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Forbes 400 Data Shows Paul Graham Is Wrong

192 points by apsec112 16y ago

Someone commented to Paul Graham last month (original thread: http://apps.ycombinator.com/item?id=1320439): "pg, unfortunately for America, in recent years most of the highest paid people (to the tune of hundreds of millions per person) have been financiers. Even fairly successful outcomes in the start-up world, such as Mint.com to take a random example, don't make founders that rich. I suspect if you look at the new inclusions in Forbes 400 list over the past 10 years, that list (of deltas) would be dominated by Finance. This is not a good thing." pg replied: "Instead of assuming this, why don't you check and tell us? It should be pretty easy; historical Forbes 400 data is available online." I decided to go check and tell everyone, and Paul Graham is wrong about the Forbes 400 showing startups having a higher return than Wall Street. According to the Forbes 400 data, between 1999 and 2009: - 211 new people entered the Forbes 400 list during this ten-year period. - Of these, 59 were from finance. - 17 were from technology. I think the record speaks for itself. You can see the raw data at http://www.forbes.com/lists/home.jhtml?passListId=54&passYear=1999&passListType=Person, http://www.forbes.com/lists/2009/54/rich-list-09_The-400-Richest-Americans_FinalWorth.html.

pg 16y ago
Interesting. Who were the 59 from finance?
- apsec112 16y ago
  I didn't write them all down because that would have taken another hour and it's 11 PM Bay time on a Friday, but here are a few: http://en.wikipedia.org/wiki/Ray_Dalio http://en.wikipedia.org/wiki/Ray_Dalio http://en.wikipedia.org/wiki/James_Simons http://en.wikipedia.org/wiki/James_Simons http://en.wikipedia.org/wiki/Steve_Schwarzman http://en.wikipedia.org/wiki/Steve_Schwarzman http://en.wikipedia.org/wiki/John_Paulson http://en.wikipedia.org/wiki/John_Paulson http://en.wikipedia.org/wiki/Daniel_Och http://en.wikipedia.org/wiki/Daniel_Och http://en.wikipedia.org/wiki/David_Shaw http://en.wikipedia.org/wiki/David_Shaw http://en.wikipedia.org/wiki/Steven_A._Cohen http://en.wikipedia.org/wiki/Steven_A._Cohen http://en.wikipedia.org/wiki/Kenneth_C._Griffin http://en.wikipedia.org/wiki/Kenneth_C._Griffin If you're curious as to whether I included any specific people please feel free to ask.
  - jimmyjim 16y ago
    You can apparently filter the results by the industry (from one of your own links), and here's a direct link as concerns the finance industry: http://www.forbes.com/lists/results.jhtml?passListId=54&passYear=1999&passListType=Person&resultsStart=1&resultsHowMany=25&resultsSortProperties=-numberfield2,%2Bstringfield1&resultsSortCategoryName=worth+($mil)&category1=Industry+Name&searchParameter1=6Str||PatCS||Finance&category2=category&searchParameter2=unset http://www.forbes.com/lists/results.jhtml?passListId=54&...
    - deleted 16y ago
      [deleted]
  - pg 16y ago
    I'm curious what your test was for deciding whether someone was in finance.
    - apsec112 16y ago
      Here are the industries I considered to be "finance": - Hedge funds and other money management - Private equity - Investment banking - Leveraged buyouts - Proprietary trading - Traditional (retail) banking and credit cards I did not consider heirs with investments to have gotten their money in finance, unless they increased their original sum ten-fold or more (in real dollars). I also did not consider real estate investment/speculation to be finance.
      - pg 16y ago
        Sounds reasonable. But when you have time it would be useful to see the actual lists of the people you put in each category.
        deleted 16y ago
        [deleted]
        deleted 16y ago
alexyim 16y ago
Original thread: http://apps.ycombinator.com/item?id=1320439 http://apps.ycombinator.com/item?id=1320439 Raw data: http://www.forbes.com/lists/home.jhtml?passListId=54&passYear=1999&passListType=Person http://www.forbes.com/lists/home.jhtml?passListId=54&pas... http://www.forbes.com/lists/2009/54/rich-list-09_The-400-Richest-Americans_FinalWorth.html http://www.forbes.com/lists/2009/54/rich-list-09_The-400-Ric...
thunk 16y ago
> I think the record speaks for itself. There's something about the way you phrased this that makes me think you were gunning for pg. It would be nice if you included the complete breakdown, as well as your criteria for determining tech vs. finance. Since you had to manually go through the entire list, I can't imagine it would have been difficult to record your results.
- apsec112 16y ago
  "There's something about the way you phrased this that makes me think you were gunning for pg." I was responding to him specifically, yes. "Since you had to manually go through the entire list, I can't imagine it would have been difficult to record your results." Not actually difficult, just time-consuming (I did it by having the two different lists, sorted by name for easy comparability, in two adjacent browser windows).
  - thunk 16y ago
    I'm not saying you're wrong, just that it's a little disingenuous to publicly call someone out without providing your methods or your results.
nazgulnarsil 16y ago
outliers hold no interest for me. what percentage of people who tried to become successful financiers made it vs what percentage of tech entrepreneurs started a successful company?
- _delirium 16y ago
  That'd be an interesting number as well, but my guess is that financiers win there, too. Even if you don't make it big in finance, you can "fail" into a lot of lower-level jobs that pay around $200-300k. In tech, the fail-out-into-a-salary route tends to get you more like $100-150k.
- apsec112 16y ago
  Difficult to say exactly. Both are definitely high-risk industries. The key difference is probably the timespan over which you make your money. A moderately successful entrepreneur might work hard for five years, sell his company for $20M, and get $4M of that. A moderately successful financier might work hard for thirty years, and make $500K - $2M every year that he works. Essentially, successful financiers tend to be older (50s and up) while successful entrepreneurs tend to be younger.
  - paraschopra 16y ago
    > Essentially, successful financiers tend to be older (50s and up) while successful entrepreneurs tend to be younger. I think this data can also answer the question. Has any one done any calculations on this front?
- jpark 16y ago
  If you can make the cut at a top investment bank, hedge fund, PE firm, etc, it's fairly trivial to accumulate $1M in liquid assets after 10 years of work. Much much easier than trying to sell your startup for > $1M.
- pyre 16y ago
  Maybe, but that's not what this discussion is about: Original Post: http://apps.ycombinator.com/item?id=1320439 http://apps.ycombinator.com/item?id=1320439 > Despite the high risk/high reward, I think the > expected value (in money) of going to Wall > Street is still quite a bit higher than that of > a startup. pg's reply: http://apps.ycombinator.com/item?id=1320447 http://apps.ycombinator.com/item?id=1320447 : > The one place data is easy to find is at > the high end-- in the Forbes 400-- and there > at least that is not the case.
JacobAldridge 16y ago
There's a fundamental difference between 'there are more financiers than start-up founders in the Fortune 400' and 'a greater percentage of financiers in America make the Fortune 400 than start-up founders in America'. Using extreme example to make my point, if 0.001% of all 'financiers' made the Fortune 400 and 5.000% of all start-up founders did, no-one would claim that 211 v 59 means much because of the asymmetrical volume of the candidate pools. The percentages won't be that stark, of course. Are there 4 times as many financiers as start-up founder? I would suggest more (many, many more) which would indicate that being a start-up founder makes it more likely to hit that measure of financial success than being a financier, based on those figures. I make no comment about the relevance of this to the original discussion and pg's right or wrongness, which I was not a part of.
- madair 16y ago
  Which leads to another big point about financiers...too many preppies heading to college for a quick buck on Wall St.
  - leelin 16y ago
    I don't blame the college kids. At least right now, our capitalist society deems their brains are better spent finding the next good $10M trade as opposed to helping ship Office 2010 or becoming grad students in math / physics / CS.
    - rbanffy 16y ago
      I don't consider shipping Office 2010 a lofty goal... Come on, we are trying to make the world a better place. As someone currently doing two migrations from Outlook (I finally got approval to get rid of Windows on my corporate notebook and my wife is moving her Exchange-based mail to an IMAP server) I can say any shipment of Office 2010 prevented means at least one more happy person ;-) As for the other options, making the next 10M trade or becoming a grad student, I think you should follow your heart.
    - jbarham 16y ago
leelin 16y ago
Can we explain this by saying many hedge funds are negatively correlated, along with survivor bias? This is a huge simplification, but consider for every four hedge fund managers, one goes long the market, another short the market, another long volatility and another short volatility. No matter what it's very likely one or two out of those four perform very well over one year. Start with enough hedge funds and throw on enough leverage and after a few years, there are bound to be some huge outlier-sized winners and many other blowups. It's like a big roulette table, but every possible outcome has someone betting big on it. Contrast that with startups, where almost every startup has exposure to market beta (either in receiving funding or finding an acquirer). In addition, it's quite possible every music startup in the industry goes bust, or every PDA-maker startup, or every online poker startup, etc. The roulette wheel has an infinite number of bets, and can easily land so that no one wins. Edit: I'm very convinced there are people with extraordinary skill in investing and/or in founding startups. I'm only suggesting how the Forbes 400 list could still exist if it was pure luck and no skill.
- patio11 16y ago
  The roulette wheel model of hedge funds is even slicker, since other folks provide most of the money you're gambling with and you get to keep 2% of the chips you wager win or lose, and 20% of their winnings when you win.
- nostrademons 16y ago
  Startups have the same phenomenom: for every product that people are not buying, there's a substitute that they're buying instead. Either that or consumers are stuffing their money under the mattress, but we know (from the savings rate data) that this isn't happening. In some ways, there ought to be more variation with startups, because consumers will tend to pile onto the market leader because they're seen as reliable, which starves other firms in the industry and shifts resources onto a few big winners. The information cascades among consumer businesses can be much bigger than the information cascades among financial firms.
  - leelin 16y ago
    That accounts from some ways startups can be negatively correlated, but for the purposes of billionaire founders making the Forbes 400, I still say they are all hugely correlated to market conditions that enable crucial funding rounds, M&A events, and IPO events. Also, if I think startup X sucks, it's not that obvious how I can bet against them and get rich on their dismal failure. But if I think hedge fund Y is doing stupid things, I can take the other side of their trades, and one of us will wind up rich.
nearestneighbor 16y ago
> "Instead of assuming this, why don't you check and tell us? It should be pretty easy; historical Forbes 400 data is available online." Well, he wasn't WRONG. He just advised you to make a stronger argument, since the data is easily available.
startingup 16y ago
I made that original comment. Thanks for doing the analysis I was too lazy to do! Your analysis jives with the broader point I was trying to make - in the past 15 years, finance has been the surest path to riches in America. It is not just at the level of the Forbes 400. During the real estate bubble, newly minted mortgage brokers (often coming from other fields such as car sales, they found selling debt far more lucrative) were taking home $0.5 million - and not just a few of them. I have had acquaintances in Goldman, at fairly low level in the org chart, who have been taking home similar sums in bonuses every year. I know Unix systems administrators in Wall Street who take home ~$300K/year - and these guys are generally very low in the Wall Street totem pole. It has been the age of the financier for a while now. No, this is not capitalism at work; it is Federal Reserve policy. It allowed specially privileged entities to lever up (30x leverage in case of investment banks like Goldman or Morgan Stanley, 10x in case of hedge funds), allow them to speculate with easy money, and have them pay out huge bonuses in case of investment banks or huge carried profit in case of hedgies ... and finally bail them out when their leverage blew up on them, only to have them start speculating all over again.
- tmsh 16y ago
  The thing is, however, that the times are different now. Look at a chart of the US 10 year note from the 60's to the present. It peaked in 1981. I parse that history as -- the world was coming off of a golden era in productivity, wealth and economic stability. It would make sense for people from B school to make a lot of money if they started getting their chops on Wall Street, etc. But now it's different. I think that the 10 year note has begun its steady rise again, finally (biggest acceleration since the late 60's and early 80's). But in this economic climate, nimbler business arrangements surely are more viable and better training for future business leaders. It's just basic math -- in a 4% environment, things like SpaceX and other lighter economic models will be successful. In a 15% environment, financing itself is more useful, and, with synergy and everything, on average produces more massive individual personal wealth. The constraints that faced those currently on the Fortune 400 list (which is really some sort of integral of the past 30 years -- as these are people at the peak of their careers) are different from those who will be on the Fortune 400 list in 2030. (N.B. I made all this s* up having looked at an all-time 10 year note chart earlier tonight. But it's an idea.) ETA: Although it's a bit of a project. I think it would be interesting to compile the 100 wealthiest people in the world over the past 100 years. I have a feeling that certain periods in time would've produced clusters of financiers (JP Morgans, etc.), whereas other times would produce clusters of startup founders. Would be interesting to compare them to different economic indices, etc. Then the thing would be to determine if our own present economic climate resembles others periods -- and what that means to the different types of fields you should, on average, go into to maximize personal wealth (if that's something that you're into). Or at least be aware of it.
devin 16y ago
The real question is: Do you want to be a financier or a founder? Personally, forget finance. Some of us like to invent stuff, and by stuff I don't mean phony securities.
deleted 16y ago
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diedsj 16y ago
I think the bigger point that sparked this discussion is: if you want to get rich should you go in finances or should you start a startups ? fact is, you should probably get in a finance startup, but a startup nonetheless. A startup offers you the unique ability to become a seth-godin-linchpin more so then taking a job in finance for say JPmorgan... then again comes the question: should money be the driving factor for your career choice? maybe, but most likely it should be whatever you are most passionate about. maybe thats money?
Towle_ 16y ago
I don't understand why the two categories are being contrasted against each other as though one cannot be both. Wouldn't many highly successful founders later become financiers as well? If the root of this discussion is indeed which paths any given individual might take to achieve much greater wealth-- and not some sort of "financing vs. founding" contest-- then the founder role should nonetheless receive greater attention in all/most aspects. For most, the financier role will only ever be open if they are founders first.
- _delirium 16y ago
  It appears that the "finance" category often is totally separate though, and that you can break into it without doing something like tech first. The people being classified as "financiers" on the list never started a non-finance company--- folks like George Soros made their money 100% in finance. They made their initial money moving up the ranks at investment banks, playing arbitrage strategies, pulling in bonuses from big deals, etc.
rameshnid 16y ago
A man of finance measures his success on a single metric - wealth accumulated. A techie founder on the other hand has many takeaways - social respect, geek goodness, making the future instead of guessing it, money in some cases. I think if economic wealth is used as a measure instead of monetary wealth, pg would be spot on. What say?
mmaunder 16y ago
I used to work for CSFB (now Credit Suisse) in London's Canary Wharf. It's the most I've earned in my entire career. Unless you've worked for an investment bank you have no idea how much money they have. It's like a giant gulf-of-mexico-style money gusher that doesn't quit. How do they make it? CSFB flies on the bleeding edge of what's legal and always have. I was there when Frank Quattrone was involved in the IPO of VA Linux. The share allocation resulted in the US vs Quattrone lawsuit. Imagine you facilitate an IPO and you get to hand out shares at $80 a piece to your buddies on and the first day it pops up to $300/share and you can sell - right then. http://bit.ly/cBMdqb http://bit.ly/cBMdqb I was also there when James Archer, Jeffrey Archer's son was found guilty of manipulating the swedish stock exchange and banned for life. http://news.bbc.co.uk/2/hi/business/1459638.stm http://news.bbc.co.uk/2/hi/business/1459638.stm In investment banks there is what's known as the Chinese Wall. It separates investment banking from the brokerage divisions to prevent conflicts of interest. Imagine you have a bunch of guys buying and selling stock for the bank's account and another group of guys recommending to customers which stock to buy and sell. They're all in the same building, using the same elevators, the same mens rooms and the same lunch hall. Quick entrepreneurial quiz: Anyone see a business model there? They take their licks though. I was there when the LTCM fund collapsed and they lost $600M. Also when the Russian economy collapsed and they lost another $600M. Layoffs? Nah - business as usual. If you're a developer or ops guy and get tired of startups, I strongly recommend going to work for an investment bank. It's very very hard to get your first job - you're going to have to network your ass off or have a seriously hot resume - probably both. But once you're in, provided you're good at what you do, it's very easy to move between banks and promote yourself into better jobs in other banks or divisions. So what the fk am I doing running a startup? Good question. I ask myself that sometimes. When you look at the opportunity cost from the "I could be in an investment bank" perspective it is scary. I don't have some magic answer or a bunch of bullet points. I guess what draws me to it is the fact that I own my own business. It's also completely honest. Your success is your own and so is your failure. Working in banking feels like cheating. Perhaps it is. But it pays cash and lots of it.
- rwmj 16y ago
  Before you start that bank job you should also think about whether what you're doing is moral and right. Whether by doing that job you're contributing to making the world a better place.
grasshoper 16y ago
This is a false dichotomy. The financiers who made this list were all entrepreneurs. James Simons, John Paulson, Steve Schwarzman, David E. Shaw, etc all successfully founded companies. Their companies just happen to be investment firms. The fact that more founders of financial startups have made this list in past decade than founders of tech startups speaks to the dominance of the investment industry in recent years. It says nothing about finance vs start-ups. The Forbes list will always be dominated by those who took an entrepreneurial risk and had that bet pay off. Nobody, finance sector or otherwise, makes this list by being an employee. Not even top employees can reach this level. Jamie Dimon, Lloyd Blankfein, John Mack are not on here. Now for more modest monetary goals, there's still no better field than finance. The only path to the Forbes list is through entrepreneurship, but finance opens up additional paths to millionairehood. Make it to Managing Director at an investment bank? Become a successful trader? You'll get 7-figures in yearly comp. Wanna do that in the tech world? You'll need a successful exit.
- apsec112 16y ago
  "Nobody, finance sector or otherwise, makes this list by being an employee. Not even top employees can reach this level." That is indeed true, but "start-up" has specific technology connotations in the minds of most people here.
- daniel-cussen 16y ago
  Two of these (James Simons and DE Shaw) having started quant funds.
- theorique 16y ago
  One could argue that Renaissance (Jim Simons) and D. E. Shaw and Co (David Shaw) are actually technology firms, and only incidentally financial firms. The majority of their competitive advantage emerges from software design and implementation, and systems integration. With Renaissance, it's even in their name - the full name of the company is Renaissance Technologies, not Renaissance Capital.
hooande 16y ago
People can interpret a data set in so many ways. I don't know which people you put into the "technology" and "finance" categories. I just went with the people that Forbes put into the categories of "Finance" or "Investment" vs the people that they put into the categories of "Internet" or "Software". I ran some numbers on the data they provided and here's what I found: Finance/Investments: Total People: 81 Avg Net Worth: 181.77 Avg Age: 62.32 Internet/Software: Total People: 48 Avg Net Worth: 321.47 Avg Age: 45.43 The net worth is in millions I guess, but the numbers don't seem to jive (Bill Gates is worth $85B??) It seems that technology > finance, in terms of net worth and number of years required to achieve that worth. While a financier may be more likely to make the list, the expected value for a tech entrepreneur seems to be much higher.
- apsec112 16y ago
  Did you look at just the new rich (the people who have gotten rich over the past ten years), or all the rich? If the latter, you're including a lot of dot-com people who wouldn't have gotten nearly as rich if it weren't for the bubble.
  - hooande 16y ago
    I'd have to normalize the data for all kinds of bubbles in a variety of markets, not just the dotcom bubble. Plus, I couldn't see how to determine who was new rich based on the data. In the light of morning, I'd like to amend my statement to "the expected value for a tech entrepreneur seems to be slightly higher", based on the definition of an expected value: 81 / 400 x 181.77 = 36.80 48 / 400 x 321.47 = 38.57 Given that the odds of making the list in finance are higher, it's still a better bet to start a technology startup.
rbanffy 16y ago
It may be stating the obvious, but if you are founding a (tech) startup for the money, you are doing it for the wrong reason.
- jteo 16y ago
  While this is true to a certain extent, one must consider the opportunity cost of a startup. In this case: how much I am giving up, assuming I could have gone and worked in finance?
pge 16y ago
The original discussion was about expected value, not maximum value. I continue to believe that the expected value of finance exceeds that of startups, but the answer to that is not in the Forbes 400, which shows those who are at the extreme. To make an analogy, the guy that just won the Powerball lottery is far richer than all the doctors in his state, but that doesnt mean the expected value of playing the lottery is higher than being a doctor. Salaries in finance tend to start at close to $100K for first year employees coming out of undergrad. A solid performer can get up to $300K/year in 5 years. The difference between this kind of career path and startup is that the finance employee has much more control over his compensation - if you're smart and willing to work hard, the salary rises in a predictable fashion. An entrepreneur can make a lot more if he is successful, but many of the factors that determine success are out his control. The entrepreneurs win much bigger than financiers (so the entrepreneuers should be much better represented in the Forbes 400), but the expected value of being a financier is greater (no data available to prove that).
jussij 16y ago
You said: > 211 new people entered the Forbes 400 list during this ten-year period. > Of these, 59 were from finance. > 17 were from technology. He said: 'that list (of deltas) would be dominated by Finance' So how exactly was he wrong wrong?
- jarek 16y ago
  "that list (of deltas) would be dominated by Finance" was said by startingup. pg said, in response to "the expected value (in money) of going to Wall Street is still quite a bit higher than that of a startup.", "in the Forbes 400 [...] at least that is not the case."
jasonlbaptiste 16y ago
The smart middle ground would be applying good technology/product entrepreneurship to the finance industry. They clearly have the money to play with and what may seem simple to us is wizardry to them. Someone pointed out an opportunity to me yesterday re: illiquid real estate assets. My mind is blown. I'm sitting here fucking around trying to get a 300k angel round, and these guys are trying to get rid of 300mil. there's a lot of money to be had out there combining tech/product know-how with boring industries. Money is usually found in the unsexy places.

192 points by apsec112 16y ago

pg 16y ago

Interesting. Who were the 59 from finance?

apsec112 16y ago
I didn't write them all down because that would have taken another hour and it's 11 PM Bay time on a Friday, but here are a few: http://en.wikipedia.org/wiki/Ray_Dalio http://en.wikipedia.org/wiki/Ray_Dalio http://en.wikipedia.org/wiki/James_Simons http://en.wikipedia.org/wiki/James_Simons http://en.wikipedia.org/wiki/Steve_Schwarzman http://en.wikipedia.org/wiki/Steve_Schwarzman http://en.wikipedia.org/wiki/John_Paulson http://en.wikipedia.org/wiki/John_Paulson http://en.wikipedia.org/wiki/Daniel_Och http://en.wikipedia.org/wiki/Daniel_Och http://en.wikipedia.org/wiki/David_Shaw http://en.wikipedia.org/wiki/David_Shaw http://en.wikipedia.org/wiki/Steven_A._Cohen http://en.wikipedia.org/wiki/Steven_A._Cohen http://en.wikipedia.org/wiki/Kenneth_C._Griffin http://en.wikipedia.org/wiki/Kenneth_C._Griffin If you're curious as to whether I included any specific people please feel free to ask.
- jimmyjim 16y ago
  You can apparently filter the results by the industry (from one of your own links), and here's a direct link as concerns the finance industry: http://www.forbes.com/lists/results.jhtml?passListId=54&passYear=1999&passListType=Person&resultsStart=1&resultsHowMany=25&resultsSortProperties=-numberfield2,%2Bstringfield1&resultsSortCategoryName=worth+($mil)&category1=Industry+Name&searchParameter1=6Str||PatCS||Finance&category2=category&searchParameter2=unset http://www.forbes.com/lists/results.jhtml?passListId=54&...
  - deleted 16y ago
    [deleted]
- pg 16y ago
  I'm curious what your test was for deciding whether someone was in finance.
  - apsec112 16y ago
    Here are the industries I considered to be "finance": - Hedge funds and other money management - Private equity - Investment banking - Leveraged buyouts - Proprietary trading - Traditional (retail) banking and credit cards I did not consider heirs with investments to have gotten their money in finance, unless they increased their original sum ten-fold or more (in real dollars). I also did not consider real estate investment/speculation to be finance.
    - pg 16y ago
      Sounds reasonable. But when you have time it would be useful to see the actual lists of the people you put in each category.
      - deleted 16y ago
        [deleted]
        deleted 16y ago

alexyim 16y ago

Original thread: http://apps.ycombinator.com/item?id=1320439 http://apps.ycombinator.com/item?id=1320439 Raw data: http://www.forbes.com/lists/home.jhtml?passListId=54&passYear=1999&passListType=Person http://www.forbes.com/lists/home.jhtml?passListId=54&pas... http://www.forbes.com/lists/2009/54/rich-list-09_The-400-Richest-Americans_FinalWorth.html http://www.forbes.com/lists/2009/54/rich-list-09_The-400-Ric...

thunk 16y ago

> I think the record speaks for itself. There's something about the way you phrased this that makes me think you were gunning for pg. It would be nice if you included the complete breakdown, as well as your criteria for determining tech vs. finance. Since you had to manually go through the entire list, I can't imagine it would have been difficult to record your results.

apsec112 16y ago
"There's something about the way you phrased this that makes me think you were gunning for pg." I was responding to him specifically, yes. "Since you had to manually go through the entire list, I can't imagine it would have been difficult to record your results." Not actually difficult, just time-consuming (I did it by having the two different lists, sorted by name for easy comparability, in two adjacent browser windows).
- thunk 16y ago
  I'm not saying you're wrong, just that it's a little disingenuous to publicly call someone out without providing your methods or your results.

nazgulnarsil 16y ago

outliers hold no interest for me. what percentage of people who tried to become successful financiers made it vs what percentage of tech entrepreneurs started a successful company?

_delirium 16y ago
That'd be an interesting number as well, but my guess is that financiers win there, too. Even if you don't make it big in finance, you can "fail" into a lot of lower-level jobs that pay around $200-300k. In tech, the fail-out-into-a-salary route tends to get you more like $100-150k.
apsec112 16y ago
Difficult to say exactly. Both are definitely high-risk industries. The key difference is probably the timespan over which you make your money. A moderately successful entrepreneur might work hard for five years, sell his company for $20M, and get $4M of that. A moderately successful financier might work hard for thirty years, and make $500K - $2M every year that he works. Essentially, successful financiers tend to be older (50s and up) while successful entrepreneurs tend to be younger.
- paraschopra 16y ago
  > Essentially, successful financiers tend to be older (50s and up) while successful entrepreneurs tend to be younger. I think this data can also answer the question. Has any one done any calculations on this front?
jpark 16y ago
If you can make the cut at a top investment bank, hedge fund, PE firm, etc, it's fairly trivial to accumulate $1M in liquid assets after 10 years of work. Much much easier than trying to sell your startup for > $1M.
pyre 16y ago
Maybe, but that's not what this discussion is about: Original Post: http://apps.ycombinator.com/item?id=1320439 http://apps.ycombinator.com/item?id=1320439 > Despite the high risk/high reward, I think the > expected value (in money) of going to Wall > Street is still quite a bit higher than that of > a startup. pg's reply: http://apps.ycombinator.com/item?id=1320447 http://apps.ycombinator.com/item?id=1320447 : > The one place data is easy to find is at > the high end-- in the Forbes 400-- and there > at least that is not the case.

JacobAldridge 16y ago

There's a fundamental difference between 'there are more financiers than start-up founders in the Fortune 400' and 'a greater percentage of financiers in America make the Fortune 400 than start-up founders in America'. Using extreme example to make my point, if 0.001% of all 'financiers' made the Fortune 400 and 5.000% of all start-up founders did, no-one would claim that 211 v 59 means much because of the asymmetrical volume of the candidate pools. The percentages won't be that stark, of course. Are there 4 times as many financiers as start-up founder? I would suggest more (many, many more) which would indicate that being a start-up founder makes it more likely to hit that measure of financial success than being a financier, based on those figures. I make no comment about the relevance of this to the original discussion and pg's right or wrongness, which I was not a part of.

madair 16y ago
Which leads to another big point about financiers...too many preppies heading to college for a quick buck on Wall St.
- leelin 16y ago
  I don't blame the college kids. At least right now, our capitalist society deems their brains are better spent finding the next good $10M trade as opposed to helping ship Office 2010 or becoming grad students in math / physics / CS.
  - rbanffy 16y ago
    I don't consider shipping Office 2010 a lofty goal... Come on, we are trying to make the world a better place. As someone currently doing two migrations from Outlook (I finally got approval to get rid of Windows on my corporate notebook and my wife is moving her Exchange-based mail to an IMAP server) I can say any shipment of Office 2010 prevented means at least one more happy person ;-) As for the other options, making the next 10M trade or becoming a grad student, I think you should follow your heart.
  - jbarham 16y ago

leelin 16y ago

Can we explain this by saying many hedge funds are negatively correlated, along with survivor bias? This is a huge simplification, but consider for every four hedge fund managers, one goes long the market, another short the market, another long volatility and another short volatility. No matter what it's very likely one or two out of those four perform very well over one year. Start with enough hedge funds and throw on enough leverage and after a few years, there are bound to be some huge outlier-sized winners and many other blowups. It's like a big roulette table, but every possible outcome has someone betting big on it. Contrast that with startups, where almost every startup has exposure to market beta (either in receiving funding or finding an acquirer). In addition, it's quite possible every music startup in the industry goes bust, or every PDA-maker startup, or every online poker startup, etc. The roulette wheel has an infinite number of bets, and can easily land so that no one wins. Edit: I'm very convinced there are people with extraordinary skill in investing and/or in founding startups. I'm only suggesting how the Forbes 400 list could still exist if it was pure luck and no skill.

patio11 16y ago
The roulette wheel model of hedge funds is even slicker, since other folks provide most of the money you're gambling with and you get to keep 2% of the chips you wager win or lose, and 20% of their winnings when you win.
nostrademons 16y ago
Startups have the same phenomenom: for every product that people are not buying, there's a substitute that they're buying instead. Either that or consumers are stuffing their money under the mattress, but we know (from the savings rate data) that this isn't happening. In some ways, there ought to be more variation with startups, because consumers will tend to pile onto the market leader because they're seen as reliable, which starves other firms in the industry and shifts resources onto a few big winners. The information cascades among consumer businesses can be much bigger than the information cascades among financial firms.
- leelin 16y ago
  That accounts from some ways startups can be negatively correlated, but for the purposes of billionaire founders making the Forbes 400, I still say they are all hugely correlated to market conditions that enable crucial funding rounds, M&A events, and IPO events. Also, if I think startup X sucks, it's not that obvious how I can bet against them and get rich on their dismal failure. But if I think hedge fund Y is doing stupid things, I can take the other side of their trades, and one of us will wind up rich.

nearestneighbor 16y ago

> "Instead of assuming this, why don't you check and tell us? It should be pretty easy; historical Forbes 400 data is available online." Well, he wasn't WRONG. He just advised you to make a stronger argument, since the data is easily available.

startingup 16y ago

I made that original comment. Thanks for doing the analysis I was too lazy to do! Your analysis jives with the broader point I was trying to make - in the past 15 years, finance has been the surest path to riches in America. It is not just at the level of the Forbes 400. During the real estate bubble, newly minted mortgage brokers (often coming from other fields such as car sales, they found selling debt far more lucrative) were taking home $0.5 million - and not just a few of them. I have had acquaintances in Goldman, at fairly low level in the org chart, who have been taking home similar sums in bonuses every year. I know Unix systems administrators in Wall Street who take home ~$300K/year - and these guys are generally very low in the Wall Street totem pole. It has been the age of the financier for a while now. No, this is not capitalism at work; it is Federal Reserve policy. It allowed specially privileged entities to lever up (30x leverage in case of investment banks like Goldman or Morgan Stanley, 10x in case of hedge funds), allow them to speculate with easy money, and have them pay out huge bonuses in case of investment banks or huge carried profit in case of hedgies ... and finally bail them out when their leverage blew up on them, only to have them start speculating all over again.

tmsh 16y ago
The thing is, however, that the times are different now. Look at a chart of the US 10 year note from the 60's to the present. It peaked in 1981. I parse that history as -- the world was coming off of a golden era in productivity, wealth and economic stability. It would make sense for people from B school to make a lot of money if they started getting their chops on Wall Street, etc. But now it's different. I think that the 10 year note has begun its steady rise again, finally (biggest acceleration since the late 60's and early 80's). But in this economic climate, nimbler business arrangements surely are more viable and better training for future business leaders. It's just basic math -- in a 4% environment, things like SpaceX and other lighter economic models will be successful. In a 15% environment, financing itself is more useful, and, with synergy and everything, on average produces more massive individual personal wealth. The constraints that faced those currently on the Fortune 400 list (which is really some sort of integral of the past 30 years -- as these are people at the peak of their careers) are different from those who will be on the Fortune 400 list in 2030. (N.B. I made all this s* up having looked at an all-time 10 year note chart earlier tonight. But it's an idea.) ETA: Although it's a bit of a project. I think it would be interesting to compile the 100 wealthiest people in the world over the past 100 years. I have a feeling that certain periods in time would've produced clusters of financiers (JP Morgans, etc.), whereas other times would produce clusters of startup founders. Would be interesting to compare them to different economic indices, etc. Then the thing would be to determine if our own present economic climate resembles others periods -- and what that means to the different types of fields you should, on average, go into to maximize personal wealth (if that's something that you're into). Or at least be aware of it.

devin 16y ago

The real question is: Do you want to be a financier or a founder? Personally, forget finance. Some of us like to invent stuff, and by stuff I don't mean phony securities.

deleted 16y ago

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diedsj 16y ago

I think the bigger point that sparked this discussion is: if you want to get rich should you go in finances or should you start a startups ? fact is, you should probably get in a finance startup, but a startup nonetheless. A startup offers you the unique ability to become a seth-godin-linchpin more so then taking a job in finance for say JPmorgan... then again comes the question: should money be the driving factor for your career choice? maybe, but most likely it should be whatever you are most passionate about. maybe thats money?

Towle_ 16y ago

I don't understand why the two categories are being contrasted against each other as though one cannot be both. Wouldn't many highly successful founders later become financiers as well? If the root of this discussion is indeed which paths any given individual might take to achieve much greater wealth-- and not some sort of "financing vs. founding" contest-- then the founder role should nonetheless receive greater attention in all/most aspects. For most, the financier role will only ever be open if they are founders first.

_delirium 16y ago
It appears that the "finance" category often is totally separate though, and that you can break into it without doing something like tech first. The people being classified as "financiers" on the list never started a non-finance company--- folks like George Soros made their money 100% in finance. They made their initial money moving up the ranks at investment banks, playing arbitrage strategies, pulling in bonuses from big deals, etc.

rameshnid 16y ago

A man of finance measures his success on a single metric - wealth accumulated. A techie founder on the other hand has many takeaways - social respect, geek goodness, making the future instead of guessing it, money in some cases. I think if economic wealth is used as a measure instead of monetary wealth, pg would be spot on. What say?

mmaunder 16y ago

I used to work for CSFB (now Credit Suisse) in London's Canary Wharf. It's the most I've earned in my entire career. Unless you've worked for an investment bank you have no idea how much money they have. It's like a giant gulf-of-mexico-style money gusher that doesn't quit. How do they make it? CSFB flies on the bleeding edge of what's legal and always have. I was there when Frank Quattrone was involved in the IPO of VA Linux. The share allocation resulted in the US vs Quattrone lawsuit. Imagine you facilitate an IPO and you get to hand out shares at $80 a piece to your buddies on and the first day it pops up to $300/share and you can sell - right then. http://bit.ly/cBMdqb http://bit.ly/cBMdqb I was also there when James Archer, Jeffrey Archer's son was found guilty of manipulating the swedish stock exchange and banned for life. http://news.bbc.co.uk/2/hi/business/1459638.stm http://news.bbc.co.uk/2/hi/business/1459638.stm In investment banks there is what's known as the Chinese Wall. It separates investment banking from the brokerage divisions to prevent conflicts of interest. Imagine you have a bunch of guys buying and selling stock for the bank's account and another group of guys recommending to customers which stock to buy and sell. They're all in the same building, using the same elevators, the same mens rooms and the same lunch hall. Quick entrepreneurial quiz: Anyone see a business model there? They take their licks though. I was there when the LTCM fund collapsed and they lost $600M. Also when the Russian economy collapsed and they lost another $600M. Layoffs? Nah - business as usual. If you're a developer or ops guy and get tired of startups, I strongly recommend going to work for an investment bank. It's very very hard to get your first job - you're going to have to network your ass off or have a seriously hot resume - probably both. But once you're in, provided you're good at what you do, it's very easy to move between banks and promote yourself into better jobs in other banks or divisions. So what the fk am I doing running a startup? Good question. I ask myself that sometimes. When you look at the opportunity cost from the "I could be in an investment bank" perspective it is scary. I don't have some magic answer or a bunch of bullet points. I guess what draws me to it is the fact that I own my own business. It's also completely honest. Your success is your own and so is your failure. Working in banking feels like cheating. Perhaps it is. But it pays cash and lots of it.

rwmj 16y ago
Before you start that bank job you should also think about whether what you're doing is moral and right. Whether by doing that job you're contributing to making the world a better place.

grasshoper 16y ago

This is a false dichotomy. The financiers who made this list were all entrepreneurs. James Simons, John Paulson, Steve Schwarzman, David E. Shaw, etc all successfully founded companies. Their companies just happen to be investment firms. The fact that more founders of financial startups have made this list in past decade than founders of tech startups speaks to the dominance of the investment industry in recent years. It says nothing about finance vs start-ups. The Forbes list will always be dominated by those who took an entrepreneurial risk and had that bet pay off. Nobody, finance sector or otherwise, makes this list by being an employee. Not even top employees can reach this level. Jamie Dimon, Lloyd Blankfein, John Mack are not on here. Now for more modest monetary goals, there's still no better field than finance. The only path to the Forbes list is through entrepreneurship, but finance opens up additional paths to millionairehood. Make it to Managing Director at an investment bank? Become a successful trader? You'll get 7-figures in yearly comp. Wanna do that in the tech world? You'll need a successful exit.

apsec112 16y ago
"Nobody, finance sector or otherwise, makes this list by being an employee. Not even top employees can reach this level." That is indeed true, but "start-up" has specific technology connotations in the minds of most people here.
daniel-cussen 16y ago
Two of these (James Simons and DE Shaw) having started quant funds.
theorique 16y ago
One could argue that Renaissance (Jim Simons) and D. E. Shaw and Co (David Shaw) are actually technology firms, and only incidentally financial firms. The majority of their competitive advantage emerges from software design and implementation, and systems integration. With Renaissance, it's even in their name - the full name of the company is Renaissance Technologies, not Renaissance Capital.

hooande 16y ago

People can interpret a data set in so many ways. I don't know which people you put into the "technology" and "finance" categories. I just went with the people that Forbes put into the categories of "Finance" or "Investment" vs the people that they put into the categories of "Internet" or "Software". I ran some numbers on the data they provided and here's what I found: Finance/Investments: Total People: 81 Avg Net Worth: 181.77 Avg Age: 62.32 Internet/Software: Total People: 48 Avg Net Worth: 321.47 Avg Age: 45.43 The net worth is in millions I guess, but the numbers don't seem to jive (Bill Gates is worth $85B??) It seems that technology > finance, in terms of net worth and number of years required to achieve that worth. While a financier may be more likely to make the list, the expected value for a tech entrepreneur seems to be much higher.

apsec112 16y ago
Did you look at just the new rich (the people who have gotten rich over the past ten years), or all the rich? If the latter, you're including a lot of dot-com people who wouldn't have gotten nearly as rich if it weren't for the bubble.
- hooande 16y ago
  I'd have to normalize the data for all kinds of bubbles in a variety of markets, not just the dotcom bubble. Plus, I couldn't see how to determine who was new rich based on the data. In the light of morning, I'd like to amend my statement to "the expected value for a tech entrepreneur seems to be slightly higher", based on the definition of an expected value: 81 / 400 x 181.77 = 36.80 48 / 400 x 321.47 = 38.57 Given that the odds of making the list in finance are higher, it's still a better bet to start a technology startup.

rbanffy 16y ago

It may be stating the obvious, but if you are founding a (tech) startup for the money, you are doing it for the wrong reason.

jteo 16y ago
While this is true to a certain extent, one must consider the opportunity cost of a startup. In this case: how much I am giving up, assuming I could have gone and worked in finance?

pge 16y ago

The original discussion was about expected value, not maximum value. I continue to believe that the expected value of finance exceeds that of startups, but the answer to that is not in the Forbes 400, which shows those who are at the extreme. To make an analogy, the guy that just won the Powerball lottery is far richer than all the doctors in his state, but that doesnt mean the expected value of playing the lottery is higher than being a doctor. Salaries in finance tend to start at close to $100K for first year employees coming out of undergrad. A solid performer can get up to $300K/year in 5 years. The difference between this kind of career path and startup is that the finance employee has much more control over his compensation - if you're smart and willing to work hard, the salary rises in a predictable fashion. An entrepreneur can make a lot more if he is successful, but many of the factors that determine success are out his control. The entrepreneurs win much bigger than financiers (so the entrepreneuers should be much better represented in the Forbes 400), but the expected value of being a financier is greater (no data available to prove that).

jussij 16y ago

You said: > 211 new people entered the Forbes 400 list during this ten-year period. > Of these, 59 were from finance. > 17 were from technology. He said: 'that list (of deltas) would be dominated by Finance' So how exactly was he wrong wrong?

jarek 16y ago
"that list (of deltas) would be dominated by Finance" was said by startingup. pg said, in response to "the expected value (in money) of going to Wall Street is still quite a bit higher than that of a startup.", "in the Forbes 400 [...] at least that is not the case."

jasonlbaptiste 16y ago

The smart middle ground would be applying good technology/product entrepreneurship to the finance industry. They clearly have the money to play with and what may seem simple to us is wizardry to them. Someone pointed out an opportunity to me yesterday re: illiquid real estate assets. My mind is blown. I'm sitting here fucking around trying to get a 300k angel round, and these guys are trying to get rid of 300mil. there's a lot of money to be had out there combining tech/product know-how with boring industries. Money is usually found in the unsexy places.