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How to earn a billion dollars

paulgraham.com

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Re: How to earn a billion dollars

#731

Post by pdonis »

johnea wrote: post #719
oatmeal1 wrote: post #716

PG makes little effort to identify what it means to earn something. Some people consider effort the measure of whether something is earned. Some believe luck should be subtracted from result to get what is earned. Some say you cannot earn the benefits you receive from your genetics. No idea of what it means to earn something is given except for making users happy while "not cheating" (who decides what counts as cheat…

I think we can clearly say that capital gains are not earned. Someone who lays bricks, "earns" their income; someone who's wealth increases as a bricklaying company's value increases, does not. In this sense, it is indeed impossible to "earn" a billion dollars...

> I think we can clearly say that capital gains are not earned.

No, we can't say that at all, because most businesses are small businesses, owned by the people who run them, and capital gains are the owners' income from running the business.

The money startup founders make, from building something as PG describes, is also capital gains. So again, no, we can't say at all that capital gains are unearned.

Re: How to earn a billion dollars

#732

Post by tensility »

old-gregg wrote: post #604
wat10000 wrote: post #593

Earlier quoted context omitted.

The post is patronizing as hell, it’s no wonder people respond to it negatively. Patting people on the head and saying “you moron, it’s just two numbers” isn’t a good way to make an argument.

Sam Harris often makes an argument that I both hate and kind of agree with. He says that exchanging arguments and having a debate only works when the two arguing parties share a foundation. The debate’s purpose is to reconcile a measurable difference of opinion. In this case, I feel there’s no shared foundation. Half of the commenters here don’t seem to understand what money is or how it works. There's no soil in whi…

Well, with the extreme levels of income stratification that we have in the US and greater world, money literally means a different thing to the few folks who've escaped the poverty trap ... just like hunting means a different thing for the hunters as it does for the prey.

Re: How to earn a billion dollars

#733

Post by smallmancontrov »

oatmeal1 wrote: post #716

PG makes little effort to identify what it means to earn something. Some people consider effort the measure of whether something is earned. Some believe luck should be subtracted from result to get what is earned. Some say you cannot earn the benefits you receive from your genetics. No idea of what it means to earn something is given except for making users happy while "not cheating" (who decides what counts as cheat…

The responses to PG were remarkably substantive and specific, in the direction you point out and others! The high-horse complaint about "negativity" was easily the laziest and least specific thing in this thread.

Re: How to earn a billion dollars

#734

Post by demorro »

DonsDiscountGas wrote: post #468
grim_io wrote: post #304

To me, earning something means deserving something. I don't think that the current system rewards those deserving the largest cuts of the pie. If you want to argue how to get a billion dollars, sure. But to me that is different than earning it.

Yes I'm sure that's what AOC meant too but it's not much of an explanation. Who are you to decide what people deserve or earn? And if you're going to decide that perhaps you'd like to provide a better justification, one that doesn't just boil down to "a billion is really really a lot of money".

> one that doesn't just boil down to "a billion is really really a lot of money".

Why? That's the point. It's too much damn money for one person to realistically earn. We all know how long a day is and how fast a human being can think, move, how much suffering they can tolerate, etc. It is an intuitive truth.

There is no conceivable formulation of physical and mental actions a human could perform, regardless of outcome, that could possibly justify that level of wealth relative to the average levels of compensation for other workers in society.

Re: How to earn a billion dollars

#735

Post by smnplk »

pmxi wrote: post #639
galenptacek wrote: post #602

Someone told me it was impossible to become an avogadrillionaire (to have a net worth of one mole, or approximately 6.02 x 10^23 dollars.) Now there's this founder I know whose startup grew 93% last month. Let's be conservative and say she has 2 million dollars. Let's calculate how many months of 93% growth it takes for something to grow 301,100,000,000,000,000x. The log base 1.93 of 301,100,000,000,000,000 is 61.209…

PG acknowledged that growth is limited by market size. Markets to support "avogadrillionaire" level wealth may not current exist. However, there obviously exist markets to support billionaire level wealth, as evidenced by the at least 30 billionaires produced by YC, and the many others.

I think that avocado farms in Earth orbit have the avogadrillionare potential. Musk is on it. :P

Re: How to earn a billion dollars

#736

Post by johnea »

johnea wrote: post #719
oatmeal1 wrote: post #716

PG makes little effort to identify what it means to earn something. Some people consider effort the measure of whether something is earned. Some believe luck should be subtracted from result to get what is earned. Some say you cannot earn the benefits you receive from your genetics. No idea of what it means to earn something is given except for making users happy while "not cheating" (who decides what counts as cheat…

I think we can clearly say that capital gains are not earned. Someone who lays bricks, "earns" their income; someone who's wealth increases as a bricklaying company's value increases, does not. In this sense, it is indeed impossible to "earn" a billion dollars...

Typical ownership heavy replies, which want to equate other people's effort to their own...

Re: How to earn a billion dollars

#737

Post by epsteingpt »

jmyeet wrote: post #352
epsteingpt wrote: post #238

Impressed at the commentary here, which correctly points out Paul dodges the entire issue at hand. Three things can be true: 1. Growing at a rapid rate over long periods of time is hard , doable and rewarding 2. Incentivizing the discovery of these things is good for society. 3. Nonethless there is and should be a limit to wealth acquisition, given moral hazard. To make a similarly glib counterargument to Paul G: If…

> Impressed at the commentary here, Me too, honestly. I'm also kind of shocked. I want to expand on your last point. Uber became a billion dollar business by running an illegal taxi service. Now I like the ability to book a taxi from my phone with seamless payment. I also dealt with the yellow cabs in NYC in years gone by and it sucked. Shift changes, annoying looping ads you couldn't turn off, card skimming, the pro…

Correct.

Travis Kalanick did far worse with Uber. He illegally spied on political opponents to Uber's expansion. As far as I know he's still out there free as a bird.

Private equity is a different problem, which hits closer to the real problems at the edge of the market where prices don't signal reliable information.

We've known for over a century monopolies are bad, but the actual finding is more like concentrated pricing power for goods with inelastic demand is pretty bad. PE exploits these corners with devastating efficiency and often bad results.

Re: How to earn a billion dollars

#738

Post by collingreen »

YZF wrote: post #725
johnea wrote: post #719

Earlier quoted context omitted.

I think we can clearly say that capital gains are not earned. Someone who lays bricks, "earns" their income; someone who's wealth increases as a bricklaying company's value increases, does not. In this sense, it is indeed impossible to "earn" a billion dollars...

So if I'm a brick layer and I decide to innovate and build a machine that can lay bricks faster and cheaper, and I hire people to help me do that, suddenly I've not actually earned anything? If I'm a farmer and I use a horse and a plow to plow my field instead of with my bare hands then I've not earned anything? Putting your capital towards these things is absolutely "earning" and the modern economy is just a general…

You gave examples of creating and inventing things and employing and leading people. Those are value creation.

I don't think I fully agree with it, but OPs point wasn't about any of that and instead said capital gains (and clarified further - fungible, uninvolved capital without any other contribution). That's really different. If you want to attack that maybe use an example of passive index investors or pension funds allocating capital to a vc.

Re: How to earn a billion dollars

#739

Post by danielheath »

auggierose wrote: post #706

If pg doesn't understand that the way he uses the way "earn" is very different from the way that AOC uses "earn", then I guess he is just not that smart. AOC also doesn't say anything about "moral", etc. You can behave perfectly morally in US society and "earn" a billion dollars. It is just that, no matter what exactly you did, you didn't actually "earn" it. Of course pg is smart enough to understand that there are t…

The confusion is, in part, because one of the functional underpinnings of capitalism is “make a bet” as a method of allocating resources.

Those whose bets paid off didn’t “earn” the money, they “won” it. Calling it “earned” confuses “being morally deserving” with “receiving”.

The positive functional effect of “take a risk and get more money if it pays off” is that folks who allocate capital well end up with more capital to allocate.

Of course, this is imperfect ; there are those who allocate capital poorly (by some definition) yet win returns anyways, and some who allocate it well while being unable to capture the value they create.

Re: How to earn a billion dollars

#740

Post by pdonis »

ProjectArcturis wrote: post #688
pipes wrote: post #509

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.

I would have liked the essay more if PG had actually engaged with AOC's claims. He just does some math and shows that exponential growth is fast. What did the founder have to do to keep growing at 93%? Good solid business fundamentals and identifying a new solution can get you some growth. But eventually you've done all that and the only way to continue growing is extraction -- buy out your competition and raise marg…

> I would have liked the essay more if PG had actually engaged with AOC's claims.

I don't see why he should have engaged with them any more than he did, because AOC's claims are BS. He gave them more attention than they deserve.

What he should have engaged with is, what happens when a startup stops being a startup? All three of his poster children for startups, Apple, Google, and Facebook, are now notorious for treating their users badly and making money in ways that at least a substantial number of people don't think are "earning" money, such as monetizing users' data. And at the last of those three, the founder is still in charge, so even if PG can argue that Zuckerberg earned what he got from Facebook in its startup phase, that doesn't mean he's earning the money he makes now from Facebook in the same way. (And the other poster child he mentions, AirBnB, can't be said to have clean hands either at this point.)

To me that's the biggest gap in PG's worldview more generally, that I never see him address in his essays: once the startup phase is over, the company drops off his radar and he pays no attention to the collateral damage it causes when it's a tech giant. (And of course AOC's claims have nothing to do with this genuine issue either.)

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