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How People Get Rich Now

paulgraham.com

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Re: How People Get Rich Now

#891

Post by bumby »

refurb wrote: post #780
idiotsecant wrote: post #684

Earlier quoted context omitted.

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.

No it’s not due to that. How do I know? Look at PE ratios. Stock prices are backed by earnings.

I think the Cyclically Adjusted PE ratio is more useful in this regard. It does seem to point to overinflated prices compared to earnings. The current PE ratios are only surpassed by those during the dot-com boom when people found it difficult to create valuations grounded in reality. One theory is this is due to access to cheap capital in the last decade +

https://www.multpl.com/shiller-pe

Re: How People Get Rich Now

#892

Post by harimau777 »

WalterBright wrote: post #643
harimau777 wrote: post #609

Earlier quoted context omitted.

That's only the case if you can afford to buy the stock (and more specifically afford to buy enough of the stock to make a difference).

Anyone can buy stock. You can invest for as little as $10 and buy fractional shares for zero commission. > afford to buy enough of the stock to make a difference Having that mentality will guarantee one never gets ahead. CEOs don't start at the top, either.

What I mean buy "enough to make a difference" is enough to offset the increase in the increasingly unequal distribution of your company's profits.

Re: How People Get Rich Now

#893

Post by benzor »

mike_hearn wrote: post #866
danielmarkbruce wrote: post #824

Earlier quoted context omitted.

Would you have put Google and Facebook in this group when they weren't profitable? You are missing something - many companies have great long term economics even if they are losing money right now . Slack (if still independent) could easily be profitable - they just have to spend less growth (ie, largely they could cut their sales and marketing dramatically, along with other items). Snapchat the same, Pinterest the s…

This is a common argument but would seem wrong to a lot of people. It's just unintuitive. Most people of our parents generation would find this argument slightly absurd, and our grandparents would find it entirely absurd. It sounds weird because it assumes that every tech business has either insurmountable lock-in or insurmountable first mover advantage, without explicitly stating that. To fill in that assumption req…

This is an excellent answer and took the thoughts right out of my mind.

To elaborate a bit for GP: No I would not have classified early stage Google or Facebook or Amazon as "perpetually unprofitable tech" because, frankly, they clearly weren't. All 3 of these companies had strong, obvious moats that enabled them to preserve pricing power. All 3 of these companies had a small handful of initial cap raises and have grown entirely via Free Cash Flow ever since. The fact that all 3 of these companies continue to operate with staggering profitability decades later confirms this. (You can of course debate the ethics of having such a moat, antitrust etc., but you cannot deny it's there.)

Re: How People Get Rich Now

#894

Post by aliswe »

intricatedetail wrote: post #755
benzor wrote: post #324

There'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. - Interest rates are at all time lows, borrowing is cheap - The Fed's balance sheet is at an all-time high. The economy is flush with cash, particularly the investor / VC class - This excess cash creates an (arguably a…

Isn't that in a way a ponzi scheme? Companies that don't bring value and need a supply of investors... that does ring a bell. Why regulator doesn't look into it?

Nono, lots of differences. In a ponzi scheme, the early investors get paid by the new investors and the company doesnt have any real business other than gathering new investors

Re: How People Get Rich Now

#895

Post by Sohcahtoa82 »

internetslave wrote: post #23

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…

> Wages, even at 150-200k just really aren’t that much

Imagine thinking 150-200K isn't that much while there are millions of minimum-wage workers trying to survive on under $30K. (EDIT: And in some states, only $15K!)

Re: How People Get Rich Now

#896

Post by int_19h »

handmodel wrote: post #805
int_19h wrote: post #795

Earlier quoted context omitted.

The same goes for stock, though. When we talk about billionaires, most of that money is invested somewhere. So nominally it's worth $X because it's N shares worth $Y each; but if they try to sell them all off rapidly, that would drive the price down. Finding enough buyers might also get tricky.

I sometimes think this is overrated. Bezos has as much stock as anyone but if he sold it all in the course of a year I don't think it would lose value. Musk probably would - but only so many people on the top of the list (at least I think)are in a position where there company worth would drop dramatically from the founder selling.

The real trick is using it as a collateral for loans. So yeah, this is even more complicated in practice.

Re: How People Get Rich Now

#897

Post by CameronNemo »

prawn wrote: post #810
CameronNemo wrote: post #658

Earlier quoted context omitted.

I've never looked at that list so I have no idea who is on it. Is there a reason I care who the richest people on earth are?

This is a bit "I don't even own a TV" in a thread about TV shows. The topic is wealth and the industries/methods behind it. You're responding to two people having an interesting discussion about known and unknown riches.

So what? It is an honest question. Nobody answered. I still don't care.

Re: How People Get Rich Now

#898

Post by CameronNemo »

int_19h wrote: post #796
CameronNemo wrote: post #658

Earlier quoted context omitted.

I've never looked at that list so I have no idea who is on it. Is there a reason I care who the richest people on earth are?

To become the richest people on Earth, they have to collect economic rent from the actual producers of wealth, which is all the rest of us. Wouldn't you want to know who is being unfairly enriched by your labor?

Perhaps. But I tend to look at the actual interactions I have as a laborer and consumer, and try to determine the effects of those actions. So I care about Jeff Bezos because I occasionally order goods from Amazon, not because he is the richest person on earth.

Re: How People Get Rich Now

#899

Post by Florin_Andrei »

missedthecue wrote: post #649
wavefunction wrote: post #618

Earlier quoted context omitted.

I find the notion that paying a CEO 321 times the salary of a worker in cash to be problematic for society while paying the CEO 321 the salary of a worker in stock options/grants is not not problematic to society to be completely unconvincing. Both illustrate to me the historic and increasing inequality in distribution of income and wealth. Asking me to ignore that divide and instead sympathize with someone like Carl…

Why is it a problem then? Your personal intuitions about how much any human should earn in a given year sounds less like a convincing argument to me and more like envy.

> Why is it a problem then?

I honestly think the Ayn Rand crowd are missing a few circuits. Well, that's a crude way of putting it, but let's just say it's like color blindness but for ethics. No amount of oratory will make a color-blind person see red. And that's just the way it is.

Those "circuits" play an important role in regulating how groups behave. Lacking them, you open the door for extremely bad things to happen. This is why libertarianism and related ideologies should be treated with extreme caution at best.

Re: How People Get Rich Now

#900

Post by Aicy »

Balgair wrote: post #506
benzor wrote: post #488

Earlier quoted context omitted.

Apologies for some hastily chosen examples. I think the point still stands if you consider the following companies: WeWork, Lyft, Snapchat, Pinterest, Dropbox, Slack, Casper, Lime, Peloton, Beyond Meat, Wayfair, Zillow. More generally speaking, take a look at Goldman Sachs' Non-Profitable Technology Index: https://pbs.twimg.com/media/EsRVCiMXIAE7xlA.png

Are the fake-meat companies tech companies? I thought they are more like contract manufacturers, brewers, or other industrial foodstuffs. No doubts on the access to cheap debt, though.

How are they not?

It's technology innovations in food rather than electronics, but it's still technology innovations that are based around disrupting the existing industry.

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