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pg's reading of it is so blunt and misrepresentative that I'm nervous about what kind of content he's consuming.
I don't think anyone reading PG's blog is clueless about the power of compounding or the difference between salary and wealth through asset growth.
Her point is essentially whether the entire capital system is "fair." And to be fair to PG I don't think AOC articulated a particularly strong point either.
> What [AOC] meant was that it's impossible to get that rich without doing something bad — without cheating in some way... The reason [my founder's] startup was growing so fast was simply that users loved what she'd built. So she could feel from her own experience how wrong [AOC] was. She wasn't exploiting anyone. Exactly the opposite in fact. The reason her startup was growing so fast was that she and her cofounder had been working their asses off to make their users happy, and as a result the users had been telling their friends. And that gets you exponential growth.
In other words, he's saying that rapid wealth creation can (and often does) come from creating and selling things of value to willing buyers, at scale, and that that's not unethical to do.
I do agree with you that AOC's point is not particularly strong, though :)
in common parlance, theft
Ideally a new business creates more value than it simply takes out of an existing marketplace.
I think one can argue a lot of 2010s app-ification, Uber-of-X, or what I called "re-intermediation" was more than 50% rent seeking.
The business model of being willing to lose billions selling $1 of goods for 80cents (before even talking CapEx) until your competitors fold (and then raise prices) is the kind of thing we used to regulate against.
At some point our regulation shifted towards a more short term "if it makes consumer prices lower right now its OK".
Apple was already a multibillion dollar company almost 30 years before the iPhone was invented...
(though I'm sure you will have no trouble inventing some other reason that that wealth, too, was created through exploitation)
The fact is the billionaire managed to extract value from the market. The ethical question is: who deserves to get the value that was created by the market? The answer could be "the founder" but it could also be the funder, the worker, the customer, the political structure that enables the market economy, the mother of the funder who raised them to be hard working, the nurse that treated the founders minor illness in an early stage and prevented it from causing a physical disability, etc.
That's why we're here debating, because one can create value, and one can extract value. Both statements are true and easy to argue for. The synthesis is that creating value also grants licence to extract since it's impossible (possibly even theoretically impossible) to define exactly where the line between the two is.
The original claim, as I understand it, is basically this: you can’t be an honest actor in a dishonest system.
And it’s not even necessary to claim that billionaires did something uniquely wrong to become billionaires. It’s just that their share of the exploitation is so, so, so much bigger.
> What [AOC] meant was that it's impossible to get that rich without doing something bad — without cheating in some way... The reason [my founder's] startup was growing so fast was simply that users loved what she'd built. So she could feel from her own experience how wrong [AOC] was. She wasn't exploiting anyone. Exactly the opposite in fact. The reason her startup was growing so fast was that she and her cofounder had been working their asses off to make their users happy, and as a result the users had been telling their friends. And that gets you exponential growth.
To any honest reader, it's clear he's saying the system isn't necessarily dishonest, and that it's possible (if not common) to rapidly earn money in the system by simply creating things of value and selling them to willing customers.
> There are three ways to make a living:
> 1) Lie to people who want to be lied to, and you’ll get rich.
> 2) Tell the truth to those who want the truth, and you’ll make a living.
> 3) Tell the truth to those who want to be lied to, and you’ll go broke.
The marxist nonsense about exploitation is getting really tired and needs to die already. Yes, we get it, marxists don't value anything that grows total output, don't think it should be compensated and are totally fine living in the stagnation that view creates. If they could all just skip a few steps and go to the end game of their philosophy that would be great because I'm tired of hearing from them.
Reasonable people can disagree as to the nature/extent -- or even the existence of -- exploitation, but this guy absolutely has impermissibly strong blinders on, rendering most of this article a waste.
Like, does PG really not understand that nobody is arguing that a company can build a billion dollars worth of value? Has he not read Adam Smith? Is his definition or understanding of rent seeking so limited that he can't see the grey areas between "extraction" and "earning" money?
Anybody who earns significant income from investment, including VC money, should recognize that they are at some level extractive, not the hard won dollars that the folks at the ground level are generally putting in.
For guys like PG, Musk, Bezos, Zuck, Ellison, Thiel their very identity is tied to winning this as a game, and thus, any actions they take must defended at all costs, and the score must be seen as righteous and deserved and free from interference.
1. Extracting from the market or the economy. It seems like (correct me if I'm wrong) this is what you're reading it as? Here you're generally exploiting what private equity calls "pricing power" or what economists call "enclosures" (or "rent-seeking") so inelastic demand (eg housing) or market protection (eg making municipal broadband illegal); and
2. Extracting from labor. This is the basis of the labor theory of value [1].
The point of comments like AOC's is mostly the second one, which is to say that you only become a billionaire by extracting it from your workers. And yes, this is a fundamental disagreement with many people. Some will say that the startup founder who makes a billion dollars deserves it by taking the risk or being the leader or however you want to frame it.
The counterargument is that that value simply wouldn't exist if it wasn't for those workers and their work. Even Instagram, which famously had only 13 employees when acquired for $1 billion, still needed those workers. It would've been nothing without them.
Take Google as another example. The profit per employee has famously been (at times) over $1 million per year.
The term for this is "surplus labor value".
[1]: https://en.wikipedia.org/wiki/Labor_theory_of_value
> Take Google as another example. The profit per employee has famously been (at times) over $1 million per year.
So, are you saying that the employees were exploited in some way? I could give you examples of how value is created without any work at all.
musk isnt a trillionaire because his assets would equate to physical product. his valuation is an inflated target of market manipulation.
when you add up all the physical goods in the world that directly benefit people, that comes nowhere near these valuations.
and externalities are one way wealth is taken from the environment. then theyre parlayed.
That sounds like a pretty impoverished world to live in. No music, no art, no communication with our friends and family beyond speech…
Not to mention that, especially in a fiat environment where currency is printed out of thin air, it is literally a zero-sum game by definition. When the printer winds up, the bankers win big at everyone elses expense; setting the tone for the entire market. Anecdotal success stories of hard working, honest billionaires is a nice distraction, but that's all it is.
The substantive reality of the status quo is one of unprecedented levels of extraction, and as we continue down this AI power consildation story, that will be harder and harder to deny as we go forward. If you happen to win big as an outlier, more power to you, but the article even admits to the rarity of this story implicity. 20 years. thousands of companies. 30 billionaires.
Even if every single one of those people are honest to goodness saints, that's only slightly better odds, perhaps, than winning the lottery.
Any discussion not grounded in those facts is a dishonest discussion. It is a zero sum game until those externalities change because ultimately our species is built upon extraction resources to produce wealth. It IS a zero sum game until you or someone else invents a means of solving the first order problems.
Does this mean you haven't been following his twitter the past several years?
Uber was not a YCombinator company. For some unexplained reason, many mistakenly think it was a YC startup but it's not correct.
(The gp's comment is an example of how chatbots hallucinate because they train on the text of people unintentionally hallucinating.)
()
His post here in particular violates the fundamental principles of HN in that he does not engage with the argument at all.
The argument isn't that it's impossible to become a billionaire legally, the argument is that it's impossible to become a billionaire in a moral way, though that's more of a problem of the system than it is necessarily one at the individual level. A just and moral system would assign the value being created in such a way that becoming a billionaire would be essentially impossible.
Yet pg never even acknowledged the possibility that that might have been the argument.
I'm of the opinion that this skill atrophies substantially for billionaires.
Looking through wages and trying to find a ceiling(by time/effort) on the value creation by a human is one dimensional at best.
This is what aoc is referring to essentially. It's practically impossible to become a billionaire through "regular" work alone that pays you a salary.
I'd argue that for all super wealthy people, their salary isn't the major factor in how they gained their net worth. Lets take Googles CEO, he makes 2 mict llion per year (the exanumber isn't that relevant here). With this salary it'd take him 500 years to earn his net worth. Again, completely different proportions to "normal" people earning their net worth through their job. And I'd argue you can do this for everybody with more than 100 mil. dollars.
> The work is done by the seed/sun/soil/water.
and the farmer collects. It's not that the farmer does nothing or deserves nothing. But it is precisely the same as the capitalist model: the capitalist sets the stage for labor to do the work, and then collects.
As others have noted, the central question is who gets to benefit from what is created and why.
So the reason you can’t think of any is because no economic activity exists with out them.
But externalities can both be positive or negative.
Say, for example, my job is allocating capital across the S&P 500. My work is picking the stocks, the fruits of my labour are excess returns.
Are those excess returns not work? What are they?
And now comparing PG's writing today and what he wrote 10~15 years ago, I finally get what Joel means.
Is "building structures" not work?
And a lot of these structures either involves a percentage cut or a security of some kind. And it's not new, it's copied.
The actual opposing argument is that it's impossible to create a billion dollar enterprise without a group effort, and for one person to end up with a billion dollars necessarily means that they made decisions within that enterprise that resulted in a lopsided allocation of resources at the end.
Period. That's it, and it's inarguable.
Every single aspect of the system is arbitrary and is a policy decision made by society. The basic building block, the limited liability joint stock company as a legal concept with some form of independent rights and entity status is arbitrary. Every lever, every part of the system, is created by people making decisions about how society is organized.
The people he is arguing with are basically saying "we want the system structured differently because this one is producing too much concentrated wealth." That's a political choice and an eminently reasonable one.
So if it's that simple, why would he feel a need to straw man instead of just addressing the actual argument? Well because he'd lose. The reality is is most people agree with this assessment of society and want it to change.
And by the way the question of how resources get split between labor and capital is the oldest and most central political problem in human history. To adopt a condescending tone while pretending to be ignorant of stuff you learn in the first couple weeks of any real study of politics or history, betrays the deception inherent in his essay.
George Lucas made a movie with a (small) group effort. But what made a billion dollars is his Star Wars universe which is almost entirely his creation.
It literally creates wealth for other people. If my toy sells $10,000 without Star Wars and $100,000 with it, did I participate in making George’s billion, or am I benefiting from it?
> means that they made decisions within that enterprise that resulted in a lopsided allocation of resources at the end.
What do you mean? Every good and service involves many people, but the degree to which they participate in its creation and risk vary. For example, a Farmer may create a more efficient way to grow food. Is the grocery store now entitled to a piece of the reward? They didn’t change anything, all of the improvement is the farmer side.
If that were actually true, how come we can't predict what the next Star Wars universe will be?
Same for pop songs etc. If it were actually about objective qualities of the creation, and not just luck, the next winners of the lottery would be apparent even before they hit the theaters.
There is null inherent quality in the Star Wars universe causing the billion dollar revenue. If George Lucas wouldn't have been there at the right spot at the right time, the dominant IP would simply have been something different.
If you have kids, you can directly observer what actually happens: The IP owners dump huge amounts of money into merch and product placements everywhere, resulting in them getting in contact with the franchise before they are out of their diapers. My kids came home from daycare roleplaying lightsaber fights without any previous contact with the franchise at our home. The trick is implanting the meme (in the original meaning of the word) into kids' brains before another meme can nest in there.
Once again, lopsided allocation - George benefited from and is directly responsible for keeping the cost of labor low: https://www.hollywoodreporter.com/business/business-news/100...
Would he have been a billionaire without that? Who knows? But it definitely helped him get there.
My argument is this: the core disagreement here is about the allocation of resources between labor and capital.
I’m right. It is.
That doesn’t mean I have settled the argument about what those allocations should be which nobody has, it’s a core organizational element of politics.
But I think his argument is bullshit. It’s a purposeful misdirection because it refuses to recognize the terms of the discussion at all.
No it's not, it's actually extremely easy to prove wrong: J.K. Rowling.
I'm not defending that interpretation, mind you, just saying it's a possible read of the phrase.
You should read that as a self-preservation technique. The eager use of a strawman tells us PG heard AOC's words as an attack against him personally, his business, and his friends.
So the essay is not a reasoned retort but more an emotional self-defense to soothe a bruised ego. It's to assure himself that no -- in fact he did earn his wealth fair and square, and to imply otherwise shows a lack of understanding of how this all works. But I do love this essay because it does show just how emotional and irrational billionaires can be when their wealth and egos are threatened.
I wasn't there at the time, so I could be wrong. But I feel like their robber baron counterparts 100 years ago knew that they were hated and had some idea of why. And that's why they spent so much money on parks and buildings and colleges and everything else. They could see option B was the masses coming across their lawn with sharp implements.
When you hit a hundred billion in net worth, you get a nice solid gold plaque that says "I won capitalism", you get an attaboy from the UN, and we start taxing the shit out of wealth over that cap.
Adjust periodically for inflation. (Do that for minimum wage while we're at it.)
Three things can be true: 1. Growing at a rapid rate over long periods of time is hard, doable and rewarding 2. Incentivizing the discovery of these things is good for society. 3. Nonethless there is and should be a limit to wealth acquisition, given moral hazard.
To make a similarly glib counterargument to Paul G:
If it's the founders who earned the same monetary value of the companies they created ("because they're responsible for it"), they should bear the same moral and legal responsibility for the externalities.
So far, only SBF is in jail. Lots more of these companies have broken the law.
Let's throw the founders in jail too - they can keep their money!
Rewarding entrepreneurship for example a good thing, but I'm also very much of the opinion that a single person controlling a billion dollars is extremely bad for the society while spreading some of that wealth out would do a lot of good.
The big problem we as a society face right now (in my opinion) is that a lot of political energy (votes and discourse) is spent on things that don't fix the economic imbalance right now. Poor poeple vote for politicians making the poor poorer and rich richer.
Nobody who illegally make the rich richer goes to jail, they get a promotion usually
There's a huge social element. No one wants to throw their buddies in jail.
It looks bad on the golf course (or at Burning Man / Sun Valley if you're in tech)
And to the people criticizing, this is cheating. To them, a billion dollars enterprise is not possible without the exploitation of employees, customers, or at least the environment.
Also, the most important thing to understand about a society is how people gain status, not just money/wealth. If you focus on money, you won't have an explanation for political movements or artistic endeavors.
While at Amazon Jeff Bezos considers his worth to be 80k a year hence he was paid that much, and paid taxes in that salary.
If someone becomes a billionaire by being paid 50m a year for 40 years and paying taxes on that income then congrats.
This article did not sit well with me. I have found myself rereading Beyond Smart, How to Write Usefully, The Need to Read, Life is Short. But this one is harmful; nobody needs a billion dollars.
But you probably need >$10M to not HAVE to work and live a low-risk comfortable life in even modestly expensive parts of the US.
The funny thing about money is, it's really hard to save $1M and $10M, but once you get there, it's pretty easy to grow that substantially.
The fundamental problem in the West, IMO, is that we make it so hard to save even small amounts of money, and so easy to compound huge amounts of money (and no the EU is not much better on this front than the US).
It should be the opposite.
This is a technology + investing forum and all of us agree that in general creative destruction processes are enormously net positive, but they frequently do kick off a toxic byproduct in the form of said destruction (e.g. Uber and displaced taxi drivers), so there is moral entanglement between creation and destruction. Morally speaking, figuring out how to mitigate this toxic byproduct is part of our remit just as it was part of the remit of earlier industrialists to figure out how not to discharge so much flammable goo into the river that it lit on fire. We neglect this at our peril, because society merely pinches its nose if the toxic byproducts are small, but they are increasingly not small.
Easier for them to adopt AI than AI companies to rebuild the networks
I had cab drivers nearly drive off with me hanging off the car in San Francisco, because they were far more concerned with screening my destination than, say, not killing me. If Uber destroyed that industry, it was only a net benefit to society. They created immense value, and the "destruction" was only to eliminate a layer of corrupt parasites who made money by preventing a free market (in this case, the medallion owners, but the entire industry was corrupt from top to bottom).
We still want to encourage creative destruction to move forward, but paying taxes to clean up the destruction is the very least that the victorious parties can do because the entanglement exists in moral accounting even if it doesn't exist in financial accounting.
I mean, maaaaaybe a Jevon's Paradox kicks into play with human labor and replacing people with robots somehow creates even more jobs, but whenever someone says this your immediate response should be: "ok, now put your money where your mouth is and bet on it by strengthening the social safety net."
(Eg agricultural revolution in the US)
I do believe in good safety nets as well and I think that shows in my voting record, so I’m not sure what else you would expect from me, if anything.
Eventually it becomes rational to start buying politicians, and subsequently laws. The next obvious avenue is to then control entire government agencies like the FAA or the FCC and just write favorable laws and regulations they don't even have to circumvent.
But even that isn't the end because they're growing too fast, they actually outgrow the law, so breaking it becomes a rational, profit-driven choice. Huge fines? Regulators breathing down your neck? No worries! Just spend more money then has ever been spent in an election to their favored presidential candidate, and then they get to just shut down investigations into themselves!
But even that isn't enough -- soon it becomes a rational business-forward goal to take over the entire government; or even better become the government. First a city, then a state, then a nation. Guess what folks EVEN THAT won't be enough. Not even everything on this entire planet Earth is enough for them; they also want the Moon and Mars and the entire solar system. They will have to become God at some point for this growth to keep up, and that will still be too little for their egos to bear. Something has to give.
I presume it's a company that just has co-founders then? Or everyone is getting an equal % of the share? In which case SHE's not getting 93% richer just cause her start up is.
If the company makes an unexpectedly large profit, the employer is not obligated to redistribute that to her employees in addition to the already agreed-upon and paid compensation. If the employees think that what they agreed to work for is no longer sufficient, they are welcome to renegotiate their compensation or, if they feel they have been wronged and are being paid less than they are worth, to take their talent to a different employer. After all, everything so far has been consensual. The only thing that would be non-consensual would be obligating the employer to redistribute her profit over and above what had already been negotiated.
Well there you have it folks case closed.
Slavery is illegal therefore there is no slavery. Geniuses at work indeed
Lets walk through the math. If her company is worth $100, and she owns 100% (her wealth starts at $100), and the company grows 93%, then the company has grown to be worth $193 and her share has grown by $93 which is indeed a 93% growth rate for her wealth.
Alternatively, if her company is worth $100, and she owns only 10% (making her wealth $10), and the company grows 93%, then the company has grown to be worth $193 and her share has grown by $9.30 which is still indeed a 93% growth rate for her wealth, which started at $10 and now rises to $19.30.
Maybe the politicians position is that the whole system is based on cheating and everyone who partakes is acting immorally?
Is it fair that the founder got education and some money to start his company while other people are living on the street or have to care for relatives? If they come from a relatively privileged position and manage to build a company that ends up being successful, did they earn that money?
I don’t think the cheating people criticize is necessarily criminal fraud.
Edit: and the second thing people seem to criticize is that just keeping your company growing often seems to involve some unethical things. Basically every company that’s manufacturing hardware is doing that in Asia under inhumane conditions, so they probably can’t really claim they earned their money and it’s just maths.
Im not from the US so I’m probably not doing a good job at the devils advocate thing but I could imagine that you just tax the people that start the business so they still get some healthy personal wealth by redistributing the truly extreme wealth back to the workers/society.
There’s probably some motivation problem to grow the company further at some point but maybe you could limit the percentage any individual can earn by holding the company or something like that?
>AOC: “There’s a certain level of wealth and accumulation that is unearned. You can’t earn a billion dollars. You just can’t earn that. You can get market power, you can break rules, you can abuse labor laws, you can pay people less than what they’re worth, but you can’t earn that”
there's some truth there in that PG is talking about capital gains as the owner of a company and AOC is talking about earnings as payment for labour which are different things both in reality and in tax policy and law.
The capital gains can be unfair in that most of them go to founders and VCs and not much to other employees and stakeholders who have contributed as well.
I don’t think a definition of “earn” that excludes cases like that captures the generally understood meaning.
How does he get the money to do that?
(And in California where the most profitable crops are perennial fruits and nuts, probably outright stealing water from the aquifer or state irrigation system.)
I don't think that the current system rewards those deserving the largest cuts of the pie.
If you want to argue how to get a billion dollars, sure. But to me that is different than earning it.
This assumption is depressing. That the only alternative to "earn" is "cheat".
A system of diminishing work (i.e. where money makes money), especially combined with inheritance, means every dollar is arguably less earned than the last. That system is fine and actually very useful, but that diminishment becomes a big problem at large enough scales. We've been operating at that scale for many decades.
LeBron James has, between playing basketball and endorsing things, earned a billion dollars. What bad thing did he do, other than losing the finals a few times?
If she meant "impossible" completely literally, then she is wrong.
"No I didn't mean this [virtuous example]. I meant the vast majority of [unnamed nefarious actors] which I don't need to elaborate about as their existence is obvious."
Once you say it's just hyperbole and you don't mean it literally, then the only way to prove it is a statistical argument.
"The overwhelmingly share of company founders and companies are bad and don't earn their money." is a big claim that requires more than vibes.
It’s an industry of low-grade exploitation, generating products that people mostly don’t need. It’s bizarre. It fits squarely into the category AOC is trying to define here.
In another world, LeBron is still a millionaire, getting a nice $1M a year. The rest, a mere $39M, which in Paul Graham terms is just a couple months from turning into a billion, goes to the hopeless kids actually churning out the god damn shoes.
LeBron did nothing wrong. The system is this corrupt.
Amazon was first, then Uber went world wide, so did Airbnb, and now OpenClaw, so yes, the AI gold rush opened the gates for new opportunities but only a few will make it. We all can run the race for sure but most of us will only get tired at the end while the lucky few will take all the prizes and our corpses will be their podium, as it's supposed to be.
Still, we have to run because there is a chance, a very slim chance which is more than zero hope.
Amazon is famous for being a terrible company to work for, on the logistics side.
Airbnb has caused all sorts of social problems.
Uber results in people working for peanuts and has circumvented labour laws.
I think there are some startups that have created large scale value without doing something malevolent, but not those ones.
Things like Linear. Good tool for software dev, no one harmed.
At becoming billionaires. Many more than that succeeded at making a good chunk of money that was life-changing for them, their families, their early employees, etc.
So I think your reading of the chance of "hope" are overly cynical. Of course it's not easy to make millions, but it's not so bleak and the market isn't so ruthless that it can't be done for those who try intelligently and persistently.
And of course, even below that level of wealth, there are tens of millions of people who work regular jobs and are able to afford pretty high standards of comfort and living by any yard stick that's ever been used to measure.
That's not the problem.
The problem is even simpler mathematics. Proportions. How much do we give to first employees? How realistic is that John Smith, first salesman of the company is getting 2% and should consider himself lucky, while I, Peter Boss retain most of the company?
We always talk about the dilation of the founders' shares and its relation to the VC portion.
What is the usual proportion of the shares held by the founders and the first 10 or 100 employees?
Is that proportion usually realistic with regards to the effort put in and the risk assumed?
Is that risk usually really that heroic or most of us in the "can found a startup" caste can usually go back to jobs that already pay well over average?
I am the founder of a company. I want it to succeed. I don't want to become a billionaire, but I want the people that help me build it to have similar successes to mine.
If we succeed, I don't want my car or house to be 10x more expensive than of those people who joined me first.
There's something seriously rotten about telling university students about billions. The issue isn't whether anyone can earn a billion dollars. Nobody actually needs a billion dollars.
The question they should be pondering is given the excess of talent and opportunity they have, how can they help the people around them and give something back to society.
The assumptions are:
1. A uniquely special class of people do all the work that matters. They're astoundingly gifted, talented, and insightful, and have a rare ability to make profits happen by having very special ideas, owning Important Things, and telling everyone else what to do. These prodigies deserve everything. They are not to be criticised or judged by their inferiors. Ridicule only proves their superiority.
2. The work everyone else does is far less important. Most of the people doing it are interchangeable and literally disposable. Sometimes they deserve nice things, in a limited sense, if it's hard to make things happen without them. But mostly no.
3. Negative externalities - pollution, ecosystem collapse, spiralling asset prices, financial and political instability - aren't real. If they are real they don't matter. If they do matter they're someone else's fault.
4. It's absolutely fine to treat other humans with aggressive indifference and outright contempt as long as Number Goes Up. In fact it's expected.
The hierarchy of wage looks something like:
1. hourly pay (how many hours you can work sets the maximum possible salary)
2. base pay + cash bonus (the cash bonus starts to increase your earning potential. Sometimes the bonus can be huge, for traders, salespeople, etc.)
3. base pay + stock options (the stock options can outsize your base pay by big margins)
4. stock ownership (almost all your wealth is tied up to the stocks)
The vast, vast majority of people are stuck at (1), and will never move to (2). Nearly all billionaires are at (4).
The average worker will work around 100k hours in their lifetime. If you started working today, with a 2% inflation rate, you'd have to start getting paid close to $6000 / hour in order to reach a billion dollars (pre-tax) in total income by the time you retire 50 years from now.
Another factor to consider, is that salaried workers can't use leverage to increase their earnings. A startup founder can find investors and raise money, which works as rocket-fuel for their company. You can practically outspend your competition. That is simply not possible for regular workers, without breaking rules (as in outsourcing your job, taking on several jobs and outsourcing those, while collecting).
[0] Big "if" obviously but so is a 15% monthly growth rate in revenue.
The simple truth is that many people don't want to step into that kind of intensity and uncertainty, or lack the skills to succeed in a cutthroat industry.
The idea that founders are somehow "cheating" is hilarious to me. Anyone in the developed world can easily become a founder, why don't you try it?
While many don't necessarily value pay as #1, it is important to people. If a regular worker receives a 20% pay increase, that's huge compared to not getting anything, or something which barely covers inflation. Even though the dollar amount may not be much compared to others.
1. Coming from a relatively affluent background (eg Bill Gates's father was a successful lawyer);
2. Social status. For example, Sundar Pichai came from a relatively modest socioeconomic background but he's also upper caste;
3. Even having access to a top-tier education (eg Stanford) generally shows a lot of privilege, Social connections, financial security, probably access to a quality education prior, tutors and so on;
4. Even just being white in the US means your family had access to create generational wealth that minorities didn't. The post-WW2 GI Bill famously discriminatory in providing cheap mortgages (as well as subsidized college eduation).
One cannot overstate the opportunities available to you if you are "free to fail". If your family can support you or even you can live at home then you have the option of starting a company and being unpaid for a long period.
As for founders "cheating", well that's a different story but also objectively true. Many companies extracted value by essentially breaking the law and getting large enough before enforcement caught up with them, which allowed them to buy those changes. AirBNB and Uber are good examples of this.
The myth of meritocracy has been so successfully propagandized it's no wonder that so many people see themselves as "temporarily embarrrassed millionaires".
If a career path (e.g. startup founder) outperforms at time T1, then this fact will diffuse quickly throughout society, causing the path to become overcrowded, which pushes down the average performance. So at time T2 the path will no longer outperform. This is analogous to a stock becoming overpriced due to hype. I consider the founder path to be enormously overcrowded at this point.
The key to finding a good career is to play a kind of Money Ball - find paths that, for whatever reason, are mispriced and thus undercrowded.
One reason why doctor is more popular is the process for becoming one is high effort but low risk. So if you have any risk tolerance you’re probably better off using that effort elsewhere.
Wealthy, sure, but becoming a billionaire effectively destroys your place in any of your social circles. It obliterates any dynamics of trust and interdependence you may have and replaces them with a gnawing unease about if they’re still hanging out with you, or if they’re hanging out with the money.
Not to mention, Graham entirely fails to differentiate between EARNING a billion dollars and HAVING a billion dollars. You can be part of a structure that earns a billions dollars without “cheating”, there are all kinds of companies that do that. But if you let that wealth accumulate in yourself? There’s something wrong there. You are almost guaranteed to be under-valuing the contributions of others, or the externalities of the systems in which you operate or SOMETHING.
And even if you’re not? That’s a dragon’s hoard of money. You’d have a very difficult time spending that much money on yourself and your lifestyle, and I find it hard to justify sitting on the rest, just to have it. It is literally a hoarding problem at that point. You do not need that money, it is actively making your life worse (look up the Billionaire’s Social Calendar: it’s the list of ultra-wealthy-only events that billionaires must attend if they want even a chance of interacting with people as peers instead of dependents), just let it go.
Take Mr. World’s First Trillionaire, Elon Musk. He doesn’t have a dragon’s horde, his money is almost entirely invested in SpaceX and Tesla, building things he wants to build. SpaceX didn’t IPO so he could have bragging rights with his Forbes list peers, it IPO’d because it was the most efficient way to get more capital to grow and achieve its various strategic aims—largely set by Elon and its other preexisting owners.
You can take that away either proactively by making such ownership structures impossible or retroactively through taxation forcing current ownership to sell, but the end result is the same: No incentive for folks like Musk or Bezos to use their skills on big, ambitious, capital-intensive enterprises. Control is what matters, not $.
That’s weird. I grew up around farming and farmers. A group also very proud of the work they do, in a profession where the wage is also indirect — sometimes negative, sometimes a fortune, always based directly on the work they’ve done. Year after year, the work.
That’s different.
I’ve always identified two sets in the realm of entrepreneurs: those that want to “be rich”, and; those that want to “become rich”. The latter group is perhaps more admirable as they acknowledge the process and the value creation whereas the former seek only the status. But neither are often interested in the work of it.
I don’t know where “the politician” went with that comment, but for me the more pressing conversation is whether we want a society where many are struggling and some make a billion dollars.
You benefited from society, clearly, which is not to say you didn’t work hard. But it seems entirely reasonable to me to ask you at that point to give back. We can knock plenty of people back to mere “hundred millionaire” status, they’ll be fine, and we can do a whole lot with that money.
Their money goes to heirs who did not earn billions and do not know how to allocate it, or to questionable non-profits. So it ends up being a huge drag for the society.
If we extrapolate to trillionaires, we know for a fact that you need to be an all-around dousche that manipulates politics and literally cuts government funding to the poorest and most vulnerable groups to get there.
And since this post has a numbers focus, zuck is worth 195 billion. Would Facebook’s negative influence be noticeably less if they spent 194.9 billion on reducing the harms of Facebook, and zuck remained a millionaire? I believe so.
Clearly nothing is universally the case, but this pattern repeats in enough freqeuncy that it's effectively the case.
Fine, show me the average person who can come up with 2 million dollars. I sure as hell can not. I even went to banks and founders with my ideas, cash flow sheets and customer list looking for a loan.
No, I am convinced, the rich already have 2 million dollars, and make themselves a billionaire. The system is rigged against "normal" people.
Once a company starts operating, but before revenue (and hopefully eventual profitability), the valuation is trickier. The share price _should_ be the number of shares divided by the sum of all future profit (minus current debt.) Which is hilarious of course, because no one actually knows the denominator.
That original $2M equity stake can grow to billions if the company ends up making something that a lot of people want or need, so the sum of all future profit is large. Or, much more likely, it will be worth nothing, or a modest amount.
Graham's essay kind of avoids the point of whether ownership of a vastly appreciating asset is "fair", if a bunch of other people help that asset to appreciate.
Why are you presupposing the world is just when EVERY skill and opportunity is distributed non-linearly?
Is that skill?
Most people with millions do not become billionaires. So yes, there is an exclusive pool of players who can play the game. But within that pool there is incredibly different outcomes.
A better analogy is being born as a child of D1 basketball athletes and then making 100 million in the NBA. Being born into a family with no interest in athletics makes it almost impossible to be a professional athlete. Life isn’t fair. It’s still impressive to become one.
If someone has an idea that 'only' makes them 20 million, I would call that a great success; even if it takes dozens of years to get there.
But this kind of person isn't rare either, even in Italy or Poland where I live I know many multi millionaires.
Some are farmers, some have restaurants/hotels, some work remotely for US tech companies, some were early engineers in startups.
Sure, if you start off with $2 million and double it 9 times, you end up with $1 billion. Exponential growth is a powerful thing, so it comes as no surprise that maintaining a large growth rate over time very quickly grows a starting sum into a much larger pool of money.
However, his only response for how you should achieve exponential growth is this hand-wavy "make something you yourself want". His only acknowledgement of the concern that maintaining exponential growth may require cheating is a casual dismissal, and his only acknowledgement of the concern that the growth rate will drop off over time is "you'll still get there eventually".
So, while the original concern was that you cannot earn a billion dollars without some wrongdoing, PG's response can be boiled down to "nuh uh".
- Ordinary income has sky-high taxes compared to capital gains, and you don't even have to pay the taxes on capital gains if you don't realize them!
- Inelastic labor supply mismanaged into increasingly soggy demand, mathematically tanking wages
- Attributing credit for job creation to capital without attributing blame for job destruction to capital
there are more, but these are all Political Economy decisions that didn't have to be this way. They are this way because people with money and power wanted them to be this way and were willing to morally compromise to get them this way.
We've been pushing all the money into the capital economy and all the taxes into the labor economy and this can't go on forever.
What did George Lucas do?
LeBron has to be worth a few hundred million. What did he do?
Worse, it's just a long post trying to show that doing math with a calculator somehow disproves real-life ethics.
Reminds me of this post I’ve seen making the rounds recently about a welder at SpaceX who was making $28/hr becoming a millionaire.
They keep emphasizing he’s a welder, the system works, and at the verrrry end mention he was issued 10k in stock a decade ago at SpaceX and held until it IPO’d the other day. The only “lesson” here is “if you own stock and stock go up you get lots of dollar bucks.”
They keep emphasizing “he’s a hardworking welder.” My response is “great! Let businesses take a lesson here: give all your employees a chunk of the company. Let’s all share in the success!”
But that’s obviously not their point.
The thumbnails often just tell the welder story, for instance. It’s very clever (misleading).
Don't >95% of tech companies offer stock options or equity, from startups to FAANG?
Looooots of caveats here.
> Starting a successful startup is the most common way to become a billionaire, so in effect I've spent the last 21 years training people to become billionaires. So far about 30 of them have, but there are many more in the pipeline.
Seems to me that right off the bat he completely undermines his own point - less than .5% of the founders being funded at basically the best connected best financed incubator become billionaires. Easy, right?
I won't even go into the embarrassing math that follows... pyramid scheme salesman levels...
He specifically says it isn't.
Airbnb/Bed Boat, Neighbor, Swimply, Uber/Lyft, Bird/Lime, BlackJet, Waymo/Cruise, Splacer/Peerspace, Zenefits, Tilt, Loomis/Stablecoins, Coinbase, Worldcoin, Stripe, AngelList/Sydecar, Polymarket, Uniswap Labs, Doordash/Instacart/Postmates, CloudKitchens, Shef, Done Health, Forward Health, Cerebral, Pacaso, Sonder, 23andMe, Ro/Hims/Hers, Viome, Juul Labs, Oura Ring, Particle Health/Moxe Health, Roblox, YouTube, Popcorn Time, Kickstarter/Indiegogo, Republic/Wefunder, Deel/Remote, Lambda School, Make School, Mission Bit, WeWork, Oyster/Papaya Global, HiQ Labs, FlexPort, Katerra, Zipline, Starship Technologies/Serve Robotics, 3D Robotics, Anduril Industries, DraftKings/FanDuel, Cydia, Eaze, MindMed, Odin, Swarm Technologies, Starlink, Convoy/Uber Freight, Carvana, Tesla, VoltShare.... oh yeah, and OpenAI.
What do all of these companies have in common? They all manipulated markets, bent and broke laws in order to get that "exponential growth". They didn't want to wait around and find out if their businesses would be legally allowed to grow. So they just broke or worked around the law, with the intention of becoming billionaires. But that's okay, because growth rate! We're not doing anything bad, people want these things! Who cares if it might be illegal or the spirit of the law frowns on what we do? Money!!!
This is just one of the reasons why becoming a billionaire requires you to cheat. There's also the tax loopholes, the inducement to harm (both of the customer and by the customer), anti-competition, etc. In order to get these gains, you need to cheat, because if it were easy to do legally, ethically, and quickly, somebody already would have. It's corporate doping.
Surely these things are on a moral and ethical continuum and we need to look at them individually? Pretty much every person has broken some law at least once in their lives. I don’t disagree that moral ambivalence is often necessary to make billions, but I also don’t consider all laws sacrosanct, or that breaking the law is the primary measure of a company’s moral standing.
The pg view seems to assume that if there is a causal relationship between your actions and a billion dollars appearing in your bank account, then it counts as having earned that money.
The countering viewpoint seems to consider the words "earn" and "build" as having a similar relationships to money and buildings respectively. If I tell you I built the shed in my garden, then you'll probably take my word for it. If I tell you I built a skyscraper, you'll either call me a liar or understand me to mean that a large number of individuals built it at my request.
I think the second version is more useful and more accurate.
Call me cynical but ...
I can literally think of a million ways.
1) lie to your customers about what your product actually does; this seems inevitable, once (if not before) private equity gets involved.
Using AirBnB as example: all the excess fees which have slowly crept into the final purchase price, while still requiring guests to clean &c
Most absolutely glaze over at the idea of calculating the "log base" of anything. If they ever got that far in math class, they certainly have not used the concept since then and cannot remember what it means or how it works. They might remember exponents, but the compounding of them is absolutely lost on the overwhelming majority of people.
(Edit: At the top of https://news.ycombinator.com/classic, at present.)
It tends to filter out trite topics and lower-quality submissions, though I have the feeling that it has become less effective for that in recent times.
Regardless, can we talk about the danger to society of having these resulting billionaires and how we ought to address that? I think that is in fact what "the politician" mentioned in the article was trying to address.
(The new American Dream appears to be: be one of the 30 people every 21 years that finds themselves the head of a startup that succeeds.)
"The purpose of capitalism is to pay rich people for being rich in proportion to how rich they are, thereby establishing, reinforcing, and perpetuating a class hierarchy where the people on the bottom must constantly pay to exist while the people on top constantly get paid to exist."
Dear reader, if you bristled at how casually this statement ignored that compounding returns are a feature of the real world that we want our economy to model and encourage, now you understand how a normal person feels when a megacorp or megacorp cheerleader casually fails to account for everyone they displaced and stepped on in order to capture the value that they did. "Negligent accounting" is a strategy that points both ways.
The plot twist is that the 'rightie' and the 'leftie' are both entirely correct. Which is why most developed economies try to remove sources of wasteful, unearned rent and also include significant amounts of redistribution/social insurance rather than relying on pure market outcomes. This doesn't erase the compounding dynamics altogether, but it hopefully ensures that folks at the lowest end of the distribution can keep a tolerable standard of living that doesn't have them 'paying' too much.
Now, if that isn't inspiring, I don't know what is! Some of my rich buddies got to be super rich following my advice!
I really don't know why the average person hates the rich. Those poors are so out of touch!
"Earning a billion", to the skating coach, is like pulling off a dodeca-axel.
It's not gonna happen through mere pluck, and it's probably gonna involve a lot of other folks' work if it ever happens, who probably aren't gonna get that much of the glory.
I'm suggesting - and I think the politician was also clearly suggesting - that a certain point of scale it ceases to really be "earning" anymore.
The idea of becoming rich is as old as society itself but it has not been a static concept. It is an idea shaped entirely by the things mentioned - ideology, culture and history. There is no wealth accumulation without ideology of one sort or another.
It's fair to resist a view of wealth that may seem flawed but it's disingenuous to assume this can be done from a neutral position.
When people say that it's not possible to earn a billion dollars, they're talking about the discrepancy between the wealth gained by those employed by the company versus the shareholders of the company. For example, when WhatsApp was sold to Meta for $19 billion, how many of WhatsApp's 55 employees walked away with hundreds of millions of dollars?
The fundamental problem is that it's possible for an employee to generate a hundreds of millions of value for a business, and yet be compensated for a vanishingly small fraction of that. Even if the employees agreed to a particular salary, is it ethical to pay them so little in comparison to the worth they generate, or is it exploitative?
Most, if not all billionaires, reach that status by paying people far less than the value they generate. If you want to become a billionaire, you need to find people who are willing to be paid thousands or tens of thousands of times less than they're worth. You need employees who will generate you $100 million in exchange for being given $100 thousand.
As a career programmer, I worked for several companies. Each time I took a job, I negotiated what I thought was a fair salary for my wages. Some companies also gave me stock options and one gave me founder's stock. When a company had a good year, they often gave generous bonuses.
Only when I took great personal risk, did I expect to share the rewards that come with a successful company. I was always grateful when I got more than I agreed to work for, but I never felt entitled to it.
A janitor working for a 10x company should not feel entitled to 10x of the salary as another janitor working down the street for another company that is struggling.
But hiring people who are compensated fairly does not make someone a billionaire. If you generate $300,000 of value per year and I pay you $200,000, then I'm only making $100,000 profit off your work. I could hire more employees, but value does not scale linearly indefinitely. Doubling my number of employees does not guarantee I double my profits.
No, if I want to become a billionaire within my lifetime, I need an asset that generates far more money than it costs to buy and maintain it. In other words, I need employees who will generate millions for every thousand I pay them.
Now you might well argue that I'm taking a risk. How do I know if an asset or an employee or a team of employees is undervalued? Not every bet is going to pay dividends. However, while this is true, I don't think this makes it ethical. If I'm a venture capitalist looking to make it rich (or richer), the fact that I'm taking a risk doesn't change the fact that ultimately I'm looking for people who I can pay far less than they're worth.
You start by ignoring what a "billion dollars" means, and most people don't think it's stock. Then you have to ignore what "earn" means, which most people don't think is getting stock on the assumption that the company you own a portion in will turn a profit one day, possibly many years ahead.
Getting investment without having profitability, getting to keep a portion of this investment, even if the banks that are insured with taxpayer money lose that money, is not what the constituency of AOC think is earning money.
There is a huge amount of technological advancement and personal fortune that I enjoy from this system, but I'm not trying to bullshit anyone that the system is fair.
In conclusion, I do think this attitude is cope that allows a high performing individual to focus on this game and be successful, and Paul Graham seems to be successful, so it's natural.
building something people love can make you a billionaire, but most billionaires did not build something people love, and most people who’ve built something people love are not billionaires.
Andrew Wilkinson has a whole part in his book about what it's like to be on the billionaire side of this speaking to former employees who feel that you took more of the value than you deserved it was an interesting read.
> She wasn't saying, of course, that it's impossible to become a billionaire.... What she meant was that it's impossible to get that rich without doing something bad — without cheating in some way.
> But now you at least understand, from having done the math yourselves, that you don't have to cheat to become a billionaire. You've seen for yourselves that there are only two numbers in the calculation, the growth rate and how long it continues. If it's impossible to make a billion dollars without cheating, which of those two numbers is impossible?
AoC quote:
> There’s a certain level of wealth and accumulation that is unearned. You can’t earn a billion dollars. You just can’t earn that. You can get market power, you can break rules, you can abuse labor laws, you can pay people less than what they’re worth, but you can’t earn that.
Come now @pg.
$2 million * 9.45 months * 93% growth rate = earning a billion dollars, ok. Does that really address what AoC was saying? She wasn't saying that the math doesn't math.
But, in the real world, as the 'exponential earnings' stack up, the incentives to do unsavory things to keep the rate of growth scales right along with the earnings; and the odds of anyone actually 'earning' a billion dollars while sharing the proceeds and absorbing the risks and societal costs of that growth fairly, ethically, legally and honestly has a growing potential to become vanishingly small.
AOC was speaking to this reality, the author was speaking about the math functions of how some steady rate of growth crosses from a small number to a very big number due to the law of compounding growth, and speaking to the actions and motives of a cohort who had not yet done what it took to realize that rate and duration of growth.
They actually are both right.
AOC was not addressing the math at all, nor did she claim that it was mathematically difficult to become a billionaire; just that it was unrealistic to expect that the process of doing so did not select for people with an intrinsic ability to externalize risk and maximize profit in a manner which many other people find distasteful, bordering on criminal if known to the full extent.
And the original post posits that his representative cohort was free from these types of behaviors and thus would remain so.
I find one of those arguments more realistic and actionable than the other even though they both may be true. I'll leave which for another day.
This is no different than any of the Thiel/Musk/Bezos propaganda that's been swirling around as they realize that the natives are getting a bit restless and mentions of guillotines become more common on social media. And they look at the UHC CEO's murder and wonder just how safe they really are.
> What [AOC] meant was that it's impossible to get that rich without doing something bad — without cheating in some way... The reason [my founder's] startup was growing so fast was simply that users loved what she'd built. So she could feel from her own experience how wrong [AOC] was. She wasn't exploiting anyone. Exactly the opposite in fact. The reason her startup was growing so fast was that she and her cofounder had been working their asses off to make their users happy, and as a result the users had been telling their friends. And that gets you exponential growth.
In other words, this founder being on a trajectory toward billionaire status, through doing little but working to provide something of value to those willing to pay for it, belies the claim that you must be doing something unethical and cannot earn one's way to a billion dollars.
Companies focus of the Rule of 40 and struggle to keep above it. And this struggle is where many in management lose their way.
Enshitification begins. The margins get harder. More corners cut. Employees get treated less well, customers get treated less well.
Instead of telling us "it is just exponential growth bro," do case studies on billionaires and their dealings. In the US, you have billionaire business leaders who have full time employees who require government assistance every month.
The couple of billionaires and near-billionaires I have worked with (and helped build their companies) have not been bad people. But working at their companies pre and post IPO is way different. Less perks, more pressure. If the company culture isn't solid, it becomes bad fast.
> The reason her startup was growing so fast was simply that users loved what she'd built.
> In the real world, growth rates tend to slow down a bit. A very successful startup will probably be growing faster than 15% a month in year 1 and slower than 15% a month in year 4.
It turns out that the people who will invest in your startup when 93% MoM gains are possible want you to do pretty much anything to keep growth as high as possible--also your career, net worth, and employment are tied to this so you're similarly motivated--including squeezing and manipulating those users who loved you so much. But hey, as long as you personally get rich it's fine I guess.
--
// 8bn world population / 3,500 billionaires:
0.000000_44
--
// 300mm US population / 1,000 billionaires
0.00000_333
--
// Odds of winning billion dollar powerball
0.00000000_3422298 (play once)
0.0000000_68446 (play twenty times)
0.000000_34223 (play 100 times)
--
// Global net worth vs billionaires
0.03636364
--
// US net worth vs billionaires
0.0942029
It's a very sf-bubble type article.
Even if the leader wants to hear honest criticism – to receive capital `t` Truth, IMHO: rare – his echelons will sequester any challenge(s) to their status quo, often by excluding dissent(er)s.
----
Thou art mortal, Caesar.
Paul, playing dumb doesn't suit you.
The first definition of "earn" on merriam-webster.com is "to receive as return for effort and especially for work done or services rendered".
Your chose a straw man, "doing something bad", to argue against because it's so easy to beat.
Much harder to justify that anyone's doing $1B of effort. Being a billionaire doesn't mean you're bad. In fact, it doesn't even matter if they are all bad -- there are always going to be bad people. It means a system that allows, encourages, and protects billionaires might be a problem that needs to be fixed.
Scary idea, I know. But we all only get to go around this world once. Might as well spend our time trying to make it better rather than rationalizing why it's OK to spend all your time trying to make it worse.
Another example would be taking over media companies like what Bezos did, the side effect would be being able to waylay/hide any dirty laundry.
With nearly all the billionaire PG mentions the money is the company valuation rather than cash in the bank.
The easiest way to earn a million dollars is to start a business that makes sense and work your ass off running it well. Maybe that's even the easiest way to reliably earn ten million dollars, a million isn't what it used to be.
But at some scale that's far short of a billion the game becomes about asymmetry.
This asymmetry takes many forms. For Steve Cohen it was trading on inside information, for Jim Simons it was (as far as anyone can tell) novel mathematics.
For most of the technology companies in the 21st century it was about privatizing the commons and/or externalizing costs that a well-refereed market would place on your company.
The United States used robust public/private partnerships and a vibrant, thriving university system to build the greatest pile of latent wealth in the sum history of humanity during the 20th century. Everything from the transistor to the integrated circuit to the laser to Velcro to tang to the internet to the web was a product of this holy Trinity of innovation: defense and related public money, well-refereed private companies (even a notable natural monopoly or two under muscular regulation), and a paved path between the Academy and the other two. The gains accrued enough to individuals to keep everyone motivated but largely in the form of status, which confers a desirable station in life but does not compound directly into political power. Feynman and von Neumann and Einstein all seem to have led very enviable lives and are easily as smart and accomplished as anyone in the front row at the last Inauguration (and if we're honest, a lot more), but none of them had a billion dollars or untoward access to the levers of government. All of them paid far more into the ocean of latent wealth deeded to the body politic than they took out of it.
And at some point (my money is on the kneecapping of Brooksley Born, whose architect is now resigning in disgrace from everything for Epstein affiliation and whose most recent post was on the board of pg's protege) the flow reversed. The access caste started to be d away from the competence caste and the singular fortune deeded to the public started to accumulate as a dozen private fortunes that were substantially just the 20th century stuff with a named owner.
You get a billion dollars by stealing it, this is qualitatively different, a distinction of kind not of degree, from how you get a million or even a few tens of millions.
To get a trillion dollars as we have now seen, well first you steal a billion.
1. In pre-industrial society there is less technological leverage, so that it’s very difficult for an incidental or group to help very many people.
Perhaps the closest analog before then was land discovery or conquest (taking other people’s stuff).
2. Post-enlightenment society is one of the first which doesn’t predefine your social role by birth. So you can claim new roles and status from your own wealth.
America has a much stronger sense of 2 which is why European attitudes towards wealth differ.
Early pg wrote about Lisp and engineers should do their own testing and commodity FreeBSD on commodity Intel was better than Oracle on Sun for starting a company.
He wrote that makers and managers needed different schedules. He wrote that math has asymmetrical upsides. He wrote that you do things that don't scale while you're in the garage.
In his wheelhouse he was best in the genre, maybe not the Balzac he fancies himself as an essayist or the painter he fancies himself at all, but the best guy to listen to if you were doing a garage band startup that involved the Internet. He was surrounded by legitimate legends like Robert Tappan Morris and Trevor Blackwell, and he wrote about things he understood.
Late Soviet Paul Graham exists as the lobbyist for Garry Tan Y-Combinator, which isn't even really prestigious anymore. As far as the signalling value goes? I'd rather have a strategic from NVIDIA before YC. I would think about YC's money if literally no one else was interested. This is "ChatGPT Tha License Dawg", "die motherfuckers die motherfuckers die" tweets tagging elected officials Y-Combinator he's defending, and the vampire companies he cites as his clean wins are suitable filleted in the rest of the thread that mine would be redundant.
And the real mile marker of a guy whose audience has exceeded his depth is that he's lecturing a room full of people about how a single operation on the iPhone calculator app can teach you more about government and economics than is apparently understood by someone who has survived eight years in Congress designed to destroy people like her, who has an Economics degree cum laude from Boston University that she got while working as a bartender to support herself and her family after her father died, a situation with no parallel in pg's life or that of anyone adjacent to him in either it's highs or lows.
I got into this business substantially because pg's writing was so motivating to twenty year old me, and for that I'm still grateful. And just like I hope Kanye gets back on his Lexipro and starts making great music again, I hope that pg goes back to his roots and starts printing great technical and startup essays again instead of spewing solid waste.
But just like I can't follow Kanye down the "death con three to the jews in hollywood" road, I can't follow pg down the "think about the billionaires and don't listen to the honors economist multiple-term congresswoman" road.
One is dramatically more offensive in it's form, one is dramatically more toxic in it's substance, because there are people who take it seriously.
Of course, we'll ignore the huge issues that Airbnb created for cities, customers, and providers. We'll ignore the way they knowingly helped ignore any regulations on tourism as much as they could. We'll ignore the business model of simply being the biggest middlemen around. We'll ignore the fact that their business is slowly being outlawed in major cities, at least in Europe, because of all of the above.
And, surprisingly, if we ignore all of the things these founders do to ignore the law and cheat the market or their competition, we can say that they earned their billions without cheating!
We'll also ignore the fact that the brilliant magic math that us lay people and politicians just don't understand also predicts that the founder whose business is growing 93% per month will not only be a billionaire in 9 months, but a trillionaire 9 more months after that, and surely the world's first quadrillionaire within 5 years. You might think this is implausible, but that's just because you don't understand how exponential growth works!
I’m thinking of vibe coding a calculator app How Many Babies Died For This where you input your startup idea, life(style) goals and AI token usage and the machine spits out the Net Babies Dead for you to achieve your dreams
Politicians spend their lives in one of the purest zero-sum systems in existence. Of course they don't have a gut level understanding of the creation of wealth.
But consumer surplus matters most of all. Imagine the net benefit to consumers of Robotaxi and Optimus (ok, ok, assuming they work, for the doubters in the room). Entrepreneurs capture
There are facets of the query that are actually interesting (to think about, not surrender to).
- Wealth is a curve like any other, it has a SD, shape, and other curve defining properties
- Motivation and discovery are two important pillars of capitalism.
A core belief of capitalism is that humans, as very fallible machines especially in collectives, do a poor job of managing that curve for others without hurting discovery and motivation. Intervention hurts the very evolutionary traits that make capitalism so successful.
While that's absolutely true, surely we can entertain the idea that there is a theoretical optimal wealth curve that doesn't effect the properties of capitalism we care about in such a way. Perhaps it is never achievable by systems we can design, but there surely is a "better" curve.
Its also evident if you look at psychology. Humans are more motivated by their relative differences (SD bands) vs their absolute values. There are wealth levels that are so abstract and absurd that they actual amount is meaningless to the holder; you'd have a hard time convincing me me $500B and $1.1T make a interesting difference to preservation of capitalist mechanics.
To reiterate: humans controlling the curve is no bueno, full stop. But surely we don't have the theoretically optimal curve.
a) thinking that others don't understand exponential. Any reasonably college educated grad understands it well.
b) thinking that growing 93 percent every month means the founder has put in 93% more effort than the prior month.
Their argument relies upon the ideology that just because you thought and executed an idea profitably means you should continue to "earn" from it.
In the LLM age, more and more people are questioning this, and rather want to goto: effort == earnings.
Not exactly the way I interpreted it (emphasis on earn). Right or wrong, I think the vast majority of us think that "deserved money" is money earned from "work".
A simple example would be the billionaire Walton children: their fortunes inherited. Most people would argue that they did not really earn those billions of dollars.
On an admittedly slippery slope, for many, investing and other means where the money makes money is also not regarded as work (and therefore is not earned money).
To wave around the idea of "the American Dream", I suspect that many American's disapprove of any means of obtaining wealth that the average Joe or Jane are not privy to. This idea that you have to be born into money or have money to make money—we are (perhaps naturally) repugnant to.
You might not believe you've done anything "bad" to become a billionaire, but the mere fact that you accumumated so much wealth necessarily means others, somewhere, had to work for it. The mere existence of billionaires is the mark of an unhealthy economy, that doesn't distribute wealth in an efficient or fair manner.
The assertion that it should be "impossible" to be a billionaire (or trillionaire, gazillionaire, whatever) is really an assertion that a just and moral society would design all of these things to prevent that outcome.
And I think it's pretty reasonable to say that we ought to set society up such that as someone gets wealthier we take money away from them at faster rates, so that beyond some level of wealth it is very difficult to continue to get richer.
Unfortunately, a lot of people are captured by rather libertarian ideas about government, money, property, etc. that seem to prevent many people (at least in the US, UK, et al.) from behaving in anything but the most selfish, individualistic, and antisocial of ways.
"But now you at least understand, from having done the math yourselves, that you don't have to cheat to become a billionaire. You've seen for yourselves that there are only two numbers in the calculation, the growth rate and how long it continues."
What could possibly be false in a two-parameter model of reality?
There are 86,400 seconds in a day (24 hours * 60 minutes * 60 seconds = 86400). Now let’s say you spend an average of 1$ every second. That’s every second, including when you’re sleeping or on the toilet. That’s 86,400$ per day, which I hope we can all agree is a lot of money.
If you had one million dollars, to spend it all it’d take you over 11 days (1,000,000 dollars / 86,400 seconds = 11.57).
If you had one billion dollars, to spend it all it’d take you over 31 years (1,000,000,000 dollars / 86,400 seconds / 365 days = 31.71). That is an obscene amount of money.
In aristocracies we traditionally assume or imply that a person can deserve a certain wealth or power simply by being born into it. Capitalism, however, sells us the dream of the meritocracy: your (financial) success in life should depend not at all on factors of chance like birth or genetics but simply how much of yourself you choose to sell to the market.
At any point in time you have control of some tangible or intangible capital, including wealth, physical health, social connections, equipment, information, trained skills, et cetera. Some of these assets are gained by luck, e.g. accident of birth; some of them are gained by trading your time; and some of them are gained by spending another asset (whose origin reduces, recursively, to some combination of luck or time). At any point you can, assuming the market is appropriately liquid, spend some of these assets to get cash.
Some of these assets have force-multiplier effects on your future output in certain domains, from which exponentials naturally arise; but the time spent on them remains linear, and so, if we want to ignore inherited factors (the opportunity to spend the time on things without immediate feedback, say, or handed-down insight about which of these investments will produce the most value in the future, or access to the required tutors) the increase in earnings these things _merit_ has to remain linear as well. There is no way to compound your time and therefore, under an assumption of meritocracy, there is also no morally acceptable way to compound earnings, which I would assume is the point the politician is attempting to make. Under this worldview, any exponential compounding that occurs must, mathematically, be a result of systematically undervaluing the time of an exponential number of other people, since each person can only spend a linear amount of time.
In practice, of course, the assumption of meritocracy is simply wrong, and arguably the concept as a whole is internally incoherent (or at least I don't believe we've yet managed to articulate it coherently: we would have to settle the nature vs nurture debate and completely sever the value of a person's spent time from the accidents of their birth, if such a thing is even meaningful). But I think that's where the claim falls down, not in failing to understand the mathematics of exponentials.
The most famous ones ended-up in prison (Sam Bankman Fried, Elizabeth Holmes, Jeffrey Epstein, Bernie Madoff) but anyone with a basic grasp of statistics and criminal behavior know that many others will escape the justice system forever.
It does not mean that all billionaires are bad, the criminals are not the majority, but there are enough criminals to justify skepticism and scrutiny.
As Upton Sinclair put it, "It is difficult to get a man to understand something, when his salary depends on his not understanding it."
That quote is just the tip of the iceberg of Sinclair's work, though. He wrote about how when a person's livelihood, reputation, or financial well-being relies on a specific status quo, they often find it impossible to see the logic or ethics in changing it. It can be very difficult for them to confront such issues objectively.
He also wrote about the question of cynics vs. true believers in this situation. For the true believers, he pointed out that the only way for them to resolve their cognitive dissonance (while maintaining their lifestyle) is to block out the truth entirely. They stop trying to understand because actually understanding would be too painful.
How does your startup avoid failing? By skirting local laws? Exploiting employees? Destroying the environment? Replacing jobs in a way that makes the standard of living better for the few but worse for the many? Making weapons or systems that coordinate weapons? Submitting to and therefore tacitly supporting oppressive governments?
Sure, there are examples of startups that don’t do these things. But looking at billionaire-class startups (there’s not that many of those to analyze!), there are far more of them in the other category.
In addition, the converse is not true. Just because you’ve found something that grows fast and in large market, doesn’t mean you’ll become a billionaire. With all humility, I’ve been lucky to have done that twice, but in a large company. I’m not complaining, I’m just saying that doesn’t necessarily make you a billionaire.
The billionares hands are clean, the climate is fine, the elections are great, there's nothing wrong, close your eyes, stuff your ears with wax, and keep on trucking :)
> I've spent the last 21 years training people to become billionaires. So far about 30 of them have
Since it's a post about math, let's do it.
6500 companies with 2 founders each - 13000 founders.
30 of them became billionaires - 0.2% of them.
So being a tech founder at the most famous startup accelerator in the world give you about 0.2% chance of becoming a billionaire.
Or put another way, only 1 out of every 500 YC-combinator founded startup makes one of it's founders a billionaire.
Greed mixed with analytical thinking on industrial scale - graham, thiel, musk, hoffman, bezos, zuck all symptoms of “smart” people who screwed this country ultimately - all for what?
Has the changed world that resulted been for the better?
It's not about the math of the thing, it's about the arguably necessary exploitation that must occur to hit those kinds of numbers.
And in fact, IMHO, you don't even need to get to "exploitation" to criticize this mentality.
Any normal human would (and if not would, SHOULD) want to stop "earning" well before they hit those ridiculous numbers. Let's say -- at about 50 million, a normal person should realize, yes, that's enough. Time to pivot to something that doesn't cause so much accumulation. This does happen, we just don't hear about it enough.
Trades are almost always positive sum with some externalities.
Trades aren’t exploitative like you claim.
> There are other ways to get rich than by starting startups. Some of those do require you to exploit people. But startups are the most common way to become really rich, and if you want to start a successful startup, the key is not exploitation but empathy.
> How people become rich in your society is one of the most important things to understand about it. You can't let your beliefs about this be determined by ideology, or movies, or historical examples that are centuries old. You must look at the world around you and see how it's actually done.
The "it's impossible to do morally" people are looking at how it used to be done, and how it's sometimes still done. They are right to be opposed to that. But oppose the immoral aspects of it, not doing it at all.
And those who hard-core define a billion as immoral are I think signalling something else: They want the government to take that money, from every billionaire. (If we're talking immorality, we could discuss the morality of that.) But they don't understand that there will probably be second-order consequences of doing so...
If you count individual founders, the rate is even lower. So to insinuate this is some kind of training people to become billionaires, is like a lottery operator saying he teaches wealth creation because a few ticket buyers hit the jackpot.
PG is turning an extreme power law outcome into a moral argument. A tiny fraction of founders capture enormous upside, thousands do not, and PG presents the winners as proof that the system is fair. I could not think of more survivorship bias with a halo.
And thee political sneer is also absurd. Startups do not exist outside politics. They exist( or should exist) inside law, tax, infrastructure, courts, labor rules, housing rules, securities law, immigration policy, and government procurement. Uber S-1 warned that its business would be harmed if drivers were classified as employees rather than independent contractors...and described legal and regulatory obstacles as material business risks. In other words...regulatory arbitrage ( corruption? ) as a business model.
Airbnb is an even cleaner YC example. Its own filings describe short term rental law, host registration, tax collection, fines, city restrictions, and New York 2023 rules as materially affecting the business. Its a business that lives lives inside a fight over housing law and local regulation.
And if the claim is that politicians do not understand value creation, then SpaceX is a hilarious counterexample. SpaceX is a company completely entangled with the state and US tax payer. SpaceX has about $22B in government contracts, mostly NASA, and Reuters separately reported a $5.9B Space Force launch award in 2025.
And the biggest logic failure being used here is the so called exponential growth part. The world is not exponential. Population growth is not exponential forever. Demand is not exponential forever. Restaurants, supermarkets, apartments, drivers, cities, and disposable income are finite. Real markets saturate. Growth curves become S curves. Pretending that 15% monthly growth can simply continue for years is nothing more than spreadsheet intoxication.
So instead of the claim you can earn a billion by making users happy, what is reality is, that in a legal and financial system that massively rewards scalable equity ownership, a tiny number of founders can become billionaires if capital, timing, network effects, labor structure, regulation, and distribution all break their way. I don’t think its legal, and the best PG could do with this is a defense of the casino by pointing at the jackpot winners.
Just reflect on this: Of the 30 billionaires Paul Graham talks about, in an essay where, notably, he never once uses the word “entrepreneur” they come from these 14 companies:
Airbnb, Brex, Coinbase, Cruise, Deel, DoorDash, Dropbox, Flexport, Instacart, Loopt, Meesho, Reddit, Scale AI, Stripe.
Less than half of them are profitable as of 2026. None created a vaccine or cured a disease, discovered a new algorithm or mathematical theorem, developed the economies of poorer countries, created a new engine, or invented a renewable energy source. If all of them...disappeared tomorrow...you would probably just use some other payment system, maybe with higher or lower commissions, and argue on some other message board not called Reddit.
The impact on human lives would be zero... or maybe even slightly positive.
> The rational fear of those who dislike economic inequality is that the rich will convert their economic power into political power: that they’ll tilt elections, or pay bribes for pardons, or buy up the news media to promote their views.
> I used to be able to claim that tech billionaires didn't actually do this — that they just wanted to refine their gadgets. But unfortunately in the current administration we've seen all three.
Now he's claiming he's trained all these billionaires and they are a blessing to the world, not avaricious sociopaths.
In the following weeks we saw Elon do two Nazi salutes in front of the presidential seal, and we saw the Trump admin hire tons of thugs to rip minority children out of their beds, and those same thugs have murdered a number of citizens, with Stephen Miller loudly shouting that they have absolute immunity.
I'm surprised Paul Graham and the signers of the blog post are not to embarrassed to continue posting their thoughts. At worst Paul should stop talking, better, he should apologize and admit he is a fool.
You mass exploit labor at scale to exfiltrate 1B$.
You commit wage theft to obtain 1B$ (the largest theft category).
You union bust and fire workers who try to fight for better working conditions and wages.
You engage in monopoly practices to obtain 1B$.
You engage in corruption via 'campaign donations' to lay down laws that benefit you and harm others.
Doctors earn. Engineers earn. Scientists earn. LABOR EARNS.
But billionaires never *earn* 1B$. They exfiltrate, steal, and corrupt.
But Labour Theory Of Value has been debunked and is mostly not used anymore.
- Upton Sinclair
And, well, you are right that there are 'debunkments' of Labor Theory of Value. Of course, they are put out by hard right-wing laissez faire capitalist enclaves, like Mises. I would never expect them to take a dispassionate view of capitalism, given their extremist position.
https://mises.org/mises-wire/three-arguments-debunking-marxs...
"Oh, if we just operate in a vacuum, do not closely examine the systemic interactions of our accumulation of such vast sums of wealth, assume there's no moral or ethical quandary that would prevent us from utilizing every game theory strategy available to us, and have consistently high, compounding growth over time, then anyone can make a billion dollars if they follow my teachings, which in turn were formulated over thousands of students and with a success rate still in the single percentage points, at best."
Here's the thing none of these people will ever admit: not everyone can actually succeed at a goal, otherwise it wouldn't be a goal, but a baseline. This is the fundamental grievance I have with these sorts of "wealth whisperers" braying on (and on, and on, and on) about how with a good idea and hard work (and YC's guidance), you too can be a Larry Ellison or Elon Musk or Mark Zuckerberg type.
Which, no, you cannot. If you could, PG's success rate for billionaires would be 100%. It is not, so clearly hard work and a good idea (and a mentor) alone isn't enough. Yet enough leaders and populace have bought into this fairy tale that we've reoriented society around it wholesale. The presumption is that anyone lacking in obscene wealth has done so by choice, rather than examine systemic incentives and policy failures that make such an outcome the default, rather than a personal choice (or worse, some sort of personal failure).
I'm just so weary of having the same argument with the same people who refuse to bother learning anything that might remotely conflict with their world view anymore. If the response to "maybe we should improve society somewhat" is some banal wealth-building sales pitch relying on cherry-picked statistics and devoid of any wider context, then I think it's safe to presume you're either willfully arguing in bad faith or so colossally ignorant that you're beyond help.
EDIT: One thing I would add requires quoting PG.
> There are other ways to get rich than by starting startups. Some of those do require you to exploit people. But startups are the most common way to become really rich, and if you want to start a successful startup, the key is not exploitation but empathy. What do users really want? What could you do for them that would make their lives dramatically better? That kind of empathy is what we look for in founders, and what we cultivate in the ones we accept.
I will flatly reject that YC startups of late have any shred of empathy for their customer base, in general. If they had any shred of empathy for their customers, they all wouldn't collectively lean into the "permanent underclass" and "AI job replacement" narratives so often spouted by their predecessors. In fact, I would go so far as to argue the only groups with a shred of empathy for their customers might just be the non-YC startups or the FOSS groups cranking away in spite of all the headwinds.
Nobody - nobody - makes a billion dollars through empathy alone. At some point, one has to make a conscious decision to say "I demand more returns than reasonable relative to my costs, and I expect my customers and/or employees to bear that burden on my behalf." Otherwise we'd see a parade of companies demanding caps on margins to drive prices lower or wages for workers higher, thus creating more spending money among workers that in turn produces more economic activity. We do not see this outcome, therefore we cannot ascribe empathy as a source of wealth.
Step 1 ensure server connection is alive and you see pre-birth screen
Step 2 pick character starter pack of higher surface luck areas (e.g. father runs emerald mine in south africa)
Step 3 identify server grandmasters and rewrite unfavorable rules after birth
Unfortunately I skipped step 1 on this build so I'm looking to improve next time!
If one ever does so, one has definitely done something morally indefensible.
— 1 Timothy 6:10 KJV (The King James Bible) <https://en.wikisource.org/wiki/Bible_(King_James)/1_Timothy#...>
HN used to be open minded about people creating wealth. The change is shocking to me, actually.