-loaded term, you can just use 'practice.'

I'm not sure what marxism has to do with this (I don't think Marx wrote about charity) and although I'm not a native speaker I'm pretty good at syntax/semantics: >the solution to guilt is more speech instead of praxis vs >the solution to guilt is more speech instead of practice Second one is vague and unclear.

In English, the usual terms are theory and practice. Praxis is a synonym of practice, but it is rare and formal (for the marxist connection, see https://en.wikipedia.org/wiki/Praxis_School).

At any rate, what you wanted to say is maybe best expressed as "the solution to guilt is more speech instead of action."

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