[HN Gopher] How People Get Rich Now
___________________________________________________________________
How People Get Rich Now
Author : prakhargurunani
Score : 570 points
Date : 2021-04-12 16:07 UTC (6 hours ago)
(HTM) web link (paulgraham.com)
(TXT) w3m dump (paulgraham.com)
| williesleg wrote:
| I thought we got rich spending all our time complaining about
| shit, burning and looting, and reading hacker news.
| ed25519FUUU wrote:
| > _This trend has been running for a long time. IBM, founded in
| 1896, took 45 years to reach a billion 2020 dollars in revenue.
| Hewlett-Packard, founded in 1939, took 25 years. Microsoft,
| founded in 1975, took 13 years. Now the norm for fast-growing
| companies is 7 or 8 years._
|
| How much of this can be directly attributed to actions of the
| federal reserver?
|
| Besides, when the federal government passes a $2T spending bill,
| isn't that basically _guaranteed_ to create more billion dollar
| companies?
| jonnycomputer wrote:
| And real income growth has precipitously declined in the same
| period, and that is not some statistical artifact, but a widely
| acknowledged econometric fact.
| hunter-2 wrote:
| Took too many words to state the obvious fact - that it is
| extremely easy to start a company today than it was in 1982.
| ihyfhgyfhth wrote:
| I don't think anyone has mentioned this.
|
| The Forbes list of 100 wealthiest people will exclude people that
| ask to be excluded. All of the excluded people have inherited
| their wealth and all of them are so wealthy they would push out
| anyone without inherited wealth.
| benzor wrote:
| 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 artificial) wealth effect
| and drives an appetite for risk
|
| - Large unicorn startups that are perpetual money losers continue
| to operate only because they are effectively subsidized by
| regular capital raises. Look no further than all the Silicon
| Valley darlings such as Uber, Netflix, AirBnb, Tesla, and so on.
| All of them would cease to exist without continued capital
| injection from secondary share offerings or VC raises
|
| - These companies achieve growth and put pressure on the
| competition by offering their services below the real cost that
| would be needed to achieve profit, hence driving huge share price
| growth
|
| - This share price growth attracts new investment from the
| momentum-chasing crowd, increasing appetite for subsequent
| secondaries, and then the cycle repeats
|
| I don't mean to be cynical, but it's hard to see this ending well
| for some of the nouveau riche. Tech has been a great avenue to
| riches by offering real innovation in some cases, but the
| article's error-by-omission really gives the wrong impression.
| sithlord wrote:
| These companies could easily cut their marketing budgets in
| half and basically be profitable. They could also cut their R&D
| and focus only on their main money streams and be profitable.
| There is just no reason to be profitable, when you can raise
| more money.
| heylook wrote:
| > - Large unicorn startups that are perpetual money losers
| continue to operate only because they are effectively
| subsidized by regular capital raises. Look no further than all
| the Silicon Valley darlings such as Uber, Netflix, AirBnb,
| Tesla, and so on. All of them would cease to exist without
| continued capital injection from secondary share offerings or
| VC raises
|
| You should look up the financial statements of the companies in
| your list.
| benzor wrote:
| 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
| Balgair wrote:
| 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.
| jdgoesmarching wrote:
| WeWork was also never a tech company but pushed really
| hard to brand themselves that way. If evaluated
| truthfully as a real estate company, the money they
| raised was hilariously idiotic.
|
| So much of this world is driven by idiotic speculation
| based on slick websites and charismatic presenters.
| sillysaurusx wrote:
| Why Dropbox? Did something change?
|
| I haven't paid attention for many years, but at one point
| is was an extremely profitable company.
| drtz wrote:
| I don't think this article makes the argument the author thinks
| it does.
|
| If I take the author at his word that more people are creating
| large new fortunes at a higher rate, and I assume that the large
| fortunes of 1982 have not become significantly smaller (I
| admittedly don't have a citation for this, although I feel it's a
| safe assumption), and finally take into account that wealth
| inequality has been steadily increasing in the USA [1] since
| 1982, I come a reasonable conclusion:
|
| "Winners" from the middle class are being promoted to super-
| wealthy status by consolidating wealth from their peers in the
| middle and lower classes, and it's happening at a much higher
| rate than it was 30 years ago.
|
| [1] https://www.pewresearch.org/social-
| trends/2020/01/09/trends-...
| kadomony wrote:
| So, "start your own company". Or, trickle down wealth from VCs.
|
| To be honest, a lot of people don't WANT to run a business.
| Business ventures are expensive in terms of time and money. I
| wish there was a quicker, more passive answer to "how people get
| rich now" than "invest in VTSAX and let it compound". A lot of
| people want the money to do the work for them.
| harshaw wrote:
| I don't want to derail this too much with personal anecdotes, but
| I suspect you are much more likely to build wealth with the more
| established tech companies - and that wealth is "rich enough".
|
| Maybe I am just unlucky or unskilled, but I spent roughly 20
| years working at startups or innovation labs. I was "close" to
| some big events where I could have made big $$ but made 0. Both
| at my own startup and being at early stage duds. Its kind of like
| I was the tech guy in 'life of Brian'. However, in the last three
| years I have built more wealth at a FAANG than I have in the
| previous 20 years. YMMV.
|
| Back to the thesis, I think pg is saying wealth is built by
| startups - I am just here to say that's it still really rare
| unless you get lucky. But maybe you create your own luck by
| living in SF - I am a Bostonian.
| notacoward wrote:
| Likewise, even down to being in the Boston area. I did OK at a
| couple of the eleven startups I worked at, but still made even
| more over just a couple of years at a FAANG. Many of my former
| colleagues on both sides have had similar trajectories. The
| vast majority of the "merely rich" in tech got that way by
| working at companies that had already broken away from the
| pack.
|
| Speaking of breaking away from the pack, that brings us to the
| ultra-rich. AFAICT what pg has shown is not that building
| wealth alone is a path to riches (nor was that his intent
| AFAICT). The way to become _ultra_ rich is to be one of the
| "lottery winners" among a cohort of relatively minor wealth
| creators. Playing the lottery is just as essential as building
| wealth, just as with literal lottery winners. The main
| difference is that _this_ lottery isn 't entirely random. Even
| among those who make it into the first round (founders), some
| players have certain innate advantages over others in the
| second. There's little demographic distance between Gates,
| Ellison, Bezos, and Musk - and Graham, for that matter. It's no
| accident. If you want to become _seriously_ rich, it helps if
| you can afford to ride out risks - or even actual losses - that
| would force others out of the race.
| fossuser wrote:
| I think this is true in the common case, but I thought Bezos
| was raised by a single mom who had him at 17 and his step
| father was a cuban immigrant?
|
| https://www.aboutamazon.com/news/policy-news-
| views/statement...
|
| There's also the donut king:
| https://news.ycombinator.com/item?id=25241898
|
| I'm not trying to just pick rare counter examples, but I'm
| skeptical of the claim that there's little demographic
| distance or the implication that it's a prerequisite. One of
| the reasons people like the US is an immigrant can come here
| and they themselves (or their children) can become the
| richest person in the world (or the vice president).
|
| I'd agree there's a randomness element, but it's less lottery
| and more placing bets with odds that are hard to determine.
| Some people have better initial odds, but that's only one
| part of it.
|
| If anything - I'd hypothesize that extreme outliers share
| something other personality trait more relevant than
| demographics, willingness to take huge risks. You could argue
| that someone who has more of a safety net is in a better
| position to do so, but someone who has nothing to lose may
| also find the tradeoff easier. It's possible that most people
| in a relatively comfortable position would be less likely to
| take the big kind of risks that outlier payoffs require (I'd
| guess this is one reason why we have few people like Elon
| Musk).
| Retric wrote:
| The point about the demographic similarities doesn't go
| away when you include outliers. Their are vastly more
| people with poor backgrounds so having them
| underrepresented doesn't go away with a few exceptions
| sprinkled in.
|
| People talk about America as a meritocracy yet, the US has
| had vastly more presidents closely related to previous
| presidents than say Black, Hispanic, and or Female
| presidents combined. That's to put it bluntly not he
| outcome of random chance even if you're limiting things to
| just white men it's obvious something else is involved.
|
| https://www.factmonster.com/us/government/executive-
| branch/u...
| fossuser wrote:
| I don't disagree really - and the president issue is
| somewhat separate given its political nature and obvious
| historical context.
|
| As I said, I agree in the common case - I just see people
| generalize and include in their examples people that
| contradict them (Bezos, arguably Musk too).
|
| Extreme outliers are often outliers in more ways than
| one.
| VRay wrote:
| yeah, I think his adoptive dad was reasonably well-off
| though
|
| I think "demographic distance" makes sense if you think of
| it in terms of "Coming from a family of at least moderate
| wealth". My family was pretty poor, and there's a lot they
| couldn't teach me about money because they just had no
| idea. Plus, my whole life I've had to set aside $X per
| month to keep the family afloat, so it's made it a lot
| harder to dink around with startups that aren't going so
| well.
|
| I don't think I can get as rich as Bill Gates myself, but
| I'll bet I can get as rich as his dad, and give my kids a
| shot at becoming mega-billionaires
| kdusneodnejdn wrote:
| "demographic distance"
|
| You mean they're all white, and men, and you have decided
| that means they are all the same, regardless as to the
| details of their backgrounds.
|
| This is literally racism, bigoted prejudice based solely on
| the group membership of people you don't like.
|
| You can't just look at people in these positions and say
| "they're overrepresented therefore systemic racism" or you're
| going to get into a really awkward place when you start to
| notice that Jews are actually overrepresented in places of
| leadership.
|
| If you consider race and sex the most important attribute of
| a person, then your statement about demographic makes sense.
| Only then.
|
| Regarding your username, you are in fact a coward.
| nicetryguy wrote:
| Safe to say PG has a healthy amount of Survivorship Bias.
| amelius wrote:
| > Maybe I am just unlucky or unskilled, but I spent roughly 20
| years working at startups or innovation labs. I was "close" to
| some big events where I could have made big $$ but made 0.
|
| Probably holds for many people, but we mostly hear the success
| stories only.
| anonu wrote:
| > but I suspect you are much more likely to build wealth with
| the more established tech companies
|
| FANG: low variance + moderate reward
|
| vs
|
| ENTREPRENEUR: high variance + high reward
|
| The Kelly Criterion can probably be applied here on how much to
| "invest" in each opportunity. Ultimately it matters how often
| these opportunities come up.
| whimsicalism wrote:
| When you use the phrase "reward", are you talking expected
| value? Or top of the distribution?
|
| Because if it's expected value, I doubt "entrepreneur" is
| high reward compared to FANGs "moderate reward".
| anonu wrote:
| Yes, EV. I certainly think tech entrepreneurs go into a
| startup opportunity impassioned by their ideas, but knowing
| they could IPO or exit at some point in the future for a
| sizeable amount of cash is certainly a motivating factor.
|
| EV = Probability * Outcome
|
| Probability is very low of an IPO outcome - but EV is
| probably still higher than FANG work.
| whimsicalism wrote:
| Yeah, I don't think that is true.
| medvezhenok wrote:
| Around 1% of seed-funded companies go on to become
| unicorns (>1B valuation).
|
| Total market value of unicorns ~$2T (~600 unicorns). So
| average unicorn valuation ~3.3B USD.
|
| Let's say you're the founder and your [ultimately
| diluted] share of the company is 10%. You have a 10Y
| runway. Your EV in startup case is 330M (10% of 3.3B) *
| 1% chance of success = $3.3M or $330K USD per year. This
| is only counting the extreme (unicorn cases) and will
| obviously vary with equity percentages.
|
| https://news.crunchbase.com/news/private-unicorn-board-
| now-a...
| whimsicalism wrote:
| What percent of entrepreneurs create seed-funded
| companies?
|
| $3.3m in NW is 100% beatable in FANG.
| medvezhenok wrote:
| Sure - I agree; that was only the slice of the pie
| attributable to the extreme success (1%). There's also
| exits which are non-unicorn but non-trivial which
| probably bump that number up quite a bit.
|
| It's a tricky problem in the general case because the
| skills that would allow you to capture a high
| compensation in FAANG probably correlate with the skills
| that would lead to a successful startup (not perfectly,
| but somewhat), so the better your options in FAANG the
| better your potential outcome via startup (with much
| higher variance).
| cupofcoffee wrote:
| Your intuition is wrong.
|
| Suppose, 10^-9 odds of a startup making 10 billion. Let's
| assume the other terms are negligible.
|
| E_startup = ... + 10^-9 * 10^11 = 100$ E_faang = 10^-1 *
| 10^5 + 10-2 * 10^6 + ... >= 10^4
| baloney1 wrote:
| absolutely correct, and let's not forget there is the whole
| spectrum of startups and mid sized growth companies that one
| can join in between.
| cmrdporcupine wrote:
| Yep, I wouldn't say I've had as much startup experience as you
| but I did work as employee #4 at one and then after that at a
| startup that got acquired by Google and while I did get a
| windfall out of that it certainly didn't make me rich and I've
| made a lot more money in the years since just taking in my
| regular FAANG compensation.
|
| FAANG compensations can be quite high. Arguably they are that
| high precisely to siphon up headcount that would in the past
| alternatively go into other ventures to seek wealth there. But
| I would say that these high compensations seem to me to be set
| precisely high enough to hoover up talent but not high enough
| for employees to achieve "escape velocity" entirely from the
| market (without extreme financial discipline anyways)
| VRay wrote:
| Regarding the "escape velocity", it really isn't that tough
| IMO to save enough to retire when you're making 5-10x the
| median household US income, even if you're wasting
| $3500/month on rent. Yeah, milk and gas cost about twice what
| they do in the rest of the USA, but since I moved to the Bay
| Area I've been saving over a third of my income without even
| trying despite having a kid, eating out every day, and buying
| every gadget and gizmo I hear about
|
| ~5 years of savings can buy you a house out in the outside
| world so you can take a stab at building a ramen-profitable
| startup
|
| ~15 years' worth can probably cover regular old retirement at
| a level that'd be comfortable for people from
| https://old.reddit.com/r/FinancialIndependence
| mmmmmbop wrote:
| I think this is exactly what the parent commenter meant.
| You'll be able to retire comfortably after your most
| productive years, but you most likely won't be financially
| independent within 5 years and have the means to focus on
| building a startup.
| bawolff wrote:
| I don't think that's a controversial opinion. Start-ups are
| high risk high reward. You probably won't truly make it, but if
| you do you have more money than you know what to do with.
| afpx wrote:
| Over 25 years, I worked for 4 startups, 2 pre series A, 2
| series A. All were VC funded, high growth, successful. 3 were
| acquired; 1 stayed private.
|
| I worked for startups because I really wanted to "get rich".
| And, I put way too many hours in trying. In the end, I did get
| moderately rich. But, honestly, it was mostly from saving and
| investing well, not from exit events. Unless you play the
| political game, I doubt you're gonna get rich from options.
| And, they don't write the options contracts like they used to.
|
| When I started working, I made $30k / year, and I loved my
| work. Now, I make $180k / year, and I hate it. I hate the
| people mostly, and the politics. Lol. I do have enough to
| retire early, and I probably will because generally I feel the
| golden years of software development seem over. I liked it
| better when it was a bunch of nerds playing with tech - people
| who loved it. Now, it's more people who would have otherwise
| gone into banking. Ymmv.
| bob33212 wrote:
| I have a similar background, and also miss the 90s where the
| people playing with tech were not thinking about the money
| but actually enjoyed the coding.
|
| What I find hopeful about Paul's essay and the current state
| of the world is that I can start my own company for next to
| nothing. And I only have to find a couple customers to cover
| my living expenses. I'm not going to be the CEO of a billion
| dollar company and that is fine. I don't want to have those
| responsibilities.
| danielscrubs wrote:
| Not sure about that. Let's say you have 10x cheaper tools,
| but 1000x more competition can you still make it?
| bob33212 wrote:
| The world is becoming more fragmented and long tails are
| getting longer. I'm not going to build a competitor to
| Facebook or AWS, but there are thousands of small
| untapped market segments.
| alberth wrote:
| Rich != Wealth
|
| I think where PG and others are conflating two topics is being
| Rich vs being Wealthy.
|
| You can certainly become Rich working at FAANG (top 1% earner +
| appreciating stock ... and it's way less risky than other
| jobs).
|
| Where you can become Wealthy starting your own company (super
| high risk, most likely won't even become "rich" doing it, but
| you have the potential to create limitless wealth)
|
| EDIT:
|
| If you're going to downvote, can you at least comment why you
| disagree ... so that we can have a productive conversation to
| hear a differing opinion.
| nly wrote:
| Chris Rock has a funny skit about being rich vs having
| wealth:
|
| https://www.youtube.com/watch?v=We8P8J25OKQ
| claudiulodro wrote:
| The definition of "rich" is "having a great deal of money or
| assets; wealthy." Seems like Rich == Wealth as far as I can
| tell. There is definitely a difference between well-off and
| wealthy, though.
| alistairSH wrote:
| While not a dictionary definition, I've seen "the wealthy"
| described as the subset of "the rich" where their money is
| self-sustaining (passive income that spans generations).
|
| By most definitions, many of us on HN are rich, but few of
| us are wealthy. Most of us still have a day job and rely on
| that salary to pay bills and save for retirement.
| fossuser wrote:
| Yeah living in SF (or just the bay area) is pretty key.
|
| AirBnB, Uber, Tesla, FB, SnapChat (LA based, but a lot of
| friends moved there to join friends from the peninsula and knew
| about it because of being here/near Stanford), Lyft, Snowflake,
| Stripe, eventually Robinhood, Roblox, Palantir, etc.
|
| I'm not saying luck isn't a factor - but the equation changes
| dramatically when you're in the bay area. A lot of people I
| know have been through exit events of some sort, many clear
| $1-5M via that (which is about enough to buy a house if you're
| closer to the $3-5M side). Fewer clear $20M+.
|
| That said, you could also have just worked at a FAANG and
| probably have saved $1-2M if you just stayed there over the
| last ten years (and obviously if you were at FB pre IPO in
| 2012). There's also a lot of opportunity to grow in that
| environment which can lead to higher incomes (particularly at a
| place like Netflix that just pays a lot up front).
|
| Doing a non-bay area startup seems riskier to me than working
| at a FAANG. If you live in the bay area for a bit - it's easier
| to learn which startups are likely to succeed.
|
| There's a reason YC moved from Boston.
| kevinqi wrote:
| yeah having lived in both cities, I think the likelihood of
| success in the bay area is going to be higher than in boston
| for sure.
| cupofcoffee wrote:
| You are not unlucky the vast majority of startups fail.
|
| You need to be extremely lucky, extremely talented, extremely
| ambitious basically extremely everything to create a company
| and get rich from it.
|
| It's pretty much a pipe-dream to create a company and get rich
| from it. The most likely result is ending completely burnt out
| and having wasted a couple of years.
| internetslave wrote:
| False. I personally know multiple people that have done it.
| And I knew them before they got rich
| cupofcoffee wrote:
| Right. Even if you knew 100 people that all made startups
| and made 10M+ it would still prove nothing. What percentage
| of startups do you think succeed?
| internetslave wrote:
| I'm kinda busy to go all into this, but generally people
| who went to top schools and raise from top vcs gave very
| good outcomes. The problem is when you lump in people
| with bad or mediocre career outcomes who try to start a
| company. The data is very misleading, getting funding
| from Andreesen Horowitz leaves a huge chance of success.
| chrisBob wrote:
| He is saying you are more likely to become a _Billionaire_ by
| starting a company than by joining a FAANG as an employee. Now
| that is a 1:1000000 event instead of a 1:5000000 event like it
| may have been in the past. I will forgive you if you still
| think it is unlikely.
|
| Most people's goal isn't (and shouldn't be) $1B. If your goal
| is a more reasonable $5M then joining an existing company is
| still your best bet. I am going to plan my own like around the
| MEDIAN result which makes startup stock $0, and the salary
| wins.
| throwawayboise wrote:
| That's sort of my take. Super wealth comes from founding or
| having a large stake in a unicorn. That's of course true but
| also rare and sort of like a kid betting his future on
| playing in the NBA. Sure some people make it, but the vast
| majority do not.
|
| "Enough" wealth -- i.e. retiring with millions in assets, is
| _much_ more attainable by anyone who simply invests sensibly
| over the course of a working career. You don 't even need
| stock options or equity compensation or a SV salary.
| karolsputo wrote:
| Dustin Moskovitz presented that point in the invaluable How
| to start a startup series - https://youtu.be/CBYhVcO4WgI
|
| A good resource when deciding on your future ambitions
| cblconfederate wrote:
| What about those billion-dollar companies that never made
| money but got acquired by FB, MS etc? Their founders did
| build a company, but if it wasn't for FAANG's insane
| profitability, which makes the cost of their moat so high,
| they wouldn't be worth that much. They essentially joined
| facebook as employees to make their billions.
| winkeltripel wrote:
| Average exit event (going public or getting bought) won't
| out-pay working for FAANG. The chances that it does are
| like 10%, and that's if there is a real exit, instead of
| just a wind-down.
| darkwizard42 wrote:
| I think this is a good lens to look through.
|
| If you want the BIG payout and "f u" money, then forming your
| own company is now the highest odds way to make that result.
| The chance of abject failure ($0 payout) is still high but
| even that isn't necessarily true these days with the
| experience and learnings leading you to FAANG jobs (should
| you choose) anyways. You do fall behind your colleagues who
| started at those jobs earlier, but they won't reach that $1B
| goal that you had and now neither will you; the difference
| being you gave it a shot (and the highest odds shot).
|
| PG's point might be simplified to say starting a company is
| the newest highest odds way to be super rich.
| angrais wrote:
| Who's the tech guy in the life of Brian? As in, what part of
| the movie are you referring to?
| blacktriangle wrote:
| Just the whole notion that Brian is the guy whose life
| paralleled Christ but unlike Christ he was just some random
| guy.
| justinlilly wrote:
| I think he means he's the tech equivalent. As in, "he was
| near many historical events, but not the focus or beneficiary
| of them"
| BurningFrog wrote:
| That also sounds a lot like Forrest Gump :)
| rapnie wrote:
| Forrest didn't care about fame and fortune, went for life
| and love.
| sneak wrote:
| I think the consolidation thing he describes is happening
| again, and we are again entering a period like the 60s where
| access to the markets is limited by a few small, impenetrable
| companies, and the only meaningful path to wealth will be
| working at those companies.
|
| I really hope I'm wrong, but the death of the web and the rise
| of the censored, anticompetitive app stores seems to be the
| writing on the wall.
| sjg007 wrote:
| This is exactly why we antitrust enforcement. It's not an
| easy problem to solve though.
| jedberg wrote:
| I've worked two startups and two public companies (and a
| University) in my career. Other than the small salary, I made
| nothing from the startups. The first public company made me
| enough to buy a house in the Bay Area and the second made me
| enough to fund my own startup as well as invest in others.
|
| So yeah, my experience tracks with yours -- all my wealth was
| made working for public companies (that I happen to catch
| during their biggest periods of growth). To be fair though,
| that may change if my investments work out. Then most of my
| wealth will be from investing in startups.
| [deleted]
| codegladiator wrote:
| And how many people got poor starting a new company ?
| de_keyboard wrote:
| There are clearly jobs that require high talent and have a
| shortage of labour that pushes up salaries. This includes things
| that require mathematical talent, like quantitative finance, but
| it also includes skills like motivational speaking or playing
| sports to a very high level.
|
| However, I think most jobs are ones that, frankly, anyone could
| do if given the opportunity and a bit of training, but access to
| these jobs is controlled via gateways such as fancy schools,
| culture, family connections, your accent, etc. There's a kind of
| mediocre upper-middle class filling seats at large organizations
| but not really doing much. These are sometimes referred to as
| bullshit jobs.
|
| But this is just speculation... I would like to see some data
| around it.
|
| The number of people doing start-ups is a blip. This is not how
| most people accumulate wealth.
| lvs wrote:
| Paul Graham is a charlatan. He has no great insights into the way
| the world works that aren't fatally colored by his own self-sense
| of success. In large part, the purpose of articles of this ilk is
| little more than to seek self-justification for the status quo,
| so you can sleep better at night. If that's what you seek, then
| this is the charlatan for you.
| tmilard wrote:
| Good to know : PG is not alone
| wiremine wrote:
| As usual, it's a well-written article. I wonder about a few
| things:
|
| 1. Why look at the top 100 people? It's an incredible small
| sample size. Those 100 people represent a huge amount of wealth,
| but a small number of people. What are the trends is we zoom out
| to, say, the top million wealthiest people? Does his thesis play
| out?
|
| 2. By extension, looking at the top 100 makes Graham feel myopic
| and elitist, which is what I think a lot of the comments in this
| thread allude to. By definition there can only be 100 richest
| people. The odds of breaking into that group are extremely small.
|
| 3. Graham's job is to convince people they have a chance to
| making it big. That's not a bad thing: we need those people. But
| it doesn't speak to broader needs of society.
|
| So, honest question, because I haven't researched his essays in
| recent years: does Graham write about the situation of the bottom
| 100 million, in addition to the top 100?
| StavrosK wrote:
| Two things bother me about this article: One is the message that
| "'the richest people got rich by winning the lottery, therefore
| buying lottery tickets is good' says rich lottery ticket seller".
|
| The other is the unspoken (and thus unchallenged) assumption that
| getting rich is what you should strive for in life, which I
| personally disagree with.
| cupofcoffee wrote:
| Pretty much an essay aimed at gullible 20 year olds.
| cblconfederate wrote:
| > Of the 40 new fortunes in 1982, at least 24 were due primarily
| to oil or real estate
|
| In 1982, oil and real estate was technology. Information
| technology was still research and not ready for big business. One
| could argue that those two were based on exploiting natural
| resources, but so is tech, it's exploiting the natural resources
| of human attention and information, it's not making flying cars.
| In that sense , the way people make money has not changed much:
| make something people want that exploits and indefensible
| resource, rinse, repeat. Like big oil, the big tech of today can
| keep on making billions without building any new tech. I really
| dont enjoy this hero worship of tech, it's 2020 those days are
| gone.
| neilk wrote:
| There are a lot of people who have already taken pg to task over
| the rather thin chain of reasoning (anecdata about the Forbes 100
| -> grand societal conclusion)
|
| But what about the initial claim, that inherited wealth now means
| very little? Tech founders have always come from at least the
| upper-middle class (I'd say that's roughly where I hail from).
| But that seems to be trending upwards. Increasingly, "tech"
| founders have only limited tech skills themselves but hail from a
| class where they have access to investors, often with a
| significant cash injection from their own families.
| [deleted]
| azinman2 wrote:
| > If you only look back as far as the mid 20th century, it seems
| like people getting rich by starting their own companies is a
| recent phenomenon. But if you look back further, you realize it's
| actually the default. So what we should expect in the future is
| more of the same.
|
| First, he pointed to one other point in time. Maybe this is true
| (although I doubt it), but the argument would benefit from many
| more data points if you're going to establish that 'startups are
| the default'.
|
| Secondly, of course future here isn't disambiguated so it's hard
| to argue with. But past performance is only a guess for future
| prediction. Given the rise of populism globally, I think we're in
| for some big big changes at the societal level.
| benjaminjosephw wrote:
| One implicit idea here is that companies are now also different
| kinds of things now - they are much smaller and leaner while also
| making a lot more money - that gives them a very different
| character to the large, dense and slow moving corporations of a
| few decades ago (and maybe a lot less accountability too).
|
| Perhaps these big shifts warrant a renewed discussion about the
| role of new large and lean mega companies in society. Market
| success can't be the only metric we use to measure the societal
| value of a company. If it were, tech domination would be the name
| of the game and companies would devolve into creating software
| that manipulates users for more revenue in whatever way
| possible/necessary. On a resource constrained planet, that would
| be absolute madness.
| tribune wrote:
| Note that the _Forbes_ list doesn 't necessarily reflect how
| people are getting rich at the moment, but how people in the more
| recent past _have gotten_ rich. The catalyzing events that launch
| the fortunes of the wealthiest were already happening a while ago
| pjfin123 wrote:
| > fund managers discovered new ways to generate high returns, and
| more investors were willing to trust them with their money.
|
| Is the first part of this true? Most funds underperform the S&P.
| AlexandrB wrote:
| It's funny how this post subtly buries the lede:
|
| > In 1892, the New York Herald Tribune compiled a list of all the
| millionaires in America. They found 4047 of them. How many had
| inherited their wealth then? Only about 20% -- less than the
| proportion of heirs today. And when you investigate the sources
| of the new fortunes, 1892 looks even more like today. Hugh
| Rockoff found that "many of the richest ... gained their initial
| edge from the new technology of mass production."
|
| I agree with PG, 1892 _is_ a lot like today. And just like today
| it was characterized by the formation of huge monopolies that
| consolidated control of new technologies, as well as rampant
| inequality and exploitation of workers[1]. The reaction among
| those that didn 't get to benefit from the excesses of this era
| is also notable - Communism - and not the kind where hipsters
| complain on the internet but rather the kind where people were
| willing to violently overthrow governments.
|
| [1] https://en.wikipedia.org/wiki/Gilded_Age
| analog31 wrote:
| >>> Indeed, we should expect both the number and wealth of
| founders to grow, because every decade it gets easier to start a
| startup.
|
| In my view, this isn't guaranteed. I don't think there's any
| inherent reason why the "tech" industry can't consolidate itself
| into a few huge "gatekeeper" companies, and make it harder to
| start startups that are actually successful.
|
| At any moment, we could be at the beginning of an era, or at the
| end of one.
| insert_coin wrote:
| For the same reason old "tech" (GE, IBM, HP, etc.) didn't
| prevent the rise of new tech giants: Blindness.
|
| They tried, tho, it just didn't work out because they were
| blinded by past success and the innovator's dilemma.
| taurath wrote:
| So in the 1960s the rest of the world was rebuilding their bombed
| out cities. The US had no competition to speak of and provided
| "mature" at the time manufacturing to the rest of the world.
| There's a lot of cracks and hand waving in this article, it's a
| very roundabout way to say that income inequality isn't a
| problem. It is a problem, and PG is so far removed from it he's
| just thinking about how to justify keeping his and his friends'
| money.
| bawolff wrote:
| I don't think he said that. This seems like an article trying
| to explain increased wealth inequality. At most he's saying its
| a neccesary consequence of innovation, and he would prefer a
| world with innovation than without. That's very different from
| saying its not a problem.
| taurath wrote:
| Tying innovation/technology to wealth inequality at all is a
| false narrative. There's literally the industrial revolution
| that "counts" towards this "pattern" and that is it. It's
| comparing apples to 1970s automobiles.
| bawolff wrote:
| The invention of farming also counts towards that narrative
| Tycho wrote:
| An interesting exercise is to go through the wikipedia lists of
| the richest people in different countries. Follow the links for
| the the top 5 or 10 individuals listed, and see how they made
| their fortune. It's a rather high-entropy information dump - you
| can infer a lot about different parts of the world, from not much
| reading.
| kontxt wrote:
| Classic PG. Summary / TLDR:
| https://www.kontxt.io/document/d/q4Jpm8Kft2ZNa5I5wzdNonRuaCF...
| brudgers wrote:
| Alternative hypothesis: old wealth has become more adept at
| maintaining discretion via trusts and fictitious persons such as
| LLC's and off-shore investment vehicles.
|
| CEO's of new companies can't be discreet. Their job requires the
| opposite.
|
| Lack of discretion always distinguishes new money from old.
|
| With the collapse of well funded investigative reporting, it is
| well nigh impossible to track down wealth that seeks not the
| spotlight.
|
| Forbes has 54 full time employees. https://www.dnb.com/business-
| directory/company-profiles.forb...
| ekanes wrote:
| You can't look at the richest 100 people and say anything at all
| that's useful to regular people or even super smart tech folks,
| because they're outliers of the largest magnitude.
| alexashka wrote:
| Let me guess, start-ups is how people get rich?
|
| When all you have is a hammer, everything looks like a nail.
| domk wrote:
| This essay feels really dishonest. It tries to simplify the
| vastly complex problem of income inequality, on which there is a
| sea of existing, detailed research, into a simple "it's easier to
| start companies now" argument. And it doesn't even explore that
| argument in that much depth.
|
| What about bottom incomes? Why have those barely increased in
| real terms in the last 30 years, while the top 1% of incomes has
| been shooting steadily up? Surely that's nothing to do with
| people starting companies.
| pradn wrote:
| His constant defense of high-risk startups also acts as a
| defense of his own wealth. If you can do it, and deserve wealth
| for succeeding, I must deserve my wealth for the companies I've
| founded. I'm not saying one shouldn't be rewarded for founding
| useful businesses. I'm saying there's a whole lot of
| mystification, self-mythmaking, and luck involved.
|
| For the average person, being born to a somewhat comfortable
| family, being able to train yourself into a good career, and
| being able to save and invest in a mundane way are far safer
| and comfortable ways to live a good, secure life. The gulf in
| security between someone like him now, and anyone but the very
| top percentiles in wealth is literally unimaginable for him,
| because he doesn't live the reality of an average person. His
| constant push in this direction is not much more than "let them
| eat cake", or "let them found startups".
| lupire wrote:
| pg has never cared about the average person. His thesis has
| always been that average people are bad and nerds should take
| over the world.
| boatsie wrote:
| The inequality is also being caused by the internet. Before,
| people would choose a product, restaurant, retailer, service,
| entertainment, etc based on what was near them. Or what they
| had a good experience with. Or what their neighbor recommended.
| But now the internet has pushed everything into what's "best".
| So if a company comes out with a great product or service, it
| can get huge and popular fast. Same with movies and music, the
| distribution and popularity travel basically at the speed of
| light. This is the meme economy and keeps pushing things to the
| head of the curve, while the tail gets longer and flatter. That
| then trickles down to the companies/founders/shareholders etc.
| david927 wrote:
| It's not just dishonest -- it's gross. Paul needs to spend less
| time on yachts. Being a mouthpiece to try to find a morality in
| increasing income inequality, when so many are suffering, more
| each year, is simply vile.
| ludocode wrote:
| > You would think, after having been on the side of labor in
| its fight with capital for almost two centuries, that the far
| left would be happy that labor has finally prevailed. But
| none of them seem to be. You can almost hear them saying "No,
| no, not that way."
|
| This line is particularly disgusting. Labor has _not_
| prevailed. Labor in fact has been crushed by deregulation,
| union busting, automation, and most importantly
| globalization. Real wages have been stagnant for over 40
| years while the cost of living continues to increase.
|
| Paul Graham is delusional. He thinks that we're all getting
| richer because 0.01% of the population has the means to start
| a startup.
| hindsightbias wrote:
| He must be in some world where all labor gets rich on RSUs
| and not the one where they're worthless or have pensions
| defaulted to the PBGC.
|
| Let them eat soylent.
| danans wrote:
| > He must be in some world where all labor gets rich on
| RSUs
|
| He's even out of touch with that kind of labor.
|
| Even in RSU land, most don't get "rich" (meaning enough $
| to work electively) from them. Companies have
| increasingly been shifting regular pay to things like
| RSUs.
|
| Many people at RSU granting companies are using the
| proceeds to pay their mortgages or for childcare.
| rland wrote:
| It's really interesting to see the world through PG's eyes. Kudos
| to him, I guess, for actually saying out loud what most of the
| mega-rich are unwilling to.
|
| Everyone who isn't like PG (so, 100% of the population) is
| finding it difficult to make enough money to have a life in the
| most basically fulfilling sense: education, retirement, support
| for loved ones, and good health.
|
| https://academic.oup.com/qje/article/129/4/1553/1853754?logi...
|
| So, PG: great news about the Forbes 100, I guess?
| danans wrote:
| > Everyone who isn't like PG (so, 100% of the population) is
| finding it difficult to make enough money to have a life in the
| most basically fulfilling sense: education, retirement, support
| for loved ones, and good health
|
| This exactly. PG arguing the relevance of the Gini coefficient
| is oblivious to the the crumbling state of the public
| infrastructure in the US and the declining accessibility of
| high quality public goods to the working and middle class.
|
| The Gini coefficient is an indicator, not an objective in and
| of itself.
|
| Investment in public goods might even make the super rich even
| richer by making the corporations they own more effective
| through better trained workers and less loss due to poor
| infrastructure.
| norswap wrote:
| I'm not sure what the intent of this post is.
|
| Seemingly, it's to encourage people to start a company, because
| it's so easy now and you can get rich (look at all these people
| in the top 100 that got there by starting a company!)
|
| But I'm not sure looking at the top 100 is a compelling argument.
| That's for the 0.0001%. How does the top 10% do? The top 25%?
| What about the median outcome?
|
| More than that, what are the trade-offs? (hint:
| https://danluu.com/startup-tradeoffs/)
|
| Now, I'm all for encouraging people to start their own companies.
| But this just strikes me as a not very good argument for it.
| Hell, using similar logic, there is a better case to be made to
| buy bitcoins and HODL (everyone that bought in 2012 an held made
| 1000x return!)
| Supermancho wrote:
| What number of companies are created vs those that made people
| rich? I think the numbers would paint a different picture than
| what is implied by the article narrative.
| ttiurani wrote:
| 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.
| NovemberWhiskey wrote:
| 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 comparanda are actually divergent.
|
| This is somewhat important as it goes to the question of
| whether Gini coefficients tell us what they're relied on for,
| what a "good number" is, and if we do decide on a good number
| what the impact of the required policy changes would be.
| lanstin wrote:
| 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!
| rcoveson wrote:
| > But I'm not sure looking at the top 100 is a compelling
| argument.
|
| It seems to be very compelling. Most people spend more energy
| writing about, worrying about, or praising Bezos, Musk, and
| Gates than they do the rest of the top 0.1% richest people
| combined. Perhaps it's not a _good_ argument. But it 's
| compelling.
| sharemywin wrote:
| The top lotto winners gained their wealth from winning the
| lottery!
| [deleted]
| betwixthewires wrote:
| I think the point of the article was to demonstrate that the
| "wealth disparity" we are seeing nowadays is not due to
| parasitic rent seeking behavior, but due to genuine creativity
| and the creation of things people want to buy, and also that
| this was the norm except for the mid to late 20th century.
| [deleted]
| mdorazio wrote:
| I think the parent point stands, though. Using the 100
| richest individuals as a proxy for measuring and commenting
| on wealth disparity isn't very helpful. These people have
| always been outliers. A meaningful discussion would look more
| broadly at the top 10%, 1%, and 0.1% groups and investigate
| why they have been accruing wealth at a much higher rate than
| the bottom 75%/50%/25%
| betwixthewires wrote:
| I think it is more meaningful with regard to what the
| article is after, in that it shows the _paths to the top_
| very clearly and how that has changed over the years. You
| could get a clearer picture with your approach of how on
| average the paths upward have changed, but I don 't think
| that was the goal of the article.
| gonational wrote:
| Coining a term: *The Social Limit*
|
| At any given moment, this is the income/wealth level of the
| medium social media account owner. Naturally, as those with fewer
| means come online, this limit decreases.
|
| The purpose of this limit is to define the level of
| income/wealth, above which one will have to send an inordinate
| amount of time trying convincing everyone below the limit that it
| is not one's fault that the rest are currently below the limit.
| Everyone below that limit will be angry.
|
| Once everyone in the world is online this limit will be defined
| as 0.
| purple_ferret wrote:
| >So it's not 2020 that's the anomaly here, but 1982. The real
| question is why so few people had gotten rich from starting
| companies in 1982...a wave of consolidation was sweeping through
| the American economy
|
| Microsoft, Oracle, Apple, Bloomberg, etc were all started in the
| late 70's/ early 80's. Their founders are the richest people in
| the world.
|
| Seems like the question he's asking, though, is why weren't they
| obscenely wealthy after only 5 years, but that requires a
| different thesis than PG's.
|
| Every time I read one of PG's posts, it seems like he's working
| from a narrative that he's trying to conform facts to.
| adwn wrote:
| > _Every time I read one of PG 's posts, it seems like he's
| working from a narrative that he's trying to conform facts to._
|
| Indeed. Compare this gem from [1]:
|
| _You could probably work twice as many hours as a corporate
| employee, and if you focus you can probably get three times as
| much done in an hour. [1] You should get another multiple of
| two, at least, by eliminating the drag of the pointy-haired
| middle manager who would be your boss in a big company. Then
| there is one more multiple: how much smarter are you than your
| job description expects you to be? Suppose another multiple of
| three. Combine all these multipliers, and I 'm claiming you
| could be 36 times more productive than you're expected to be in
| a random corporate job. [2] If a fairly good hacker is worth
| $80,000 a year at a big company, then a smart hacker working
| very hard without any corporate bullshit to slow him down
| should be able to do work worth about $3 million a year._
|
| The process is: Start with a hidden conclusion, selectively
| pick convenient facts (or make up bullshit numbers), ignore
| that they don't make sense in context, and finally present your
| a-priori conclusion.
|
| [1] http://www.paulgraham.com/wealth.html
| sillysaurusx wrote:
| Hm? That paragraph is accurate. When you're free to work
| flat-out - as hard as you can, as much as you want - you can
| make a lot more progress than if you were paid to do the same
| thing for someone else.
|
| 36x may not be the exact multiple, but it's correct within a
| power of two.
| adwn wrote:
| > _Hm? That paragraph is accurate._
|
| No, the assumptions in it are ridiculous in context:
|
| 1) _" You could probably work twice as many hours as a
| corporate employee"_: Okay, maybe you can "work" 80 hours a
| week, as in "be in the office 80 hours per week".
|
| 2) _" if you focus you can probably get three times as much
| done in an hour"_: No. You can't stay focused for 11.5
| hours a day, especially not 7 days in a row, especially
| especially not week after week after week.
|
| 3) _" You should get another multiple of two, at least, by
| eliminating the drag of the pointy-haired middle manager
| who would be your boss in a big company"_: No. First,
| that's already covered by "being focused" in point 2.
| Second, there will be other aspects that will drag down
| your raw coding output, like clients, employees, legal
| matters, or organizational issues. They can be worse than
| your boss.
|
| 4) _" Then there is one more multiple: how much smarter are
| you than your job description expects you to be? Suppose
| another multiple of three"_: No. At 80 hours per week,
| you're not three times smarter/more productive per unit of
| time than an average employee at 40 hours per week.
|
| Look, I'm not saying that an equivalent compensation of $3M
| per year for a founder is wrong. I'm saying that those
| numbers are bullshit. Everyone can make up figures,
| multiply them, and arrive at any conclusion they want. That
| doesn't mean there's any truth in them.
| sushisource wrote:
| I think you're making the point. Correct according to...
| what... lol? The preconceived notion that it should be?
|
| I don't even necessarily disagree, but, "No, it totally is
| right" isn't exactly an argument.
| sillysaurusx wrote:
| Personal experience. But, my experience is merely
| anecdata. Does it hold true in general?
|
| It seems to. Suppose your company consists of ten people,
| and its valuation rises to $10M. The value must have come
| from those ten people. If they weren't at the company,
| the company would not be worth $10M.
|
| It would be easy to dismiss that example too. After all,
| I made it up. But that kind of example happens _all the
| time_ in startups. It 's such a striking correlation that
| you'd now have to explain away many hundreds of examples
| as coincidences, or claim they're due to other factors
| like the founders' connections, upbringing, being in the
| right place at the right time, etc. Those things do
| matter -- in fact, you'd be hard-pressed to start a
| successful startup without at least one of those -- but
| you can't bullshit your way through a startup. Either
| you've made something people want, or you haven't. And if
| you haven't, your upbringing and personal connections
| won't change the fact that your startup is doomed.
|
| So it seems the simplest explanation is probably true: a
| small group of smart, dedicated people can do enormously
| valuable work, given the right conditions. And pg's
| paragraph seems to explain those conditions pretty well
| -- at least in my experience.
| sidlls wrote:
| > Every time I read one of PG's posts, it seems like he's
| working from a narrative that he's trying to conform facts to.
|
| Because that's precisely what he's doing.
| AnimalMuppet wrote:
| He said that poorly. But if you follow his point, he's saying
| that the richest people in the world in 1982 should have been
| the founders of companies in 1940 to 1960. He's not talking
| about those who founded companies in 1982; those are the
| richest people of 2020.
|
| And so his point stands - why were the richest people in 1982
| not the founders of companies?
| jefftk wrote:
| _> Microsoft, Oracle, Apple, Bloomberg, etc were all started in
| the late 70 's/ early 80's. Their founders are the richest
| people in the world._
|
| How are they the richest? Per https://www.forbes.com/real-time-
| billionaires/ Gates is #4, Ellison is #7, and
| Apple/Bloomberg/etc are lower. Above Gates are the founders of
| the much later Amazon and Tesla (then there's FB, Google, etc)
| JohnJamesRambo wrote:
| >In 1982, 84% of the richest 100 people got rich by inheritance,
| extracting natural resources, or doing real estate deals. Is that
| really better than a world in which the richest people get rich
| by starting tech companies
|
| I'm not sure. I feel like the tech companies are just valued
| where they are currently based on "extracting natural resources"
| from willing investors and our privacy and sense of well-being.
| We need another downturn like in 2000 before we know what is
| worth what. Internet companies were worth a lot in 2000 too.
| Turns out a lot of those valuations were bunk.
|
| US venture capital funding at 2000 levels again-
| http://cdn.statcdn.com/Infographic/images/normal/11443.jpeg
| anonu wrote:
| This reminds me of a graph of breweries in America over the last
| 100+ years.
|
| I think the line started around 3k or 4k breweries across America
| around 1900, reached an all-time low in the 1970-1990s and now
| were back up to where we started.
|
| Of course, the story here is refrigeration. When refrigeration
| was not common place, you needed a lot of breweries near
| consumption.
|
| I'm also thankful for the variety of beer options we have today.
|
| edit: this might have been the image I remember - but theres no
| data source mentioned: https://vinepair.com/wp-
| content/uploads/2015/11/historical-b...
| JohnWhigham wrote:
| But the industry has slowly been going the way the tech
| industry has for some time now. AB InBev and friends have been
| buying up the big breweries left and right.
| wing-_-nuts wrote:
| >Of course, the story here is refrigeration. When refrigeration
| was not common place, you needed a lot of breweries near
| consumption.
|
| Uh beer doesn't _have_ to be refrigerated? England has a long
| history of drinking warm beer. Hell, they even hopped it up to
| ship it all the way to india (months!) without it spoiling.
| rmason wrote:
| As someone who was an adult during the Carter and Reagan
| administrations Jimmy Carter started the deregulation debate and
| he set in motion money to study the idea. He was definitely in
| support of it, but faced significant opposition in his own party
|
| But it was Reagan who actually executed on it. The unions and a
| significant amount of Democrats opposed both of them. Some jobs
| were lost but consumers greatly benefited.
| TheRealDunkirk wrote:
| > The tech companies behind the top 100 fortunes also form a
| well-differentiated group in the sense that they're all companies
| that venture capitalists would readily invest in, and the others
| mostly not. And there's a reason why: these are mostly companies
| that win by having better technology, rather than just a CEO
| who's really driven and good at making deals.
|
| I'm sorry, but this is utter bullshit, told to one's self to feel
| better about the real facts on the ground. What we're seeing in
| "tech," over and over, is NOT an effort to come up with "better
| technology," but the play to capitalize on some particular niche,
| and then MONOPOLIZE it. This is key.
|
| It's not good enough to provide nice co-working spaces; the goal
| is to own every rentable building in a city. It's not good enough
| to provide a ride sharing solution; the goal is to run taxis out
| of business, and own the ONLY ride share in town. It's not good
| enough to run a respectable social media site; you have to be the
| only one that people use for a particular purpose.
|
| VC's are NOT looking for the next big idea; they're looking for
| the next MONOPOLY. That's where all the money is going. It's what
| our government and society has now optimized for. Other companies
| (like the latest $20B Microsoft gobble) are scrambling to own a
| monopoly vertical workflow stack of their own, but it's all the
| same idea in play.
|
| We're heading directly for the cyberpunk, citizens-of-
| multinational-corporations future that people have been writing
| about for decades.
| greatgib wrote:
| 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
| five times greater than the 58-to-1 ratio in 1989"
| gip wrote:
| Exactly. And I also think looking at money only may not go far
| enough. At the end of the day what matters is the amount of
| resources that the society allow a person to enjoy during
| her/his life, from food to home ownership to work
| opportunities, to access to vaccine.
|
| It's pretty clear that a new class of people (founders, VCs and
| people close to them) are capturing a larger part of the
| resources today while the majority gets a decreasing share of
| that. And we should all be working at finding way to reverse
| that trend.
| WalterBright wrote:
| They're creating the value, not taking it from others.
| gip wrote:
| 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.
| shuckles wrote:
| 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.
| WalterBright wrote:
| SpaceX, etc. That's what you do with billions to spend.
| WalterBright wrote:
| The resources are bounded. The value you can create from
| those resources is _not_ bounded.
|
| Google, Microsoft, Twitter, Netflix, etc., are enormously
| valued and none of it is based on bounded resources.
| bumby wrote:
| While you're not wrong, I think what you're missing is an
| important qualifier. Sometimes they are creating
| _perceived_ value that doesn 't materialize. Meaning the
| value is at least part speculation, rather than realized
| value.
|
| E.g., did Broadcast.com really create nearly $6B in value
| just because that's what it was speculatively valued at
| when purchased? I'd argue no, unless you think the "greater
| fool theory" is the correct way to measure value rather
| than intrinsic worth.
| WalterBright wrote:
| If you've got a superpower that enables you to determine
| the "real" value of something rather than its "perceived"
| value, you can use it to become the richest man in the
| world.
| bumby wrote:
| Intrinsic value can be measured, albeit imperfectly.
| Equity, as an example, is measuring real assets as
| opposed to some pie-in-the-sky assumption of future worth
| built on a foundation of hopes and dreams. Value
| investors have in fact gotten rich this way for a long
| time.
| crazygringo wrote:
| > _taken from the average employee cut of the profits_
|
| There's never been any such thing. In the US, salaries have
| always been determined by the supply and demand of skills,
| they've never been linked to profitability or some share of it.
|
| And stock options and stock grants are relatively new (not
| really a thing in 1960), so if anything the actual employee
| share of profits -- since the value of stock is future profits
| discounted -- has gone up.
|
| The idea that CEO compensation is somehow "at the expense of"
| employee compensation is a pure myth. If CEO's were paid less,
| the extra money would flow to shareholders, not employees.
| lanstin wrote:
| And the shareholders are often held by pension or 401k funds
| for the employee retirements. Certainly in aggregate, and all
| the companies have seemed to decide that this fleecing is a
| good thing all at once.
| Aerroon wrote:
| Imagine looking at the 5 deadliest plane crashes in 1970 and
| comparing them to the 5 deadliest plane crashes in 2010. You
| find that more people died in these crashes in 2010 than 1970.
| You wouldn't conclude that air travel is now less safe than in
| the 70s, would you?
|
| There was _a lot_ more air travel in 2010 compared to 1970. The
| _5_ deadliest flights makes up a much smaller portion of all
| flights in 2010 than it did in 1970. It 's a misleading
| comparison. You should instead look at the number of deaths per
| passenger or per passenger mile.
|
| You have to think of the same point when looking at the "top
| 350 companies in the USA in 1965 vs 2017".
|
| Are the companies the same size in 2017? Do CEOs have the same
| amount of responsibility in 2017? Is the complexity of managing
| the company the same in 2017 as it was in 1965? What percentage
| of all companies do these top 350 make up?
|
| These are all factors you might want to take into account when
| looking at a specific number of top companies.
|
| I'd be curious to know what the numbers would look like if they
| looked at the top 1% or top 0.1% of companies in the US
| instead. Or perhaps even the average and median companies. My
| guess is that those stats wouldn't be politically as useful. I
| imagine that you'd still see a growing disparity, but a smaller
| one.
| bumby wrote:
| Not entirely sure why you're being downvoted but I think
| these are at least relevant considerations.
|
| There seems to be a lot of contradictory academic claims
| about CEO compensation so I thought referencing a meta-
| analysis would be the most useful[1]. If company size is a
| proxy for your complexity claim, that seems to be much more
| informative regarding executive pay. Actual company
| performance was only about 5% predictive, compared to 40% for
| firm size. It seems like the heuristic I've heard about the
| "best way to get a raise is to grow your department not
| necessarily grow your profit" may have a seed of truth to it.
|
| [1]https://www.researchgate.net/profile/Steve-
| Werner-3/publicat...
| ikeboy wrote:
| The companies are much bigger today.
|
| If you run a company that's 10 times as big, why is it
| surprising that you're getting 10 times the compensation? You'd
| need to compare to similarly sized companies today. Instead,
| they look at the top 350 companies now and then.
| extra88 wrote:
| The workers that produce 10 times as much today (because of
| newer technologies, techniques, etc.) don't get paid 10 times
| as much. Worker productivity has continued to climb, decade
| after decade, but inflation-adjusted worker pay is basically
| flat over the same time period.
| fallingfrog wrote:
| Yeah much of the innovation has been in ways to elude labor
| laws (Uber) or ways to get rid of labor unions (moving
| production to China) or ways to hack tax laws (stock buybacks,
| shell companies, always showing zero profit on the balance
| sheet). That's where the profit comes from.
| missedthecue wrote:
| 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 only get 312-1 by adding in performance based stock and
| incentive alignment options. But these don't come from the
| cashflow of the business like wages and salary. They come from
| diluting Wall Street. Knowing this, the whole thing is way less
| of an outrage. The comparison is so uneducated.
|
| 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. Carl Icahn for
| example is wildly against this level of CEO compensation
| because it dilutes his ownership.
|
| John Doe on his forklift stacking pallets in the Coca Cola
| factory is not made poorer over excessive CEO pay. Carl Icahn
| is.
| heavyset_go wrote:
| This analysis is about as apt as saying, "Larry Ellison's
| salary was only $1, so what are you complaining about?"
| missedthecue wrote:
| 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 $20 million
| in stock comp.
| lanstin wrote:
| If that worker has a pension or 401k, then it does
| matter. The fleecing isn't directly from him, but
| aggregate it by "managerial class" and "middle class" and
| you see the high $ managerial cash flows are directly at
| the expense of the middle class and retirement of the
| middle class. Thru in some tax policy, and you can see it
| is also taking money away from education of young middle
| class folks, and investment in communal things like roads
| and public health and so on.
| missedthecue wrote:
| Yes, it hurts shareholders. That's what I wrote in my
| first comment. You agree with me then?
| PhilipTai wrote:
| No. There is really no difference whether CEO is paid in
| cash or in stock, regarding the negative impact of the
| pay.
|
| Scenario 1: CEO get paid $50 million in stock. Scenario
| 2: CEO get paid $50 million in cash. And then the company
| raise $50 million from stock market, so that it will have
| the same amount of cash as scenario 1.
|
| They are the same.
| CPLX wrote:
| 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.
| bumby wrote:
| And in that context, the article does speak to this point.
|
| > _the companies themselves are more valuable, because newly
| founded companies grow faster than they used to._
|
| The added reliance on stock-based compensation combined with
| higher valuations leads to higher CEO salaries.
|
| This isn't making a case one way or the other about whether
| this is a fair or sustainable model, just meant to bolster
| your point about why greater context is needed when
| discussing executive salaries as a multiple of the individual
| employee.
| royaltjames wrote:
| Salary isn't How People Get Rich Now, seems like you
| missedthecue.
| amalcon wrote:
| > _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.
| JMTQp8lwXL wrote:
| A more useful longterm metric is _total compensation_
| CEO:worker ratio. Stating the salary ratios are the same isn
| 't a compelling argument since that's only one factor in the
| total package.
| fshbbdssbbgdd wrote:
| > 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.
| diogofranco wrote:
| 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.
| greatgib wrote:
| First, when PG compare wealth of rich persons, he does not
| just compare salaries but the total wealth that come from the
| total of incomes.
|
| Second, there is something not to forget about the stocks:
|
| It is a "right" to the proportional part of all the future
| financial results of the company.
|
| .
|
| So, let's forget about inflation and consider equivalent
| dollars:
|
| Imagine you have a 30 employees company, that will generate
| 1000$ of income. Of these 1000$, there is a 50% margin, so it
| remains 500$ of benefit.
|
| .
|
| In 1965:
|
| - Boss will have a salary of 200$
|
| - 30 employees total wages of 300$ (so 10$ per person)
|
| - Net result of 0$ (total of stocks, going to the boss
| anyway)
|
| .
|
| In 2017, same company and conditions:
|
| - Boss will have a salary of 50$
|
| - 30 employees total wages of 19,23$ (so 0,64$ per person)
|
| - Net result of 430,77$
|
| The net result belongs to Boss + other shareholders.
|
| -> boss get: 150$
|
| -> other shareholders get: 280,77$
|
| (So in result 200$ for the boss, 0,64$ per employee, 312-1
| ratio)
|
| .
|
| Some people will say that the stocks value, based on
| valuation, does not correspond to 1 year of revenue. So, for
| example a 100$ stocks might correspond to an expectation of
| 10 years of 10$ benefit.
|
| But, on the previous article the 312-1 ratio corresponds to a
| year compensation, that is repeated every year. So it means
| that as a boss, you will also get new stocks or bigger
| capital for your stock every year to have this ratio
| maintained.
| peter422 wrote:
| Why can't employee compensation also come from diluting Wall
| Street?
|
| Why do they vast majority of those benefits go to top
| executives?
| missedthecue wrote:
| Performance and incentive alignment. John Doe stacking
| pallets at the Coca Cola factory really won't produce much
| better top or bottom line results for the business if you
| offer him a stock bonus. His forklift only drives so fast,
| and he plays a very minute part in the direction of the
| business. The CEO on the other hand can have a huge impact,
| and it's why shareholders choose and vote on certain
| incentives and bonuses.
|
| But more importantly, in other businesses this type of comp
| is certainly offered. If you work in a small startup in any
| position, you probably get stock options, because your
| performance on a 10 or 20 person team probably does have
| real noticeable and measurable impact on the business's
| success.
| daemin wrote:
| But why not give them stock options as well? Why
| shouldn't all the people employed by the company share in
| its success? Even if it's the CEO's decision which
| determines the direction the company will go, it's all
| the people implementing that plan that actually cause the
| company to make money and succeed.
| WalterBright wrote:
| A lot of companies do. Microsoft has generated 20,000+
| millionaires or more from its employees.
| lanstin wrote:
| And it's not like a top down plan is the key. Having all
| the people in the company feel interested in and
| empowered to fix problems they see is the key to a
| successful organization these day. A genuine commitment
| to "people are valuable" is key to getting people's
| interest in fixing problems.
| WalterBright wrote:
| Another example is salesmen. They get paid mostly on
| commission. Their sales are good, they take home $$. If
| they sell less, they take home less.
| alpha_squared wrote:
| > John Doe stacking pallets at the Coca Cola factory
| really won't produce much better top or bottom line
| results for the business if you offer him a stock bonus.
| His forklift only drives so fast.
|
| A counter-perspective would be that John Doe becomes
| incentivized to improve efficiency and innovate in the
| process. People are not machines or primitive animals.
| Humans are capable of creative problem-solving.
|
| Note: stock options are not stocks. You're not given a
| share in the company, you're given the opportunity to
| invest in the company. You have to put money in to
| _potentially_ get money back.
| djrogers wrote:
| > Note: stock options are not stocks. You're not given a
| share in the company, you're given the opportunity to
| invest in the company. You have to put money in to
| _potentially_ get money back.
|
| While pedantically true, in reality this is generally not
| the case. As long as you are still employed by the
| company that granted you the options, you do not have to
| exercise them ('invest') until you wish to sell them.
| What this means in practice is that nary a single dollar
| ever comes out of your pocket.
| alpha_squared wrote:
| > As long as you are still employed by the company that
| granted you the options
|
| I think that's the key, which makes them fundamentally
| different. So, in the _very_ narrow scenario in which you
| happen to join a company that will IPO and that you're
| there from pre-IPO until post-IPO, yes -- they're nearly
| the same; you really just benefit from the difference of
| the strike price and public price. If you've spent time
| at the company, vested your options, and want to leave
| for just about any reason, it's nothing at all the same.
| I posit that a vast majority of startup departures fall
| under the latter scenario.
| drexlspivey wrote:
| > Note: stock options are not stocks. You're not given a
| share in the company, you're given the opportunity to
| invest in the company. You have to put money in to
| _potentially_ get money back.
|
| Stock options and shares are pretty much equivalent. If
| the stock price goes up the option goes up (by a ratio).
| You don't have to put your own money in, i.e you get 100
| options every quarter, you sell 50 of them to get the
| money to exercise the other 50.
| alpha_squared wrote:
| > i.e you get 100 options every quarter, you sell 50 of
| them to get the money to exercise the other 50.
|
| And lose the opportunity at longer-term gains for the
| ability to afford the short-term cost. They're really not
| equivalent at all. I know they're billed that way, but
| there are very real reasons startups forgo IPO for so
| long and remain on the options track in the meantime.
| Startups can offer stocks and often choose not to.
| jjav wrote:
| > Note: stock options are not stocks. You're not given a
| share in the company, you're given the opportunity to
| invest in the company. You have to put money in to
| _potentially_ get money back.
|
| As a technicality that's true, but irrelevant in
| practice. Employees receiving options are nearly always
| going to do a same day sale where the option is
| excercised and immediately sold and you get the
| difference. No need to put any money in.
| pdonis wrote:
| _> A counter-perspective would be that John Doe becomes
| incentivized to improve efficiency and innovate in the
| process._
|
| But the best-case percentage improvement in the overall
| company bottom line due to his innovations as a fork lift
| driver is still very, very small. To make it bigger, John
| Doe needs to stop being a fork lift driver and move to
| some other position with more leverage. And a person who
| really does have the ability to "improve efficiency and
| innovate" enough to make investors notice is probably
| better off quitting their current job and starting a
| startup.
|
| _> stock options are not stocks. You 're not given a
| share in the company, you're given the opportunity to
| invest in the company. You have to put money in to
| _potentially_ get money back._
|
| My experience is that virtually all employees of large
| corporations who get stock options exercise them for
| direct cash, meaning they never actually own the stock;
| they "buy" it and then "sell" it immediately and take the
| cash (in practice whatever financial institution is
| running the company's stock option program does all this
| automatically and just sends the employee a check and a
| 1099 form for when they file their taxes). So virtually
| no employees actually take the opportunity to invest in
| the company. They just take the additional immediate
| income.
| [deleted]
| aerosmile wrote:
| The benefits should go to whoever is responsible for the
| success of the company. This obviously opens up a political
| can of worms: the Left will say the CEO can't get anything
| done without the workers, the Right will say the workers
| can't get organized without the CEO (eg: what was Apple
| doing before Steve Jobs came back?). The workers can
| obviously leave and seek employment elsewhere. So can the
| CEO.
|
| For better or worse, the data presented in the parent post
| indicate that the market seems to be increasingly siding
| with the CEO-side of the above argument. I am not really
| sure that there's a simple regulatory move that would
| negate that (eg: you can cap salaries, but CEOs make most
| of their money from stocks. You might be able to cap how
| much stock a hired CEO can own, but most of the wealthiest
| people like Bezos and Zuck are founders).
| coldtea wrote:
| > _The benefits should go to whoever is responsible for
| the success of the company. This obviously opens up a
| political can of worms: the Left will say the CEO can 't
| get anything done without the workers, the Right will say
| the workers can't get organized without the CEO_
|
| And a pragmatism can say that all kinds of CEOs have
| driven companies to the ground, reducing their valuation
| even 1/10 what it was, and destroying their market share,
| and walked away just fine, with golden parachutes and
| even bonuses...
|
| CEOs get more because CEOs get to determine what they get
| (and the board members and execs rub each other's back
| when it comes to their collective advantages).
|
| It has little to do with performance and "whoever is
| responsible for the success of the company".
| tjs8rj wrote:
| A sharper metric: it tends to do with whoever is
| responsible for the success of the company at the least
| cost to shareholders.
|
| Imagine a company starting out. If they need you to join
| or they fail, and they can get you for 1% of the company,
| that founder is rewarded incredibly for securing you with
| very minor cost to the company, making them rich and you
| not, even if you are responsible for the success of the
| company. The reason being: if you're so integral why
| didn't you start your own company and keep all the
| equity? Why didn't you bargain for more?
|
| Capitalism doesn't make any prescriptions about what
| should happen, it's just a system where individuals make
| consensual transactions and the chips fall where they do.
|
| In the above scenario, whether the founder "deserved" to
| be rich or not doesn't matter, because you "made" them
| rich with your consensual transaction. As long as we are
| all free to be the founders or the employees, I don't see
| why there should be some moral issue there. If your
| effort is worth more to others, either you need to haggle
| harder, start your own company, or you're lying to
| yourself.
|
| Everyone is a stock in capitalism, that's all that is
| true. Everyone sets the value of each other's labor and
| capital. If your stock isn't doing so hot it's because
| others aren't buying it.
| jfk13 wrote:
| > As long as we are all free to be the founders or the
| employees
|
| But we're not. Much of it comes down to the simple
| lottery of the circumstances into which you were born.
|
| If you have an inherited trust fund, or wealthy parents
| and friends to fall back on, you can take huge risks, one
| of which might eventually lead to a multi-million dollar
| payout even if several of them fail dismally in the
| meantime.
|
| But if keeping a roof over your head and putting food on
| the table _today_ is dependent on working two
| backbreaking jobs today and every day, you 're not "free"
| to be a founder.
|
| "To them that have, more shall be given."
| lazide wrote:
| As someone who grew up lower middle class to poor, with
| parents that struggled to put food on the table for a
| great many years, and who dropped out of an abysmal
| highschool to go full time into tech at 16 - and is now
| in stealth mode founding a startup - while what you are
| saying is OFTEN true, it is never ALWAYS true.
|
| The things I got from my parents are things many people
| have had - some of which; such as help buying a terrible
| beat up old '78 Dodge Van to move states to my first real
| job, or a relentless drive to get better, to DO better, a
| great many people have had. I've also been lucky to get
| into the industry when someone motivated but without
| credentials could get started.
|
| I've had zero money from them since I started working at
| 16, and before that it was a minimal allowance I earned
| through hard work with chores. I earned the $200 to buy
| my first computer digging holes and repairing fences.
|
| Don't buy into the myth it's not possible. It's self
| defeating. Also, don't buy into the myth it's easy for
| anyone - even those from money. It will test you like
| nothing else will, and I'be done enough hard things over
| the year to know
| jasonwatkinspdx wrote:
| The problem with this position is its naivety. Are you
| going to say with a straight face that all potential
| founders are equally likely to be funded by investors
| purely on their probability of success, and not via false
| signals and stereotyping if not straight up bigotry? That
| there aren't credentials that can be effectively bought
| to gain access to that?
|
| Markets are just markets, not oracles of unbiased merit.
| Making whatever the market does morally normative as
| you're doing is frankly, evil. They're useful tools, but
| that is all. They should not be a religion.
| aerosmile wrote:
| That argument sounds familiar, but it's not reflected in
| the latest YC stats (32% of founders come from
| underrepresented groups). I feel good knowing that one of
| the fastest career paths in the history of the world has
| a 32% admission rate to practically anyone anywhere in
| the world (again, if you're feeling down about your
| chances as a US citizen, spend a minute talking to one of
| the Nigerians in YC and your perspective with change
| instantly).
| coldtea wrote:
| > _I feel good knowing that one of the fastest career
| paths in the history of the world has a 32% admission
| rate to practically anyone anywhere in the world_
|
| Anybody, as long as they had a westernized upbringing,
| access to computers and education, and a middle class or
| higher status in their country...
| aerosmile wrote:
| Fair enough. But having all those things in Nigeria still
| puts you way behind someone who was born into a poor
| family in the US (out of around 200 founders I met at YC,
| far more of them reminded me of Garry Tan - who is
| awesome! - than of the Winklevoss twins). It's not ideal
| in either case, but some things are less ideal than
| others.
| wizzwizz4 wrote:
| It's _advocating_ for evil - how evil such advocacy
| actually is depends on your influence.
| Aunche wrote:
| A lot of employee compensation does come from diluting Wall
| Street. Until recently, Tesla was operating at a loss.
| During that time the workers were paid by diluting equity.
| efficax wrote:
| stock based compensation exists for C-level employees because
| it allows them to reduce their tax burden by taking their
| income via long term capital gains. It's still income!
| systemBuilder wrote:
| I think that only works for ISOs (incentive stock options),
| and now the rules on who can get them and how many can be
| issued are very restrictive.
| khuey wrote:
| I don't think "upper management comp has exploded only
| because they invented an entirely new way of compensating
| themselves" is the get-out-of-jail-free card you seem to
| think it is.
| joshuamorton wrote:
| > They come from diluting Wall Street.
|
| Yes, until the company offers a stock buyback (which these
| companies collectively spent more than 50 billion on in 2020)
| missedthecue wrote:
| ok. But then they're using cash from the business to get
| the share count back down to prior levels, and it's still a
| net loss for Icahn. There are only 100 percents. If the
| management team gets more ownership through dilution, it
| means Carl Icahn owns less.
| shkkmo wrote:
| Yes, and that cash is a part of the revenue that could be
| used to pay the workers who generated that revenue.
|
| Thus CEO pay is absolutely the concern of workers,
| unions, and union supported politicians.
| joshuamorton wrote:
| But the employees don't gain anything. You've modeled
| this is a fight between wall street and the CEO, entirely
| forgetting about employees who get no (or trivial) stock
| compensation.
|
| Hypothetically, a company could pay 100M in stock to the
| CEO, and then issue 100M in stock buybacks to the CEO.
| This is functionally equivalent to paying the CEO 100M,
| but it wouldn't count in your salary numbers. And
| notably, both of these, stock buybacks and CEO pay,
| dilute wallstreet in the same way. But neither benefits
| employees.
|
| To use the JP morgan example, (and this is roughly
| equivalent for Google), the company could stop stock
| buybacks, and instead pay _every_ employee an additional
| $150,000.
|
| That results in the CEO _and_ wall street getting less
| money, and employees getting more.
|
| Walmart and Coke modulate the share price in other ways,
| so stock buybacks won't tell a particularly interesting
| story.
| alpha_squared wrote:
| 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 comment leaves out the golden parachute
| CEOs often have, which is orders of magnitude greater than
| most severance packages, if there's even a severance package
| in place. Financially, it's pretty hard to fail as a CEO of
| just about any public company; even in failure, you profit
| considerably.
| davvolun wrote:
| 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 that CEO salaries haven't changed much doesn't say
| anything.
|
| Yes, a CEO should be making more money than the average
| employee. The debate is over how much -- why do CEOs get
| absolutely massive bonuses and golden parachutes and stock
| options and for employees it's expected that you put in the
| work in the hope of future recompense in terms of bonuses,
| promotions, etc.
| WalterBright wrote:
| > why
|
| Because their decisions can drive a company into
| bankruptcy or transform it into a trillion dollar
| company. Your average line employee has no such leverage
| from their actions.
| FireBeyond wrote:
| 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.
| WalterBright wrote:
| Stock based compensation goes to zero in bankruptcy.
| lanstin wrote:
| Usually somehow the execs have sold out just before the
| bad news, while the regular employees haven't liquidated
| their 401s/stock plans.
| WinstonSmith84 wrote:
| Usually? Please ...
|
| That's called insider trading and those who do that ends
| up in jail or at best have to hide in the sun for the
| rest of their life.
| paulmd wrote:
| A recent example would be Intel's CEO Brian Krzanich
| dumping as much stock as he could after learning about
| Meltdown and before the news went public.
|
| https://arstechnica.com/information-
| technology/2018/01/intel...
|
| The article also cites Equifax's CEO selling before the
| news of their data breach went public.
|
| And that's just the ones that are prominent enough that
| everybody knows about it.
| bumby wrote:
| There's of course legal ways to do similarly. I thought
| this was a good example of John Krafcik's resignation
| which to a certain extent meets the same aim:
|
| Official resignation letter:
|
| https://blog.waymo.com/2021/04/capstone-of-my-career-
| email-f...
|
| "Interpreted" letter:
|
| https://gist.github.com/ChuckM/ff5fc8c800c7fe9160483b68ec
| 45a...
| ivan888 wrote:
| Is "hide in the sun" an idiom I'm unfamiliar with?
| Genuinely curious about what this means
| centixel wrote:
| Not OP, but I take it to mean that they flee to a
| tropical country with limited extradition laws.
| throwaway22211 wrote:
| Non-extradition countries are often tropical. "in the
| sun". https://worldpopulationreview.com/country-
| rankings/countries...
|
| Latin countries, while not technically non-extradition,
| are still easy to hide in ... and also "in the sun"
| refenestrator wrote:
| 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".
| WalterBright wrote:
| Why would any company hire a CEO and pay him millions to
| warm a seat? Why would the stockholders put up with that?
| bobthepanda wrote:
| Stockholders are increasingly not putting up with it.
| Votes against are still kind of rare, but they do happen:
| https://www.restaurantbusinessonline.com/financing/starbu
| cks...
|
| 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.
| [deleted]
| lanstin wrote:
| 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.
| idiotsecant wrote:
| 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.
| samatman wrote:
| > _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._
|
| This is correct, but the post you're replying to has the
| answer: CEOs successfully claimed more of the portion of
| surplus value which was going to stockholders, employees
| claimed less.
|
| It's key to analyze these things if the goal is to see
| employees better rewarded, as they should be, but it must
| start from the correct analysis.
|
| The details of how to do this are way over my head, and I
| won't embarrass myself by trying to make suggestions here.
| asdffdsa wrote:
| Give stock to employees. Easy
| aerosmile wrote:
| Instead of cash? Just like money, stocks don't grow on
| trees.
| Kye wrote:
| They find them for CEOs.
| aerosmile wrote:
| There are about 100 references on this page here alone
| stating that CEOs get relatively low cash comp in return
| for exceptionally high equity comp. Even CEOs have to
| treat equity as a form of compensation (duh!), and they
| have to trade off one against the other.
|
| Some people here also pointed out that Amazon would
| rather pay RSU, but people prefer cash. We all know that
| Amazon outperformed the market in the last couple of
| years and that the RSU would have been more valuable than
| cash, but even with the benefit of that hindsight, most
| warehouse workers would still pick cash because they
| don't have the privilege of making long-term investments.
| The sad reality of today's society is that it's not that
| hard to make profitable long-term investments (just look
| at pretty much anyone's 401k) - but for the majority of
| the population, they just don't have enough money to put
| it to work.
| WalterBright wrote:
| You can't get a CEO without offering a golden parachute.
| This is because you're not hire a loser CEO, you're going
| to hire a winner, and you'll need to attract him away from
| his current lucrative position.
|
| It's the same thing as top athletes getting contracts
| paying them millions of dollars whether or not they
| continue to win games.
| dfxm12 wrote:
| Athletes aren't comparable to the CEO in this situation.
|
| Athlete pay (at least for athletes who are paid by an
| owner and not mostly from prize money) isn't really tied
| to winning or losing, but is largely defined by
| collectively bargained negotiations, based on how much
| the league brings in. You also have guys like Bryce
| Harper who, even when he goes 0-for-3, will earn their
| keep in other ways, like getting people to watch games on
| TV which increases rights fees & ad rates, selling
| tickets to games where people spend money on parking and
| beer or jersey sales: https://www.mlb.com/news/bryce-
| harper-sets-pro-sports-jersey...
|
| In short, athletes get paid a lot because they know how
| much money their bosses are making from their labor and
| have collectively bargained to get their fair share.
| yardie wrote:
| > 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, a poor performing athlete has no golden
| parachute to fall back to.
|
| [0] https://www.pff.com/news/nfl-salary-cap-terms-tricks-
| to-know...
| WalterBright wrote:
| You don't think that CEOs also have a lot of performance
| related clauses? Stock options are, for example.
| bobthepanda wrote:
| In practice compensation clawback can be quite difficult.
| https://hbr.org/2021/03/why-executive-compensation-
| clawbacks...
| bumby wrote:
| 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 probably un-ironically are known to be
| relatively stable and well paid.
|
| And yet, workforces continually vote against unionization
| while these debates about pay abound. Maybe it's just the
| vocal minority, but I don't quite get it.
| idiotsecant wrote:
| 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.
| bumby wrote:
| Yes, because I give the individual's agency and try not
| to infantilize them. They have a right to collective
| bargaining protected by the right of association (within
| the US at least). They choose not to wield it.
| Alex3917 wrote:
| > 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.
| xur17 wrote:
| A good example of that [0]. Amazon is quoted as saying
| that hourly employees prefer the "predictability and
| immediacy of cash to RSUs", and I imagine Amazon would
| prefer to give RSUs, so this is probably accurate.
|
| [0] https://www.theverge.com/2018/10/3/17934194/amazon-
| minimum-w...
| Aunche wrote:
| Cash is generally better than its equivalent worth in
| RSUs. If Amazon faces fiscal troubles, then you can
| potentially both lose your job and your retirement plan.
| The upside of potentially becoming a millionaire doesn't
| make up for this.
|
| The problem is that a lot of people will spend their
| surplus cash on more consumer goods rather than rather
| than investing it their 401ks.
| liveoneggs wrote:
| an RSU is a massive tax problem, for one thing.
| xur17 wrote:
| How so? Isn't it just taxed as normal income at vesting
| time? Most employers automatically sell enough to cover
| the tax withholding to solve any issues.
| lazide wrote:
| Wash sales, long term/short term gains and associated tax
| issues, RSU withholding which is a fixed amount and not
| based on the income tax withholding, and a typical broker
| account to sell/get money are massively more complicated
| than a direct deposit to your bank account and money back
| from the government at the end of the year unless you
| massively screw it up.
|
| By number, most of Amazon's employees are working minimum
| wage and probably don't have much of a balance. Many of
| them might get evicted if pay gets delayed even a couple
| weeks.
| kennywinker wrote:
| If I'm making a below-livable wage, I need ALL of that
| cash NOW. I can't wait a few days for it to clear - I
| can't handle the loss if I have to sell in a dip.
|
| And amazon is using that fact to justify lowering total
| compensation for hourly workers, so I don't think they
| actually do have an incentive to give RSUs in this case
| WalterBright wrote:
| > Stock based compensation didn't exist in 1965.
|
| In 1965 employees also typically got pensions, the value of
| which is not counted in those figures.
| CPLX wrote:
| 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.
| confidantlake wrote:
| This distinction seems meaningless. At the end of the day,
| the stockholders own the business. They are paying the
| salaries of both the CEO and the pallet worker, regardless if
| it comes in the form of cash or stock.
|
| Also wages don't always come from cashflow. Amazon lost money
| for its first X years. Salaries and everything else were
| covered by investor cash.
| fredophile wrote:
| What does "diluting wall street" mean? How is it different
| from "taking money from the business owners"? If I'm CEO at a
| company what difference does it make to me if I'm compensated
| by salary or shares/bonuses? If I'm an employee at a company
| what difference does it make to me if the CEO is compensated
| by salary or shares/bonus3s? If I'm a shareholder in a
| company what difference does it make to me if the CEO is
| compensated by salary or shares/bonuses?
|
| The distinction between salary and bonus compensation is
| irrelevant outside of possibly some minor tax impacts.
| foobiekr wrote:
| I'm not going to name companies, but I think this is actually
| not quite right. While I agree with your broader point, in a
| lot of larger legacy companies the heavy use of buybacks to
| buoy the stock price, which in turn benefits executing
| compensation, directly plays into whether that cash is
| available to use for employee compensation.
| markvdb wrote:
| > 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.
| missedthecue wrote:
| 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.
| markvdb wrote:
| It's certainly possible to view these things from other
| perspectives than a narrow transactional economic
| perspective. Can you imagine some of those?
| Florin_Andrei wrote:
| TLDR: CEOs are wildly better paid nowadays, compared to
| decades ago, via mechanism X, as opposed to mechanism Y. Both
| X and Y ultimately deliver money.
| missedthecue wrote:
| And the question is whether that's a problem or not, and if
| so, who is it a problem for. My comment illustrates that
| modern CEO pay does not hurt the average employee in any
| way, only the shareholders.
|
| Either you don't think modern CEO pay is a problem, or you
| think it's a problem because it makes shareholders poorer.
| It doesn't impact the rest of the employees or reduce their
| incomes.
| wavefunction wrote:
| 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 Icahn is
| obscene in a humorous way.
| missedthecue wrote:
| 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.
| jjav wrote:
| > CEO salaries today are still about 20-1
|
| Base salaries are not significant to the discussion. Sometime
| high profile CEOs make $1 salary.
|
| What matters it the total comp, just as with any employee.
| Some FAANG engineers might make $175K in base salary but
| total comp is over 1M.
| jjav wrote:
| > They come from diluting Wall Street. Knowing this, the
| whole thing is way less of an outrage.
|
| The outrage is why all that dilution goes to the CEO. Options
| can be granted to all employees more fairly than common these
| days.
| lokl wrote:
| How People Find Fulfillment Now
|
| The post we actually need. I want to know about innovations in
| this space. Who has a disruptive way to bring fulfillment to
| lives at scale, using blockchain or whatever other buzzwords you
| need to attract investment. Because that's what's actually worth
| investing in. If you're starting a company to get rich, you're
| missing out on life.
| decebalus1 wrote:
| > You would think, after having been on the side of labor in its
| fight with capital for almost two centuries, that the far left
| would be happy that labor has finally prevailed. But none of them
| seem to be. You can almost hear them saying "No, no, not that
| way."
|
| As always, completely removed from reality, ivory tower bullcrap.
| Only a subset of the workforce has the luxury to be able to start
| a company. It is cheaper now and for good reason. There's not a
| whole lot of demand.
| _k3n_ wrote:
| These late period Paul Graham essays are so wildly out of
| touch. It's like he hasn't had a conversation with a normal
| person in 15 years. He seems obsessed with pointing out that
| it's slightly easier to get rich now, while ignoring the fact
| that it's drastically easier to become poor.
| tw600040 wrote:
| Top 100 richest people etc is an outlier by definition. Chasing
| that phantom isn't going to get one anywhere. For those seeking
| to build meaningful wealth (think ~10M etc and not billions) it's
| better to be grounded and focus on the simple more predictable
| things one can control and build systems for good side income,
| passive income, do the np brainers like 401K, Roth IRAs etc. But
| unfortunately one can only read about the Bill Gates of the world
| and there is hardly anything written about the guys in 10M range
| that have 3 Valeros and 2 subways and a motel.
| geofft wrote:
| > _But at the moment at least, there is definitely something they
| share in common that distinguishes them. What retailer starts
| AWS? What car maker is run by someone who also has a rocket
| company?_
|
| If you went back a century and tried to figure out who would be
| running both a car company and a rocket company, the answer would
| almost certainly be the guy running Standard Oil.
|
| And abstracting "AWS" a bit, if you went back a century and
| looked for a company that was both a giant logistics business as
| well as a giant provider of stuff you need to run a business,
| you'd find Andrew Carnegie, who owned the trains that ran on
| railroads as well as the factories that built the steel for the
| railroads.
|
| Amazon and Tesla and SpaceX are "tech" companies in the sense
| that they make effective use of new technologies just as US Steel
| and Standard Oil did. But history does not remember those as tech
| companies; history remembers them as industrial consolidations,
| as vertically-integrated conglomerates, as trusts.
|
| I think you need a little more data than 1982 to make this
| comparison meaningful. I suspect there was a time during the last
| century in which trusts were much harder to build, when there was
| effective competition, and where the economy was working well for
| everyone, and during that time, the people with unnatural amounts
| of wealth only had it because it was previously accumulated and
| made available to them as an inheritance. I suspect we are now
| _back_ to the economic /political conditions that made trusts and
| robber barons possible.
| giantg2 wrote:
| I just wish I was financially independent.
|
| When I buy a Powerball ticket (maybe every other year), I don't
| hope for the jackpot. I just hope for the million dollar prize.
|
| Edit: why downvote? This is how I feel. This is my only
| opportunity to make "real money".
| jodrellblank wrote:
| > Edit: why downvote?
|
| Every thread about money comes with some "if you don't want it,
| give it to me!", "I wish I had money", "If I had money I'd pay
| for my wife's college debt!!!", "I dream of a million dollars",
| just like every internet thread that hints of a woman posting
| gets some "no woman has ever spoken to me before, can I see
| your tits?" drooling.
|
| Drool doesn't make a good comment.
| giantg2 wrote:
| I didn't phrase it like your example comments. Isn't it at
| least important to let other losers like me know they are not
| alone? Otherwise you end up with biased representation that
| everyone on here has made millions and are successful company
| owners.
| mempko wrote:
| Mr Graham writes "You would think, after having been on the side
| of labor in its fight with capital for almost two centuries, that
| the far left would be happy that labor has finally prevailed. "
|
| Unfortunately Mr. Graham has an outdated view about the "far
| left". I recommend anyone interested in what a modern "far left"
| looks like learn about Richard Wolff and the Democracy at Work
| movement. A startup in a garage where everyone is an owner
| building great stuff is pretty much it.
|
| He did a Google Talk here:
| https://www.youtube.com/watch?v=ynbgMKclWWc
| labatyd wrote:
| Wouldn't that just be "the left" with "the far left" reserved
| for MAP (minor attracted persons gag), ANTIFA, weather
| underground, etc type organizations that have their hopes
| invested in the left but see no support from the actual party.
| ant6n wrote:
| What's that actual party that's left?
| mempko wrote:
| That's why I put "far left" in quotes. What is "just left" to
| many might seem to be the "far left" to Mr. Graham. But I'm
| just speculating what he meant by "far left" and could be
| wrong. He doesn't elaborate on the term.
| fsckboy wrote:
| he does elaborate, he said "after having been on the side
| of labor in its fight with capital for almost two
| centuries" whereby he describes the aspect of the left he
| is talking about. He is a pro capital-ist, and he's
| referring to the part of the left that is anti capitalist.
| There is a lot of the left that is not anti capitalist
| mempko wrote:
| I'm confused by this conversation. What's important about
| the semantics around the words vs my criticism around
| that his view is outdated? Nobody seems to comment about
| the substance around my original post.
|
| Paul Graham seems to think labor is now winning since it
| is able to get capital to do startups much easier than in
| the past. But nobody on the left is criticizing this. The
| left criticizes the organization of these companies as
| they grow bigger. Anti-capitalism is the criticism that
| only a small group of people end up owning everything and
| making all the important decisions. The criticism is the
| anti-democratic nature of how most corporations function.
| mortenjorck wrote:
| _> And there 's a reason why: these are mostly companies that win
| by having better technology, rather than just a CEO who's really
| driven and good at making deals._
|
| I'm not entirely sure how pg arrives at this point when he should
| know better than nearly any of us just how critical a factor the
| latter is, _in support of_ (and sometimes in spite of, c.f.
| Neumann or Holmes) the former. Isn 't the entire point of YC to
| build the networks of support, advisory, and dealmaking required
| to turn what would otherwise be good technology in isolation into
| a high-growth business?
|
| Superior technology by itself is just potential energy. It still
| takes old-world business skills to harness that energy into
| something productive.
| [deleted]
| rossdavidh wrote:
| I like reading PG's essays, but...I read a book on pretty much
| the same phenomenon ("Capital in the Twenty-First Century" by
| Thomas Piketty) a few months ago. It took a lot longer to cover
| the same ground, but it also covered it a lot better, and a lot
| more persuasively. Not unsurprisingly, it is also a lot less
| sanguine about the impact of recent wealth trends.
| mensetmanusman wrote:
| " But the main reason it's easier to start a startup now is that
| it's cheaper. Technology has driven down the cost of both
| building products and acquiring customers.
|
| The decreasing cost of starting a startup has in turn changed the
| balance of power between founders and investors. Back when
| starting a startup meant building a factory, you needed
| investors' permission to do it at all. But now investors need
| founders more than founders need investors, and that, combined
| with the increasing amount of venture capital available, has
| driven up valuations. [8]"
|
| This is true for software companies, but not for materials
| companies that have to build stuff out of atoms. (e.g. cheaper to
| move electrons than atoms).
| SuboptimalEng wrote:
| How people get rich in the future: social media
| [deleted]
| aqme28 wrote:
| I don't think that the top 100 richest people is a good dataset.
| You can be extremely rich without making it anywhere near that
| list.
|
| While a lot of those top 100 people made it to that list by
| starting companies, I'm curious how many of them did so by
| leveraging family or inherited wealth.
| JMTQp8lwXL wrote:
| People should read how the Forbes 400 list got started. It was
| extremely difficult to get off the ground. It's hard to know
| who has the most wealth -- it isn't public information, after
| all. Those who become wealthy via public markets have their
| ownership disclosed, so we can place a minimum value on their
| assets, and as a proxy, their total net worth.
|
| The changes to the list over the decades could be more a
| function of wealth disclosure, which are mandated by the
| regulatory requirements of equity markets (e.g., we can all
| look up Zuckerberg's percentage ownership of Facebook).
| josefresco wrote:
| I agree. 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. In between this scenario, and
| the other (handed money) there are countless scenarios that
| make conclusions very cloudy.
| pc86 wrote:
| > _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."
| Pfhreak wrote:
| 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
| opportunity to invest in some way you would not normally
| have access to. Or it could open the door to further
| introductions and connections. Network effects are powerful
| things, and being introduced to the right node in the
| social graph _can_ make all the difference.
| fumar wrote:
| 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).
| seppin wrote:
| I think it's dramatically understated as well how much of
| a permeant disadvantage not having connections from
| family/friends is. You can literally work your whole life
| and not be able to have a single deal be made that
| another person can ask a "family friend" to help
| facilitate in a matter of days.
|
| The door to some people is permanently closed, no matter
| how hard their "hustle".
| blackoil wrote:
| It means that one introduction becomes the difference
| between a talented, motivated, hard working person who is
| successful vs who is not.
| VBprogrammer wrote:
| There is a pretty low bar for inherited wealth. Simply having a
| family who is able to support you if everything goes pair
| shaped (maybe as little as letting you live in your childhood
| bedroom for little or no rent) gives you a huge advantage over
| someone who isn't in that position.
|
| Having parents who are able to lend / invest / gift modest sums
| of money is yet another step up the ladder.
|
| All the way up to having parents with business / political
| contacts in the industry you are trying to move into.
| lostcolony wrote:
| Yeah; the ways that small differences lead to big changes in
| outcomes is super interesting.
|
| I was lucky to live in a state where my college tuition was
| mostly paid for, and with a parent who, despite making very
| little (worked in the school system), was still able to help
| support me with a stable home and to help cover some of the
| gaps (like living on campus). I was very lucky.
|
| I realized later on the advantages other people had though
| when talking with people; a work colleague whose parents,
| though not rich, were far better off than mine, and had
| equipped her with life skills I and my family simply did not
| have. It was from her I learned about the company 401k, and
| investing in general, and caused me to realize that I should
| be investing money, not saving it.
| effingwewt wrote:
| Also, from personal experience people with those support
| networks almost always say 'And I did it all on my own!',
| though that's almost never the case.
|
| They don't see borrowing money or using connections as a
| favor. I've also heard them say 'If I was born today to a
| broke family I'd still be rich by 30! I'm a _hustler_! '
|
| These were my own family members and work colleagues, as well
| as an ex-girlfriend or two.
| fellowniusmonk wrote:
| I started working full time at 15 to keep the roof over our
| families head after my mothers cancer diagnosis. Until the
| early death of both my parents I had an anti-safety net, I
| can vouch that people underestimate the soul crushing nature
| of real poverty. My own congenital heart defects cost me many
| surgeries, procedures and money. Thank goodness for medicaid
| for children, I would probably be dead without it.
|
| I have fought without connections or degree to hit 1% in
| earnings for my age bracket in my late 20s, but the lack of
| wealth, the lack of security means developing ideas requiring
| runway and capital is nearly impossible.
|
| Struggling and succeeding through the financial equivalent of
| having you head held underwater by life is very very
| different than even a lower middle class upbringing.
|
| Thank goodness software development exists, it has the
| closest thing to effectively 0 signaling/gatekeeping to a
| very good income.
|
| I'd still kill for a couple years of runway and the money to
| hire two or three devs.
| gen220 wrote:
| Speaking as someone with a not dissimilar background to
| yourself, and happening to have friends in similar
| circumstances.
|
| You might want to consider what it is, exactly, that you
| want out of your career.
|
| You already are in a position to give your children a 10x
| better life, if that's something that drives you (this is a
| common denominator for a lot of people).
|
| The stress of chasing the 100x and the fear of the 0x,
| without connections and an infinite runway, might make you
| a 10x worse partner, parent, friend, etc. and you end up
| losing the things you were trying to secure.
|
| Again I don't know you or what drives you, but just wanted
| to share this idea in case you hadn't considered it before.
|
| Escaping poverty into 1% of income is a huge accomplishment
| that can never be diminished, from my humble armchair you
| don't _need_ to prove anything more to people. You've made
| it.
| fellowniusmonk wrote:
| The heart defect thing definitely puts me in a weird
| psychological bucket when it comes to underlying
| drive/motivation. I've only met one adult that had
| similar feelings/views and they had childhood multiple
| recurrence leukemia.
|
| I have some concepts that I want to try to bring into the
| world.
|
| One is a first principles notes/app platform I've been
| using for personal use that upends how apps and data
| relate. The goal is to reduce context switching costs to
| nearly 0 and reduce cognitive overhead for 80% of "life
| things".
|
| One is a social software approach to ending involuntary
| homelessness that is invasive enough that it needs tons
| of homelessness education for the general public and buy
| in from existing homelessness resources. I want to upend
| charitable giving by combatting the learned helplessness
| society inculcates from childhood.. because we perceive
| it as an intractable problem.
|
| Another is a platform for developers to "never" interview
| again and for high signal employed developers to capture
| 50/60% of profits going towards recruiters (piggy backing
| off my work with speaking talent and how speaker bureaus
| work.)
|
| I'd like to take an honest, well funded stab at those
| three things before I die, the notes app is the first on
| the docket because it's the easiest and I'm working my
| way there via bootstrapping atm because I'm weak at
| fundraising. Succeed or fail I want to birth these things
| into the world you know? Do my damndest before I die,
| that's really it.
| 908B64B197 wrote:
| > Another is a platform for developers to "never"
| interview again and for high signal employed developers
| to capture 50/60% of profits going towards recruiters
| (piggy backing off my work with speaking talent and how
| speaker bureaus work.)
|
| That's interesting. You mean to get rid of "Coding
| Interviews?"
| fellowniusmonk wrote:
| Get rid of coding interviews for devs not already
| employed is one aspect.
|
| Lead gen for filling a companies open roles either 1.
| Doesn't get engagement from the employed or 2. Extracts
| value from the already employed with little career
| return. It distracts from core competency.
|
| Software engineers path to self monetization is basically
| be a dev and get paid for labor or start an agency (which
| sucks and changes what your work actually is), but there
| is a third path that is pretty well trod that most people
| haven't experienced (and no devs really), that lets dev
| write code like they love and still reap most of the
| profit from placement without an active time sink.
|
| It's basically bringing what Zig Zigler originally
| modeled with his company and current speaker bureaus do
| for "hot" talent to the developer world.
| gen220 wrote:
| I definitely relate to wanting to birth projects like
| this into the world! The ending-involuntary-homelessness
| one sounds particularly interesting to me, personally.
| I'd love to hear more about it.
|
| A follow-up question, is there a reason you want the stab
| to be well-funded? As opposed to a FOSS, nominal-fee-for-
| hosting-bootstrap?
|
| From my limited perspective, the worlds' most successful
| technologies, in terms of (value created) - (costs
| incurred for each impacted party) tends to follow the
| FOSS/open model.
|
| Again, limited perspective, but having observed some
| "well-funded" things from the inside: being well-funded
| comes with the cost of an incessant demand for outsized
| and near-term returns.
|
| This demand is, quite frequently, at-odds with net value
| creation. In fact, it urges your project to become re-
| distributive: sucking money from bottom-to-top, either
| directly from the global poor, or indirectly, through
| government subsidies funded by taxes that are paid by
| those who need an income to survive (86% of federal
| revenue comes from individual income tax + payroll taxes,
| in the US in 2019. 7% from corporations.
| https://www.taxpolicycenter.org/briefing-book/what-are-
| sourc...).
|
| The redistribution passes through you, the founder, near
| the top, which is nice for you because you get to keep
| some of it, but it doesn't change the net value equation.
|
| All this to say, if your goal is to create real, enduring
| value, you might be on the right path already, today!
| fellowniusmonk wrote:
| I agree with what you are saying, another thought I have,
| which could be incorrect, is that there is a reason that
| so many second startup attempts by founders are
| successful. I think it has to do with general experience
| and many other things but one of the big ones is that a
| first startup that does "modestly" well or has a decent
| exit can setup a founder in a place where they have more
| breathing room financially for the next, a 20k chunk of
| cash gives a lot of breathing room for savings/disaster
| that takes stress off.
|
| I almost had it with my talent booking agency (which was
| bootstrapped over nearly 4 years), and then the money we
| were making went to a co-founders head and he blew up the
| company after developing a coke/sex addiction that
| unhinged his mental health, he couldn't handle the money
| and the access it gave him and that was at ~50k mrr....
| it was like a whole world opened briefly opened up for me
| before getting crushed.
|
| For me personally I experienced that having an income
| source not dependent on personal labor has a very strong
| benefit for being able to focus on execution and setting
| the company up strategically, it also let me hire devs
| who I trusted and had a compounding effect on speed of
| development. I like to think I am a good dev, but I'm not
| as good as 3-4 good devs, I can't afford that hiring in
| my current state.
|
| For the homelessness thing in particular, well funded
| also means well connected, it means you have buy in and
| backers and vested people going to bat for you. It means
| I don't have to do all the dev on my own.
|
| That's my current thinking at least.
| technofiend wrote:
| >Having parents who are able to lend / invest / gift modest
| sums of money is yet another step up the ladder.
|
| >All the way up to having parents with business / political
| contacts in the industry you are trying to move into.
|
| Well that and understanding _how_ to leverage those contacts.
| I have people in my social circle that could serve as
| contacts, but the idea of asking for that makes me extremely
| uncomfortable. And if I somehow forced myself to do it, it
| would still end up in a "what now" situation because it's
| not really clear what next steps are. I think the kind of
| people who know how to operate in those circles have a
| skillset that's not taught in a CS/EE curriculum.
| 908B64B197 wrote:
| > I think the kind of people who know how to operate in
| those circles have a skillset that's not taught in a CS/EE
| curriculum.
|
| You nailed it. I don't think there's any formal way of
| learning it either.
| jandrese wrote:
| I'd imagine a good number of those new to the top 100 were
| born into families in the top 1000. Sure they technically
| built their own tech company instead of inheriting their
| position, but they did so starting with a small 10M "loan"
| from their parents and already connected with the movers and
| shakers of Silicon Valley.
| mmsimanga wrote:
| Anecdotal. In Africa my observation is that people who grew
| up poor are more driven than the ones who grew up middle
| class. Kids of middle class parents often can not tough it
| out and many tend to be spoilt. Many of my middle class
| contemporaries live below the standard of living they grew up
| in. They are less successful than their parents.
| boringg wrote:
| What is leveraging family? Thats kind of broad. I.e. having
| parents who were able to afford you extra time for learning,
| paying for secondary education so you have no debt, exposing
| you to interesting people/ideas or something more Trumpian like
| offering up a multi million loans for free?
|
| I'd agree top 100 is too small a data set.
| eloff wrote:
| To make it on that list, you have to have succeeded at such an
| extreme outlier level that almost by definition almost
| everything had to have gone perfectly.
|
| That takes a lot of luck and advantages, such as family
| advantages. I'm not saying that detracts from what they
| accomplished, but they can't take all the credit either and
| it's not reproducible.
| rapind wrote:
| It should detract from what their accomplishments _appear_ to
| be though. Our society worships the ultra rich mostly without
| recognition of societies own contribution.
|
| Where would Amazon be without pre-existing innovation and
| infrastructure that the public paid for? Systems like roads,
| education, technologies, safe working environments, etc.
|
| We tend to regard these uber rich as though their success
| happened in a vacuum and all of those billions are justified.
|
| (I'm not accusing the rich themselves of necessarily
| promoting or having this view point. That would vary by case.
| Just that it's society's view in general.)
| VRay wrote:
| haha, this reminds me of World of Warcraft
|
| Third-party sites post rankings showing the best player
| performance on various metrics worldwide across thousands of
| boss fights
|
| There's often some choice you can make for your character
| where it works out like "10% chance of doing 5x as well, 90%
| chance of doing half as well", and the entire leaderboard is
| filled with people who lucked out
| boringg wrote:
| I'd agree - I have seen a lot of wealthy family children
| completely underperform relative to this bar. I'd say it's
| the exception and far from the norm that wealthy families to
| produce exceptional children.
|
| Exception to the statement being wealth taken from your
| countries people through corruption (like Putin, Jinping
| etc).
| pc86 wrote:
| I'd be curious to see if the rate of "exceptional" children
| is higher for "exceptional" families than "unexceptional"
| families since by definition it's going to be far from the
| norm regardless. But the rate could still be 2x or 3x (I
| don't think it is, but it's a possibility). There's a lot
| of focus on the exceptional but I think where having a very
| rich or wealthy family helps is less in a much bigger
| upside, which certainly exists in some degree, but in a
| much higher floor.
|
| If you are born into a single-income, lower-middle class
| family, your floor is poverty and even literally starving
| to death. If you're born into a family of two high-income
| individuals, the odds of you living your adult life in
| poverty are vanishingly small and your floor is probably
| something closer to a ho-hum middle/upper-middle life. If
| you're born into a family where one of your parents is the
| CEO of a publicly traded company and makes tens of millions
| a year, your floor is probably a $150k/yr lower management
| job in some sector-adjacent company that your parents had
| to call in a bunch of favors to get you.
|
| It's not so much that coming from an exceptional family
| increases the "genetic" odds of exceptionality, but it
| provides safety and security that allows you to take risks
| someone waiting tables at night to pay for college wouldn't
| be able to, which coupled with the natural contacts and
| associations you'll have, gives you a huge advantage.
| boringg wrote:
| Oh completely agree -- wealth raises the floor, not the
| ceiling.
|
| I'm not discounting that at all (and I recognize all the
| advantages that that class receives), rather pointing
| that generational wealth is normally created once, not
| multiple times in a family. Probably as a function of
| environment and not having the same drive - but thats
| merely speculation.
| [deleted]
| api wrote:
| I'd be more interested in a study of how people move from lower
| classes to at least upper middle class.
| jedberg wrote:
| Unless it's changed recently, I believe there is exactly one
| person on the billionaires list that started life in the
| bottom quintile -- Oprah.
|
| So you have a good question is all I'm trying to say.
| [deleted]
| areyousure wrote:
| https://www.forbes.com/real-time-billionaires/
|
| #1 was born to a teenage mom (and an alcoholic/deadbeat
| dad). Since she was still in high school, I assume she was
| probably in the bottom quintile of income.
|
| #7 was given up by his mother and adopted.
|
| #9 was born in the Soviet Union. It's likely his family's
| income (in rubles) was in the bottom quintile of the United
| States at the time. (Sources I've found suggest that the
| top 1% income cutoff in the SU was around 250 rubles per
| month, which is less than the $5,000--$7,500 cutoff for the
| bottom quintile in the US at the time.)
|
| #13 was born in Yemen before his family moved backed to
| India. One could probably assume that he was in the bottom
| quintile by US standards, because even today, the top 10%
| cutoff in India is below the bottom 10% in the United
| States.
|
| #18 was born in China and I have little doubt that he was
| far below the bottom quintile cutoff for the United States
| growing up.
|
| You might think it's a stretch to call Bezos's family
| "bottom quintile", but saying that billionaires Zhong
| Shanshan, Xu Jiayin, or Qin Yinglin weren't is hard.
| plandis wrote:
| I think this is misleading since Jeff Bezos' adoptive
| father (adopted when he was 4) was a petroleum engineer,
| and his grandfather was a director in the Atomic Energy
| Commission according to Wikipedia.
| lupire wrote:
| Why would you ignore Musk's father, who raised him?
| Alcoholic doesn't mean poor, and deadbeat is the wrong
| term for the father Elon lived with.
|
| Elon's "teenage mother" was a famous model.
| throwaway_1301 wrote:
| I suspect that was in reference to Jeff Bezos.
| atq2119 wrote:
| Being in the bottom quintile for the US is not very
| relevant if you're not from the US. What matters far more
| is your position within your own society, as that's what
| gives you the safety net, connections, education, etc.
| jedberg wrote:
| When I look at that list, Jeff Bezos is #1. The first
| woman on the list is at #10 and inherited her wealth. Are
| you looking at a different list?
|
| Also, people born in foreign countries had completely
| different experiences, and more importantly, what is
| relevant is if they were in the bottom quintile in their
| own country.
|
| If you're super rich in your own country then you have a
| lot of opportunity. For example Sergey Brin may have been
| born in Russia, but his family managed to come to the US
| when he was a kid and he was clearly middle class as a
| teen.
| throwaway_1301 wrote:
| > When I look at that list, Jeff Bezos is #1. The first
| woman on the list is at #10 and inherited her wealth. Are
| you looking at a different list?
|
| I think the comment does refer to Jeff Bezos. Here is the
| relevant section from Wikipedia:
|
| "At the time of his birth, his mother was a 17-year-old
| high school student and his father was 19.[17] After
| completing high school despite challenging conditions,
| Jacklyn attended night school while bringing baby Jeff
| along.[18]"
|
| IMO a 17 year old attending night school is pretty low in
| terms of economic status.
|
| Also I am sure there are other cases but I know about #17
| (Mukesh Ambani) and his father was a petrol bunk
| attendant - pretty low down even by Indian standards.
| jedberg wrote:
| Ok so Bezos was born in a low quintile, but then jumped
| when his mom married a wealthy person when he was 4. He
| effectively had the same advantages of a rich person
| through his adopted father's success.
| [deleted]
| areyousure wrote:
| His father was a Cuban refugee who came to the US alone
| as a 16-year old.
| jedberg wrote:
| Ok but he was wealthy when Bezos was a child. The point
| is, for all intents and purposes, Bezos grew up wealthy
| and had the support of a wealthy family when he went out
| on his own. He famously got a "small" $250,000 investment
| from his parents to start Amazon.
| areyousure wrote:
| For reference, the people mentioned are #1 Jeff Bezos, #7
| Larry Ellison, #9 Sergey Brin, #13 Mukesh Ambani, and #18
| Zhong Shanshan.
|
| And https://en.wikipedia.org/wiki/Zhong_Shanshan "He
| dropped out of elementary school during the Cultural
| Revolution and found work in construction."
|
| https://en.wikipedia.org/wiki/Xu_Jiayin "Xu Jiayin was
| born to a rural family in Jutaigang Village, ... His
| father is a retired soldier who participated in the
| Second Sino-Japanese War in the 1930s and 1940s. After
| the establishment of the Communist State, he became a
| warehouseman in his home-village. Xu's mother died of
| sepsis when he was 8 months old. He was raised by his
| paternal grandmother. After high school, he worked in a
| cement product factory for a few days and then worked for
| two years at home."
|
| https://en.wikipedia.org/wiki/Qin_Yinglin "Qin was born
| in 1965 in Hexi Village... He grew up in poverty.
|
| In 1982, when Qin was in high school, his father saved up
| money and bought 20 pigs, but all but one died. This
| motivated Qin to study pig farming at university, so that
| he could help people in his village earn money raising
| pigs."
|
| I'm not sure billionaires like Eric Yuan ("collected
| construction scraps to recycle copper for cash"), Jay
| Chaudhry ("Chaudhry was born in Panoh, a Himalayan
| village without running water"), Jan Koum ("When he was
| living on welfare, Jan Koum's family collected food
| stamps a couple of blocks"), Isaac Perlmutter ("He
| emigrated to America, arriving in New York City with only
| $250"), and Romesh Wadhwani ("He contracted polio at age
| of 2") count as "super rich in your own country" that
| would thus "have a lot of opportunity".
| dred_prte_rbrts wrote:
| Mukesh Ambani's dad was NOT lower quintile by any
| standard: https://en.wikipedia.org/wiki/Dhirubhai_Ambani
| UnpossibleJim wrote:
| https://www.visualcapitalist.com/the-decline-of-upward-
| mobil...
|
| Here's a chart that tries to show the decline of upward
| mobility in the U.S. with an article that explains it. While,
| from the reading I did while trying to find this - which was
| not a huge amount - it does appear down, somewhat, worldwide,
| it is in a much sharper decline in the U.S. on average. This,
| of course, is in comparison to European nations. Not a true
| "worldwide" comparison.
| betwixthewires wrote:
| Looking at that link, in particular I really like the 3
| tier "chance of out-earning parents" chart because it shows
| that while average upward mobility may have gone down,
| there's a sharp decrease in upper classes moving up while
| the decrease for lower classes is much less. This means
| that the rich in fact get richer less so than lower class
| people move up, and by a huge margin, than in the mid 20th
| century.
|
| Also I like the stagnant wage growth numbers because it
| demonstrates that the corporations are no longer the
| gatekeepers to economic opportunity. If you're more likely
| to make money starting a business than getting a job
| somewhere and working there 30 years, this is good for
| everyone because their economic prospects aren't dictated
| by McDonalds and General Motors. It means a more
| diversified economy, more opportunity beyond the beaten
| path, and more creativity driving economic growth.
|
| I'd also like to see the criteria for "upper", " middle"
| and "lower" used in the chart about income distribution.
| Judging by the first graph of "is it all bad news?" I'd say
| it's a hard dollar amount delimitation, a very bad metric,
| because while that would appear to show a bad trend, all it
| shows is that more people have higher amounts of money. The
| only way to get a clear picture is to weight income/wealth
| with purchasing power as the delimiter between classes.
|
| Another note on this first graph, it clearly shows that
| less people are in the lower class and lower middle class,
| and more people are in the middle, upper middle and wealthy
| class with each graph since 1967, which means people have
| gotten richer and as a whole life is getting better for
| people economically. Ideally what you'd want to see is the
| bars to the right of each sample get bigger and the bars to
| the left get smaller with each sample, and you almost see
| exactly that. I'd like to see the same graphs in 20 years
| and that will tell if upward mobility has actually
| decreased. I'd also like to see this graph weighted with
| purchasing power.
|
| From those graphs, upward mobility looks perfectly fine,
| I'm getting the sense it peaked about 20-30 years ago, but
| has not had a sharp decline and is definitely still higher
| than it was 50 years ago.
| UnpossibleJim wrote:
| And, let's be honest, poverty and poor in the 40's and
| 50's was very different than poverty and poor in todays
| imaginations. I'm not saying it's fantastic and that the
| safety nets are great, but they exist. Especially for
| single mothers, which weren't thought of in the 40's and
| 50's. I'm not one who glorifies the 60's, but it did help
| reproductive rights (which is a big step out of a poverty
| cycle) and it brought in help for single mothers, from
| church groups to government.
| labatyd wrote:
| Starts at decade born 40's and goes from there. This is the
| moral equivalent of starting in mid March to look at stock
| gains. If we had the same information from the founding of
| our country until today it would probably look closer to a
| U with "born in the 40's" being pretty damn close to the
| top of that U. This should not be used by anyone to make
| any conclusions.
|
| The world just went through massive war that destroyed
| nearly all of Europes infrastructure and the demand to fix
| it mostly manifested as opportunity for Americans. Since
| then Europe has rebuilt and both India and China have
| arrived on the scene as powerhouses of their own. We will
| never have the same opportunities that we had then again,
| or at least we should all pray we don't.
| sjg007 wrote:
| There are studies. The bay area is one of the best places for
| that to happen. New York as well I think.
| Quarrelsome wrote:
| > I'm curious how many of them did so by leveraging family or
| inherited wealth.
|
| Its interesting to note that many of our own prized
| meritocratic examples owe their parents in terms of
| intellectual inheritance or first-round funding.
|
| I believe Trump's father (a billionaire in 2018 dollars) was
| given start up capital by his father who owned a diner in gold
| territory during the rush. Elon Musk I believe also was the
| beneficiary of a small amount of investment from his parents.
|
| The question is whether or not that "counts". It certainly
| counts when discussing disparate outcomes between demographic
| groups when discussing success/failure with broad brush strokes
| but probably doesn't when comparing aristocratic-like
| inheritances to startup wealth.
| FireBeyond wrote:
| > Elon Musk I believe also was the beneficiary of a small
| amount of investment from his parents.
|
| There's so much mythology around this. I've heard the
| argument, "he had no support from his father", and I've read
| in more detail that one of the examples of said lack of
| support was "Elon and his friends wanted to buy and operate a
| video game arcade when they were teenagers, but his father
| refused to provide financial assistance".
|
| There's a whole world between "deadbeat" and "wouldn't buy
| his son and his friends their own video arcade".
| eptcyka wrote:
| I wonder if it really is easier than ever for the bottom 95% of
| US citizens (or bottom 95% of the developed western countries) to
| become rich by starting a business these days.
| WJW wrote:
| The majority of rich people being tech entrepreneurs does not
| imply that being a tech entrepreneur will make you rich. It is
| entirely possible to start a company and not make any money. In
| fact, greater ease of starting a business would increase the
| number of companies, thus the amount of competition would also
| increase and therefore the odds that any individual company
| makes large profits is smaller.
| jxidjhdhdhdhfhf wrote:
| Seems like it, for the simple reason that the infrastructure
| and process for an average person becoming rich is in place now
| in a way it wasn't in the 80s. For example there are startup
| incubators, VCs and general startup culture.
| SavantIdiot wrote:
| Hardly.
|
| Or rather, only if you fall into a small sliver of society.
|
| You are describing startup a "website/app company". There is
| an entire industry for trying to find the next TikTok.
| Unfortunately that is the ultimate unicorn. That immediately
| winnows the crowd down to maybe 10% that have degrees /
| knowledge of computer science?
|
| There isn't really any other "startup" culture right now
| except hoodie-wearning Rust/JavaScript/Python programmers
| interested in machine learning.
|
| It is a monoculture, and if you don't program, you ain't in
| it. Becoming "rich" isn't even accessible to 90% of the US
| population.
| jxidjhdhdhdhfhf wrote:
| I mean I'm not sure what it would even mean for becoming
| rich to be accessible to 90% of the population since the
| definition of rich is having above average means. It seems
| like only the lottery would fit there. On the other hand it
| seems much more accessible to go to school and get a degree
| in CS than to be born into wealth. For example, plenty of
| foreign students come here from poor countries and find
| there way into the startup world.
| missedthecue wrote:
| There are a lot of freshly minted billionaires in Asia these
| days so I'd say yes.
| eptcyka wrote:
| Asia is an underdeveloped market, excluding Singapore (a tax
| haven), Japan and South Korea etc on account of being
| American protectorates.
| codegeek wrote:
| The barrier to entry is very low these days so technically Yes.
| At least in theory, someone can start a "tech" business with a
| couple hundred bucks and shit tons of sweat equity. Back in the
| 70s-80s, I am sure you needed a lot more capital to start a
| traditional business. Granted, the 1 person bootstrapped tech
| biz won't hit the same 1B revenue scale in 10 years but you can
| become "rich" if your definition of rich is not necessarily the
| Top 1%.
| SavantIdiot wrote:
| You are not talking about the bottom 95%, you are talking
| about 5% of the bottom 95%: tech-educated programmers &
| engineers. Now look at how many have the skills to be a CEO
| and that's about another 5% of that. So in reality you are
| describing 2.5% of the population.
| Godel_unicode wrote:
| The population of people who have the skills to be CEO of a
| <25 person business is far more than 5% of the population.
| The blue collar sector is filled with such people running
| e.g. electrical or plumbing companies. Plenty of those
| people are doing very well for themselves, and now we're
| talking about how rich is rich.
| SavantIdiot wrote:
| I know a woman who is the CEO of her Etsy knitting
| company that her daughter helps her with. So I guess
| you're right, anyone can call themselves a CEO.
| arcturus17 wrote:
| > So I guess you're right, anyone can call themselves a
| CEO
|
| Semantics... That's not what I got from GP's point. They
| are talking about a company of up to 25 people (so, an
| order of magnitude larger than a two-person company).
| CEO, general manager, principal, top dog... What does it
| matter.
|
| The point is you can make bank with a business of that
| size - possibly the mom and daughter operation you're
| describing does.
| csomar wrote:
| Back in the 70s-80s, housing was very accessible and jobs
| were simpler and equally available (now you probably need to
| move to a _hot_ city). So people could build considerable
| real-estate equity from being a salaried man.
| simonebrunozzi wrote:
| By the way, confounding income with wealth is as bad as
| confounding market cap of a company and GDP of a country, e.g.
| GDP of India vs Apple's market cap [0].
|
| [0]: https://www.profgalloway.com/scarcity-cred/
| vmception wrote:
| > Of the 73 new fortunes in 2020, 56 derive from founders' or
| early employees' equity (52 founders, 2 early employees, and 2
| wives of founders)
|
| 0 husbands of founders
|
| An observation. Maybe it ought to say spouse to avoid the meaty
| bait of several different flavors that supports this reality. As
| at least 1 of these is an ex-spouse it also brushes against
| divorce expectations in various jurisdictions, where the unpaid
| contributions toward the union fit an O(log n) level of efficacy
| instead of linear O(n).
| theptip wrote:
| > In 1892, the New York Herald Tribune compiled a list of all the
| millionaires in America. They found 4047 of them. How many had
| inherited their wealth then? Only about 20%... So it's not 2020
| that's the anomaly here, but 1982.
|
| This is an oversimplification. Go back 100 more years to 1782 and
| I bet you'd find the dominant paradigm is inherited wealth. Go
| back another 100 years and it's still inherited wealth. I'd
| assume that below a certain tribal size you stop seeing much
| inherited wealth, and so the starting point for groups of humans
| is more like a meritocracy, where the strongest tribe member gets
| to keep the most stuff, but "inherited wealth dominates" is
| probably the default mode for most of what we'd recognize as
| "civilization".
|
| More generally it's extremely dubious to attempt to extrapolate a
| historical trend from the datapoints 1892,1992, 2020, especially
| given that your first two datapoints are different; if you saw a
| consistent trend going backwards in time you'd be more justified
| in extrapolating from that.
|
| A more nuanced model would be to think in terms of cycles; this
| is a very well-established concept in both history and economics.
| Technological paradigm shifts allow innovators to overturn the
| status quo. Over time power accumulates, monopolies form, big
| companies figure out how to exploit the new technology, the
| winners of the cycle entrench, and opportunities for upwards
| mobility decreases again. The industrial age is one such paradigm
| shift. The "information age" is another. Inside the latter, you
| can make the case for smaller cycles of innovation that still
| have large economic consequences, like mainframe computing,
| desktop computing, and cloud computing. Each of these paradigm
| shifts minted new titans of industry.
|
| When a new paradigm arises, the cycle repeats again. We see this
| with the railroad barons and other industrial innovators, the
| progenitors of a generation of inherited wealth. We'll probably
| see this again with the Zuckerberg lineage. It seems entirely
| possible to me that in 20 years' time, there are essentially no
| new tech multi-billionaires, and instead the big-5 tech companies
| just buy any startup that grows big enough to be a potential
| competitor. This would mint plenty of tech millionaires, but
| leave the "100 richest" unchanged. Of course, anti-trust laws
| exist, and so this outcome is far from a certainty. But it would
| at least be consistent with how previous paradigm shifts have
| played out.
|
| A potential counter-argument to this line of reasoning would be
| to look at the cycle period and argue that the troughs of
| ossification/consolidation between cycles are shortening, and we
| should expect the existing dominant companies to get unseated by
| whoever comes up with the next paradigm shift. This is a very
| interesting subject for discussion; I'd just note that it is a
| much more nuanced argument than Graham's point, which is
| essentially claiming historical homogeneity prior to 1892 and
| using that to imply that things will stay the same as they are
| now going forwards.
| anonu wrote:
| > Of course the Gini coefficient is increasing. With more people
| starting more valuable companies, how could it not be?
|
| The conclusion in the last 2 sentences feels like a non-sequitur.
| The article forms a cogent idea of how we're back in the age of
| startups like we were 100+ years ago - and then ends in "yes this
| is why we have inequality".
|
| Inequality is a lot more complicated concept than "people are
| starting tech companies and theyre highly valued". A lot of it
| has to do with government policy, education, etc...
| anoncow wrote:
| Twitter thread:
| https://twitter.com/paulg/status/1381638769967837193
| csbartus wrote:
| > In 1982, 84% of the richest 100 people got rich by inheritance,
| extracting natural resources, or doing real estate deals. Is that
| really better than a world in which the richest people get rich
| by starting tech companies?
|
| Google, Facebook, Amazon are extracting human resources. More
| precisely they are exploiting it.
|
| Which one is better? Doesn't matter. Once something is exploited
| it will disappear.
| Certhas wrote:
| It's an interesting read, and not entirely new information, but I
| find this leap pretty unconvincing:
|
| > So it's not 2020 that's the anomaly here, but 1982. The real
| question is why so few people had gotten rich from starting
| companies in 1982.
|
| It seems more likely to me that industrialization and mass-
| production in the late 19th century, and information technology
| in the late 20th century were inflection points at which the
| gradual progress of new technologies enabled revolutionary
| businesses across a wide spectrum of the economy. There is no
| reason to assume that this is always possible, or to extrapolate
| into the future.
|
| > we should expect both the number and wealth of founders to
| grow, because every decade it gets easier to start a startup.
|
| Non-sequitur. If the technology that there is is sufficiently
| well exploited by Google, Amazon, Facebook, then where is your
| supposed opening? We are not at the end of the IT tech revolution
| now, but we are also nowhere near the beginning. The best VR
| experience right now is engineered by Facebook, not by some
| plucky start up acquiring new customers.
|
| It's easy to imagine that tech will enter a consolidation and
| comodization phase in the next decades, if it hasn't already.
|
| In fact, if the forces that are claimed to be behind the
| resurgence of founders getting rich were really correct, we
| should see lots of new manufacturing start ups. Yet those are
| extremely rare, and not terribly disruptive in the grand scheme
| of things.
|
| Edit:
|
| The Gini coefficient bits are also pure ideology dressed up as
| data. Sweden has more billionares per capita than the US, has a
| better per capita start up rate than the US, and yet because it
| never followed the disastrous right turn on economic policy, it
| has far far far lower inequality (though rising somewhat recently
| it's still lower than France for example).
|
| [1] https://www.oecd-ilibrary.org/science-and-technology/no-
| coun... [2]
| https://data.worldbank.org/indicator/SI.POV.GINI?locations=S...
| ptr wrote:
| Sweden's wealth Gini coefficient is the 4th highest in the
| world though. US is at 5. Asset distribution is very unequal in
| Sweden.
| https://en.wikipedia.org/wiki/List_of_countries_by_wealth_eq...
| Certhas wrote:
| That's an interesting point, thanks. I only looked at
| income...
| danielscrubs wrote:
| If you have assets they are barely taxed, if you have the
| audacity to go to work you are taxed into oblivion.
|
| The politicians tried to tax assets but to no ones surprise,
| there was a mass exodus of rich people so they stopped.
| stereolambda wrote:
| _> Non-sequitur. If the technology that there is is
| sufficiently well exploited by Google, Amazon, Facebook, then
| where is your supposed opening? We are not at the end of the IT
| tech revolution now, but we are also nowhere near the
| beginning._
|
| This is so true. I say the "tech" (~= internet software?)
| industry is now somewhere near the telecom level of maturity.
| We can think of these companies selling the raw (cloud)
| infrastructure as of something related to that. (Although the
| precise economics of this for customers is debatable, as
| discussed time and time again on HN). Selling ad placements is
| not predicated on huge innovation either, rather on trying to
| find untapped markets (as much as they still exist) and
| efficiency gains for the same thing.
|
| The next stage, farther in the future, is these corporations
| becoming more like boring railroad companies. In fact, it's one
| of the few glimmers of hope for people aware of big tech's
| ramifications.
|
| _> The best VR experience right now is engineered by Facebook,
| not by some plucky start up acquiring new customers._
|
| Maybe AI is a better example of something that has huge
| potential for sure, but is mixed in equal proportions with
| fantasy. To use similar analogies, I'd say it's in its (later
| phase of) dotcom era. And even then, as you say, it's not
| really made by startups built to get big, but - at best - by
| entities hoping to get bought.
|
| But this way, we are still kinda able to sustain the public
| mythos of tech entrepreneur as a big idea person, and not an
| industry knowledge and capital efficiency person (related to
| _really driven and good at making deals_ from the essay). It
| may be a result of fiscal policy, but it 's certainly also
| beneficial for existing big corporations. Also, the romantic
| idea is more emotionally appealing.
| PragmaticPulp wrote:
| I've been noticing an increasingly bimodal distribution of
| success among startup founders, at least locally. I see more
| stories of unbelievably large funding rounds online every day. I
| read non-stop Tweets about how easy it is to secure funding.
| Locally, we have a few lucky founders tapping into this easy
| capital and raising valuations that would have seemed impossible
| a few years ago.
|
| Yet outside of the lucky few founders securing this money, I see
| a lot of founders struggling to even get the attention of VCs. I
| know several otherwise successful local startups with good
| founders that have been failing to raise for months or even years
| because they don't fit the mold of a potential rocketship
| startup. In some ways, having established customers and a working
| business model with self-sustaining revenue is a negative sign
| for investors looking for the next 100x investment or quick flip
| opportunity.
| levinb wrote:
| Advice straight out of The Onion, 18 years ago:
|
| https://local.theonion.com/i-should-start-some-sort-of-huge-...
|
| "Working security at Rite Aid for $6.55 an hour is just not
| cutting it the way it used to. But I'm not worried, because last
| night, as I was standing there staring at the rows of shampoo
| bottles and disposable razors, the answer hit me: I should start
| some sort of huge corporation!"
| CivBase wrote:
| > There were no fund managers among the 100 richest Americans in
| 1982. Hedge funds and private equity firms existed in 1982, but
| none of their founders were rich enough yet to make it into the
| top 100. Two things changed: fund managers discovered new ways to
| generate high returns, and more investors were willing to trust
| them with their money.
|
| PG brushes past this to talk about tech company founders, but I
| thought this part was actually kind of interesting. Why _is_
| there so much money in hedge fund management? My understanding is
| that their profits come from skimming off the top of the proceeds
| generated by investing their customers ' money. What's stopping
| hedge fund management firms from racing to the bottom by
| competing for customers?
| darkwizard42 wrote:
| To be fair, nothing stops hedge fund management from doing
| this. Most funds cannot justify a "2 and 20" fee structure
| right off the bat. However, there is a certain bias after
| having some track record of success to charge that fee
| structure (or more) as a way to signal you are a "big dog" fund
| to invest in. Does a private university need to have a list
| price of $75K a year? No, but they do this to signal they are
| "elite" (even if 80% of their students get financial aid and
| never pay that list price).
|
| Newer funds always start with a lower fee on AUM and sometimes
| have more creative fees on top of profits.
|
| My point on universities is largely grounded in my experience
| at Carnegie Mellon which acknowledged they were going to just
| start charging more to make themselves more elite (and while
| some of that money did go back into making the programs better,
| a lot did not) and it worked...
| cblconfederate wrote:
| > What's stopping hedge fund management firms from racing to
| the bottom by competing for customers?
|
| Regulatory capture.
| missedthecue wrote:
| What regulations prevent any given firm from offering 1 and
| 10?
| mateo411 wrote:
| I think if you want to be a successful hedgefund manager, then
| you need to beat the market. This means if the market grows by
| 5%, then the funds capitalization needs to grow by more than
| 5%.
|
| What you are describing is how a bank or more conservative
| financial investment management firms work. These are the firms
| that manage mutual funds or sell life insurance.
| nly wrote:
| > What's stopping hedge fund management firms from racing to
| the bottom by competing for customers?
|
| Having money doesn't automatically make you wiser or smarter
| than the average Joe down the race track. Many wealthy people
| still believe hedge funds have "the knowledge" or some sort of
| edge. This is re-enforced by many funds being exclusive to
| those investing through a financial advisor, or with a minimum
| amount of capital to invest. Having wealth actually does open
| doors that Joe with his $50K of life savings can't access.
|
| Paying 2 and 20 is indeed less common than it used to be
| though.
| jessaustin wrote:
| Hedge funds are another group who manage to avoid just
| taxation. All that "carried interest deduction" crap means a
| hedge fund manager never pays the top marginal rate, no matter
| how many millions she socks away.
| onlyrealcuzzo wrote:
| It's hard to take this article seriously. People get rich now
| from companies because multiples have been artificially pushed
| higher by low interest rates.
|
| If that weren't the case, the top 100 would still likely be
| dominated by heirs.
|
| All that's changed is the Fed is manipulating the market more now
| than before, and that's benefiting growth stocks and fund
| managers of growth stocks... among other things.
| [deleted]
| Taek wrote:
| The games we've played with money have pushed valuations to a
| point of being nearly meaningless. There are people who own a
| billion dollars of stock/crypto, and then there are people who
| own multiple yachts, multiple mansions, sports teams,
| factories, etc.
|
| The thing that bothers me the most about paper wealth is that
| not all of it can be exited. The economy may say that there are
| 500 new billionaires, but if all 500 of them try to buy a fleet
| of yachts at the same time, their divestment would crash (rug
| pull) their entire wealth.
|
| Anyone who already owns a fleet of yachts is in a completely
| different category from someone who owns nominally the same
| value in paper.
| robjan wrote:
| Thing is you don't even need to liquidate in order to get
| that yacht. Many are taking low interest loans collateralised
| against these paper assets.
| globular-toast wrote:
| Exactly. At the end of the day there is only so much stuff to
| go around and we're pretty much at the limit of what people
| actually want. If a billionaire wakes up twice as rich
| tomorrow is he immediately going to buy a bigger mansion?
| Another car? Another yacht? More expensive food?
| Realistically he's unlikely to really want anything else.
| Billionaires have essentially infinite wealth. They can have
| whatever they want. But if one of them one day decided what
| they really want is a B52 bomber or an entire neighbourhood I
| think the limits of that wealth would become apparent.
|
| I think what we're seeing is the limits of possibility. There
| are more billionaires than ever because they're all
| essentially at the limit. People like me are rich. I own a
| car with leather seats and air conditioning. I have my own
| home cinema. What do they have that I don't? A bigger car? A
| better home cinema? Who cares?
| giantrobot wrote:
| A billionaire (or a sufficiently wealthy millionaire),
| along with their family, has practically unlimited agency.
| You don't. Their wealth is also self perpetuating.
|
| A billionaire can spend 1% of their wealth hiring well
| compensated professionals to manage their wealth and keep
| it growing. Just the fact a billionaire _has_ their wealth
| means they have access to influence and opportunities you
| will never have.
|
| Even someone with a mere hundred million in wealth only
| needs a 1% yearly return to have a million dollars a year.
| Even that _paltry_ amount would allow them to live better
| than anyone you or I know.
| jedberg wrote:
| > What do they have that I don't?
|
| The ability to do whatever they want whenever they want. If
| they want to see a live show in another country, they can
| get front row seats and be there. If they want to talk to
| the President, they can. If they want a new law that
| benefits their business, they can make a few calls and get
| that done.
| AnimalMuppet wrote:
| True, low interest rates push multiples higher. That's _one_
| factor increasing valuations, and it 's a factor PG didn't
| mention.
|
| > If that weren't the case, the top 100 would still likely be
| dominated by heirs.
|
| Baloney. A (relatively) large number of people would still be
| getting really rich from startups. They might not be getting
| quite as rich - say, less rich by a factor of 2 or 4.
|
| > All that's changed is the Fed is manipulating the market more
| now than before, and that's benefiting growth stocks and fund
| managers of growth stocks... among other things.
|
| Yes, that has changed. No, that is not _all_ that has changed.
| Far from it.
| 1001101 wrote:
| The Fed funds rate was 21.5% in June 1982. Negative real rates
| in 2020. Equity models that discount future earnings to a risk-
| free rate are going to spit out significantly different numbers
| in each regime.
| sharemywin wrote:
| Technology has changed things. Amazon generates twice as much
| revenue per employee as Walmart.
|
| So the bottom line is Tech can sell a hell of lot more of
| china's stuff per American worker than old retail.
| Sohcahtoa82 wrote:
| I think that has less to do with technology and more to do
| with how much simpler it is to ship things out of about 100
| distribution centers than it is to sell products from a few
| thousand brick-and-mortar stores.
| NovemberWhiskey wrote:
| > _If that weren 't the case, the top 100 would still likely be
| dominated by heirs._
|
| Do you believe that because you think that heirs are likely to
| hold their wealth in cash, bonds or in other assets that
| haven't been "artificially pushed higher by lower interest
| rates?"
|
| It seems to me that if wealth of any kind is invested well,
| it's likely to generate exactly those same higher returns; the
| source of the wealth is kinda irrelevant, no?
| 6gvONxR4sf7o wrote:
| Heirs will probably be diversified. Their returns will be
| about average. Founders will win bigger and lose bigger, so
| when you only look at the top top top winners, those outliers
| will be outlierier. Wider variance means higher highs and
| lower lows.
| motbob wrote:
| If you look at nominal interest rates, yeah. Real interest
| rates haven't been particularly lower post-1980 than pre-1980.
| Sure, high interest rates pre-1980 built wealth passively, but
| periods of high inflation also destroyed wealth passively.
| edouard-harris wrote:
| > People get rich now from companies because multiples have
| been artificially pushed higher by low interest rates.
|
| No -- this is not correct. In reality, multiples are driven by
| the company's growth rate, minus the prevailing interest rate.
| And while it's true that interest rates are historically low,
| the growth rates of today's successful companies are high
| enough that increasing the interest rate (from ~0% to, say, 5%)
| wouldn't really have a big effect on valuations.
|
| As an example, note that Slack's 2020 revenue was around $1B,
| which represents an approximately 94% YoY increase over its
| 2019 revenue [1]. At 0% interest rates, that gets them a (very
| roughly) 10x valuation multiple. At a moderate-high 5% interest
| rate, their real growth rate drops to 94% - 5% = 89% YoY. One
| can argue that this should drop their multiple from 10x to
| maybe something like 9x. That drop is not nothing, but the
| reality is that it represents little more than a rounding error
| on the founder's wealth.
|
| PG's point is that growth rate is by far the dominant factor in
| valuations. He correctly ignores interest rates in the essay
| because (barring out-of-band hyperinflation) their magnitude is
| too small to have a material effect on the conclusion.
|
| [1] https://www.macrotrends.net/stocks/charts/WORK/slack-
| technol...
| jeffreyrogers wrote:
| It's a bit disingenuous to say 1/4 are getting rich from
| investing. They are getting rich because of the leverage embedded
| in the standard 2-and-20 payment agreement where the hedge fund
| managers get 2% of assets under management and 20% of profits
| above some threshold. Plenty of not particularly good hedge fund
| managers get really rich because they can convince wealthy
| institutions to give them money.
|
| The VC industry is the same way. Most funds' returns are poor,
| though there are obvious exceptions, just as there are in the
| hedge fund industry.
|
| Edit: the leverage is that the GPs (general partners) usually
| only put up 5% max of the total assets under management (the rest
| comes from the LPs (limited partners), the pension funds,
| endowments, high-net worth individuals, etc. invested in the
| fund) but get 20% of the profits.
| ablekh wrote:
| > It's easier now to start and grow a company than it has ever
| been.
|
| Arguing that, due to being easier now to start and grow a
| company, more wealth gets created, is "conveniently" seeing only
| one [the positive] side of the coin. Because, considering the
| alarmingly low ratio of success in the startup world, growth in
| the overall number of startups also means growth of startup
| failures (which often means destruction of wealth, however small,
| instead of its creation). But, for obvious reasons, VCs don't
| like to talk much - at least, publicly - about it ... And this
| essay is just one more example of that trend.
| corpMaverick wrote:
| I don't always agree with PG. But this is the first time I feel
| disappointed by one of his posts. He is thinking about the rich
| of the rich. The 0.001% . May be he can make the case that
| intellectual capital is as important as assets capital. But that
| doesn't make it any better for the millions of people struggling
| in the middle classes or the billions of people living in
| poverty.
| Ericson2314 wrote:
| I'm really glad even Hacker news is calling out PG's bullshit
| now.
| csbartus wrote:
| Usually I find his articles entertaining, sometimes thought-
| provoking.
|
| This one is none of these.
|
| I've commented my own objections, read others'. What strikes me
| is that this article was proof-read by (the usual) people, and
| no one realised it will blow up on HN.
|
| That smells a bubble in which PG/YC is.
| Ericson2314 wrote:
| Truely it does.
| arminiusreturns wrote:
| Wow, its nice to see something I've strategized for years
| articulated well. While I would like a larger dataset, and mostly
| focus on the non-billionares in my more reasonable target wealth,
| it generally matches my analysis.
|
| "Roughly 3/4 by starting companies and 1/4 by investing."
|
| Some people have given me a hard time for not being too attached
| to companies, especially startups, but one of the things I've
| learned by seeing the internals of hundreds of companies, both as
| a contractor and as an employee, is that there are so many
| lessons to be learned at the business level _if you learn how to
| pay attention and think about those problems_. I found that as a
| sysadmin I was around these kinds of discussions a lot, but that
| other sysadmins just tuned most of it out. Instead I exploited
| the fact that so many C 's viewed me as a "janitor", and soaked
| up the knowledge about what to do right and what not to do... and
| I continue to do so.
|
| Now, I finally got my foot in the door in finance, and my two
| main strategies match (starting a business and investing).
|
| "There were no fund managers among the 100 richest Americans in
| 1982. Hedge funds and private equity firms existed in 1982, but
| none of their founders were rich enough yet to make it into the
| top 100. Two things changed: fund managers discovered new ways to
| generate high returns, and more investors were willing to trust
| them with their money."
|
| This is because put options weren't even a thing until, what,
| 1977, and more complicated options weren't removed from the
| moratorium until 1980. It was a very new field even for the
| existing hedge fund managers.
|
| "of the 73 new fortunes in 2020, 4 were due to real estate and
| only 2 to oil."
|
| Again, this is a very limited dataset, especially as someone who
| has been inside at least one oil boom, with family in the
| industry. I've seen quite a few many-millionares created by oil,
| they just don't show up in the forbes lists. They are still
| extremely wealthy, of course it's very sad to see so many of them
| piss it all away on hookers drugs trucks and houses, only to end
| up destitute when the bust cycle hits... (and a little
| infuriating)
|
| The real crux is in defining the word "rich" it seems. To me,
| building up enough that I can retire early and live off my
| investements without penny pinching to much is "rich". I only
| need a few mil for that, and it's achieveable. To others,
| especially with high expenses because they live in places like
| SV/NY, their required "rich" is many more millions.
| qzw wrote:
| I'm rather disappointed PG would think that the Forbes wealth
| list could support any kind of conclusion whatsoever. One of the
| biggest reasons that the top of the list is filled with tech
| billionaires is that their wealth is relatively transparent,
| being mostly in the form of stock holdings in publicly traded
| companies and often directly disclosed. This makes it much easier
| for Forbes to estimate their net worth with some degree of
| confidence. Older wealth is often more opaque and diffuse, hidden
| behind various complex financial structures or stored in assets
| that are difficult to value or rarely change hands. Whether
| Forbes is aware of how much wealth there is and in what form,
| depends largely on the desire of the possessor to make it known.
| Some would want to disclose (or even inflate) their wealth for
| ego or branding reasons. Others would likely prefer to remain off
| the Forbes list altogether. So the Forbes list is a poor starting
| point even for a discussion soley about the wealthiest people. To
| draw any kind of inference from it to the broader economy is just
| downright ridiculous.
| mmmmmbop wrote:
| Genuinely curious: Do you have any more background on this? Who
| are these rich people that are not listed in Forbes?
| CameronNemo wrote:
| 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?
| SavantIdiot wrote:
| I wish he had listed his classifications. I'm looking at the list
| now and all I see are tech monopolies, hired C-level names,
| inheritance, and financiers. A bit different picture than the
| pro-scrappy-startup narrative Paul has been pushing for over a
| decade.
| ClumsyPilot wrote:
| Making economic recommendations based on top 100 richest people
| is like making dieting reccomendations based on top 100 anorexia
| sufferers.
|
| Any statistician jnows that your sample neess to be
| representarive of the population. Define your 'rich' and take a
| random sample.
| sjg007 wrote:
| I enjoyed reading this. We are in a tech growth phase where the
| cloud, SaaS and AI are eating up both businesses and antiquated
| business processes (aka digital transformation). Find a niche and
| help them evolve.
| skybrian wrote:
| From the headline, I had guessed this article would be about how
| people become millionaires rather than billionaires, but that
| would be a whole different article.
| aqme28 wrote:
| And would probably have a lot more heirs.
| hospadar wrote:
| While I think this is in general interesting, a couple things
| stand out to me:
|
| > And there's a reason why: these are mostly companies that win
| by having better technology, rather than just a CEO who's really
| driven and good at making deals.
|
| Really? Always? Are we sure that some companies [which are funded
| by giants like softbank and have names that rhyme with schmuber]
| don't [at least] sometimes win because of massive capital
| injections which allow them to subsidize consumer-facing pricing
| and stomp all over the competition? Having "better technology"
| wouldn't allow you to beat uber, you'd also need to subsidize
| rides for years to choke out uber on pricing. This is true for a
| lot of big modern companies - they can leverage their capital to
| crush early competition and wait till they're the only game in
| town to raise prices and cover their costs (or hope that
| economies of scale will catch up). I realize that PG isn't saying
| this _doesn't_ happen, just seems like he's painting a glossy
| "it's because meritocracy and innovation" picture over things
| that often have a lot more to do with simply having access to
| insane amounts of capital (i.e. _being good at making deals_ )
|
| > Of course the Gini coefficient is increasing. With more people
| starting more valuable companies, how could it not be?
|
| I think this is a really deceptive statement - it kinda sounds
| like "more people are getting rich" when in fact fewer people are
| getting [even] richer. The details of _who_ is getting richer are
| interesting and I think well covered by this post (and I'm not
| arguing that), I just have a personal beef with the presentation
| that maybe it's somehow OK (or good?) that income inequality is
| getting worse because... tech?
|
| A reframing of this story about how the combination of tech & the
| modern world of VC enables the ultra-wealthy to more effectively
| concentrate and grow their wealth (even if sometimes a startup
| founder gets to win the lottery and join the club) could be just
| as factually correct and a little less rosy.
| lanstin wrote:
| Maybe things have shifted, but the Jobs bio and the Gates bio
| makes one think that in the technology land rush, "better
| technology" looses to "driven and good at making deals."
| Perhaps the "worse is better" feature of technological culture
| explains it, but the Woz and Unix did not win; Jobs and
| Microsoft won. (Perhaps free software will win in the end, but
| no guarantees in history.)
|
| In fact, if I had to explain the change in technology over my
| lifetime it is that the people who understand technology and
| love elegance and efficiency are being pushed out by the people
| that want to be wealthy and get in on good deals.
| splithalf wrote:
| Is it possible that we just don't know about people inheriting
| great wealth nowadays? Is there a world registry of wealth
| somewhere to track this stuff or does Forbes just search public
| information sources? Maybe the richest people are secretive.
| TurkishPoptart wrote:
| The Rothschild family is not included in the Forbes 100 richest
| list.
| sgt101 wrote:
| The way that the Gini coeffient could be reduced in the face of
| start-up wealth is via the introduction of progressive taxation.
| That, Mr. Graham is how it could be.
| vmception wrote:
| > In 1982, 84% of the richest 100 people got rich by inheritance,
| extracting natural resources, or doing real estate deals. Is that
| really better than a world in which the richest people get rich
| by starting tech companies?
|
| Data is a natural resource and is being extracted. It is not
| better. It has nominal differences and doesn't cause as much
| pollution.
| rubiquity wrote:
| Given the massive concentration of capital to a small pool of
| behemoths that seem to be paying their employees to not start a
| competitor and the amount of debt being carried around by the
| majority of public companies, I'd say it's far more likely we're
| headed towards a period like 1982 but with new players than we
| are heading towards the 2000s and 2010s again. Companies saddled
| in debt will have a hard time innovating but their market
| presence is worth buying.
| jeffbee wrote:
| I don't think I can take seriously the claim that people did not
| start companies in mid-20th century America, because of high
| taxes. I'm thinking of the whole Fairchild diaspora, Intel,
| Microsoft, Apple just in the computer industry, then there's Wal-
| mart etc. all of these predate Reagan's low-tax philosophy.
| Layke1123 wrote:
| Does that apply to Theranos? I can't tell you how many class
| action lawsuits I've received lately too. Looks like move fast a
| break things is infecting everything. I suspect eventually the
| government will HAVE to catch up and redistribute the wealth for
| the wealthy.
|
| That or the people will do it with some kind of sharp, pointy
| object I'm sure.
| scottious wrote:
| Okay yeah, but that's like "Forbes 400" level rich, which is
| almost nobody. What about "acquire $10M by 50 years old" level of
| wealth? To me, that seems like a much more interesting story
| because it captures many more people.
| cupofcoffee wrote:
| Where to read more about stories like that?
| AlchemistCamp wrote:
| https://mixergy.com
| backtoyoujim wrote:
| Also about about money managers: in 1982 pensions existed. Now
| there is only the 401k. Now money managers get to invest other
| people's pensions.
|
| If I was a money manager for a 401k I would prolly start
| investing other people's money into money management and it
| accouterment.
| lawn wrote:
| Tell me, why are people still willing to listen to PG? He's
| clearly justifying an existing belief here by cherry picking.
| didibus wrote:
| As an aside, it always frustrates me when people say that someone
| got rich from investing, when really they got rich from running
| an investment firm and doing investment managing. It gives the
| wrong impression that people are getting rich from their own
| investment.
| internetslave wrote:
| 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 and out is slavery, you
| never make enough money to escape the debt of your mortgage.
| Sure, some FAANG employees do, but the number is small, and with
| a family, 300k compensation still doesn't cut it, you will be
| working forever.
|
| People are getting "rich" from startups because they're actually
| capturing the value of their labor, which I argue, used to happen
| at corporations.
| mattlondon wrote:
| I disagree. Sure I am not able to just give up work entirely
| but those sort of figures you mention lead to a very
| comfortable standard of living, even supporting my entire
| family on one salary.
|
| I guess it is about expectations about what you think you
| should have. I don't have a Tesla for instance.
| giantg2 wrote:
| I think some of this depends on the area. Even in an average
| area, a $200k salary with a family could give the option for
| early retirement.
|
| I make less than $100k and support my family in an average
| area. It does feel like I'll work until I die. If I were making
| double that, it would be a huge difference.
| NortySpock wrote:
| Yeah, also making under 100k if I made 200k even for a year
| it would absolutely let me pay for my wife's college out of
| pocket rather than co-signing on debt, and then let me either
| buff my retirement IRA or pay down a chunk the mortgage...
|
| Located in the Midwest USA
| giantg2 wrote:
| I know, right? Even $100-120k would make a huge difference.
| I see people talk about maxing out their 401k, but who has
| $20k per year to save? I mean, I've done everything right -
| good grades, stay out of trouble, got an ok job, worked
| hard (not so much now after being screwed multiple times,
| went to night school for a masters, 9 years in, and still a
| not very successful intermediate developer. Kind of
| depressing.
| tqi wrote:
| "working for a corporation day in and out is slavery"
|
| Corporations are the boogeyman de jour but from personal
| experience, landlords / restrictive zoning / "anti
| gentrification" activists are the primary cause of my angst. I
| make more money now than I ever thought I would, but a truly
| staggering amount of it goes directly into my landlord's
| pocket.
| ClumsyPilot wrote:
| Zoning doesnt matter unfortunately, prices go up in line with
| maximum possible mortgage amounts.
|
| Real-estate prices have no bearing on 'value' of the land or
| materials. The buyer is convinced that he will get that money
| back and then some from the next sucker to buy it off him. It
| a pyramid scheme, detached from real economy.
| kmeisthax wrote:
| In this particular economy, absolutely - where _else_ is
| your money going to go?
|
| However, part of the way we got here is specifically due to
| neighborhood segregation and zoning laws. People don't like
| their housing going down in value, so they protest anything
| that might cause it to do so. Whether or not upzoning would
| actually harm property values is not material: the fact
| that people _believe_ it to do so is enough to get them to
| protest increases in the housing supply. This means that
| every local government is blocking housing supply and
| working to keep prices high, which makes housing an
| artificially safe investment, and thus encourages infinite
| speculation.
|
| This will continue until we break the idea that home
| ownership = retirement plan and that dense housing = cheap
| housing = crime. Once that happens, then it makes far less
| sense to speculate on real estate and we can start
| unwinding this long con. The reason why maximum mortgage
| amounts are so high is that banks _can 't lose_ - if the
| the debtor pays off their investment in full, then the bank
| wins; and if they default, then the bank repossesses a
| house that is likely worth more than the principal of the
| loan, so they win. There's no default risk - if that were
| to return, then banks would be more skeptical of who they
| lend to, and that would put start quenching demand.
| centimeter wrote:
| You're describing monetization, not a pyramid scheme.
| ClumsyPilot wrote:
| infinitely rising house prices are impossible, so a
| housing market where everyone expects them to do that is
| a pyramid scheme, someone will be left holding the bag
| boringg wrote:
| And how much of your paycheck to landlords goes to the bank
| to pay off the mortgage
| alexgmcm wrote:
| But except for the interest that is still money going to
| the landlord as they have the property itself.
| Moodles wrote:
| What are your expenses? 200K is very comfortable early
| retirement, even working in SF or NY.
| curiousllama wrote:
| How many consultants & I-bankers do you know? You sound like
| you come from a remarkably entrepreneurial subset of the world.
|
| Where I come from, everyone wants to make MD/Partner, ether in
| law, finance, or consulting. More generally, MBA applications
| to top schools have been rising for years.
|
| Besides, if 10x the median individual income isn't enough
| outside of SF/NYC, you got bigger problems.
| yao420 wrote:
| I was in consulting and yes everyone WANTS to become a
| partner but 90% quit before the first promotion due to the
| abusive lifestyle and workload.
| internetslave wrote:
| I used to work in investment research in NYC. So I know those
| types, but the vibe was the same. Maybe I've been lucky, but
| a lot of people I know actually have had startup success. I
| know a few people that ended up making over 25 million by 30.
| None of them made it in law or finance, and none of them ever
| wanted to continue their finance career.
|
| 10x the median income just isn't that much. If you have three
| kids, money is still tight. I'm arguing that we are all
| making less and that startups are making people rich because
| they're actually getting paid what they produced.
| joshuamorton wrote:
| > 10x the median income just isn't that much. If you have
| three kids, money is still tight. I'm arguing that we are
| all making less and that startups are making people rich
| because they're actually getting paid what they produced.
|
| The tradeoff here is that if you have 3 kids, you can't
| afford to work at or start a startup, because your income
| _today_ will be less than at a BigCo. The number of
| startups that will pay you 10x the median income, today, is
| pretty low (they 're all already unicorns, which means your
| upside is somewhat limited) and you need to be fairly
| senior anyway.
| teachingassist wrote:
| > 10x the median income just isn't that much. If you have
| three kids
|
| You are taking home (in California; approximately) net 7.4
| times what people with three kids on the median income are
| taking home.
|
| If you choose to live a median lifestyle, you can save 86%
| of your net income and therefore retire on it within 4
| years.
| nostrademons wrote:
| Just as a counterpoint - if you believe that the median
| person is about to get screwed (either by civil disorder,
| famine, inflation, corporate restructuring, housing
| shortages, rentier landlords, conscription, etc.), then
| it's worth paying a premium not to be the median person.
| Judging from social & news media these days, the median
| person believes that the median person is about to get
| screwed.
|
| The "live like the median person, bank 86% of your
| income, and retire in 4 years" strategy works well in
| times of abundance, where the median person has a decent
| life. Once people start expecting shortages - where the
| median person ends up dead, or unable to complete life
| milestones they desire like having kids - it becomes less
| feasible. I've seen a large shift in expectations over
| the last 1-10 years (depending on how far down the income
| distribution you were), where more and more people are
| realizing that bad things might be on the verge of
| happening.
| curiousllama wrote:
| > if you believe that the median person is about to get
| screwed, then it's worth paying a premium not to be the
| median person
|
| You have a remarkably apt username
| Wohlf wrote:
| The lowest state median income in the US is Mississippi at
| $45,000. I can't possibly imagine how someone mismanages
| their finances so much that $450,000 is not enough to raise
| a family on.
| MisterBastahrd wrote:
| All you have to do is live beyond your means. Buy that
| $4M house in the cozy neighborhood, add in some private
| schooling for your kids, throw in a half dozen vacations,
| and add a few expensive cars that you buy new every year.
|
| Sorry, describing an old boss.
| blamarvt wrote:
| I think the problem here might be the different meanings
| of "money is tight".
|
| https://www.financialsamurai.com/scraping-by-
| on-500000-a-yea...
| giantg2 wrote:
| "...because they're actually getting paid what they
| produced."
|
| Do they really though? That's really the owners getting
| paid that, not all the workers. And a lot of that is really
| valued on the potential rather than what was actually
| produced to that point.
|
| "10x the median income just isn't that much. If you have
| three kids, money is still tight."
|
| That's about $400k, right? That seems like an insane amount
| of money (I'm not in the Bay area).
| irishcule wrote:
| "Do they really though? That's really the owners getting
| paid that, not all the workers. And a lot of that is
| really valued on the potential rather than what was
| actually produced to that point."
|
| I believe the OP is talking about the owners of the
| startups.
| giantg2 wrote:
| But in that case, the question still stands. Sure they
| started the company, but they didn't build it alone.
| There are usually people involved with little to no
| equity. It's similar to how there are CEOs making
| millions per year, when that money is really made through
| the sales of the products of the workers. So they aren't
| just being compensated for what they produced, but for
| what everyone in the company produced.
| ed312 wrote:
| Cost of living has gone absolutely through the roof, and
| shows no signs of stopping. That's, least in the
| northeast, the main reason $400k sounds rich but for a
| family of 4, with a $5k/mo mortgage, child care, etc. it
| really isn't.
| giantg2 wrote:
| I'm in the northeast, make under $100k, and support my
| family. $400k is in the top 10% of earners. $5k per month
| is about a $1M mortgage, which is on the high side,
| right?
| nostrademons wrote:
| $1M is on the high side for SFHs in the Boston area, $1M
| will get you a 2BR condo in the Bay Area.
| jkubicek wrote:
| It is an insane amount of money even in the Bay Area.
| It's more than enough to support a large family living a
| very comfortable lifestyle while also saving
| significantly for retirement. I'm not sure what the
| grandparent poster is on about.
| bradlys wrote:
| Everyone argues about this but for most people in tech -
| $400k/yr does not give you a "very comfortable"
| lifestyle. You cannot afford a $2m home. A $2m home isn't
| even that comfortable in the peninsula. (Varies on
| location but it'll probably be under 2000sqft, still 3-4
| bedroom, 4000-8000sqft lot, 2-car garage if you're
| fortunate, will likely require $200k+ in
| renovation/repairs on move in, nothing lavish) Good luck
| trying to get one anyway - you're going to be beat by
| cash offers anyway.
|
| If you extend your reach to very far out areas - you can
| get a better home and your dollar goes further but you're
| sacrificing on commute and then you don't have a very
| comfortable lifestyle because you're commuting really
| far.
|
| A very comfortable lifestyle for most people in tech
| would be: two luxury cars (bmw/mercedes/porsche/modelsx),
| good public schools, safe and pleasant to look at
| neighborhood to purchase a home in, short commute
| distance (<30 min), and the usual lake tahoe trips, one-
| two vacations abroad a year, plus the usual smaller
| vacations, etc. You're not doing that on $400k/yr in SV.
| If both partners make $400k/yr then sure. I'm skipping
| out on the nanny, private school, prepared meals, and so
| forth because I think that's going above and beyond.
|
| People I know who are at $400k/yr (household) are not
| buying homes in the peninsula or - just generally - close
| to work.
| joshuamorton wrote:
| > 2000sqft, still 3-4 bedroom, 4000-8000sqft lot, 2-car
| garage if you're fortunate
|
| In what way is this not "comfortable"? What is your
| definition of "comfortable"?
|
| Like, I grew up in a 3BR, 2 car garage house that was
| <2000 SqFt. It was absolutely "comfortable". I had
| friends who were lower income who had smaller houses who
| were comfortable.
|
| You're describing an inflated, luxury lifestyle. You even
| sort of admit it when you say "very comfortable lifestyle
| for most people in tech". That's not "very comfortable",
| that's "very comfortable for people who are already very
| comfortable". I feel like this is a sort of keeping up
| with the joneses thing: comfortable implies "more
| comfortable than the median person in your social circle,
| where your social circle is all tech people with 400K a
| year or more household incomes".
|
| Like another way of putting this is that a 400K income
| should allow you to afford a nice 3-BR rental and kids
| and save money. If you don't have kids, 400K allows you
| to keep a luxury apartment in SF and another one in the
| south bay, you know, if you want to do that.
| jkubicek wrote:
| > You're describing an inflated, luxury lifestyle.
|
| Exactly. I consider a "comfortable" lifestyle to be a 3BR
| house in a safe neighborhood, 2 reliable cars, 2 week+
| domestic vacations/year, plus saving enough to give a
| nice cushion in case of emergencies / retirement.
|
| I'm terrible with budgeting / saving and I was doing this
| working for a startup on a $120k/year salary. Granted,
| this was 10 years ago and housing has appreciated
| significantly since then, but still. $200k would be
| _more_ than enough to enjoy this sort of comfortable
| lifestyle.
| bradlys wrote:
| Sorry, $200k isn't enough. You won't get the house. I
| know because I've applied. No landlord is renting out
| homes to single income in the peninsula at $200k/yr.
| $400k at FAANG - yes (they're all afraid of people losing
| their jobs at startups and lots of FAANG out there to
| rent them homes up). But, again, we're talking about
| "very comfortable" - not comfortable. Not okay. Not "I
| managed". Very comfortable - something people actually
| want, not just live with.
|
| And I don't put renting in the "very comfortable"
| category. Nor do I put "reliable" cars or domestic
| vacations. Safe neighborhood? It's expensive - $2m
| expensive.
|
| Do you have any real insight to the CURRENT housing
| market in the SF Bay Area? Housing is the big cost. It's
| more expensive to have a garage for a Porsche than the
| Porsche itself. I can literally go out tomorrow and buy a
| 911 but CANNOT afford to put it in a garage. That's how
| fucking ridiculous it is.
| joshuamorton wrote:
| > Sorry, $200k isn't enough. You won't get the house. I
| know because I've applied. No landlord is renting out
| homes to single income in the peninsula at $200k/yr.
|
| Yes they are. I know people who've gotten them. You can
| find a 3br/2bath single family home with a garage, for
| less than 5K/mo in SF, Redwood City, Palo Alto, and tons
| in Sunnyvale and Mountain View.
|
| > I can literally go out tomorrow and buy a 911 but
| CANNOT afford to put it in a garage.
|
| The 911 costs more than a year's rent on said 3/2 SFH
| with a garage. For many, it's more than 2 years rent.
| Yes, if you want to own a $100k car, you'll have to
| sacrifice in other parts of your life.
| giantg2 wrote:
| I'm just curious, why do people choose to put themselves
| in that environment? I'm mean, based o the cost of living
| one could move to practically anywhere else (excluding
| about five areas) in the US and have this "very
| comfortable" lifestyle on $100k-150k.
| bradlys wrote:
| Because you aren't surrounded by peers. Some of us have
| lived in other areas and don't want to go back for good
| reasons. People in other areas have jobs. People in SV
| have careers. Many more reasons to list. Average
| education among my peers is obscenely high (a bachelors
| is seen as being undereducated - masters is average with
| PhD being very common).
|
| The area isn't that bad except for COL. Once you're rich,
| it isn't that bad. So, just get rich. That's the basics
| of it. It sucks but at least there is a solution for
| those that are ambitious enough. Can't fix bad weather or
| jobs.
| BlargMcLarg wrote:
| >for most people in tech
|
| The majority of people in tech do not work in Silicon
| Valley or even US tech hubs for that part. Friendly
| reminder entire continents across either side of the US
| coast by with less than 15% of that number and would live
| extremely comfortable lives with just the 100k that often
| gets tossed around here.
| bradlys wrote:
| omfg. dude, we're not comparing devs in developing
| countries to people in SV. What kind of troll comment is
| this?
|
| Is it a surprise that cost of living DIFFERS WILDLY based
| upon LOCATION?
| giantg2 wrote:
| 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.
| bradlys wrote:
| No. They literally were talking about 15% of $100k being
| sufficient. Re-read it.
| joshuamorton wrote:
| 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.
| giantg2 wrote:
| I pretty much agree, but I think they're actually talking
| about the area between the coasts for the 15% number
| ($60k).
| giantg2 wrote:
| I guess other people agree with him because I'm getting
| downvoted.
| harshaw wrote:
| Inflation data:
| https://www.in2013dollars.com/us/inflation/2010?amount=1. I
| don't think that a 20% difference means 200K is a lot less.
| It's a bit less.
| mgolawala wrote:
| Unfortunately, for the last few years I have noticed more and
| more people no longer take government inflation data very
| seriously. Here are two (I am sure there are more) reasons
| why:
|
| Housing, Health and Education.. these very basic needs have
| consistently outstripped official inflation numbers.
| Specifically on the US coasts. Correct me if I am wrong, but
| I believe the cost of housing is completely left out of that
| inflation number. Which in my opinion is kind of silly.
|
| The formula for the index used considers substitutions. So
| for example, let's say Wool gets expensive, they expect you
| to substitute it for acrylic. If beef gets expensive, they
| expect you to substitute it for chicken or turkey, and so on.
| This isn't the reality people _feel_. For example, I for one,
| would realize I am no longer able to afford wool socks, and
| have to make do with acrylic socks. In essence, feeling
| poorer than I did before.
| candiodari wrote:
| That's not really how substitutions work. Substitutions
| work by replacing what people used to buy with what people
| buy now.
|
| Now your criticism remains valid, to a slightly lesser
| extent, because if everyone gets poorer and trades wool for
| acrylic socks, they get replaced in the basket. Not to
| artificially depress inflation, but to reflect what
| everyone (now poorer) actually buys.
|
| The issue is, obviously you need substitutions. The finance
| example is going to be horses, so let's go with that.
| Nobody buys or rents horses anymore. They are exclusively
| the domain of recreation. So having them in the index would
| be lunacy.
|
| One measure people use is the "big mac inflation index", a
| PPP index. That one would tell you that inflation between
| 2010 to 2020 is about 76%, or indeed 5.8% per year average.
|
| But that's how the FED chairman Powell (and all those
| before) will dress it up these days.
| mdorazio wrote:
| CPI and inflation metrics generally do account for housing
| costs [1], but the problem is inflation in housing is not
| evenly distributed. If you live in a coastal city or tech
| hub, your housing costs have likely risen much faster than
| the national average. I've found it difficult to get
| realistic measures of city-level inflation data without
| trying to construct my own index from various data sources.
|
| [1] https://www.bls.gov/cpi/factsheets/owners-equivalent-
| rent-an...
| bondarchuk wrote:
| But that is the government inflation, which is considered by
| some to be fake. Shadowstats [1] says inflation would be
| about 5%/year if we use the same methodology as in 1990,
| which gives about 60% over 10 years, i.e. you'd have to make
| 320k now. I'm just eyeballing the chart but if we use the
| 1980 method (~7% a year) it's almost 100% (i.e. you'd have to
| make 400k now).
|
| For another example, Dow Jones with dividends reinvested
| gives a 180% increase, i.e. you'd have to make 560k. Of
| course this is not really inflation, but it gives a sense of
| how much you're missing out on vs. asset owners (please
| correct me if this is massively wrong).
|
| [1] http://www.shadowstats.com/alternate_data/inflation-
| charts
| whimsicalism wrote:
| Yes, and those trails from airplanes are considered by some
| to be mind control chemicals.
|
| I wonder why the whole "secret inflation" theory seems so
| popular among techies, I see it multiple times a week on
| HN.
| zo1 wrote:
| The same "techies" that are proponents of using
| Goodhart's law to describe measures of development
| effort?
|
| https://en.wikipedia.org/wiki/Goodhart%27s_law
|
| Or how about
| https://en.wikipedia.org/wiki/Campbell%27s_law ?
|
| Both of those are good and reasonable rules to describe
| the world, and something that is very intuitive. That is
| why a lot of people find government inflation stats
| suspect - even if they are measured correctly!
| TheTrotters wrote:
| Well, yes, if you accept some official-inflation-is-fake
| conspiracy theory as a premise you can reach many
| interesting conclusions.
| frongpik wrote:
| It's not conspiracy, but an observation that hamburgers,
| cars, houses and yachts inflate at different rates. The
| gov inflation concerns hamburgers, but someone's making
| 200k really needs housing and that inflates much faster.
| TheTrotters wrote:
| 1. Rents are included in the CPI. 2. This confuses
| relative price changes with inflation.
| dominotw wrote:
| > 1. Rents are included in the CPI.
|
| Rents have remained low in my city but housing prices(
| which GP is talking about) have gone up over 30% last 2
| years.
|
| Its pretty easy to find a rental but almost impossible to
| buy a house here.
| medvezhenok wrote:
| Here is housing:
| https://fred.stlouisfed.org/series/CPIHOSNS
|
| House prices are simply bonds tied to rent value and
| interest rate and affected by certain demographic trends.
| The all-told carrying costs of a mortgage right now are
| actually lower than they were 30 years ago, considering
| inflation (the principal might be higher and you don't
| get the tailwind of dropping rates to rebalance and
| whatnot, but it doesn't change the fact that houses are
| technically more affordable, not less).
|
| Edit: Here's a graph of housing prices when adjusted for
| inflation & mortgage rates:
| https://realestatedecoded.com/the-shocking-truth-about-
| house... (although the down-payment is more unaffordable,
| yes, but you can generally buy things with as low as 3.5%
| down)
| dominotw wrote:
| > but you can generally buy things with as low as 3.5%
| down
|
| no way. It is so competitive here that buyers are
| inundated with all cash offers.
| medvezhenok wrote:
| https://accept.inc/ converts your mortgage approval into
| an all-cash offer. (Edit: looks like that's only for
| Colorado)
|
| The craziness going on right now is due to several
| factors: (1) all time low supply due to pandemic
| restrictions/fears; (2) Work from home transforming
| housing values (single family homes a lot more appealing
| if you only work from the office occasionally); (3)
| Millennials aging into the housing market and boomers
| holding on to their properties (see 1) - also a lot of
| stock is now owned by investment companies / pension
| funds past 2008; (4) Housing is the safest way to take a
| leveraged short on the US dollar (which a lot of people
| fearing inflation want to do); (5) Capital flight from
| other countries like China (though that was more of a
| factor pre-pandemic) - real-estate is the only industry
| where anti money laundering provisions are severely
| watered down / non-existent.
| ClumsyPilot wrote:
| Its not fit for purpose, just like the fact that we
| celebrate increasing GDP while life expectancy has been
| stagnant or declining
| john_moscow wrote:
| Sure, rice, jeans and dollar store trinkets have only become
| 20% more expensive. The real estate, healthcare and education
| tell a completely different story though.
| [deleted]
| internetslave wrote:
| I don't trust any inflation numbers. Financial asset
| inflation is out of control
| bufordtwain wrote:
| Inflation measurements should be tied to location because
| housing costs vary dramatically and are a huge proportion of
| expenditure for most people.
| whimsicalism wrote:
| At the same time, differing costs of living reflect
| differing values.
|
| The reason the Bay Area is so much more expensive than
| Tulsa, Oklahoma is because many people would much prefer to
| live in the Bay. Adjusting completely for COL ignores the
| reality that living in the Bay is, to some extent, a
| luxury.
| john_moscow wrote:
| Because the corporations have discovered a way to give people a
| fake feeling of growth, meaning and belonging, while de-facto
| keeping them as lowest-bidder replaceable cogs. There are many
| stories of people feeling betrayed by the corporate machine
| when their interests stopped being aligned with the corporate
| ones. There are numerous people boasting about a new sexy title
| or a recognition certificate they got from their employer, who
| at the same time shrug if you ask them about their property
| ownership or retirement plans. A lot of "pro-employee" and
| "pro-feeling" agendas boil down to making people more
| comfortable owning less and getting paid less.
| HarryHirsch wrote:
| _People are getting rich from startups because they're actually
| capturing the value of their labor_
|
| That's not a positive, isn't it? Back in the mid-1990s there
| were entry-level jobs with a career trajectory, you could drop
| out of college, join a school district as computer herder, move
| to a hosting company and get into systems programming and then
| go to work for Google and Facebook. (Hi Rachel!)
|
| That doesn't exist any longer, nowadays everyone goes and
| grinds leetcode for months to prepare for interviews.
| OldHand2018 wrote:
| Back in the mid-1990s I paid more for rent than I did for
| tuition. And the rent was affordable working part time as a
| code monkey.
|
| If you can manage to max out your 401k contributions from
| college graduation all the way until retirement, it would be
| hard not to have at least $4-5 million.
|
| Is that even reasonable right now, for someone that graduates
| today? I have no idea. But it doesn't seem like something
| that would be restricted to tech workers in the Bay Area. It
| might even be harder to do in the Bay Area than in Des
| Moines.
| dudeman13 wrote:
| Just how bad at finances are you and people around you if 150k
| just really isn't that much?
|
| That literally places you amongst the richest 1%. Not
| metaphorically, literally.
|
| A couple of years worth of saving is enough to give you passive
| income to never need to work again for food or shelter.
| DC1350 wrote:
| $150k is not even enough to buy a small home near your
| workplace in a lot of cities. Janitors had better living
| conditions 50 years ago than $150k earners do today
| Moodles wrote:
| You sound more out of touch than an alien from outer space.
| No way is 150k worse quality of life than a janitor 50
| years ago.
| Der_Einzige wrote:
| Many janitors are unionized and paid quite well. I think
| you're the out of touch one here.
| Moodles wrote:
| Data or gtfo
| TheTrotters wrote:
| > Janitors had better living conditions 50 years ago than
| $150k earners do today
|
| This is just batshit crazy.
| dudeman13 wrote:
| >Janitors had better living conditions 50 years ago than
| $150k earners do today
|
| Utter bullshit.
|
| >$150k is not even enough to buy a small home near your
| workplace in a lot of cities
|
| Live within your means for 5 years, invest the 70k/y excess
| money into index funds.
|
| You can live of dividends anywhere in the world that isn't
| a capital in a first world country. Without even losing
| money.
|
| Literally the 1% pretending to be poor and living in worse
| conditions that janitors 50 years ago. Yeah, right.
| whimsicalism wrote:
| It's utterly amazing to me how far up the wealth pyramid
| you can go and find people saying "Me? No, no, no, I'm
| not wealthy - it's the people above me who are the
| wealthy ones."
|
| Perhaps it stops at like $500k/yr?
| DC1350 wrote:
| > Perhaps it stops at like $500k/yr?
|
| It stops once somebody's net worth is already so high
| that their annual income is irrelevant. Those are the
| real wealthy people.
| paconbork wrote:
| There's plenty of cities that aren't NYC/SF/LA
| monktastic1 wrote:
| Richest 1% of what? Globally, the richest 1% is something
| like $35k IIRC. In the US, I think it's closer to $450k.
| jacobsenscott wrote:
| Well, the thing is you generally can't make $150k in a place
| where a few years of that salary will sustain you for years.
| If you are making $150k per year you are living in a place
| where you can live comfortably, but you'll still need to work
| every year for a long time.
| frongpik wrote:
| Emma, no, the top 1% has at least 10M in liquid assets
| (primary residence doesn't count). 150k will never take you
| to that level.
| whimsicalism wrote:
| If you are a two-professional household it can.
| quantumofalpha wrote:
| Get out of your bubble. There's a whole world outside of Bay
| Area/NYC, where $150-200k/y is still a batshit crazy amount of
| money and $1M can last you happily ever after, even with kids.
| Accumulating $1-2M NW is totally within reach for most
| employees at US FAANGs after a decade or so of work.
| darkwizard42 wrote:
| Agreed and I'd go so far to say just 5 years at FAANG
| (assuming you join at a mid-level eng, not L3/L4 fresh
| university hire) would get you into the $1-2M NW.
| offtop5 wrote:
| A good friend of mine lives in Asia off 400$ or so a month.
|
| If I was to retire near him I'd be able to make a million
| last for a very very long time.
|
| Whoever says 200k isn't a lot of money is full of crap. You
| can live very well off 70k in most of America.
| monktastic1 wrote:
| I'll partly agree. I live in a HCOL city, and $200k is _way_
| more than enough, even with a kid. But $1M with a safe
| withdrawal rate of 3.5% gets you $35k /yr, which won't leave
| you "happily ever after" anywhere in the US with kids,
| particularly with healthcare concerns. Of course, one could
| move abroad, but that's not always feasible.
| zuhayeer wrote:
| To be fair though mid-career engineers and PMs are now making
| incredible amounts of money even outside of FAANG. Equity has
| been a huge part of upside for high growth companies, and has
| motivated a lot of smart people to work at larger companies.
|
| No FAANG company even made the list for Entry Level on the
| Levels.fyi 2020 list: https://levels.fyi/2020/
| brianmorris10 wrote:
| This is bullshit.
|
| Source: I started a company and am still poor.
| ransom1538 wrote:
| You just need to get luckier. Wake up tomorrow and be lucky.
| toomuchtodo wrote:
| Have you tried working harder and being more lucky?
| yroc92 wrote:
| Is there a reason this blog isn't using HTTPS?
| rndmize wrote:
| I find this essay frustrating for a number of reasons, but the
| biggest one is that it feels like a rehash of his "Inequality and
| Risk" essay from 2005 - except this one is less direct and buries
| the lede until the end ("Of course the Gini coefficient is
| increasing").
|
| Because here's the thing that's wrong with most of the thinking
| in this essay and in the last one: measuring the success of your
| economic system based on outliers tells us very little about
| whether that's a good economic system. For the majority of people
| in a given country, whether the wealth of the top .001% is
| inherited or built through some sort of ability to scale doesn't
| matter, it's still a bad system. If ten thousand people try to do
| something and only the one that succeeds gains anything from it,
| we are looking at a non-viable economic system for 99.99% of
| people.
|
| And I see this all the time now, in all places. It's like when
| people say "Look, this guy makes huge amounts of money from
| Twitch/Youtube/Patreon (with the older standards being
| music/hollywood and pg's focus being startups). These are winner-
| take-all systems. _That 's_ why there's people without inherited
| wealth at the top of the charts - they won, and somewhere out
| there are tens of thousands of people that lost. This doesn't
| mean those people are destitute or homeless, mind you; people
| that "lose" in the software ecosystem go work for the winners,
| and things sort-of work out (its worth noting that things don't
| work out as well in other spaces). But consider - if I have a
| half a dozen people that start companies in the same space, and 5
| of them drop for various reasons - bad marketing, bad design, bad
| customer support, whatever - does the guy who wins really deserve
| to be not just 10x, or 100x richer, but 1000000x richer? Is this
| a just system? Is it even an _effective_ one? Are we really
| incapable of imagining an economic structure where people don 't
| lose motivation to do great work without the possible reward of
| billions of dollars?
|
| There's further complaints to be made - looking back only to the
| industrial revolution to consider 1982 the anomaly, when since
| the dawn of civilization inheritance has been the standard form
| of wealth transfer; the social impact of high inequality and how
| the massively wealthy have a tendency to warp society around them
| (this was at least examined to some degree in the other essay);
| and so on.
|
| The future I see from pg's inequality essays is one of increased
| separation: one in which rather than having an accountant or
| travel agent in every town, these services are provided by a
| single company that serves to funnel that money from hundreds of
| thousands of local areas across the world to a single business,
| probably somewhere in SV - and a few hundred thousand middle
| class jobs disappear into the void. And as our technology
| increases in capability, it happens again, and again, until we're
| largely left with a few groups - the founders and funders that
| own everything; the few remaining high-skill jobs that make and
| manage the systems for huge winner-take-all tech companies; and
| the rest, which spend their lives doing work directed and
| optimized by computers until a point is reached where that work
| can be automated cost-effectively. I'm not sure that's a world I
| look forward to.
| nindalf wrote:
| It's a classic PG article. Many true facts in there, lots of good
| analysis with just a few questionable claims thrown in here and
| there. At the end, there's a massive claim that isn't fully
| stated but implied. "Of course the Gini coefficient is
| increasing" translated means "income inequality is not a
| problem".
|
| Firstly, Gini coefficient is based on income, not wealth. That
| isn't stated clearly. Secondly, there's absolutely no data on
| what proportion of income flows to which decile. The conclusion
| (income inequality isn't a problem) is simply based on an
| assumption that the rise in the Gini coefficient is based
| entirely on the wealth accumulated by founders, and that this is
| a good thing.
|
| I think this post boils down to "people like me are creating a
| lot of value, please acknowledge it. Also there are no downsides
| to this accumulation of wealth". This would be fine if PG also
| didn't argue that policies like wealth taxes are harmful
| (http://www.paulgraham.com/wtax.html). It just seems like a
| desperate play to keep his wealth intact.
| slibhb wrote:
| > It just seems like a desperate play to keep his wealth
| intact.
|
| To me this dismissal reads as a little blithe. Is it true that,
| now more than in the past, the rich are getting rich by
| innovating? I don't see you engaging with that argument.
|
| Clearly people who create successful businesses add value.
| Clearly Jeff Bezos has added a lot of value. That doesn't mean
| he shouldn't be taxed but I constantly see people talking about
| Bezos as if he's an evil capitalist oppressor who has stolen
| his wealth from virtuous laborers. To me it seems obvious that
| Bezos' personal wealth is a drop in the bucket compared to the
| value he's added to the world (hundreds of thousands of jobs,
| changed the way we _buy things_ ).
|
| It's totally fine to be in favor of higher taxes but it
| shouldn't be because you hate rich people or you think they are
| greedy parasites. Unfortunately I see a lot of that going
| around.
| zone411 wrote:
| >Firstly, Gini coefficient is based on income, not wealth.
|
| Huh? Gini coefficient can be based on wealth just as well as on
| income. For example: https://en.wikipedia.org/wiki/List_of_coun
| tries_by_wealth_eq.... This essay doesn't specify which one PG
| is talking about.
| BlargMcLarg wrote:
| Think the implicit meaning here is that Gini coefficient is
| often used only as an indicator of income inequality, not
| wealth inequality, despite it being usable for both. Usually
| one has to specify "wealth Gini coefficient", as most default
| to income otherwise.
| zone411 wrote:
| However, this essay is specifically about wealth so at most
| I'd criticize this use as somewhat ambiguous instead of
| assuming that PG meant income Gini and therefore confuses
| income with wealth.
| whimsicalism wrote:
| Having read a fair bit of discussion of inequality, I
| think that in any popular discussion if you see the
| phrase "gini coefficient" unqualified, you should presume
| it to be discussing income, even if the rest of the
| discussion was about wealth.
|
| It's a very pervasive error.
| astura wrote:
| There's also the unstated implication that "anyone can do it if
| they work hard for it" - basically saying it used to be you had
| to be born into a wealthy family to be one of the richest
| people in the world and now you can be the richest person in
| the world based on merit alone (thus rich people are inherently
| meritorious).
| evgen wrote:
| Somehow all of those explanations seem to gloss over the fact
| that you generally need to be born into a wealthy family in
| order to have the cushion to take the risks that allow you to
| collect billions. As an example, Paul Graham would have been
| far less likely to attend Cornell and Harvard if his father
| had a blue collar factory job instead of being a nuclear
| physicist. Almost none of the 'bootstrap billionaires' of the
| tech world come from less than an upper middle-class
| background, but like PG they are quite fond of suggesting
| that their success was entirely due to 'merit'.
| Logon90 wrote:
| Not exactly desperate, however much pretense we can muster :/
| caminante wrote:
| _> Secondly, there's absolutely no data on what proportion of
| income flows to which decile._
|
| Is this true?
|
| If I simply look at the Gini wiki, there are clearly tables
| showing this data with percentages of population by income
| brackets[0].
|
| [0] https://en.wikipedia.org/wiki/Gini_coefficient#Limitations
|
| See [Table C. Household money income distributions and Gini
| Index, US]
| tubularhells wrote:
| I had the same feeling skimming through the post. What a
| despicable person this PG turned out to be.
| TacticalCoder wrote:
| People are entitled to their opinions and there's no need to
| namecall on HN.
| didibus wrote:
| > Of course the Gini coefficient is increasing
|
| Ya this confused me, because the geni coefficient measures
| inequality, the higher the number, the more inequality.
|
| > A Gini coefficient of one (or 100%) expresses maximal
| inequality among values
|
| So is PG saying it's normal the world is becoming less equal?
| Because of more people starting companies?
| mattsoldo wrote:
| Thanks for posting the PG wealth tax article. It is a highly
| flawed analysis.
|
| First wealth appreciates over time. So if your wealth
| appreciates at 15% / year, and the govt. taxes it at 1%, the
| net effect is growth rate is slowed to 14%. With these
| assumptions, someone starting with $1mm in wealth ends up with
| $2.6 billion after 60 years!
|
| Second - PG ignores that most wealth tax proposals have a high
| minimum wealth - in the $50mm range. So there is no early
| compounding of the tax. Adding this into the model, the wealthy
| founder ends up with $3.3 billion after 60 years.
|
| With no wealth tax, this hypothetical founder ends up with $4.3
| billion. So, yes the government has taxed a total of ~ 25% over
| 60 years, but the founder ends up quite wealthy.
| prostoalex wrote:
| > "Of course the Gini coefficient is increasing" translated
| means "income inequality is not a problem".
|
| The book "The Great Leveler"
| https://www.goodreads.com/book/show/31951505-the-great-level...
| is probably the most comprehensive dive into history of
| inequality, and arrives at a fairly unexciting conclusion that
| periods of great inequality are correlated with significant
| economic growth (usually related to advances in automation,
| which tend not to be universally distributed) whereas periods
| of equality can generally be attributed to stagnation.
| FabHK wrote:
| Hmmm. The traditional (1960's) view (Kuznet's "Inverted U")
| is that starting from low-tech societies where everyone has
| more or less the same, inequality rises with the advent of
| technology, then falls again as democracy and the welfare
| state kick in.
|
| Thomas Piketty in his magnum opus _Capital in the Twenty-
| First Century_ argues that the rise in inequality is
| inevitable (his famous r > g) and only interrupted by wars,
| depression, hyper inflation, and similar catastrophes that
| destroy a lot of wealth. That's rather more exciting than
| stagnation.
|
| Branko Milanovic's more recent (2016) _Global Inequality: A
| New Approach for the Age of Globalization_ (which originated
| the famous elephant graph [2]) notes that 1) inequality has
| risen recently within nations, but decreased among nations;
| 2) the Kuznet inverted-U needs to be replaced by Kuznet
| waves; 3) there does not seem to be an efficiency-equity
| trade-off in the long-term 4) social mobility seems to be
| falling (such that accidents of birth basically determine
| your station in life again, as in previous centuries).
|
| > periods of great inequality are correlated with significant
| economic growth (usually related to advances in automation,
| which tend not to be universally distributed) whereas periods
| of equality can generally be attributed to stagnation.
|
| Here, Milanovic distinguishes "malign" equalisers, which
| reduce both inequality and average income (namely the ones
| noted by Piketty: wars, epidemics, depression, etc.), and
| "benign" ones: widespread education, greater social
| transfers, and progressive taxation. [3]
|
| [1] https://en.wikipedia.org/wiki/Kuznets_curve
|
| [2] https://en.wikipedia.org/wiki/The_Elephant_Curve
|
| [3] https://economics.hse.ru/data/2015/12/23/1132608306/TOC_m
| ay....
| dnautics wrote:
| there are some very real counterexamples. It's hard to argue
| that the US did not undergo both decreasing inequality and
| growth between 1860 and 1900. Decreasing inequality (well a
| good chunk of the population was no longer chattel slavery,
| _if nothing else_ ), and the US went from "utterly destroyed
| by a civil war" to "nascent superpower"
|
| more quantitative measures of inequality between 1860-1900
| (that probably doesn't take into account slaves)
| https://voxeu.org/article/american-growth-and-
| inequality-170...
| whimsicalism wrote:
| Growth from whom and stagnation for whom? If during this
| "stagnation", the level of societal wealth remains the same,
| but inequality decreases, that indicates massive utility
| gains due to decreasing marginal utility of wealth.
|
| Moreover, inequality now is extremely high, and growth is
| decelerating. China has less wealth inequality than the
| United States, yet is growing substantially faster.
| Aunche wrote:
| > Moreover, inequality now is extremely high, and growth is
| decelerating. China has less wealth inequality than the
| United States, yet is growing substantially faster.
|
| Growth is a second derivative. Income inequality is a
| function of first derivatives. You can't directly compare
| the two. If I had to guess, China's wealth inequality in
| China is growing at a much faster rate than that of the US.
| aardvarkr wrote:
| That's a fascinating point!
| uoaei wrote:
| That would seem to indicate that Goodhart's Law is in effect
| and not much more. At least, not until you demonstrate an
| analysis of quality of life during those same periods.
| timkam wrote:
| I agree. To me, the post reads a bit like this: "Back then, we
| did not have as much inequality, but the super-rich did not
| deserve their wealth. Now, we have more inequality, but the
| super-rich [like PG himself] really deserve it, because they
| are innovators." The post does not cover the arguably more
| important questions like "Are the working and middle classes
| better off?", "Was there less innovation back then or were
| lesser paid innovators just as innovative?", and "Can we have
| as much or even more innovation with less inequality?".
| gen220 wrote:
| Yep, I think there's a lazy argument that tends to get made
| to justify the status quo, namely that inequality is
| necessary for innovation.
|
| Of course it is, otherwise why take risks?
|
| But this does not justify the 1000x inequality that we have
| today separating CEOs from laborers and 10000x separating
| founders from laborers.
|
| What if those numbers were 100x and 5000x? Might we see even
| more innovation, and stronger communities?
|
| The payoffs figures of today are also used to justify truly
| stupid risks. There are ponzi scheme type people who would
| rather masquerade at being a founder 10 times over in search
| of getting lucky once, screwing over investors and laborers
| in the process. Maybe if the disparity weren't so eye
| popping, the same people would go into other fields instead.
| CPLX wrote:
| > "Back then, we did not have as much inequality, but the
| super-rich did not deserve their wealth. Now, we have more
| inequality, but the super-rich [like PG himself] really
| deserve it, because they are innovators."
|
| Indeed. Or to elaborate a little:
|
| "Back then, we did not have as much inequality, but the
| super-rich did not deserve their wealth. Now, we have
| substantially more inequality and compounding human misery,
| and I am super-rich.
|
| Because I am unable to identify any specific moment in my
| life when I made unethical decisions personally it is not
| possible for me to understand a view of the world that sees
| my current existence as the product of an unjust system."
| didibus wrote:
| You hit the nail on the head!
|
| It also didn't discuss that it seems more so that there is a
| new technology which is enabling a shift on riches, but it's
| likely that the next phase is one of inherited wealth again.
| Unless he believes that the children of those new fortunes
| won't inherit anything or will keep being surpassed in riches
| by the next generation startups. But I'm not so sure, I think
| it's just a cycle, refresh most company from a non tech based
| one to a tech one, and once that's done, it'll go back to
| consolidation and inheritance, until the next big technology.
| whimsicalism wrote:
| Moreover, people seem to continuously forget the fact that
| half of all wealth in the United States is _inherited_ by the
| top 5% wealthiest households, not 'earned' via value
| creation.
|
| In general, I tend to agree with Rawls that this notion of
| 'deserving' is irrelevant to the question of how we ought to
| distribute goods/welfare in society.
| FabHK wrote:
| Yes, not only good old Rawls, but many contemporary writers
| make arguments about the limits of meritocracy. Some books
| I can recommend:
|
| Robert H. Frank: _Success and Luck: Good Fortune and the
| Myth of Meritocracy_
|
| https://press.princeton.edu/books/hardcover/9780691167404/s
| u...
|
| https://blogs.lse.ac.uk/lsereviewofbooks/2016/06/28/book-
| rev...
|
| Michael Sandel: _The Tyranny of Merit: What's Become of the
| Common Good?_
|
| https://www.nytimes.com/2020/09/15/books/review/the-
| tyranny-...
| amznbyebyebye wrote:
| It's probably rich man guilt, plus some attempt at
| rationalization through cherry picked facts and data.. Also why
| I think bill gates >>> pg
| i_haz_rabies wrote:
| I feel a certain degree of guilt over my (relatively low,
| even in Canada) developer salary. I didn't do anything to
| deserve my comfortable life. I can't imagine how people with
| billions sleep at night.
| anon_tor_12345 wrote:
| >It's probably rich man guilt
|
| it's hilarious to me how so many talking heads think the
| solution to guilt is more speech instead of praxis. you feel
| guilty about all of your wealth? give large sums of it away.
| charity works wonders for the guilty conscience (speaking
| from experience here). but that's unthinkable so they just go
| on engaging in this kind of sophistry. lays bare that they're
| not actually trying to cure their guilt but justify
| themselves.
| Der_Einzige wrote:
| The kind of people who use the word "praxis" don't end up
| having good praxis 99% of the time.
| anon_tor_12345 wrote:
| not sure what this means since i'm not a native english
| speaker - i understand praxis to mean something that you
| do instead of something that you say.
| jdminhbg wrote:
| In standard American English, 'praxis' is a Marxist
| shibboleth. For a non-loaded term, you can just use
| 'practice.'
| anon_tor_12345 wrote:
| I'm not sure what marxism has to do with this (I don't
| think Marx wrote about charity) and although I'm not a
| native speaker I'm pretty good at syntax/semantics:
|
| >the solution to guilt is more speech instead of praxis
|
| vs
|
| >the solution to guilt is more speech instead of practice
|
| Second one is vague and unclear.
| FabHK wrote:
| In English, the usual terms are theory and practice.
| Praxis is a synonym of practice, but it is rare and
| formal (for the marxist connection, see
| https://en.wikipedia.org/wiki/Praxis_School).
|
| At any rate, what you wanted to say is maybe best
| expressed as "the solution to guilt is more speech
| instead of action."
| anon_tor_12345 wrote:
| I'm well aware of both the colloquial use of practice and
| "marxist praxis". I was simply implying that, as written,
| my statement didn't intersect marxism in any way and
| therefore couldn't have been misunderstood as such
| without _willful_ misunderstanding.
|
| Note that there are other uses of the word that also
| themselves don't intersect marxism in any way
|
| https://www.ets.org/praxis
| https://www.luc.edu/socialwork/praxis/
| https://en.wikipedia.org/wiki/Apraxia
|
| Furthermore the precise definition of praxis:
|
| >Praxis (from Ancient Greek: praxis, romanized: praxis)
| is the process by which a theory, lesson, or skill is
| enacted, embodied, or realized. "Praxis" may also refer
| to the act of engaging, applying, exercising, realizing,
| or practicing ideas.
|
| is exactly what I intended (since I believe pg, and
| others I was implicating, pontificate but don't do much).
| snicker7 wrote:
| > Firstly, Gini coefficient is based on income, not wealth.
|
| The Gini coefficient can be applied to any statistical
| distribution, including wealth.
|
| From Wiki:
|
| > The Gini index or Gini ratio, is a measure of statistical
| dispersion intended to represent the income inequality or
| wealth inequality within a nation or any other group of people
| dheera wrote:
| It would be very interesting to re-order the list by the amount
| of _liquid_ wealth that each person owns, not including fake
| founder stock wealth that can 't be e.g. theoretically sold
| overnight to avert a world disaster -- very different from
| someone with an actual pile of cash or bonds or gold.
|
| Consider someone's _effective wealth_ as the amount of liquid
| USD they could hypothetically produce in a 24 hour period by
| selling all of their assets, including market dynamics, and
| _then_ tell me who the top 100 richest people are.
| junippor wrote:
| Sloppy thinking too.
|
| > But at the moment at least, there is definitely something
| they share in common that distinguishes them. What retailer
| starts AWS? What car maker is run by someone who also has a
| rocket company?
|
| So your justification for how you're classify Amazon is
| something the company does (good) but your justification for
| how you're classifying Tesla is other things the CEO owns? Very
| sloppy, Paul. Very lazy.
| [deleted]
| cupofcoffee wrote:
| I'm dying lol
| the_local_host wrote:
| It definitely takes a bias toward "wealth accumulation is good"
| to present the following as good news:
|
| > "The reason the percentage of heirs has decreased is not that
| fewer people are inheriting great fortunes, but that more
| people are making them."
|
| It's likely that many of the inheritances of 1982 were the echo
| of the corrupt and monopolistic industrialism in the 19th
| century. Is it a bad thing that the great individual fortunes
| that were built a century earlier couldn't be amassed in the
| 20th? Have we returned to a 19th-century environment now, with
| technology taking the place of railroads and telegraphs? On
| that note...
|
| > "the major sectors of the economy were either organized as
| government-backed cartels or dominated by a few oligopolistic
| corporations."
|
| Unless I see a FAANG company go out of business, soon, and as
| abruptly as it appeared, I'm inclined to think we're entering a
| new oligopolistic era. Just because these companies were
| recently startups doesn't mean they aren't entrenched now.
|
| (As an aside regarding the wealth tax, that actually would have
| worked to reduce the number of heirs at the top of the list in
| 1982 had it been enacted some time earlier.)
| m___ wrote:
| --"I'm inclined to think we're entering a new oligopolistic
| era. Just because these companies were recently start-ups
| doesn't mean they aren't entrenched"
|
| Your comment is on start to end, just to add, these
| "companies", are nothing more then dystopian mirrors to the
| public, their fronts(all individuals in the public eye,
| greatest example of a nobody(Leon Musk)) are just second rate
| actors. The virtualization of "finance", it's moral
| justification, nothing more is at stake.
|
| Real power, ...dwells in the shadows. This goes from the
| White House, to Hollywood, over Silicon Valley to Mar o Lago
| in the Swamp State.
|
| The measure of a dollar between a billionaire, and a homeless
| dweller as to the price of a loaf of bread is meaningless.
| What counts is the grab for the hard assets, power, control,
| that probably starts at multiple billions. A second measure
| of any meaning is the time line power and influence can be
| stretched. A professional politician is seriously handicapped
| there, hence the proof of the above as to what is "wealth".
| sneak wrote:
| > _At the end, there 's a massive claim that isn't fully stated
| but implied. "Of course the Gini coefficient is increasing"
| translated means "income inequality is not a problem"._
|
| Now, I can't speak to whether or not pg's implication here was
| intended and unsaid, or not intended: it is likely
| intentionally ambiguous.
|
| One thing I can speak to though is that it seems common now to
| read something as if the thing it implies is the thing the
| author actually intended to communicate. We should be quite
| careful with this sort of assumption. Sometimes it's a safe
| one, other times it is not.
| ahthat wrote:
| I don't think PG is necessarily saying that income inequality
| is not a problem. This is disingenuous on your part. Saying "of
| course the Gini coefficient is increasing" does not necessarily
| translate to "income inequality is not a problem." Rather, what
| he is to my mind correctly pointing out is that the entire
| situation regarding wealth accumulation, distribution, and
| class mobility is perhaps more nuanced than we typically
| understand it to be. Indeed, he points out that it is in fact
| easier in some major ways, which is a wonderful thing to
| realize. This does not necessarily mean that income inequality
| does not exist or is not a problem. There may still be ways in
| which it is. Instead, it is good to acknowledge that the
| ability to build wealth through starting businesses is, in his
| particular lens, better than it has ever been.
|
| Further, I think it is disingenuous to compact PGs meaning to
| "'people like me are creating a lot of value, please
| acknowledge it. Also there are no downsides to this
| accumulation of wealth.' ... it just seems like a desperate
| play to keep his wealth intact." So much of the time argument
| betrays the arguer and rather demonstrates a perverse
| inclination to emotions such as jealousy rather than reasoned
| indifference. Why is he desperate in this case? Is he afraid of
| people taking his money away from him? Are there people
| actively attempting to do so? Is this not a natural human
| inclination? Is this something that only affects the wealthy?
| Do not all of us to a certain degree wisely protect what we
| have earned? It has indeed gone out of fashion to point out
| that the rewards of benefitting society are equal to the
| benefit ie what society is willing to pay for those benefits
| (if not less so, due to the existence of taxes). We should
| first admit that society is made of industrious and lucky
| individuals by varying degrees, admit this, and then stave away
| jealousy at the success of those more industrious and lucky
| than you or me - for success coming to the industrious and
| lucky remains just despite the existence of those who pursue
| lives of industry and are not as lucky. It is out of fashion to
| point out the simple and bare fact that ambition to improve the
| world is amplified in the environment where it is incentivized:
| if this be done through the respect garnered as a result of
| benefitting the world, that is great; if this be done as a
| result of rewarding the creator of those benefits commensurate
| to the benefits given, that is great also. In either case, the
| results are amplified; with both cases the results are
| amplified still further by the addition of the incentives. Yes,
| indeed the numbers by certain statistical methods appear
| disproportionate within studies of income inequality. Yet,
| simply because these figures impress upon us a knee-jerk
| reaction to decry the accumulation of great wealth by the few
| as unfair, does not make it so; it does not necessarily mean
| that something is wrong that these results should be allowed to
| occur. So long as the majority of we who inhabit the economy
| are not actively oppressed by the creators of great wealth, so
| long as our freedoms are not taken away, no reasoned argument
| can point to why the accumulation of great wealth is a damaging
| thing. Indeed, if it results from the great mutual benefit to
| society, this is in fact a very good thing. So long as the
| accumulators of such great wealth are not oppressing the
| majority of participants of the economy, the accumulation of
| great wealth ought to be a sign of the great benefits that the
| accumulators are providing to society, as it is society, as has
| now been remarked a number of times in this comment, that is
| paying for it. Indeed, if we continue to demonize wealth
| creators and go on to pass reforms that remove incentives to
| wealth creation, we would only de-incentivize the creation of
| future benefits to ourselves as members of society. Further,
| with certain reforms that constitute graded barriers to
| success, the freedom of economic mobility then being lessened,
| the entire economy and state as a whole is then oppressed by
| degrees - the oppression is then rather achieved by those who
| have sought to fix the "problem". I'm not saying that income
| inequality does not exist - I'm saying that in this particular
| form the fact that there are disparities in income is not
| unfair, and that results from the just distribution of benefit
| to society that society is happy to pay for is not necessarily
| unjust by statistical analysis of income data alone.
| camhart wrote:
| Is income inequality a problem? In my opinion, the real problem
| would more accurately be defined as peoples inability to afford
| their basic needs: housing, food, and to a degree healthcare.
| Some might argue to throw education/training into the mix as
| well, and I wouldn't fight that too much as long as people
| remember more affordable options like community/technical
| colleges. Many who argue income inequality is a problem tend to
| imply that it means people can't afford their basic needs. I
| agree if people can't afford basic needs that's a problem. But
| my neighbor simply having 10000000x more "wealth" than me isn't
| a problem. Great for them.
|
| Where things become a problem is when people can't afford their
| needs. But lets be honest about what needs really are.
| Housing/shelter's needs demand a space for someone to stay
| dry/warm, with a toilet and running water (to keep things
| sanitary). We don't "need" a 3500 sq ft mansion even if you are
| a family of 16. Though the trend year after year, is we're
| spending more and more money on bigger and bigger homes for
| smaller and smaller family sizes (see
| https://www.aei.org/carpe-diem/new-us-homes-today-
| are-1000-s...), which subsequently cost more and more money to
| heat/cool. Not to mention the fact that more people are getting
| mortgages for larger and larger and longer and longer
| amounts... there are even mentions of > 30 year mortgages on
| the horizon... while mortgages help you get into a home, the
| typical 30 year mortgage today results in you paying ~1.5x+
| over the cost of the actual home (300k home costs ~450-550k
| depending on interest rates). Not too long ago, many people
| built their own homes, mortgage free. Yea, they weren't fancy
| homes. Typically a box with a roof. But they lived within their
| means.
|
| Back in the day more people heated homes "for free" using wood
| they chopped themselves back in the day. And few had AC (none
| did if you go back far enough). Back in the day people didn't
| have a microwave, toaster oven, toaster, oven, stove top,
| panini press, smoker, bbq, coffee maker, etc all in their one
| home. Depending on how far back you go, they had none of these
| things and still survived.
|
| Back in the day you didn't "need" the latest iPhone every 12-24
| months, or the biggest TV. You didn't need a new car every X
| years. You didn't "need" an international vacation every few
| years.
|
| The point I'm trying to make is our spending habits can take on
| _some_ amount of blame (how much can be argued)... especially
| when you consider the demand impact of everyone willing to
| overspend and go into debt on items they don 't truly "need".
| Take a look at the FIRE community (financial independence,
| early retirement) and you'll see real life examples of people
| who scale back their living to their needs + a few wants, on
| small amounts of income and how they're able to still put money
| aside every month. The community tends to highlight those that
| can save 50%+ of their income on a 6 figure salary... but there
| are plenty of examples of people saving on small amounts of
| income.
|
| With all that being said, I'd agree income to house cost ratio
| isn't great in a lot of areas in the country, and is trending
| in the wrong direction. That's a problem. Healthcare's rising
| costs isn't great--that's a problem. But also keep in mind
| people are living longer now than ever before
| (https://www.statista.com/statistics/1040079/life-
| expectancy-...), and I'd assume the longer people live the more
| expensive their healthcare becomes... so while this is a
| problem, I think it's false to say it was "solved" decades ago.
| Educational costs are skyrocketing too--that could be argued a
| problem. But there's also more of us spending more money going
| into more debt to get all of these things, driving the demand
| up for each of them. Massive corporations using anti-
| competitive practices to crush small up and coming competition
| is a problem. Companies failing to pay out a decent salary is a
| problem.
|
| I think there are things that need to be addressed when it
| comes to peoples ability to cover basic needs + some ideal
| wants. However I have yet to hear a convincing argument that my
| neighbor getting filthly rich somehow leads to my inability to
| afford my basic needs.
| WhompingWindows wrote:
| 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?
| blackshaw wrote:
| Because he's the founder of this website?
| lolive wrote:
| Just like RMS is highly respected at the FSF :)
| true_religion wrote:
| I understand the comparison, but the FSF can exist
| without RMS. PG on the other hand solely supports HN, I
| doubt he would continue to pay for a site that vilified
| him.
| troygoode wrote:
| This is incorrect. HN is run by Y Combinator; yes, PG
| started YC, but he retired from YC 7 years ago.
| true_religion wrote:
| Oh, I had thought he stepped down from the day to day
| role but still had significant investment and control.
|
| There are many firms where the owner is never present,
| but all employees know not to cross them. (E.g.
| Washington Post & Jeff Bezos).
| lupire wrote:
| WaPo is very critical of Amazon
| true_religion wrote:
| That wasn't my impression 3 years ago when I worked
| there.
| N00bN00b wrote:
| This site is mainly supported by its volunteer
| moderators. I doubt it cost more than a few thousand a
| year at most to run.
|
| So the fact that PG pays for it doesn't mean much. If the
| community decided to no longer be under his care, they
| could easily find a replacement model or benefactor and
| they're more than capable to arrange such an
| uprising/migration.
| vinceguidry wrote:
| What matters far more than dollars paid is having his
| name attached to it. I recall Scott Alexander getting the
| forum started around his community to remove any
| associations to him because of things people were saying
| were happening "under his watch."
| triceratops wrote:
| Pretty sure dang is not a "volunteer moderator".
| kelnos wrote:
| PG doesn't run YC anymore (he retired quite a few years
| back), which is the org that pays for HN.
| ncann wrote:
| I love RMS but unfortunately his skepticism doesn't get
| treated well by the vocal mass. These days people like to
| view things in a very black and white manner and if you
| dare to express your skepticism in a topic that is
| considered clear cut by the mass you get ostracized.
| ravenstine wrote:
| I liked it better when people were religious towards
| philosophy and universal metaphysics rather than towards
| technology and science. Now that traditional religion has
| been in decline for some time now, people have
| transitioned the concept of orthodoxy towards systems
| that are antithetical to it. This is nothing new, as
| there's long been a level of orthodoxy within technology
| groups, academia, and so forth, but now it's actual
| heresy to be skeptical towards anything authoritative,
| especially if that skepticism stems from one's own
| intuition.
|
| Inversely, the "skeptics" behave so skeptically towards
| anything contrary their views that it has the effect of
| making them hardly skeptical in the first place. I'm not
| even talking about Stallman's form of skepticism, but
| what I deem "pop skepticism" that's permeated the
| mainstream narrative. If one is so skeptical that they
| are potentially missing out on critical new information,
| that's not actual skepticism. It's a stroke of the ego
| for someone too insecure to be wrong about anything. This
| is especially true when the evidence in front of them is
| sound and they refuse to consider it.
|
| We are living in an intellectual decline. A true skeptic
| can't have any sort of controversial opinion without
| being socially burned at the stake.
| foobiter wrote:
| the skepticism he was most criticized for was playing
| devils advocate for a convicted rapist
|
| I support skepticism, but you don't make arguments like
| that for the same reason you don't say "hitler was great
| for the german economy" - it plays a major role in
| minimizing abhorrent crimes, whether you intend it to or
| not. Fighting that concept in any way makes it incredibly
| hard to distinguish the argument from support, especially
| when you're doing so from an armchair. RMS is (was?) an
| expert in one thing, and outrageously naive in most other
| things he's written about.
| thought12342 wrote:
| I don't understand if your insulting RMS but the
| comparison is definitely insult to RMS. RMS is the
| legend.
| AnimalMuppet wrote:
| 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?
| iur12 wrote:
| Indeed. Meritocracy, hard at work.
| rattray wrote:
| > can someone explain why his work is so popular?
|
| He's an important person to our field, and he's contributed
| quite a lot to it (including, for example, this forum). That
| does count for something.
|
| However, to me if anything it really just confirms yet again
| that even great people can become thoroughly warped by wealth
| and fame.
|
| His wealth tax piece was quintessentially unconvincing and
| self-serving, and many of his recent tweets and posts have
| done much more to pat himself and his peers on the back than
| to contribute convincing or useful analysis.
| tubularhells wrote:
| He is rich, and makes people rich. All the kids starting
| their tech company want to suck up to the man with the golden
| touch.
| cryptoz wrote:
| PG's recent articles have changed from what they used to be.
| Recently (last few years) there is a dramatic change towards
| defending riches, logical fallacies to explain why being rich
| is okay, a lot of focus on wealth and how to get it and why
| it's okay.
|
| A lot less technically interesting than he used to post. I
| used to send Startup=Growth to everyone I knew. I think
| people are used to high-quality content from PG and so the
| upvotes fly - but honestly, recently, the quality isn't
| there. And often the content of his posts I now find quite
| offensive and wrong.
|
| Not very interesting any more. Mostly wealth defenses and
| fallacies.
| closeparen wrote:
| The political messaging has also changed from "people in
| poverty have specific material needs that we need money to
| fix" (war on poverty) to "actually, people having or making
| different amounts of money is inherently wrong" (war on
| inequality).
|
| The war on poverty can be waged with a modest tax on the
| PGs of the world. The war on inequality is different.
| Venture capital always seeks to create wealth that will
| flow to some more than others; a very efficient way to
| fight inequality is to simply abolish venture capital.
| Along with anything else that facilitates creation of
| personal (rather than societal) wealth.
| joshuamorton wrote:
| > actually, people having or making different amounts of
| money is inherently wrong" (war on inequality).
|
| This is a misrepresentation though. There isn't anything
| inherently wrong with people having or making different
| amounts of money. The complaint, as I see it usually, is
| that the degree of inequality is unacceptable. That is,
| millionares aren't inherently unethical, heck people who
| make millions annually aren't inherently unethical. But
| people who make billions a _week_ , might be.
|
| That is, I can comfortably and easily donate enough each
| year to support a few working families. Bezos could match
| the Child Poverty Tax Credit to every child in poverty in
| the US each year and still turn a profit.
|
| (For the math here, its ~$3000 * 11 million children,
| which comes out to ~35 billion, or half his income this
| year). And remember: he could do that every year and his
| wealth would increase.
|
| The key issue is that personal wealth, after a point is
| wasted. Creation of vast personal wealth doesn't really
| serve society, so why should society encourage it? That,
| again, doesn't mean that no one should have any personal
| wealth, just that the ROI, after a point, should lessen.
|
| How much do you really care after your second billion
| anyway?
| [deleted]
| waterhouse wrote:
| > The key issue is that personal wealth, after a point is
| wasted. Creation of vast personal wealth doesn't really
| serve society ... How much do you really care after your
| second billion anyway?
|
| What do you think the billionaires' billions are doing?
| Sitting in a bank account? I think the majority of their
| wealth is _invested_ , i.e. it is funding industry, which
| is a good thing. If we assume for illustration that
| billionaires will spend $1B on things like private jets
| and invest the rest, then if we have $1T divided among 10
| billionaires, we'll have $10B spent on jets and $990B
| invested, while if we have $1T divided among 1000
| billionaires, we'll have $1T spent on jets and $0
| invested. Given that, at least for the concern of "how
| it's being spent", it's actually best to have the
| megawealth concentrated among a relative few.
| WitCanStain wrote:
| Those few would, however, have proportionally much more
| power and are not going to use that power to threaten the
| structures which made them their money. I don't think
| it's by any measure a good idea to have a few
| billionaires set the course of society; deciding what
| gets invented and produced, what kinds of ventures get
| supported, what programs enabled. That is just autocracy
| with extra steps.
| joshuamorton wrote:
| "Its invested" can mean a lot of things. And in general
| (as another user notes) the velocity of "invested" money
| is lower than the velocity of money spent. In other
| words, the 1T spent on jets is actually better for the
| economy.
|
| Invested money is usually in things like the stock
| market, which doesn't directly support a company (buying
| a share of AMZN doesn't put money in Amazon's pocket,
| although it does, amusingly, make Bezos wealthier on
| paper). Angel investing might actually be better here
| from a velocity perspective, I don't actually know for
| sure.
| jonny_eh wrote:
| > What do you think the billionaires' billions are doing?
| Sitting in a bank account?
|
| Yes. Maybe not their own savings account, but in some
| organizations' bank accounts.
|
| Money in the hands of the low to middle class is spent
| far more efficiently. [1]
|
| [1] https://www.americanprogress.org/issues/economy/news/
| 2011/12...
| waterhouse wrote:
| So, let's take Jeff Bezos. Googling a bit, an article
| allegedly updated Mar 13 says he has 55.5M shares, which
| at AMZN's price of $3379 is $187 billion; I'm sure both
| multiplicands have changed but that's probably not far
| off from the truth. What bank accounts is the $187
| billion sitting in? If he sold all his stock, where would
| that money come from? If he then spent it all on a fleet
| of private jets, how would that impact the economy?
|
| And if we split Jeff Bezos into 1000 individuals, each of
| which had about $200 million, and each of which spent
| half of it on mansions and yachts and invested the
| rest... would that be an improvement?
| read_if_gay_ wrote:
| > ~35 billion, or half his income this year
|
| Thanks to $AMZN going up. There's no way he can spend
| that much per year for prolonged periods of time.
| [deleted]
| Ericson2314 wrote:
| If the utility of money is a suitably concave function,
| those two become much more similar.
|
| https://www.jasonhickel.org/blog/2021/3/28/extreme-
| poverty-i... makes a good case that poverty and
| inequality are quite related historically, too.
| blablabla123 wrote:
| They come definitely from a privileged niche point of view
| although they usually have some really interesting
| insights. For instance this one article about how suburbs
| are created and that kids in the past were at their
| parents' workplaces and learned how they work. [1] Or
| another article about quality of discussion, ranging from
| collaboration to ad hominem. Still I hesitate to share them
| outside of the typical startup crowd because parts of them
| might offend people. [2]
|
| [1] http://www.paulgraham.com/nerds.html [2]
| http://www.paulgraham.com/disagree.html
| jdonaldson wrote:
| PG's articles are like a modern day Siddhartha. He
| illustrates the glories of growth and change initially, but
| by the end he illustrates the glories of stability and
| security.
| FpUser wrote:
| >"being rich is okay"
|
| Sure being rich is ok. As long as they make mortals better
| off which is not what is happening now. Rather majority of
| the people are getting worse for wear in the process.
| iur12 wrote:
| This isn't a surprise. The religion that formed here
| hanging off his every word subscribed to it to get rich,
| just like he started YC to get rich. Now he's happily rich,
| barely even looks in the mirror at these adherents that he
| left behind, and is writing for his new friends who are
| also rich. It was always pointless snake oil but the Sand
| Hill Greed here made everyone overlook that because maybe,
| just maybe, the key to get into YC and skip the bread line
| was buried in the ninth paragraph of some polemic from a
| guy who figured out retail in Lisp and somehow convinced a
| greed-seeking generation of hackers that he had all the
| answers.
|
| I'll take my -4 for hitting close to home. The grayer I get
| -- silencing unpopular ideas by making them grayer was his
| idea too -- the more confident I'm right. We stopped
| telling you folks you were following someone who only cared
| about your impact on _his_ RoI because that sort of
| unwashed heathen isn't welcome here. Paul Graham, YC, and
| this creation of his on which we speak now has done more to
| distort and destroy any foundation of computing remotely
| paying attention to making the world better than almost
| anything before it, and while I'm happy to see people
| finally figuring out that it just might be bullshit, it's a
| bit too late.
| AnimalMuppet wrote:
| Downvoted not because you're right, but because you're
| mostly wrong.
|
| I mean, you're maybe 10% right. You take that 10% and
| inflate it to the point that it's almost completely
| wrong, though.
| iur12 wrote:
| I appreciate your well-defended and reasoned argument. I
| learned a lot from your countless examples of what I got
| wrong and given that I've missed the mark on earning your
| vote, I'll be sure to factor your feedback into my future
| comments.
| read_if_gay_ wrote:
| Your post is just a bunch of empty accusations, too.
| You're trying so hard to be snarky but everything you
| said might as well be applied to your own post. You just
| _had_ to talk big hiding behind a throwaway, didn 't you?
| layoutIfNeeded wrote:
| I'm kind of a contrarian myself, and what you've said
| resonates with me a lot. Take my upvote!
| exhaze wrote:
| Maybe one day, you'll even be confident enough to not
| make a throwaway account to say something like this.
| iur12 wrote:
| This is kind of like a Clippy suggestion: _hi there, it
| looks like you're criticizing the forum. Would you like
| to establish a reputation on the forum?_
| mattmanser wrote:
| I don't think it's at all fair to say he started YC to
| get rich.
|
| His own thoughts about are here:
|
| http://www.paulgraham.com/whyyc.html
|
| http://www.paulgraham.com/ycstart.html
|
| Whether you believe that or not is up to you, but back
| then there was no guarantee it would work. To look with
| hindsight and say it was just greed is easy for you to
| hurl, but not at all what it looked like at the
| beginning.
| mattknox wrote:
| He was rich enough not to need more money before starting
| YC-the acquisition price for viaweb was $49M, and it
| roughly ~10x'd between then and the peak in late 1999.
| (cites: https://www.cnet.com/news/yahoo-buys-viaweb-
| for-49-million/ https://venturebeat.com/2008/10/08/as-
| other-tech-stocks-rall... ). I don't know how long he
| spent there or what fraction of the company he still
| held, but I'd assume that he'd have stayed long enough to
| get to his personal Fuck You Money.
|
| More generally, I know many many people (maybe literally
| tons by weight?) who continue to work long after they
| don't need to, usually because they're just deeply
| interested in the domain. I've seen this up close with my
| father, who continues to farm at 70, and with some
| founders who keep founding despite having more money than
| they will ever need. So when someone in that situation
| says they work on a thing because it is interesting to
| them, I generally believe them.
| nvr219 wrote:
| Dang now that you're back in the black I don't know if
| you're right or not :-/
| iur12 wrote:
| CONUNDRUM OF THE AGES
| simonebrunozzi wrote:
| Because he's famous (especially among the HN crowd), he's
| certainly smart, and it appeals to the bubble of internet
| startuppers that lurk in HN.
|
| Paul, and to a similar or even larger extent Sam Altman, and
| others, seem detached from reality, in the sense of the
| common man.
|
| Perhaps each one of us lives in a bubble of sort. His is
| immediately apparent to me, despite I kind of belong to the
| same crowd he preaches to.
|
| I don't think his intent is evil nor bad. I think he
| genuinely enjoys writing and thinking about deep stuff, and I
| am grateful that he shares his thoughts with the world.
| freewilly1040 wrote:
| There's a bias some people hold that people who are very
| wealthy must also be very wise.
| lupire wrote:
| "It turns out" (to use a popular pg phrase used when proof is
| too inconvet to produce) that pg is well liked among pg's fan
| club website users.
| hardwaregeek wrote:
| There's a cycle with blogs. The author starts a blog and they
| have a distinct, somewhat original voice with distinct,
| somewhat original views. In PG's case, the startup advice
| about building stuff that doesn't scale, not worrying about
| competitors, Lisp, etc. were quite fresh, at least to me. The
| author's blog becomes successful and their ideas become well
| understood throughout a community. But a person's ideas don't
| evolve that quickly. They start repeating themselves. The
| posts become variations on a theme. Maybe the author goes
| outside their area of expertise (No offense, but I trust PG's
| advice on startups a lot more than his advice on
| macroeconomics). By the end people are wondering what you're
| wondering. Why are we listening to this person?
| derekp7 wrote:
| In other words there is a brand identity associated with
| the articles. And brand identity is a time/effort savings
| device employed by human minds when making a determination
| on what to consume.
|
| You see this with consumer products all the time; for
| example the audiophile world may turn their nose up at
| Bose, but in the consumer space Bose is recognized as a
| known quantity (may be over priced for the quantity of
| quality you get but is recognized as not being extremely
| subpar generic).
| aerosmile wrote:
| You liked his idea that for a startup to scale, you should
| be doing things that don't scale. That article has mostly
| anecdotal evidence, and yet nobody ever pushed back on it.
| How do we know PG was right back then? (He was.)
|
| A few years later, that same guy writes an extensive essay
| with footnotes and data that must have taken days to
| compile (going all the way back to 1892). And yet, this one
| rubs you the wrong way.
|
| I am not defending PG or attacking you, but just consider
| this explanation as a possibility: when it comes to how to
| build a startup, you don't really have skin in the game.
| Whatever he says, it's unlikely to impact your life. But
| the minute we start talking about the Gini coefficient, the
| stakes are higher - it's getting political. Suddenly, it's
| like listening to Rush Limbaugh make an argument - isn't it
| clear that no Democrat will ever agree with anything that
| Rush has ever said, no matter how factual or not it is?
|
| I, for one, appreciate PG's ability to tie together global
| macro movements in a way that I've never heard anyone else
| summarize. You might agree or not with his take on the Gini
| coefficient (and especially his lack of acknowledgement or
| suggestions on how to deal with its consequences), and you
| might also get frustrated that PG is starting to dabble in
| politics, which is going to make him very polarized no
| matter how right or wrong he is. But there's still a ton of
| useful advice in this essay no matter which side of the
| political fence you stand on (eg: in 2021, if you're
| debating between entrepreneurship and finance/VC, choose
| entrepreneurship).
| random314 wrote:
| While pg has extensive foot notes for this essay, there
| is a vast amount of research with orders of magnitude
| more citations contradicting him on the gini coefficient.
|
| There is no argument about his footnotes. Quite likely
| the very richest might not be inheriting it. This has no
| bearing on the gini coefficient. And his essay on wealth
| tax is downright stupid. Are his essays as meticulously
| researched as Pikketys? Why does pg fail to refer to the
| most famous recent book on the subject in his footnotes?
| What could be the reason?
|
| https://en.m.wikipedia.org/wiki/Capital_in_the_Twenty-
| First_...
| kelnos wrote:
| > _No offense, but I trust PG 's advice on startups a lot
| more than his advice on macroeconomics_
|
| That's the key bit for me. I've found his writing about
| startups, software, hacker culture, product development,
| etc. to be mostly great and informative. But whenever I see
| anything he writes about society as a whole, I tend to find
| the conclusions he draws to be pretty out of line with
| reality, or at least (in the cases where I don't have data)
| counter to my experience and opinion.
| airstrike wrote:
| Unpopular opinion: this is similar to Stephen Hawking's
| gloomy predictions for AI
| EvilEy3 wrote:
| > Think of all the amazing writers across our civilization
| whose work is linkable
|
| Can you give some, please? I'm probably one those folks who
| cannot distinguish decent from amazing blog posts.
| sushisource wrote:
| OTOH, the top comment is a criticism. So, probably not all is
| lost :)
| idlewords wrote:
| The front page giveth and the comments taketh away
| ladon86 wrote:
| This is a really funny and pithy description of both HN
| and reddit - and according to Google, you're the first
| person ever to say it.
| wanderer2323 wrote:
| PG is apropos for this forum, but beyond that he is plainly a
| good writer. I don't know who you consider 'amazing writers
| across our civilization' -- but whether it is Gracian or
| Scott Alexander, PG shares one thing with them, namely that
| his works will be quoted beyond the lifespan of his
| contemporary readers.
| mattzito wrote:
| It's impossible to know for certain, of course, but it
| seems highly unlikely that any of those writers will be
| quoted beyond the lifespan of contemporary readers (except
| potentially in scholarly books about
| rationalism/startups/etc). How many authors from the 1940s
| are still widely read, especially for essays/non-fiction?
| InitialLastName wrote:
| Excepting the WWII memoirs (because I'm not sure how I
| want to count either Anne Frank, Elie Weisel or Winston
| Churchill in terms of "authors from the 1940s"), among
| authors whose nonfiction works are still read, there are
| a few names that do occur to me:
|
| George Orwell, Friedrich Hayek, Simone de Beauvoir, John
| Maynard Keynes, Jean-Paul Sartre
|
| For fiction there are obviously many more whose works
| have come through to frequent readership: Hemingway,
| Shirley Jackson, Albert Camus, C.S. Lewis, Antoine de
| Saint-Exupery, Ayn Rand to name a few.
| wanderer2323 wrote:
| Lewis would be my example for _nonfiction_. Narnia is fun
| and all, but it 's stuff like "The Inner Ring"
| (https://www.lewissociety.org/innerring/) where he really
| shines.
| whimsicalism wrote:
| The presumption that Scott Alexander will be quoted long
| beyond his lifespan really drives home how much of a bubble
| this site can be at times.
| blaser-waffle wrote:
| Indeed. How many people know who HL Mencken is?
|
| Alexander is a good writer, and I appreciate how he is
| able to tackle assumptions and challenge mainstream
| opinions, and does so systematically.
|
| But he's writing 10 pages of what could be summed up in
| 10 bullet points.
|
| The intellectual collateral is nice, but he's not really
| breaking new ground, and I'm not sure what he's going to
| share with the next generation of readers
| Matticus_Rex wrote:
| Mencken gets quoted pretty regularly in my circles
| :shrug:
| TheOtherHobbes wrote:
| He's good at rhetoric. The writing is simple with one point
| per paragraph and requires a low reading age.
|
| It has a single and consistently repeated/implied message
| without any deviations or uncertainties.
|
| All of that makes it persuasive.
|
| But factually it's mostly wrong.
|
| I'm not going to through it point by point to pick all the
| inaccuracies about the continuing influence of inherited
| wealth on success, or the unrealistically rosy implication
| of small business riches.
|
| I'll just suggest everyone should research for themselves
| the real survival rates for small businesses, the small
| business sectors with the best long-term viability, the age
| group most active in creating new businesses, and the
| number of tech startups that makes any return at all to
| investors.
| taurath wrote:
| He's a good writer in that he's able to convince people who
| know next to nothing about the subject matter that he is
| making good points. Neither history nor economics agree
| with his hand waving statements.
| mariksolo wrote:
| I don't think that merely being a good writer will allow
| him to be "quoted beyond the lifespan of his contemporary
| readers." I agree with OP that I really don't see anything
| special about his writings, compared even with contemporary
| writers on technology like RMS.
| MisterBastahrd wrote:
| Of all the things posted on this site, this is the comment
| that is the most wrong. If his writings are ever quoted
| again after his death, it will be meant as sarcasm.
| Nacdor wrote:
| > namely that his works will be quoted beyond the lifespan
| of his contemporary readers
|
| I have never seen PG quoted anywhere, not even on HN.
| skjfdoslifjeifj wrote:
| I see people quoting him occasionally. They're always
| mocking him and this site though.
| yarcob wrote:
| I see the quote "Do things that don't scale" often enough
| random314 wrote:
| It is funny to read pg's take on wealth tax, given that
| Piketty has produced massive scholarly literature suggesting
| the exact opposite of what pg writes.
|
| If the pg's wealth tax blog was supposed to counter Piketty's
| work, it is comically pedestrian.
| jacques_chester wrote:
| > _I don 't know, can someone explain why his work is so
| popular?_
|
| It's a prosperity gospel for nerds: _you are the special
| chosen ones, therefore you deserve every blessing. Anyone who
| says otherwise is sinful and blind to the holy truth._
| hexhex wrote:
| My two cents on why his writings are popular: - He uses
| anecdotal evidence which appears to be sound at first.
| Looking at the top 100 billionaires seems to give a good idea
| on how wealth is created and distributed, but really it is
| only a glimpse at a much bigger phenomenon (especially since
| the data only comes from two years). - His style of writing
| is very accessible and natural. He wrote an article on his
| style (http://www.paulgraham.com/simply.html), and it seems
| to strike a chord with technicians who prefer this over more
| complicated prose.
|
| I feel these are the same reasons for why effective altruism
| is so popular among technicians. It offers clear cut answers,
| and avoids uncomfortable questions.
| jrochkind1 wrote:
| Also his conclusions are what some people want to hear,
| that confirms their worldview.
|
| This is not at all unique to PG, you and I and everyone
| does the same thing, at least to some extent, in choosing
| what argument/opinion pieces (now the dominant form of
| textual media?) we are tickled by.
| milesskorpen wrote:
| Same reason Malcolm Gladwell is popular -- it's pop
| science/economics/whatever, made to be readable and
| digestible, but over simplifies (and sometimes falsifies)
| in the process.
| jonny_eh wrote:
| At least Gladwell's writings are not so obviously self-
| serving.
| tommyderami wrote:
| Could you expand on the last sentence a bit more regarding
| effective altruism? Are the uncomfortable questions related
| to the utilitarian nature of how the movement racks and
| stacks the causes they choose to support or not?
| hexhex wrote:
| I was more referring to the fact that EA promotes
| philanthropy instead of asking why we have inequalities
| in the first place. So it evades questions of
| redistribution or fairness in a similar fashion as PG.
|
| I'm not quite sure how strong the analogy is though.
| oscargrouch wrote:
| Its the same reason any tweet by Elon Musk saying stupid
| stuff get 300k likes instantly.. Its about who say and not
| about what is being said.
|
| If you don't hack your mind from a philosophical perspective
| you wont stop this tribal hard-coded neural trigger of this
| automatic authority following.
|
| This is the only thing that can save us from being that
| person in the 30's Germany photos raising their hands and
| chanting 'Sieg Heil'.
|
| Remember that this is hardwired, but it worked somehow
| because we used to be packed in small communities where
| everyone knew each other.
|
| Now the same "wiring" is being used the same way, but now
| with a virtual global tribe, where we actually don't really
| know the people that is being granted authority or why we are
| supposed to follow them, because we simply follow them giving
| everybody is also doing it.
|
| Just observe yourself more often and question even the things
| you take for granted before doing it. You will see a lot of
| these things are actually unreasonable giving their actual
| context.
| gopalv wrote:
| > people like me are creating a lot of value, please
| acknowledge it. Also there are no downsides to this
| accumulation of wealth
|
| That is an overstatement of the article, but the article is
| actually defending the rise in inequality as a nature of the
| world today with no guilt (of participation) about it.
|
| Reminds me of the call girls in H2G2 who specialize in
| sociology telling executives that it is okay to be rich and
| they earned every dollar in a dystopian war field (HanDod
| city?).
|
| It is extremely important for a creator to truly believe that
| "they built all this value" (non zero sum value and that is
| often true) and not merely built an efficient transfer
| mechanism into their pocket. This in contrast to something like
| Warren Buffet's "lottery of birth" statements.
|
| He is right about something though, the rules are the same as
| before.
|
| "Welcome all. Everyone can play, the winners get to keep
| playing, the rich can play longer even if they lose - those who
| play longest, win big. Just remember there are no second acts
| in american life".
|
| The winner-take-all only benefits those who can actually spread
| their investments around ,so that the investors can spread
| their money, but the workers can't spread their time around 10
| possible jobs.
|
| Also, picking oil and 1982 feels odd considering half the "gas
| crisis of the 70s" highlighted why oil is critical.
|
| If I said medical tech would boom in the next five years, with
| vaccines for HIV and bespoke immune therapy for cancers, that
| would not be a bad bet because of the usual "events leading up
| to".
| bambax wrote:
| The people he thanks for "having read drafts of this" are:
|
| - his two lifelong friends and business partners
|
| - his wife
|
| - two prominent libertarian economists.
|
| Missing from that list are his children and Peter Thiel.
| bambax wrote:
| Yeah. My point is, PG's essays project objectivity and
| neutrality and even science; but in truth he has an agenda,
| and it's the same as Thiel's.
| newsclues wrote:
| Once you get to a point, preservation of wealth is the most
| important thing.
| grenoire wrote:
| pg has been touting the statistics he's pulling out in here for
| a while on Twitter. I think he read these somewhere and started
| digging a bit more into it, constructed a narrative, and wrote
| an essay.
| [deleted]
| heMan09 wrote:
| He's a man of his youth; when you could start a garage band and
| have a modicum of success, then carry it forward with sound
| fiscal choices. Concepts like inflation, and buying power are
| lost on someone of PG's wealth.
|
| He's completely detached from the modern reality: content and
| options are ubiquitous relative to PG's golden years.
|
| It's the same with Marc Andreesen and his call to build; hey
| Marc why not build a progressive tax system that enabled your
| generation and your parents to explore as they chose instead of
| suggesting we all just rally behind a billionaires blog post?
|
| These guys are visible because they "won" an ephemeral
| challenge most people aren't even aware of.
|
| It's stunning how smart folks seem oblivious to the extent
| which relativity commands reality.
| hardwaregeek wrote:
| > A French critic cleverly wrote that "with Autumn Sonata
| Bergman does Bergman." It is witty but unfortunate. For me,
| that is. I think it is only too true that Bergman (Ingmar, that
| is) did a Bergman.... I love and admire the filmmaker Tarkovsky
| and believe him to be one of the greatest of all time. My
| admiration for Fellini is limitless. But I also feel that
| Tarkovsky began to make Tarkovsky films and that Fellini began
| to make Fellini films. -- Ingmar Bergman
|
| And PG does PG. It's a classic pseudo-contrarian, startup rally
| cry, PG post. Which isn't to say it's worth getting annoyed at
| it. It's simply on brand.
| tyre wrote:
| Add to that that tech companies concentrate wealth line never
| before. Airbnb takes a cut of transactions not only around the
| US but across the world. Not everyone works in the Bay Area,
| but how many of the founders, early employees, and VCs do? The
| ones who really make massive wealth? Not 100%, but most. Same
| with Stripe, the same with Facebook, Google, etc. we're pulling
| tremendous wealth into a small area, with technology that can
| scale tremendously large businesses with fewer people.
|
| This isn't to say that, for example, wealth from finance
| companies doesn't centralize in New York and London. That's bad
| too. It's not to say that good things don't come from these
| companies (though Facebook seems to be a net negative for
| humanity.)
|
| But this level of wealth concentration and inequality is
| detrimental to the fabric of a society. We're not better off,
| we're not more innovative, we're not healthier or more cohesive
| or happier when this happens.
| strikelaserclaw wrote:
| undoubtedly, i think theres a sweet spot for letting people
| gain rewards from their own hard work/talent/value creation,
| but i think as a society we are moving into the dangerous
| territory where that balance is totally skewed in one
| direction.
| Dracophoenix wrote:
| First off, I really like your username! I'm sure you had a
| particular robotic animal in mind when you chose it.
|
| Secondly, a gain from one's own rewards is supposed to be
| in one direction. A person is entitled to the fruits of his
| labor. Not anyone else. There are only a few people at the
| top of any profession or activity. But this fact seems to
| be ignored for some "utopian" dream where the guilt or
| coercion of the successful compels, via self-abnegation,
| some "compensation" to the masses for the latter's lack of
| success. That the best are merely cogs to keep churning to
| the rhythms and dictates of his fellow man and of his
| government. That the best see no value in their own work or
| selves without others as their chief barometer.
|
| However, I don't see it argued that Usain Bolt should slow
| down so that he doesn't ruin the Olympic Sprint for the
| rest of his competitors. I don't see it argued that
| intelligent students should stop going to
| Harvard/Stanford/{take your pick} because such academic
| success makes everyone else look mediocre by comparison.
| Why should it be any different in Silicon Valley? Why
| should one accept inefficiency or inadequacy? It benefits
| no one to either become or accept a prize that is lesser in
| value than the sum of one's actions. Except perhaps for
| martyrs and masochists.
| VRay wrote:
| You're looking mixing up cause and effect
|
| You're mad about "cause": Evil startup stiffs tons of small
| players across the world
|
| You're lashing out at "effect": Lots of money gets
| concentrated around the evil startup's headquarters
|
| A lot of really bad stuff has happened in history because
| of this sort of bad logic, so you really need to rethink
| your position
| zdragnar wrote:
| The use of Airbnb seems odd to me. People around the world
| use it because they don't like the alternatives.
|
| Why shouldn't they be allowed to do business?
| runarberg wrote:
| I think the problem here is the consolidation of an entire
| industry around a single Silicon Valley company. In any
| other time in history this would be called a monopoly, and
| that is a problem.
|
| If AirBnB was just an aggregator, say a cooperative
| standard where hotels and guesthouses could post their
| services and the profits of AirBnB would go back to the
| industry, that would be fine. But it is not, the profits go
| to shareholders and Silicon valley executives. And that is
| the problem.
| zdragnar wrote:
| There are competitors- VRBO, for example. AirBnB have a
| significant share, but hardly a monopoly.
|
| If Airbnb were just an aggregator, it'd be pretty
| worthless. For myself and my wife, finding superhosts on
| Airbnb is one of the indicators we use to feel
| comfortable that we probably aren't getting ripped off.
|
| The relatively simple interface for scheduling,
| requesting changes, paying, seeing up front what taxes
| and surcharges will be applied etc. are all things the
| hotel industry has had decades to implement, and they
| didn't.
|
| In fact, they still haven't. If hotels and guesthouses
| formed such a cooperative with all the same features, I
| would use it- especially if they didn't add on their own
| service charge like Airbnb.
|
| The boom of renting rooms and houses may have come with
| its downsides, but from the consumer point of view,
| AirBnB has been a godsend for those of us who don't like
| hotels, travel with pets, and go to out-of-the-way places
| that don't otherwise tend to attract a lot of online
| presence.
| matkoniecz wrote:
| Noticing some consequences does not mean that they are
| calling for outlawing them.
| zdragnar wrote:
| I wasn't really picking on the point, I was just noting
| that Airbnb seems like an increadibly bad example.
|
| Also, using hyperbolic language like
|
| > But this level of wealth concentration and inequality
| is detrimental to the fabric of a society. We're not
| better off, we're not more innovative, we're not
| healthier or more cohesive or happier when this happens.
|
| is definitly a dog whistle and not simply "noticing some
| consequences".
| twobitshifter wrote:
| I think his very good point is that a global business is
| comparatively easy to build and that has led to wealth
| concentration
| tyre wrote:
| Could you point out where my comment implied that they
| shouldn't be allowed to do business? I didn't mean to (and
| don't believe that) so it would be helpful to see how I
| could adjust the way I communicate this.
|
| They should be allowed! It's just that maybe we need to
| adjust our society to this reality.
| zdragnar wrote:
| I think the language of the post was rather hyperbolic; I
| have quoted this line a few times now:
|
| > But this level of wealth concentration and inequality
| is detrimental to the fabric of a society. We're not
| better off, we're not more innovative, we're not
| healthier or more cohesive or happier when this happens.
|
| When you give Airbnb as an example, I fixated on them
| mostly because it doesn't jive with the rest of your
| point.
|
| So Airbnb is part of a group of companies in one
| geographic area that happen to be successful. Why does it
| matter? Should we choose to not do business with them,
| for the sake of geographical monetary equity? Whether
| group fiat or government breaking them up, it is the same
| result.
|
| Sorry if all of this came off as too aggressive. It is
| monday, and I have had too much coffee already :/
| mattmanser wrote:
| Really don't get where you're coming from, that quote is
| two paragraphs after the mention of many other companies,
| where he's clearly implying the concentration of wealth
| in the hands of the founders and investors is the
| detriment.
| monoideism wrote:
| > But this level of wealth concentration and inequality is
| detrimental to the fabric of a society. We're not better off,
| we're not more innovative, we're not healthier or more
| cohesive or happier when this happens.
|
| I agree 100%, but you're ignoring the other factor that is
| detrimental to society: social factors. Notably, the divorce
| rate and single-parent rate among poor and working class
| Americans of all races has skyrocketed. Now, top earners will
| often tell you that there's nothing wrong with divorce or
| single-parenthood, but observe what they're actually doing
| themselves! Their low divorce and single-parent rates have
| remained steady over the past few decades, even as everyone
| else's is plummeting [1].
|
| In addition, the middle and working class are losing their
| social support networks. Church attendance is down, union
| membership is down, and volunteer organization participation
| is down among those groups. In contrast, most top earners
| have large and robust social networks.
|
| I could go on and on about other social issues. Yes, wealth
| and income inequality is a big problem, but it's only one
| aspect of the decline of America's middle and working class
| (excluding the upper-middle class, which has continued to
| rise). We need to stress and incentivize social factors as
| well. The non-wealth and non-upper-middle-class should
| emulate what the top earners _do_ in their social lives, not
| what they _say_.
|
| I still strongly support a wealth tax, and higher income
| taxes, as long as they're distributed directly to our
| citizens and not used to build additional government
| bureaucracy.
|
| 1. https://www.brookings.edu/research/middle-class-marriage-
| is-...
| taurath wrote:
| Could also be the tail wagging the dog. People arrested for
| say being drunk in public are gonna be broke, because they
| don't have mansions to drink in.
|
| Could be that the cultural problems you're describing
| follow whole towns being hollowed out as all wealth is
| transferred to winner take all cities, as free trade knocks
| out industries with no help nor replacement.
| triceratops wrote:
| Finances are generally a big cause of divorces. Have you
| considered that upper-class couples have low divorce rates
| _because_ they have money? Rather than they are upper-class
| because they don 't get divorced.
|
| Don't get me wrong, divorce is a massive destroyer of
| wealth. But happy couples don't generally get divorced. And
| financial stability is a big contributor to happiness.
| closeparen wrote:
| These takes freak people out because we want to think of anti-
| inequality as a virtuous, prosocial belief. But a commitment to
| hold down inequality is a commitment to prevent the creation of
| value.
|
| I don't think it's controversial to skim the top of the
| creation of value / rise in inequality to fund services that
| people need. But as long as a founder's share of his value
| creation is greater than the share accruing to the homeless
| person down the street, his enterprise is still promoting
| inequality. From an inequality frame, even with a 99% tax rate
| it ought to be stopped. There are more than 99 other Americans;
| the founder's share is still outsized.
| whimsicalism wrote:
| Is it? Does most inequality rise from value creation?
|
| Most wealth in America is held by the top 5% wealthiest
| households directly as a result of inheritance, not hard work
| or value creation.
|
| How is arguing that the inequality produced by inherited
| wealth needs to be restrained a "commitment to prevent the
| creation of value"?
| john_moscow wrote:
| >At the end, there's a massive claim that isn't fully stated
| but implied. "Of course the Gini coefficient is increasing"
| translated means "income inequality is not a problem".
|
| To me, the implied message simply reads as "Startups and
| private equity is the number way to make money in 2021. Come do
| business with us."
|
| Makes sense given PG's primary business.
| thegrimmest wrote:
| Can I ask a related question? Why all the focus on
| income/wealth "inequality"? Shouldn't we be looking at the
| absolute baseline quality of life? Hasn't it been increasing
| dramatically despite increasing inequality? Due to
| technological advances, hasn't the baseline quality of
| healthcare, education, sanitation, nutrition, shelter, comfort,
| convenience, etc. significantly improved from the 60s or the
| 80s? If so, why begrudge the rich, especially those who have
| driven this advancement, their fleets of yachts?
| lotsofpulp wrote:
| >Why all the focus on income/wealth "inequality". Shouldn't
| we be looking at the absolute baseline quality of life?
| Hasn't it been increasing dramatically despite increasing
| inequality? Due to technological advances, hasn't the
| baseline quality of healthcare, education, sanitation,
| nutrition, shelter, comfort, convenience, etc. significantly
| improved from the 60s or the 80s?
|
| If people are feeling more volatility, and that it can all
| slip out from under them at any time, then all that baseline
| quality improvement is not worth much. Also, just like many
| other animals, we are playing a game rooted in the mechanics
| of mating involving social hierarchy and various tribal
| mechanics that are key to securing desired resources and
| reducing the aforementioned volatility. I do not imagine vast
| gaps in income/wealth/security help the tribe as a whole in
| this game.
| thegrimmest wrote:
| > If people are feeling more volatility
|
| Do you think this feeling is reflected in actual risk
| though? If so, how would you quantify it? If not, shouldn't
| we expect/teach people not to feel so volatile and be more
| grateful and content?
| lotsofpulp wrote:
| Yes, the easiest way to see it is in the lack of income
| security and wage stagnation for the vast majority. You
| have to hustle, your employer may not be around for your
| working lifespan, or they might be obviated by cheaper
| labor from overseas and/or technology and automation.
|
| Edit: Another example is health insurance is tied to your
| employer in the US. It costs anywhere from $400 per child
| per month to $1k per month per adult, with a $17k out of
| pocket annual maximum. Imagine you've scraped together
| some savings for a house or a business or kids'
| education, and a wage earner becomes ill or injured, and
| can't work. Now you have giant expenses coming your way
| at your most vulnerable, and government help from
| Medicaid (for subpar quality healthcare) doesn't kick in
| until after you've exhausted all your assets, so you are
| at risk of getting sent back to square 1.
| thegrimmest wrote:
| Doesn't the article point out that this is pretty much
| the normal condition of life, with a brief interlude from
| the 50s into the 80s? Yes, life is unpredictable, bad
| things happen for no reason. This is a moral condition we
| all have to accustom ourselves to. I'd speculate that the
| pain our society seems to be going through now represents
| a correction towards the normal condition, and that we
| should adjust our expectations accordingly.
| lotsofpulp wrote:
| The gist of your original comment was that life has been
| getting better for everyone. But if you also claim people
| need to adjust their expectations downward, then some
| things are not getting better for everyone.
|
| I know that people from the 50s to the 80s didn't have
| internet, healthcare technology, medicines, smartphones,
| etc like today. But obviously there is something to be
| said for the stability or utility of knowing that your
| children will most likely have a better future than you
| did, and the demise of this fact (or belief) is causing
| friction in society.
| thegrimmest wrote:
| > stability or utility of knowing that your children will
| most likely have a better future than you did
|
| Depends on how you qualify "better". By the listed
| measures, this is still the case. By available
| land/population this is clearly not. Do we have any
| reason to believe our children will not have better
| healthcare, nutrition, access to information, etc than we
| do?
|
| If we don't, then what justification is there for
| agitation?
| lotsofpulp wrote:
| >By the listed measures, this is still the case.
|
| What measures? The ones in your original comment?
|
| >healthcare, education, sanitation, nutrition, shelter,
| comfort, convenience, etc.
|
| In the US, you can trace all of these back to wages,
| especially since healthcare is tied to your employer in
| the US, and you can look up any a variety of data to show
| that wages stagnated decades ago, length of tenure at
| employers decreased, increased participation in "gig"
| economy and service industry which don't offer benefits
| (i.e. loss in wages), consolidation of growing economies
| in fewer areas of US resulting in cost of land rising
| disproportionally to income, etc.
|
| > Do we have any reason to believe our children will not
| have better healthcare, nutrition, access to information,
| etc than we do?
|
| I don't know who "we" is here, but it's reality for
| people who spent 20 to 30 years at a manufacturing
| facility that was then outsourced and who now live in a
| town with no significant business, whose kids' only hope
| is to use college to boost themselves into an in demand
| career, but that involves moving to a HCOL area where
| they now have to sink a significant amount of money into
| their land purchase (house) to establish themselves, away
| from the rest of their family.
|
| >If we don't, then what justification is there for
| agitation?
|
| I don't know what other sources of information you want,
| but I know pretty much everyone in my parents' generation
| got married, had kids, raised families, and now the
| number of people that are coupled up is around half in my
| family and friends, and those with kids by mid 30s is
| even lower, maybe a third.
|
| There's shortages of healthcare providers in rural areas
| because no one wants to live there, there's more and more
| competition for in demand areas as everyone tries to get
| in before they can't afford it.
|
| This is all volatility. This didn't happen when
| everywhere was growing, but this happens when you have a
| divergence, and you're either on the upswing or the
| downswing.
| jasonwatkinspdx wrote:
| Because there are people being left behind. Productivity per
| person has increased massively over the last half century,
| yet income per worker has been stagnant unless you break into
| a few specific contexts. This doesn't appear to be a
| necessary part of innovation as PG and others claim, but
| rather is a reflection of concentrated wealth's ability to
| restructure the market and even the legal system to better
| serve those concentrated interests. This is the pernicious
| problem we have to fight. It is in no way somehow exogenously
| necessary for people to have half billion dollar yachts in
| order to advance the life of the typical human. "Markets
| measure merit" is a lie told by those best positioned to
| control markets to manufacture their own "merit."
| kkoncevicius wrote:
| Social status is by comparison, that's why. I assume the vast
| majority of people would choose to be in the aristocracy
| somewhere in 1300 Europe, compared to middle class today.
| Even if objectively the middle class has better quality of
| life.
| thegrimmest wrote:
| Why on earth would you assume that? Middle Ages aristocracy
| lived comparatively miserable lives - no daily hot shower,
| no climate control, nothing resembling health care, no
| running water or sanitation, no access to information, no
| international supply chain for food or products (eat only
| what your community can preserve for the winter). I would
| wager that any of those aristocrats would gladly amputate
| their limbs to live as an average person today.
| hn_throwaway_99 wrote:
| Three problems:
|
| 1. Humans are humans, and they pretty much always judge their
| success by comparing themselves to others. Or, rather, humans
| are primates. Take a look at the famous study of the monkey
| that got cucumber while the other monkey got tastier grapes.
|
| 2. Income inequality in and of itself can be a problem
| because the mega wealthy can essentially buy laws that
| benefit themselves. There have been many studies that show
| that politicians are much more responsive to the desires of
| the rich than the desires of the average person.
|
| 3. In any economy, limited resources always go to those on
| the top of the wealth graph, regardless of cost to produce.
| So while you may be able to say everyone's standard of living
| is better, that's cold comfort to someone who won't be able
| to buy a house in their lifetime because limited land supply
| goes to the richest.
| thegrimmest wrote:
| > pretty much always judge their success by comparing
| themselves to others
|
| Yes but that doesn't mean this comparison has moral
| standing. Also this behaviour is pretty low-level,
| neurologically, and we can train our higher executive
| functions to override and disregard it. I would argue that
| should be the expectation.
|
| > can essentially buy laws that benefit themselves
|
| Again - so what? As long as everyone's lives are improving
| on every metric, who cares that the wealthy mess with the
| tax laws or enact regulatory capture.
|
| > that's cold comfort to someone who won't be able to buy a
| house in their lifetime because limited land supply goes to
| the richest.
|
| No, the person (and all other people) should derive their
| comfort from the gratitude for being able to live in a
| modern, extremely comfortable world.
|
| Edit: to rephrase, isn't the problem here the
| expectation/belief that you should have/are entitled to a
| detached house?
| hn_throwaway_99 wrote:
| For many people in the US, over the past couple of
| decades:
|
| 1. Housing has become much more unaffordable.
|
| 2. Higher education has become much more unaffordable.
|
| 3. Retirement income has become much less guaranteed.
|
| 4. Employment is much less stable than it used to be.
|
| Just look at the coming eviction tidal wave that will
| happen after the eviction moratoriums in the US end.
| Telling people "But look at all the other modern comforts
| you have now!" will smack as "Let them eat cake" when
| someone gets kicked out of their house, while the rich
| got much richer over the past year.
| thegrimmest wrote:
| > Housing has become much more unaffordable.
|
| That's hardly surprising though is it? The number of
| people in the US has almost doubled since 1960, and urban
| population density has increased much more than that. Any
| expecation that everyone will be able to afford a
| detached housed in any proximity to a metropolis is
| clearly unreasonable.
|
| > Higher education has become much more unaffordable.
|
| Again, the admissions rate hasn't really kept up with the
| population has it? Also there's a labour shortage in lots
| of skilled trades, construction and agricultural labour;
| and a labour surplus in finance and law. Do you think
| it's reasonable that everyone expects to attend higher
| education?
|
| > Retirement income has become much less guaranteed.
|
| I'm not sure how you'd measure retirement income
| "guaranteedness". Also see "Pension Timebomb" for how
| actually guaranteed those pensions are.
|
| > Employment is much less stable than it used to be
|
| Do you have a source for this? Ideally one that controls
| for people changing employment to advance their careers?
| This is much more common these days for the reasons
| outlined in the article.
|
| Yes, after being evicted from a place you cannot afford,
| or after any other trying circumstance, telling people to
| focus on what they can be grateful for instead of what to
| be angry about is exactly the right thing to do. What
| business is it of yours or anyone elses how much money
| someone else has? Who cares if they have more or less
| than last year? How is that related to you personally
| being unable to affort rent due to being unemployed
| during a pandemic?
| cupofcoffee wrote:
| >That's why founders sometimes get so rich so young now.
|
| It is true. Sometimes young people get really rich while they are
| really young. Sometimes you can toss a coin 30 times and you can
| get all heads. I don't see why deceptively call it "sometimes"
| when in reality saying almost never would be heck of a lot truer.
|
| >You could get rich from starting your own company in 1890 and in
| 2020, but in 1960 it was not really a viable option. You couldn't
| break through the oligopolies to get at the markets.
|
| I am guessing by PG's definition having an internet connection is
| "getting at the market". To create a startup at 2021 in tech
| sphere you need to have a ridiculously unique skill-set. I
| haven't heard of any recent succesful start-ups that just does
| writes to DB and renders something on the screen. If there was
| such a low-hanging fruit big companies would simply copy the best
| features overnight and make you obsolete.
|
| When tons of people are getting at a market it means lots of
| competition which means you need to further reduce the
| competition space by using geography, connections or wealth.
|
| Tl;dr: You almost never get rich from starting a company.
| iaminvr wrote:
| I would like everyone to know I am posting this inside virtual
| reality, a space Paul Graham personally thinks will be full of
| rich people.
| claudiulodro wrote:
| Im curious, if we wait, say, 40 more years, I wonder will the
| richest people again be heirs (of today's current crop of tech
| billionaires)? If so, what does that mean for Paul's hypothesis?
| strikelaserclaw wrote:
| undoubtedly, unless we have a new revolution like the personal
| computing/internet revolution that makes the pie bigger and
| accessible for people, and those types of revolution are things
| that you can hardly for-see.
| spaetzleesser wrote:
| "undoubtedly, unless we have a new revolution like the
| personal computing/internet revolution that makes the pie
| bigger and accessible for people, and those types of
| revolution are things that you can hardly for-see. "
|
| It seems the computing revolution lead to a massive
| concentration of wealth.
| gfodor wrote:
| The internet isn't a revolution, but a meta-revolution. It
| seems to me we will be harvesting the value of the second
| order revolutions from the Internet for a long time.
| strikelaserclaw wrote:
| you are right but will those harvesting the value be
| individuals or corporations. Gone are those days when u can
| build a billion dollar company over a weekend, and i
| suspect the trend towards increasing technological
| complexity will continue, at some point any field where
| advances are to be made will be untouchable except by very
| few individuals with highly specialized knowledge and
| corporations.
| fullshark wrote:
| I guess the fundamental question is are we at the tail end of
| the Information age, does it have more room to grow, or is
| there a new technological shift on the horizon? Paul seems to
| take it for granted ("how people get rich NOW") that we have
| room to grow but who knows?
| strikelaserclaw wrote:
| The information age has room to grow i believe, but will that
| be spearheaded by adventurous individuals or by big
| corporations remains to be seen. Most startups these days are
| either derivatives of existing products or highly specialized
| in so far as they know their end game is just to be bought
| out by one of the big tech companies. I find it hard to
| believe we will see a brand new company that will reach FAANG
| size without some new technological revolution.
| laurent92 wrote:
| Long-term economic cycles, 70+ years long (Kondratiev cycles if
| I remember my classes) are linked to deep trends: Petrol
| appears, we rework all cities around petrol distribution, new
| opportunities are built, then stagnate then comes global
| warming and we undo all of this and people grow out of it.
|
| I associate Paul Graham's single cycle example to the one of
| petroleum. And the new cycle is of the computer age. And there
| will be S&Ps and world domination and boring climb-the-ladder
| careers and the stagnation of the 1990ies, but in 2090.
|
| The bad news is, companies which exist during the ramp-up phase
| are also the major players until the stagnation phase. That's
| why stakes are so high and valuations with dozens of multiples:
| A share of the right company today is a share in the control of
| the world in 2060.
| analyte123 wrote:
| I am skeptical of any "top X wealthiest" lists especially for an
| analysis like this which claims that people are no longer getting
| rich through inherited wealth. Inequality has gone up a lot since
| the 1980s and to me a smart person who inherits wealth is not
| going to flaunt it and probably not going to want to be in any
| kind of Forbes list. There are plenty of ways to move wealth off
| of your personal ledger while keeping it in the family, ways that
| don't even count as "hiding" and I just know casually as a
| peasant who will never encounter a single one: foundations,
| generation-skipping trusts, CLATs (maybe the "charity" is your
| foundation!).
| iamleppert wrote:
| Dude is obsessed with money and wealth. Why?
| tpmx wrote:
| What this post looks like on a 40" 4k screen (which btw is an
| awesome investment for productivity):
|
| https://i.imgur.com/gPHT5hI.png
| johnnycerberus wrote:
| The reason behind my downgrade to 1080p. The Internet is just
| not ready.
| bserge wrote:
| Adjust window size, place it in the center or wherever it's
| more comfortable, increase text size as needed. That's what I
| do :D
| dokem wrote:
| Why does a browser window need to take up an entire 40" screen
| for general browsing?
| _ZeD_ wrote:
| CTRL+mousewheel, my friend
| tpmx wrote:
| That just means you have to move your chair away from the
| desk...
| tiborsaas wrote:
| How is life browsing fullscreen on a 40"?
|
| The reason I picked a 4k giant monitor is to be able to place
| 3-4 browser windows, terminals, apps next to each other :)
| tpmx wrote:
| I mean, I'm not browsing in full-screen mode. Just used that
| to easily hide private stuff like the bookmarks bar and other
| tabs.
|
| Full-width browsing: It's generally surprisingly good. The
| vast majority of sites have learned to use margins and to
| center content.
|
| And sure, when actually doing work you want to tile your
| windows just the right way.
| burlesona wrote:
| Which model did you go with?
| tpmx wrote:
| I've generally gone with Philips 40-43 inch displays. They
| keep changing the models, but they only have one in this size
| at a time.
|
| Edit: The one I'm currently using is still on sale:
| BDM4350UC.
| yan wrote:
| To solve the wide-screen, narrow text problem, I once threw
| together a demo with a hacked up Chromium/WebKit to create a
| flowing, multi column view mode that created a long virtual
| scroll surface and scrolled it like newspaper columns:
| https://vimeo.com/59463521.
|
| It wasn't super intuitive, but wish a modern browser had this.
| tpmx wrote:
| I'm kinda sure I saw a pre-chromium Opera browser build do
| this back in like 2010 or so (maybe it was just a mockup),
| but like you say, it's not super intuitive. And the scrolling
| feels weird when you have 2-3 columns moving.
| justwalt wrote:
| This is a nice feature that I often wish every text editor
| supported natively.
| josefresco wrote:
| Optimal line length is ~75 characters which actually makes this
| layout "modern" again!
| dcolkitt wrote:
| > 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 cliff in the past few decades.[1] The number of new
| companies as a percent of total businesses is 44% lower in 2012
| than it was in 1978.
|
| Again, I think this is different than what Paul Graham is talking
| about. When he says "many more people are starting companies", I
| think he's thinking more about a SaaS startup than a McDonalds
| franchise. Obviously that fits in much more with the theme of how
| people generate massive fortunes. Nobody becomes a billionaire
| from starting a landscaping service or an auto body shop.
|
| But still, I think it's important to keep the context in mind. In
| the larger sense, entrepreneurship in America is very much dead.
| That doesn't mean that it isn't thriving in a specific Silicon
| Valley subculture, that to be fair makes massive contributions to
| the broader economy. But it should make us question what makes
| the Valley so different from Main Street, USA. If not just to
| figure out how to export the model from Palo Alto to Oklahoma.
|
| [1]https://www.inc.com/magazine/201505/leigh-buchanan/the-
| vanis...
| crispyambulance wrote:
| When Paul Graham says "get rich" it goes without saying that he
| means "billionaire rich" by virtue of being a founder of a
| unicorn that goes IPO. That's nice for those that can do it but
| it's such a tiny number of people, it's irrelevant and non-
| actionable advice for practically everyone. Right off the bat,
| he's talking about the "100 Richest".
|
| What about people that run a business and make a good living
| and some profit for themselves and their employees doing
| innovative stuff? Is that too inconsequential to even mention
| because VC's aren't interested?
| jefftk wrote:
| _[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.
|
| People sometimes get confused when they see a graph labelled
| "startups" that's going down, because there are two senses of
| the word "startup": (1) the founding of a company, and (2) a
| particular type of company designed to grow big fast. The
| statistics mean startup in sense (1), not sense (2)._
| robocat wrote:
| 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... ("This graphic plots the probability that a 30-year-
| old American has to outearn their parents" so if upward
| mobility comes later in life then it would be deceptive).
| bo1024 wrote:
| This seems to contradict his analogy between 2020 to, say,
| 1890. Instead of a bunch of people starting small local
| businesses and gaining moderate wealth, we have winner-take-
| all dynamics.
| WalterBright wrote:
| > winner-take-all
|
| You can buy stock in winning companies and get your share
| of the winnings.
| harimau777 wrote:
| 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).
| dlp211 wrote:
| Not to mention that you miss out on one of the bigger
| wealth building opportunities, the IPO. While not true
| for every company, tech IPOs have been gangbusters as of
| late. I would have loved to invest in AirBnb at their
| last evaluation before IPO. But that is only available to
| the truly wealthy.
| WalterBright wrote:
| Take a look at what you'd have today if you bought AMZN
| the day _after_ it started trading (it doubled on the
| first day).
|
| Didn't buy it because you couldn't afford to buy enough
| to make a difference? You lost big time!
|
| Unhappy about Bezos' compensation? He was there on Day 1.
| He bet the farm on AMZN. You didn't.
| WalterBright wrote:
| 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.
| jeffreyrogers wrote:
| PG is wrong about this. In the past it probably was easier to
| get rich (> $10mm) by starting what he will not call a
| startup than it is now. Lots of people used to get rich this
| way starting small businesses serving the automotive industry
| (making airbag assemblies and other important things) or
| providing specialized services to the Oil and Gas industry,
| etc. These are just examples, there are obviously tons of
| things like this. And while these opportunities still exist
| they are much rarer than they used to be.
|
| There are many reasons these opportunities are fewer, but I
| think the main ones are
|
| 1. Increased firm size means it is harder to compete since
| you don't have economies of scale.
|
| 2. High labor costs in the US mean many things are not
| profitable to do in the US, so no small US businesses can
| engage in them (they have to be big enough to engage overseas
| manufacturers or savvy enough to negotiate that environment
| as a small business... again, it can/has been done but it's
| harder).
|
| 3. Higher cost of living in the more dynamic parts of the
| country make it harder to start a business without getting VC
| funding, especially if that business requires some amount of
| R&D before generating revenue.
| mdorazio wrote:
| I had the exact same thought when I read pg's statement, "Why
| are people starting so many more new companies than they used
| to, and why are they getting so rich from it?". People aren't
| starting so many more new companies than they used to - they're
| starting significantly fewer, and that's a bad thing.
|
| pg is obviously focused on the tech side of businesses, but if
| you look at the US business climate more broadly, tech is a
| poor indicator for what's been happening the last several
| decades.
| throwaway0a5e wrote:
| You're a successful
| machinist/plumber/accountant/chiropractor/electrician/IT
| specialist/etc with a couple decades under your belt working
| for other people. In decades past you'd strike out on your own.
|
| In 2021 you look at the regulatory environment and overhead
| costs of starting a business, say "screw that" pick it up as a
| side gig and find a day job where you can coast. Maybe if you
| have some special love for the IRS you make an LLC and call
| yourself a consultant.
|
| This change has affected both the blue collar trades and a
| growing share of white collar professions these days. The
| larger of a headache it is to be Real Business(TM) the larger
| the potential upside needed to justify it. Unless you think
| your ideas are gonna change your industry or you plan to become
| the regionally dominant player in your niche why start a real
| business when a cash only side gig will scratch that itch most
| of the time?
| troygoode wrote:
| He specifically addresses this in footnote [3].
| jessaustin wrote:
| _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._
|
| The news has gone from bad to worse. Winner-take-all
| regulations, customs, and market manipulations are good for
| Bezos, but not for normal humans and not for the economy as a
| whole. It has been even worse in pandemic time, since the
| small shops just closed down while the bigger firms were
| somehow exempted from those requirements.
| criddell wrote:
| And he tries to spin it:
|
| > So what the statistics about the decreasing number of new
| businesses mean is that people are starting fewer shoe stores
| and barber shops.
|
| He might like to point out that the decrease is
| disproportionately higher among those types of businesses
| that are part of a thriving community, but the reality is the
| overall number of businesses being started has gone down.
| JMTQp8lwXL wrote:
| > Nobody becomes a billionaire from starting a landscaping
| service or an auto body shop.
|
| If that's your terminal investment, correct. But if you take
| that $100k you earned from your landscaping service, or in
| Buffet's case, selling newspapers and detailing cars, you can
| continue to apply business acumen and perhaps one day reach $1
| Billion. Wealth begets more wealth.
| vmception wrote:
| > The number of new companies as a percent of total businesses
| is 44% lower in 2012 than it was in 1978.
|
| .... because the number of total businesses is so much higher
| already? The number of existing businesses that didn't create a
| subsidiary for an additional business line is higher?
|
| That data point doesn't tell you enough of anything. I'm glad
| it got you to look in that general direction, so now let's dig
| deeper.
| davesque wrote:
| 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
| course, as you point out, the reality that the rest of the
| country is living in is conveniently ignored.
|
| So yeah, rich guy writes a blog article saying essentially
| "people should just do what I did" and water is wet.
| ashtonbaker wrote:
| 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.
| samatman wrote:
| It's not religious to observe that founders who made a
| successful exit are well-poised to do it again.
|
| They're swimming in money, they have a bunch of investors
| in their phone contacts, and they know all the ins and outs
| from the last time they put a startup through its life
| cycle. How could they not be in better shape than some kid
| slurping ramen in his first YC cohort?
|
| This does leave two big wildcards: the idea (specifically
| its product-market fit) and pure dumb luck. From what you
| wrote, I'm guessing that you think this isn't realized by
| the "cult of YC" as well as it should be, whereas I guess
| differently, but it doesn't matter that much. We all
| recognize that it's there, and without those two
| ingredients you can't succeed.
|
| As an aside, I've seen two different kinds of 'luck' come
| up in these kinds of conversations: the sort I'm referring
| to above, and the sundry genetic and social inheritances to
| which a person is heir.
|
| They're both valid uses of the word, I think the first is
| more obviously lucky than the latter. It is luck of a sort
| that someone is 2 meters tall, but I bet their parents were
| also taller than average, so saying that it's lucky that
| they were able to be a pro at basketball is going to
| confuse some people. There was no "them" before the
| peculiar genetic combination which conceived them, and
| after that, we're talking about some favorable
| circumstances (adequate time, a court, no crippling car
| accidents or stray bullets) and a great deal of hard work.
|
| Similarly, you can call it luck that Jeff Bezos was able to
| borrow a quarter million from his family, or that Elon Musk
| apparently can sleep for four hours and work for twenty,
| constantly, for decades (a genetic quirk no less special
| and rare than being two meters tall): but you can call it
| fate as well.
| ashtonbaker wrote:
| No real argument with this! I think we're talking about
| different things.
|
| If I could put my difference in opinion in my own words,
| it would be that I believe many people play the startup
| game with the right "intrinsic" qualities - hard work,
| brilliance, etc - many more than the number who exit with
| a billion dollars. Hence, "lottery". Of course, some of
| that luck can carry forward in terms of experience,
| networking... That's not really my point either.
|
| If Paul Graham wants to join our startup, I wouldn't have
| to disavow my beliefs to welcome him with open arms. That
| would obviously be to our great benefit. The leadership
| team would tout his resume, and look forward to his
| insightful contributions. I, on the other hand, believe
| that his primary contribution would be to generate a
| bunch of "Paul Graham Joins X Startup" headlines,
| increasing our value in the eyes of VC.
|
| The religion is this: you can hire Developer X or
| Developer Y. "X" was an early employee at a successful
| startup, where "Y" seems much more technically
| proficient. I think many startups choose "X" and don't
| even consider whether they're doing that for status
| within the startup world (which is what I believe), or
| because they genuinely believe that having a successful
| startup under their belt means - even in the face of
| evidence to the contrary - that the company is more
| likely to achieve a billion-dollar valuation with "X"
| than with "Y". You could argue for either justification,
| honestly, but it's the failure to see a distinction that
| strikes me as religious.
|
| And also, Paul Graham's ability to found another
| successful company aside, the clinging to his every word
| is /definitely/ religious to me.
| ZephyrBlu wrote:
| I think there's another factor you've missed, which is
| the market. And I think the market is a pretty important
| factor in the success of a company.
| jdgoesmarching wrote:
| Agreed. Maybe unpopular opinion, but entrepreneur insights
| from CEOs are rarely valuable because no individual
| contribution outweighs sheer luck. Every day millions of
| people make smart decisions, take good risks, and work hard
| without significantly improving their conditions. It is pure
| survivorship bias to think individuals are capable of more
| than slightly nudging the cosmic needle if it happens to land
| near the right place.
|
| It makes people uncomfortable to think that success is mostly
| a matter of luck. I am extremely lucky to be where I am in my
| career, and I greatly respect people who can admit this
| instead of rambling about "hustle."
| ritchiea wrote:
| Not even just luck, there are biases in who gets funding in
| the first place. PG himself says he's biased toward
| founders that remind him of Zuckerberg and other past
| founders. That group is very predominantly white and
| affluent with a small cut of Asian-american and affluent
| and a small cut of other.
|
| It helps a lot to have an affluent background when you
| start a tech company because, like a lot of other risky
| endeavors, even though the potential rewards are enormous
| it's a lot less initial earnings than just joining a
| company as an employee. And you worry whether if your
| company doesn't take off and get its next round of funding
| in a few months if it'll be harder to get that first job.
| And you may be poorer than you were pre-startup.
|
| Not to mention that poorer kids might not ever see starting
| a tech startup as an option. Both because of the biases in
| which founders get funding and because they may culturally
| never have the option floated to them.
| MomoXenosaga wrote:
| I recall the 1999 tech bubble. Lots of companies went under
| in the crash that might have made it today.
|
| There is a ton of VC money in Sillicon Valley again.
| darkwater wrote:
| > 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!"
| ritchiea wrote:
| 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.
| m___ wrote:
| Main substance left in the mist.
|
| "Founders" and their trailers, are picked up and trusted to the
| sun because there is nothing else left to do with worthless
| money, to ride the inequality of the "investors" to u-p-p for
| free.
|
| Loggerheads as Leon Musk might be "rich" but not in charge, and
| second tier as come to power. If one looks down to the Footlocker
| crowd, anything can mean "rich". The third dimension Sherlock of
| the article, time, how long will they last?
|
| The author has a serious agenda to prone, or must be mentally
| incapacitated to not see ":)", after hoovering that long above
| the evidenced. Forbes?! what gives. Hard assets in time are still
| the only measure of value as to any group, cast, clan in
| existence!
| [deleted]
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