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How to earn a billion dollars

paulgraham.com

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Re: How to earn a billion dollars

#501

Post by dmurvihill »

blfr wrote: post #23

But the accounting difference is real. It is virtually impossible to earn a billion dollars. What is possible but still difficult is to create something worth a billion dollars which you can then sell if you choose so. And to the people criticizing, this is cheating. To them, a billion dollars enterprise is not possible without the exploitation of employees, customers, or at least the environment. Also, the most impo…

What's missing is that the billion-dollar value is based on the expectation of exploiting the employees/customers/environment to achieve profit in the future.

Re: How to earn a billion dollars

#502

Post by dmurvihill »

timr wrote: post #47
irishcoffee wrote: post #8

Earlier quoted context omitted.

I will say before Uber was a thing, if I tried to call and schedule a taxi pickup in the city I lived in at the time, if they showed up at all they were at east a half hour late. Missed a flight because of it once. I don’t even like uber, but it is objectively a better service most of the time.

Yeah, anyone who uses taxi drivers as an example of destruction either don't know what they're talking about (because they never experienced it) or they're crying crocodile tears. I had cab drivers nearly drive off with me hanging off the car in San Francisco, because they were far more concerned with screening my destination than, say, not killing me . If Uber destroyed that industry, it was only a net benefit to so…

The Uber drivers created that value and should get those billions, not Travis Kalanick.

Re: How to earn a billion dollars

#503

Post by pclmulqdq »

pseudosavant wrote: post #500
AdamN wrote: post #124

She meant impossible in that one doesn't earn a billion dollars through work alone. The only way to get there is to set up a structure that extracts a billion dollars from a market (usually by building a structure that's more efficient but also generates externalities that are not borne by the person getting the billion dollars). pg's reading of it is so blunt and misrepresentative that I'm nervous about what kind of…

PG is clearly confusing "capturing" a billion dollars for "earning" a billion dollars. Becoming a billionare is working the system so that the wealth generated by something people love (Amazon) is mostly captured by a select group of people (Jeff Bezos) and not the workers who are actually earning the company the value (fulfilling and delivering the packages).

The system set up by the company is what earns the company value and creates it for others. Individual workers implement critical parts of that system, but the work of the workers does not on its own create the value. AOC and PG are both a bit obtuse about this.

Re: How to earn a billion dollars

#504

Post by hootz »

pseudosavant wrote: post #500
AdamN wrote: post #124

She meant impossible in that one doesn't earn a billion dollars through work alone. The only way to get there is to set up a structure that extracts a billion dollars from a market (usually by building a structure that's more efficient but also generates externalities that are not borne by the person getting the billion dollars). pg's reading of it is so blunt and misrepresentative that I'm nervous about what kind of…

PG is clearly confusing "capturing" a billion dollars for "earning" a billion dollars. Becoming a billionare is working the system so that the wealth generated by something people love (Amazon) is mostly captured by a select group of people (Jeff Bezos) and not the workers who are actually earning the company the value (fulfilling and delivering the packages).

So basically do exactly what Karl Marx says about surplus value and exploitation of work, but as the capitalist instead of the exploited worker.

Re: How to earn a billion dollars

#506

Post by sophrosyne42 »

inigyou wrote: post #146
TheTaytay wrote: post #129

Earlier quoted context omitted.

Your phrase “extract” betrays a fundamental disagreement with what Paul is saying. (Externalities does so again) It assumes a zero-sum game where the job is to shift money from one person to another. Value, and thus money/wealth can be created. Literally. You are saying, in different words, that no one can do it “honestly”. He is saying one can.

Yes, and the art of this game is to extract value which you did not create. It may or may not come alongside creating value. Uber creates value in the form of an app marketplace for taxis, but it also pushes taxi wages down below the sustainability line without pushing prices down that far, and pockets the difference for itself. Apple made a cool phone that it sells for a high but fair price, but it also takes 30% of…

It comes down to a fundamental misunderstanding of how the market operated. Profits only come from exchange. It is more accurate to say profits are given than extracted.

Re: How to earn a billion dollars

#507

Post by alexashka »

> Starting a successful startup is the most common way to become a billionaire, so in effect I've spent the last 21 years training people to become billionaires

He actually thinks he trained people to become billionaires.

I like how he thinks everyone else is an idiot - look, if you make a thing bigger many times - it grow big, reaaaal biiig! Take out your calculator, look, number go biiig!

Re: How to earn a billion dollars

#508

Post by [deleted] »

AdamN wrote: post #124

She meant impossible in that one doesn't earn a billion dollars through work alone. The only way to get there is to set up a structure that extracts a billion dollars from a market (usually by building a structure that's more efficient but also generates externalities that are not borne by the person getting the billion dollars). pg's reading of it is so blunt and misrepresentative that I'm nervous about what kind of…

[deleted]

Re: How to earn a billion dollars

#509

Post by pipes »

The amount of negativity to this is depressing. No one seems to be contradicting anything he's saying here, instead it's just vacuous ideology "extraction" etc etc. Purposely narrow reading. I've got kids, I want people creating start ups they can work in, the alternative is too grim.

Re: How to earn a billion dollars

#510

Post by seanlinehan »

theptip wrote: post #360
AdamN wrote: post #124

She meant impossible in that one doesn't earn a billion dollars through work alone. The only way to get there is to set up a structure that extracts a billion dollars from a market (usually by building a structure that's more efficient but also generates externalities that are not borne by the person getting the billion dollars). pg's reading of it is so blunt and misrepresentative that I'm nervous about what kind of…

Right, regardless of whether you agree or disagree with the point, PG doesn’t actually engage with it. He just says “compound growth + build something that people love”. But the meat of the point is: if the economy is growing at 2.5%, how do you sustain 15% over 5 years? Look, I’m a startup guy, I buy into the premise that it’s an intensely value-creating activity. But I think it’s self-defeating to pretend like the…

> if the economy is growing at 2.5%, how do you sustain 15% over 5 years?

US GDP is $31.82 trillion dollars per year. Taking the 2.5% growth rate, that's nearly $800 billion dollars per year in new GDP.

The economy very obviously does not progress as a bunch of soldiers marching in a straight line. Some firms will shrink 100%, some will growth 10,000%. This much is obvious by just looking around. But even if no businesses shrank, no wages were docked, nothing bad happened... even still there would be $800B in more GDP.

So if the economy is growing at $800B per year, it's extremely obvious how a company could even grow from $1M to $1B in revenue per year without doing anything shady... Just capture some of the new economic activity that cropped up this year!

And it's even easier when we're talking about an entrepreneur's net worth. Their net worth is going to be mostly holdings in company stock. The value of company stock is some multiple of the company's theoretical future financial earnings.

So if a company is making $1M revenue today, and growths to $5M revenue by the end of the year (15% MoM growth), at let's say a 30% EBITDA margin, they have made $1.5M EBITDA. And let's say that fast growth is rewarded at an extremely rich 50x EBITDA multiple. That company is now worth $75M. If this founder is lucky and owns 50% of their business, they now are "worth" $37.5M.

If they were only at $1M * .30 * 50 * 0.50 = $7.5M net worth at the beginning of the year, and then were at $37.5M at the end, their net worth increased by 500% in one year! And all they had to do was capture $4M / $8000M = 0.05% of the increase in GDP.

Like, none of this is either shady or complicated.

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