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How People Get Rich Now

paulgraham.com

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Re: How People Get Rich Now

#591

Post by amalcon »

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…

> But these don't come from the cashflow of the business like wages and salary. They come from diluting Wall Street.

How are these different? If the business pays its employees $X more, that money doesn't just appear out of nowhere. It comes out of other areas of the business -- such as capex, M&A, or retained profits. All of these things contribute directly to the value of the shares held by Wall Street, whether directly (in the case of a dividend or share buyback) or indirectly by growing the business. Likewise, dilution means that an existing shareholder benefits less from $X worth of these things, and therefore should demand an increase in X (or a reduced stock price).

It's all money either way, and money is fungible.

Re: How People Get Rich Now

#592

Post by missedthecue »

markvdb wrote: post #529
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…

> If there is outrage over CEO pay, it doesn't make sense to come from the unions or left politicians, it should be coming from activist hedge fund billionaires, which it does. One doesn't have to be a shareholder or even a direct stakeholder in a specific company to claim the right to outrage over this growing inequality in pay.

The question is whether anyone is worse off because of it, and my comment points out that contrary to popular rhetoric, if anyone is getting hurt by it, it's not the employees.

If you think nobody is getting hurt by it, it's not a problem, it's just envy.

Re: How People Get Rich Now

#593

Post by AnimalMuppet »

blackshaw wrote: post #135
WhompingWindows wrote: post #120

Earlier quoted context omitted.

Paul Graham's articles always shoot immediately up to the top of HN, but I agree with you, they're generally cursory and pithy thoughts which don't convince my skeptical mind. I don't know, can someone explain why his work is so popular? Think of all the amazing writers across our civilization whose work is linkable, and we're worshipping these decent but not amazing blog posts?

Because he's the founder of this website?

And therefore... what?

We listen to him because he founded the website? Do Facebook users listen to Zuckerberg because he founded Facebook? I doubt that many do.

Or do we listen to PG because the kind of people who find his writings to be interesting have some overlap the kind of people who are attracted to the website that he founded?

Re: How People Get Rich Now

#594

Post by lanstin »

NovemberWhiskey wrote: post #127
ttiurani wrote: post #87

Earlier quoted context omitted.

Pg looking at the top 100 people and giving his essay the heading "How People Get Rich Now", makes for a very distorted definition of "rich". How many hundreds of millions or billions does it take to be rich in his eyes? When argumenting based on statistics, labeling of the graph or text is where the ideology really shines through.

I think the relevant part here is the discussion of the Gini coefficient. There are those who argue that the increase in the Gini coefficient (i.e. increase in inequality of wealth or income distribution) means that the U.S. is diverging from its historical pattern of more equal wealth/income distribution and that this must be addressed. Pg's counterargument is that this is actually mean-reversion, and that the compa…

Mean reversion to human historical norms is something we, I would think, most fervently wake up each morning to work to avoid. We have stuck our heads up out of the muck; on wards and up wards!

Re: How People Get Rich Now

#595

Post by fumar »

_qwfv wrote: post #151
pc86 wrote: post #124

Earlier quoted context omitted.

> A rich individual can give their child $0 in inheritance but one introduction, referral or diner party later and they could be set for life. It's a mighty big leap to go from a single intro to "set for life."

Don't misinterpret what the parent is saying. It's not "one introduction will", it's "one introduction could". If you are wealthy and connected enough there are many folks who will gladly ensure your children are taken care of, if for no other reason than to be connected to the parent/family. An introduction might lead to a job, apprenticeship, or internship. It might lead to a partnership somewhere or the opportunit…

Add to it that that one investment requires the capital to invest. I have no connections outside of my career bubble and those people are seemingly in the same class as I am. How would I ever supersede my class?...or should I even aspire to do so? It seems unlikely and in many ways out of my control. This is coming from someone who believes in a strong work ethic and increasing access to risk (good or bad).

Re: How People Get Rich Now

#596

Post by shuckles »

gip wrote: post #584
WalterBright wrote: post #554

Earlier quoted context omitted.

They're creating the value, not taking it from others.

What you are missing is that the resources in the world that matter are bounded. So if a minority is creating most of the value at scale, they will be able to redirect most of the resources to themselves. This drives the increase in inequality. That is why thinking purely in financial terms is misleading. It's not because everyone has more $$$ in the bank that everyone is better off.

Is it really the case that Jeff Bezos is consuming a million times more finite resources than someone whose net worth is $100k? It seems to me like what you buy with virtually infinite money is status like hanging out or sleeping with celebrities, a seat in important rooms, and assets. There is only so much additional jet fuel and human labor a multi-billionaire can consume.

Re: How People Get Rich Now

#597

Post by Alex3917 »

alpha_squared wrote: post #454
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…

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…

> Why didn't employee profit-sharing increase at the same rate as non-salary compensation did for CEOs?

Because employees generally hated profit sharing and created unions to fight against it. Joseph Blasi talks about this in his book The Citizens Share. And it's not like he's some crank conservative, he's the economic advisor for Elizabeth Warren.

Re: How People Get Rich Now

#598

Post by lanstin »

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…

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.

Re: How People Get Rich Now

#599

Post by ashtonbaker »

davesque wrote: post #309
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…

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…

This is a huge part of "start up culture" though - like any religion (or lottery, or whatever), superstition plays a large part, and the most important superstition is that those who have been successful before know how to do it again.

Re: How People Get Rich Now

#600

Post by lanstin »

WalterBright wrote: post #573
FireBeyond wrote: post #561

Earlier quoted context omitted.

And when they drive it into bankruptcy, the company will still go to court to argue that these bonuses, compensation, parachutes should be paid, regardless. Win-win game. Except for the employees and shareholders.

Stock based compensation goes to zero in bankruptcy.

Usually somehow the execs have sold out just before the bad news, while the regular employees haven't liquidated their 401s/stock plans.
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