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How People Get Rich Now

paulgraham.com

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Re: How People Get Rich Now

#541

Post by bawolff »

taurath wrote: post #472
bawolff wrote: post #423

Earlier quoted context omitted.

I don't think he said that. This seems like an article trying to explain increased wealth inequality. At most he's saying its a neccesary consequence of innovation, and he would prefer a world with innovation than without. That's very different from saying its not a problem.

Tying innovation/technology to wealth inequality at all is a false narrative. There’s literally the industrial revolution that “counts” towards this “pattern” and that is it. It’s comparing apples to 1970s automobiles.

The invention of farming also counts towards that narrative

Re: How People Get Rich Now

#542

Post by jasonwatkinspdx »

thegrimmest wrote: post #316
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…

Can I ask a related question? Why all the focus on income/wealth "inequality"? Shouldn't we be looking at the absolute baseline quality of life? Hasn't it been increasing dramatically despite increasing inequality? Due to technological advances, hasn't the baseline quality of healthcare, education, sanitation, nutrition, shelter, comfort, convenience, etc. significantly improved from the 60s or the 80s? If so, why be…

Because there are people being left behind. Productivity per person has increased massively over the last half century, yet income per worker has been stagnant unless you break into a few specific contexts. This doesn't appear to be a necessary part of innovation as PG and others claim, but rather is a reflection of concentrated wealth's ability to restructure the market and even the legal system to better serve those concentrated interests. This is the pernicious problem we have to fight. It is in no way somehow exogenously necessary for people to have half billion dollar yachts in order to advance the life of the typical human. "Markets measure merit" is a lie told by those best positioned to control markets to manufacture their own "merit."

Re: How People Get Rich Now

#543

Post by WalterBright »

davvolun wrote: post #519
alpha_squared wrote: post #454

Earlier quoted context omitted.

You're not wrong, but the perspective feels like missing the forest for the trees. So what if stock-based compensation was uncommon in 1965? The average employee doesn't get to benefit from the very real contributions they've made to the company, while the CEO does benefit. Why didn't employee profit-sharing increase at the same rate as non-salary compensation did for CEOs? That's still relevant. Additionally, your c…

Exactly, pensions were considerably more common in the 1960s also, but at the end of the day, I don't really care if my retirement is actually funded by a pension or a 401k or by stuffing dollar bills under my mattress, I want to know when I can retire and how comfortably I can live when I retire. Yes, getting into the weeds is valuable, but here we're talking about the money in your bank at the end of the day, and t…

> why

Because their decisions can drive a company into bankruptcy or transform it into a trillion dollar company. Your average line employee has no such leverage from their actions.

Re: How People Get Rich Now

#545

Post by winkeltripel »

cblconfederate wrote: post #238
chrisBob wrote: post #113

Earlier quoted context omitted.

He is saying you are more likely to become a Billionaire by starting a company than by joining a FAANG as an employee. Now that is a 1:1000000 event instead of a 1:5000000 event like it may have been in the past. I will forgive you if you still think it is unlikely. Most people's goal isn't (and shouldn't be) $1B. If your goal is a more reasonable $5M then joining an existing company is still your best bet. I am goin…

What about those billion-dollar companies that never made money but got acquired by FB, MS etc? Their founders did build a company, but if it wasn't for FAANG's insane profitability, which makes the cost of their moat so high, they wouldn't be worth that much. They essentially joined facebook as employees to make their billions.

Average exit event (going public or getting bought) won't out-pay working for FAANG. The chances that it does are like 10%, and that's if there is a real exit, instead of just a wind-down.

Re: How People Get Rich Now

#546

Post by WalterBright »

missedthecue wrote: post #452
peter422 wrote: post #446

Earlier quoted context omitted.

Why can’t employee compensation also come from diluting Wall Street? Why do they vast majority of those benefits go to top executives?

Performance and incentive alignment. 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, and he plays a very minute part in the direction of the business. The CEO on the other hand can have a huge impact, and it's why shareholders choose and vote on certain incentives and bonus…

Another example is salesmen. They get paid mostly on commission. Their sales are good, they take home $$. If they sell less, they take home less.

Re: How People Get Rich Now

#547

Post by bo1024 »

jefftk wrote: post #503
dcolkitt wrote: post #73

> 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…

[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. Pe…

This seems to contradict his analogy between 2020 to, say, 1890. Instead of a bunch of people starting small local businesses and gaining moderate wealth, we have winner-take-all dynamics.

Re: How People Get Rich Now

#548

Post by yardie »

WalterBright wrote: post #538
alpha_squared wrote: post #454

Earlier quoted context omitted.

You're not wrong, but the perspective feels like missing the forest for the trees. So what if stock-based compensation was uncommon in 1965? The average employee doesn't get to benefit from the very real contributions they've made to the company, while the CEO does benefit. Why didn't employee profit-sharing increase at the same rate as non-salary compensation did for CEOs? That's still relevant. Additionally, your c…

You can't get a CEO without offering a golden parachute. This is because you're not hire a loser CEO, you're going to hire a winner, and you'll need to attract him away from his current lucrative position. It's the same thing as top athletes getting contracts paying them millions of dollars whether or not they continue to win games.

> top athletes getting contracts paying them millions of dollars whether or not they continue to win games.

I know in the NFL, a lot of those contracts have clauses big enough to drive a dump truck through. Many of those million dollar football contracts are back loaded to only pay out if the athlete competes the full term [0]. Winning and losing games is definitely tied to whether they stay or are cut.

Unlike a CEO, a poor performing athlete has no golden parachute to fall back to.

[0] https://www.pff.com/news/nfl-salary-cap-terms-tricks-to-know...

Re: How People Get Rich Now

#549

Post by WalterBright »

daemin wrote: post #508
missedthecue wrote: post #452

Earlier quoted context omitted.

Performance and incentive alignment. 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, and he plays a very minute part in the direction of the business. The CEO on the other hand can have a huge impact, and it's why shareholders choose and vote on certain incentives and bonus…

But why not give them stock options as well? Why shouldn't all the people employed by the company share in its success? Even if it's the CEO's decision which determines the direction the company will go, it's all the people implementing that plan that actually cause the company to make money and succeed.

A lot of companies do. Microsoft has generated 20,000+ millionaires or more from its employees.

Re: How People Get Rich Now

#550

Post by jeffreyrogers »

jefftk wrote: post #503
dcolkitt wrote: post #73

> 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…

[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. Pe…

PG is wrong about this. In the past it probably was easier to get rich (> $10mm) by starting what he will not call a startup than it is now. Lots of people used to get rich this way starting small businesses serving the automotive industry (making airbag assemblies and other important things) or providing specialized services to the Oil and Gas industry, etc. These are just examples, there are obviously tons of things like this. And while these opportunities still exist they are much rarer than they used to be.

There are many reasons these opportunities are fewer, but I think the main ones are

1. Increased firm size means it is harder to compete since you don't have economies of scale.

2. High labor costs in the US mean many things are not profitable to do in the US, so no small US businesses can engage in them (they have to be big enough to engage overseas manufacturers or savvy enough to negotiate that environment as a small business... again, it can/has been done but it's harder).

3. Higher cost of living in the more dynamic parts of the country make it harder to start a business without getting VC funding, especially if that business requires some amount of R&D before generating revenue.

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