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How People Get Rich Now

paulgraham.com

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Re: How People Get Rich Now

#681

Post by bobthepanda »

WalterBright wrote: post #655
refenestrator wrote: post #568

Earlier quoted context omitted.

That would make sense as a post-exceptional-transformation windfall. Not as standard comp for keeping the seat warm while saying "yeah do more of that thing that prints money".

Why would any company hire a CEO and pay him millions to warm a seat? Why would the stockholders put up with that?

Stockholders are increasingly not putting up with it. Votes against are still kind of rare, but they do happen: https://www.restaurantbusinessonline.com/financing/starbucks...

But also, the board makes CEO decisions, and it's not totally uncommon for board members to also be CEOs of other companies, so they buy the kool-aid because they also benefit from it.

Plus, CEOs and boards don't exist in a vacuum. You've got to keep up with the Joneses if you think you're letting a good candidate get away.

Re: How People Get Rich Now

#682

Post by diogofranco »

fshbbdssbbgdd wrote: post #539
missedthecue wrote: post #433

Earlier quoted context omitted.

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…

> But these don't come from the cashflow of the business like wages and salary. They come from diluting Wall Street. This distinction doesn’t make sense. Cash and stock are fungible for a public company.

This, many companies even make this quite explicit by issuing stock to employees and buying back the same number of shares, in order to pay with cash flow rather than dilution.

Re: How People Get Rich Now

#683

Post by bobthepanda »

WalterBright wrote: post #583
yardie wrote: post #548

Earlier quoted context omitted.

> 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,…

You don't think that CEOs also have a lot of performance related clauses? Stock options are, for example.

In practice compensation clawback can be quite difficult. https://hbr.org/2021/03/why-executive-compensation-clawbacks...

Re: How People Get Rich Now

#684

Post by idiotsecant »

lanstin wrote: post #598
davvolun wrote: post #519

Earlier quoted context omitted.

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…

Didn't you just say the stock owners were being diluted by the CEO compensations? Doesn't that include the 401k and pension funds? Isn't this is a massive transfer of wealth the the managerial class, justified simply because they can do it, and leave the consequences to others to clean up.

Bingo. The massive growth in the stock market in the past 40 years is directly a result of the massive inflow of capital from middle class 401k purchases. Overinflated CEO compensation packages are a way to siphon some of this into the pockets of the ruling class.

Re: How People Get Rich Now

#685

Post by robocat »

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…

Paul now uses “company” to mean unicorn, similar to how he uses “startup” to mean potential unicorn (startups are not companies trying to make only millions according to his meaning). He knows that this is confusing, yet he doesn’t choose to clarify his words except through a footnote. I find this frustrating.

Talking about the Gini coefficient is just ridiculous, because the usual reason Gini is referenced is to talk about what has happened to the wealth of the majority of people, not the Forbes list. There may be more tech billionaires, and that may make the world a better place: however what many people are worried about is what happens to everyone else that isn’t a billionaire... His argument doesn’t reference them at all except perhaps to imply that “a few people can become ultra-wealthy and that is good”.

Perhaps he could argue that Gini is a useless index because it depends on a few ultra-wealthy people, and that the index tells us nothing about the vast majority of people.

An honest title would be “How a few people become very rich”.

I want to see a graph by cohort of current wealth for all the founders inducted into YC: at a population level would that graph show that founding a company with YC was a worthwhile investment for your time? Even if the expected return is high, is the ergodicity such that it is still a loser’s bet? I”m curious whether it is a losing proposition for most, with a few big winners.

Edit: re: Gini: here is the real graph of upward mobility: https://www.visualcapitalist.com/the-decline-of-upward-mobil... (edit: beware that the graphs are full of assumptions - think about them carefully because they are deceptive IMHO).

Re: How People Get Rich Now

#686

Post by CPLX »

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…

This is nonsense.

What you clearly have here is a principal/agent problem.

The way it works is like this:

1) Money is invested in companies by a diffuse set of investors. That diffuse group is unified by people responsible for managing money.

2) They invest it with the intention of having it go into the productive activities of a business, such as staff and plant and equipment or technology or software or marketing. That money when received by the business is managed by the company management.

3) What is actually happening is that each of these gatekeepers is taking as much as they can get away with. It really isn't all that much more complicated than that.

They'll concoct increasingly complex rationalizations and call it "performance" and launch decades of public relations (like the article we're all commenting on) but at the end of the day the people who should be tasked with fairly apportioning resources in a common enterprise are taking more and more of it for themselves.

The solution is to stop letting them get away with it.

Re: How People Get Rich Now

#687

Post by idiotsecant »

bumby wrote: post #677
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…

To a certain extent, I think the worker is at least in part to blame. According to the BLS, union membership has declined from over 20% in the early 1980s to 6.3% today in the private workforce. I personally don't think it's by chance that this coincides with wage stagnation or even decline. Union membership is much higher in public institutions (I personally have some issues with that but it's a digression) which pr…

Interesting that you phrase this as the worker being to blame and not anti-union lobbying and legislation, coupled with an intense psyops campaign from the landed gentry to convince the serfs that voting for their own interests is un-american.

Re: How People Get Rich Now

#688

Post by ritchiea »

darkwater wrote: post #566
davesque wrote: post #309

Earlier quoted context omitted.

Actually, I think this is almost the perfect response to his article. It's not hard to imagine that a guy who made his fortune off of startups would be biased to think that everyone should create a startup and get rich that way. So, after correcting for rich guy tunnel vision, the statement "more people are starting companies" translates to "more people are starting technology companies in Silicon Valley." And of cou…

> So yeah, rich guy writes a blog article saying essentially "people should just do what I did" and water is wet. I think it's even better. Rich guy that became reach by funding tech startups says: "wanna become a billionaire? The easiest way nowadays is funding a tech company! I can help!"

I am a bit of a PG critic myself at times but he became rich from selling his own startup. He became richer by starting YC but he didn't need to start YC. Based on his essays he basically had enough money to be set for life from selling Viaweb and when he started YC he was looking for something to do next other than just retire.

Re: How People Get Rich Now

#689

Post by joshuamorton »

bradlys wrote: post #673
giantg2 wrote: post #656

Earlier quoted context omitted.

I don't see your comment as a valid response to the parent. They were not talking about developing countries. They were talking about in the US. They even pointed out that most devs do not live in the SV area (in response to your statement about most people in tech...). The majority of the people in tech in the US do not live in SV and the median salary for a dev is about $100k-110k.

No. They literally were talking about 15% of $100k being sufficient. Re-read it.

15% of "that number" is 60K, since "that number" is 400K.

They're talking about 60K being good enough on the east coast, and 100K being very nice on the east coast.

Re: How People Get Rich Now

#690

Post by CPLX »

missedthecue wrote: post #586
heavyset_go wrote: post #535

Earlier quoted context omitted.

This analysis is about as apt as saying, "Larry Ellison's salary was only $1, so what are you complaining about?"

The guardian article and the commenter I replied to are pointing out the difference between 1965 and 2020 as if it's a problem. A problem is defined as something that has a negative impact on people. My analysis points out that the only people that modern CEO pay has a negative impact on is the shareholders. I illustrated that it makes literally no difference to your average floor worker whether the CEO gets $0 or $2…

This argument is fucking ludicrous.

Money is money. If the business used to have it and now the CEO has it then the business gave it to him.

There's no class of equity that wasn't originally created and owned by the business so that's where the money comes from.

And lest there be any confusion, all the companies we're talking about do massive stock buy backs so it's not even hypothetical, they spend billions of dollars to prop up the price of stocks and the executives get it.

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