12 ms·

Ask HN: What is something surprising you learned about making money?

59 points by maximp 8y ago

ourcat 8y ago
It will not make you as happy as you thought in the long run. Comfortable, maybe. But there's a depression that hits many people after their 'liquidity event' etc. For some it can remove their raison d'être.
dani_c 8y ago
Surprisingly, you need money to make money. This I found quite true for many of my past endeavours.
- CamelCaseName 8y ago
  This is true, and not having cash flow that can support your growth can drive you to insanity. Dealing with this now and if I had two pieces of advice to give to entrepreneurs, they would be: Work in the field in which you want to build Keep working while you build
edent 8y ago
There's a monetary cost to it. And it is often worth paying. That is, a decent accountant will charge you money to make sure your taxes are in order, that you're not claiming anything you're not entitled to, and that your tax return is submitted on time. I know so many people stressed out at the end of the tax year - whereas I electronically submit all my receipts & invoices, and let someone else tell me how much to pay in tax. I always thought I'd rather save the money & spend the time doing that. Turns out it is cheaper in the long run to pay someone who has skills that you don't. Another thing I once learned - it's OK to charge a "go away" rate. If I don't want a client's business, I'll ask for double what I usually charge. They either get to find a "bargain" elsewhere, or I get to reevaluate my day rate! Finally, almost no one will have an honest conversation with you about money. Not industry peers, friends, or family. It is a touchy subject for many. Make sure it isn't within your family.
bitL 8y ago
Marketing (AKA hacking people) is the only thing that matters. You can literally sell useless, low-quality stuff as premium if you master marketing well.
- vixen99 8y ago
  Yes but do you feel good about that?
  - nexus2045 8y ago
    We are talking about making money, not feeling good about your moral compass, although that can always come later.
    - sharemywin 8y ago
      But, most of the time you make more with a win-win long term relationship.
  - LyndsySimon 8y ago
    The skills to sell something useless and something useful are the same.
  - ryandvm 8y ago
    I don't think he was advocating fraud as much as simply pointing out that without decent marketing, nothing else matters.
- tastyham 8y ago
  If there is one thing I've learned, it's this. It goes past money too, the same applies for open source software libraries, language choice, and even "design patterns" that developers use. Also applies to people. Your hireability and salary are both mostly related to how well you market yourself. Marketing is everything.
douglaswlance 8y ago
Don't sell your time. Instead, generate value.
- mancerayder 8y ago
  That sounds like a kernel of something profound, but leaves one hanging. Can you elaborate?
  - sp527 8y ago
    He probably means a lot of things, but close to the top might be "bill for the project instead of time spent". If you bill by units of time, you will like under-exploit the information and skill asymmetry between yourself and the client, and leave a lot of money on the table. You should instead price as a meaningful fraction of the value you're creating. You may not know that number, but the client will more or less signal it to you in negotiations if you're canny. Something that's relatively easy for you to do (that might take a month, for example) could generate millions in revenue for the client. You're entitled to a large chunk of that. It's in fact this approach that can make consulting extremely lucrative: someone has already gone through the work of acquiring leverage by building a business and you're coming in with the rocket fuel. You arguably should never take a contract where this isn't clearly the case, since committing to a project has an opportunity cost in your own time.
    - LyndsySimon 8y ago
      “Entitled” may not be the right word, but I agree with this. There’s a huge difference between someone able to build what a business needs and someone who understands the business’s needs and can work hand-in-hand with them to explore their needs and optimize to that. It’s very much worth the difference in cost to the business.
      - sp527 8y ago
        You're right that "entitled" is a bit strong and it was quite perceptive of you to point that out. That word choice was born out of my personal frustration at how many developers either get shorted in negotiations or never even understand how much value they could capture for their work. It is in some ways highly exploitative, in my opinion.
cm2012 8y ago
The people and companies that have money have soo much money to spend.
ydnaclementine 8y ago
On a personal level, being smart about saving money is a great way to build wealth, irregardless of your yearly pay see: Millionaire Next Door
- m0rose 8y ago
  Agreed. Also see: https://www.mrmoneymustache.com/ https://www.mrmoneymustache.com/
revel 8y ago
On the investing side, being excessively conservative with your money is often worse than being too aggressive. By holding all your wealth in cash you're trading an explicit set of risks for an invisible set. Holding lots of cash or fixed income products is a huge mistake.
- sharemywin 8y ago
  That depends on when you planning on spending that money.
- Rainymood 8y ago
  >By holding all your wealth in cash you're trading an explicit set of risks for an invisible set. I don't understand this sentiment, mind explaining?
  - tastyham 8y ago
    Keeping cash is a bet on inflation staying low, which is a very, very bad bet historically.
arielweisberg 8y ago
People will pay you wildly differing amounts for the same work. People will lie to you about what you have to do to get paid more. They may claim you are not good enough to try to con both you as an individual and labor as a group into working for less. They can't hide from the invisible hand. Look out for phrases like "next year", "next quarter", "maybe", "if", or "try". These are synonyms for no and never. Those people are wasting your time, and no they aren't entitled to your time. Whatever you think someone is capable of paying it's usually more, but that is not the same as them being willing to pay. You need to learn the levers. You may need to maneuver into position years in advance. What you are doing now leads to what happens next which leads to what happens after. You need to create as much of your own luck as you can. Your time is valuable and irreplaceable so put in the effort to make sure you are using it as best you can. There is a middle ground being making a lot of money and doing unpleasant work and that middle ground is a lot of money and the more money you make the better the work tends to be with one exception being the startup greenfield project experience. One way to make a lot of money is as an owner/founder of something. Risk adjusted it's not all it's cracked up to be IMO. It's also the most work to start. It's a lifestyle choice as much as anything.
antman1911 8y ago
One of the most powerful forces is compounding interest.
- mythrwy 8y ago
  Yes, and what many people forget is that the same rule applies in reverse.
  - deleted 8y ago
    [deleted]
  - ropeadopepope 8y ago
    Could you elaborate on that?
    - maximp 8y ago
      I imagine he means interest on debt.
bsvalley 8y ago
When you make a lot of money you realize how crucial it is to learn how to optimize your financial life. Unfortunately, a lot of rich people are rich because they learned how to deal with “too much money” type of problems. I don’t want to mention it here on HN, but setting up a smart tax strategy is probably on top of the list. A lot of (not all) rich people get richer because they endup paying less taxes. I’m not an advocate of that strategy but when you face it in real life, there’s no more “rich people need to pay more taxes”. It really hurts when you understand the potential of that big pile of money you could invest in creating more jobs, innovation, etc. Again, I’m not against paying taxes... just sharing a learning experience. Also, donating money becomes natural when you get a lot of it. You become more generous, which I thought would be the complete opposite. I guess if you weren’t born rich, you’d most likely give back by becoming rich.
acconrad 8y ago
There's always more to be made. Every time you think you're at a good rate or salary, you'll find there's another bracket of people even higher than you. It's a vicious cycle to get trapped into if you let it weigh you down. If you try and be the best person you can, keep learning, and work on yourself, it will unlock more for you and you'll be happier than going down the road of thoughts like "well if I make $X00,000, what do I need to do to be making X+1 or X+1.5."
- mping 8y ago
  I want to warn my fellow readers that this point, besides being absolutely spot on, is insanely hard to do. The golden cage is real, at every level, beginner to advanced. Only when you say no to a better paying offer you can affirm that you learned the lesson.
  - maximp 8y ago
    Could you expand on this? What is the golden cage?
    - mping 8y ago
      Golden cage, golden handcuffs means that you are a prisoner of your own success - you earn alot of money (by some definition of "alot") and cannot afford to leave for a lower paying job because of the upgraded lifestyle.
vpdn 8y ago
Generally companies do not decide against a product due to the price tag. There's always another, stronger reason.
cdnsteve 8y ago
You go chasing making it. Once you make it, what will you do with it? Do you trust banks advisors who push you into bank based mutual funds with high fees and low performance? Everyone chasing should take the time to learn more themselves about managing and investing. Read books, open a direct trading account and learn. No one will take more ownership of investing than yourself.
- AznHisoka 8y ago
  How will opening a trading account and trading help me learn about investing?
  - deleted 8y ago
    [deleted]
  - mslate 8y ago
    How will going for a run teach you about running?
tonyedgecombe 8y ago
The more people pay you the more they value your product/service. The more people pay you the better they treat you, cheapskates are the worst customers.
- malux85 8y ago
  This - I got a lot better by dropping the lower 10% of customers who were cheapskates and very demanding.
- chrisbennet 8y ago
  You beat me to it. I’ll add, that as a consultant at least, people respect your advice more if they don’t view you as “cheap”.
drinchev 8y ago
I learned a lot about how you can fail to become rich by working, after I did some digging into taxation in Germany [1]. The outcome is that you should not expect that working more will equal to becoming rich. 1 : http://www.drinchev.com/blog/germany-freelancing-and-taxes/ http://www.drinchev.com/blog/germany-freelancing-and-taxes/
xiphias 8y ago
How you invest your salary to increase your wealth is far more important than increasing your salary (getting to 2x of your starting net salary is really hard). Aggressive volatile tech investing is worth it if you have a (safe) programming job. Volatility is your friend if you can stomach it.
DougN7 8y ago
B2B transactions are not nearly as price sensitive as B2C transactions, because the business people aren’t spending their own money (unless you’re selling to an owner). This was a revelation to me when I figured it out.
- eb0la 8y ago
  Also for B2B the end of the year makes people less price sensitive because if they will loose the money if they don't spend it.
chrisbennet 8y ago
If you give clients a low introductory rate, when you raise your rate to “normal” they will feel ripped off instead of grateful that you previously gave them a deal. Example: charging a startup 50% of normal “until they get an investor”. Either charge your full rate or zero.
PappaPatat 8y ago
That wages are basically "pay off" for the amount of abuse you're subject to. That running your own business takes a lot of energy & involvement and is not the route to make money easy. That every raise / significant amount of money, inspires for about 3 months, then it is the new normal. That there will be people around you who do less and get paid more. That budget is addictive and it hurts to shrink it. That people who work for you or live with you, will not doubt that the money flow is eternal and guarantied and take 0 measures to prepare for the day you can not provide. That it takes hard work & dedication to improve your income, and is freakishly easy to sustain. That there is one moment in time to do financial negotiations and that is before the contract is signed, after that you will have to move to improve. That when "the man" is hurting, employees instantly become assets that are let go in the blink of an eye. My initial projection to out perform my parents financial improvement compared to their parents took rather drastic risks and I guesstimate my kids will have a hard time to sustain that improvement. Money does not make you happy, the lack of it makes you creative. What hurts is having less then last year. Income, costs & (net) results varies greatly per geographic area. One man's fortune, is the other man's pocket money.
tim333 8y ago
That an awful lot of wealth changes are through real estate not enterprise. I was in Delhi back when almost everyone was poor and now loads of them are millionaires and it's mostly through having owned land or properties. Similarly in many other places. In London where I'm from also there are probably 10x people who are millionaires through owning a house or two over owning businesses.

59 points by maximp 8y ago

It will not make you as happy as you thought in the long run. Comfortable, maybe. But there's a depression that hits many people after their 'liquidity event' etc. For some it can remove their raison d'être.

dani_c 8y ago

Surprisingly, you need money to make money. This I found quite true for many of my past endeavours.

CamelCaseName 8y ago
This is true, and not having cash flow that can support your growth can drive you to insanity. Dealing with this now and if I had two pieces of advice to give to entrepreneurs, they would be: Work in the field in which you want to build Keep working while you build

edent 8y ago

There's a monetary cost to it. And it is often worth paying. That is, a decent accountant will charge you money to make sure your taxes are in order, that you're not claiming anything you're not entitled to, and that your tax return is submitted on time. I know so many people stressed out at the end of the tax year - whereas I electronically submit all my receipts & invoices, and let someone else tell me how much to pay in tax. I always thought I'd rather save the money & spend the time doing that. Turns out it is cheaper in the long run to pay someone who has skills that you don't. Another thing I once learned - it's OK to charge a "go away" rate. If I don't want a client's business, I'll ask for double what I usually charge. They either get to find a "bargain" elsewhere, or I get to reevaluate my day rate! Finally, almost no one will have an honest conversation with you about money. Not industry peers, friends, or family. It is a touchy subject for many. Make sure it isn't within your family.

bitL 8y ago

Marketing (AKA hacking people) is the only thing that matters. You can literally sell useless, low-quality stuff as premium if you master marketing well.

vixen99 8y ago
Yes but do you feel good about that?
- nexus2045 8y ago
  We are talking about making money, not feeling good about your moral compass, although that can always come later.
  - sharemywin 8y ago
    But, most of the time you make more with a win-win long term relationship.
- LyndsySimon 8y ago
  The skills to sell something useless and something useful are the same.
- ryandvm 8y ago
  I don't think he was advocating fraud as much as simply pointing out that without decent marketing, nothing else matters.
tastyham 8y ago
If there is one thing I've learned, it's this. It goes past money too, the same applies for open source software libraries, language choice, and even "design patterns" that developers use. Also applies to people. Your hireability and salary are both mostly related to how well you market yourself. Marketing is everything.

douglaswlance 8y ago

Don't sell your time. Instead, generate value.

mancerayder 8y ago
That sounds like a kernel of something profound, but leaves one hanging. Can you elaborate?
- sp527 8y ago
  He probably means a lot of things, but close to the top might be "bill for the project instead of time spent". If you bill by units of time, you will like under-exploit the information and skill asymmetry between yourself and the client, and leave a lot of money on the table. You should instead price as a meaningful fraction of the value you're creating. You may not know that number, but the client will more or less signal it to you in negotiations if you're canny. Something that's relatively easy for you to do (that might take a month, for example) could generate millions in revenue for the client. You're entitled to a large chunk of that. It's in fact this approach that can make consulting extremely lucrative: someone has already gone through the work of acquiring leverage by building a business and you're coming in with the rocket fuel. You arguably should never take a contract where this isn't clearly the case, since committing to a project has an opportunity cost in your own time.
  - LyndsySimon 8y ago
    “Entitled” may not be the right word, but I agree with this. There’s a huge difference between someone able to build what a business needs and someone who understands the business’s needs and can work hand-in-hand with them to explore their needs and optimize to that. It’s very much worth the difference in cost to the business.
    - sp527 8y ago
      You're right that "entitled" is a bit strong and it was quite perceptive of you to point that out. That word choice was born out of my personal frustration at how many developers either get shorted in negotiations or never even understand how much value they could capture for their work. It is in some ways highly exploitative, in my opinion.

cm2012 8y ago

The people and companies that have money have soo much money to spend.

ydnaclementine 8y ago

On a personal level, being smart about saving money is a great way to build wealth, irregardless of your yearly pay see: Millionaire Next Door

m0rose 8y ago
Agreed. Also see: https://www.mrmoneymustache.com/ https://www.mrmoneymustache.com/

revel 8y ago

On the investing side, being excessively conservative with your money is often worse than being too aggressive. By holding all your wealth in cash you're trading an explicit set of risks for an invisible set. Holding lots of cash or fixed income products is a huge mistake.

sharemywin 8y ago
That depends on when you planning on spending that money.
Rainymood 8y ago
>By holding all your wealth in cash you're trading an explicit set of risks for an invisible set. I don't understand this sentiment, mind explaining?
- tastyham 8y ago
  Keeping cash is a bet on inflation staying low, which is a very, very bad bet historically.

arielweisberg 8y ago

People will pay you wildly differing amounts for the same work. People will lie to you about what you have to do to get paid more. They may claim you are not good enough to try to con both you as an individual and labor as a group into working for less. They can't hide from the invisible hand. Look out for phrases like "next year", "next quarter", "maybe", "if", or "try". These are synonyms for no and never. Those people are wasting your time, and no they aren't entitled to your time. Whatever you think someone is capable of paying it's usually more, but that is not the same as them being willing to pay. You need to learn the levers. You may need to maneuver into position years in advance. What you are doing now leads to what happens next which leads to what happens after. You need to create as much of your own luck as you can. Your time is valuable and irreplaceable so put in the effort to make sure you are using it as best you can. There is a middle ground being making a lot of money and doing unpleasant work and that middle ground is a lot of money and the more money you make the better the work tends to be with one exception being the startup greenfield project experience. One way to make a lot of money is as an owner/founder of something. Risk adjusted it's not all it's cracked up to be IMO. It's also the most work to start. It's a lifestyle choice as much as anything.

antman1911 8y ago

One of the most powerful forces is compounding interest.

mythrwy 8y ago
Yes, and what many people forget is that the same rule applies in reverse.
- deleted 8y ago
  [deleted]
- ropeadopepope 8y ago
  Could you elaborate on that?
  - maximp 8y ago
    I imagine he means interest on debt.

bsvalley 8y ago

When you make a lot of money you realize how crucial it is to learn how to optimize your financial life. Unfortunately, a lot of rich people are rich because they learned how to deal with “too much money” type of problems. I don’t want to mention it here on HN, but setting up a smart tax strategy is probably on top of the list. A lot of (not all) rich people get richer because they endup paying less taxes. I’m not an advocate of that strategy but when you face it in real life, there’s no more “rich people need to pay more taxes”. It really hurts when you understand the potential of that big pile of money you could invest in creating more jobs, innovation, etc. Again, I’m not against paying taxes... just sharing a learning experience. Also, donating money becomes natural when you get a lot of it. You become more generous, which I thought would be the complete opposite. I guess if you weren’t born rich, you’d most likely give back by becoming rich.

acconrad 8y ago

There's always more to be made. Every time you think you're at a good rate or salary, you'll find there's another bracket of people even higher than you. It's a vicious cycle to get trapped into if you let it weigh you down. If you try and be the best person you can, keep learning, and work on yourself, it will unlock more for you and you'll be happier than going down the road of thoughts like "well if I make $X00,000, what do I need to do to be making X+1 or X+1.5."

mping 8y ago
I want to warn my fellow readers that this point, besides being absolutely spot on, is insanely hard to do. The golden cage is real, at every level, beginner to advanced. Only when you say no to a better paying offer you can affirm that you learned the lesson.
- maximp 8y ago
  Could you expand on this? What is the golden cage?
  - mping 8y ago
    Golden cage, golden handcuffs means that you are a prisoner of your own success - you earn alot of money (by some definition of "alot") and cannot afford to leave for a lower paying job because of the upgraded lifestyle.

vpdn 8y ago

Generally companies do not decide against a product due to the price tag. There's always another, stronger reason.

cdnsteve 8y ago

You go chasing making it. Once you make it, what will you do with it? Do you trust banks advisors who push you into bank based mutual funds with high fees and low performance? Everyone chasing should take the time to learn more themselves about managing and investing. Read books, open a direct trading account and learn. No one will take more ownership of investing than yourself.

AznHisoka 8y ago
How will opening a trading account and trading help me learn about investing?
- deleted 8y ago
  [deleted]
- mslate 8y ago
  How will going for a run teach you about running?

tonyedgecombe 8y ago

The more people pay you the more they value your product/service. The more people pay you the better they treat you, cheapskates are the worst customers.

malux85 8y ago
This - I got a lot better by dropping the lower 10% of customers who were cheapskates and very demanding.
chrisbennet 8y ago
You beat me to it. I’ll add, that as a consultant at least, people respect your advice more if they don’t view you as “cheap”.

drinchev 8y ago

I learned a lot about how you can fail to become rich by working, after I did some digging into taxation in Germany [1]. The outcome is that you should not expect that working more will equal to becoming rich. 1 : http://www.drinchev.com/blog/germany-freelancing-and-taxes/ http://www.drinchev.com/blog/germany-freelancing-and-taxes/

xiphias 8y ago

How you invest your salary to increase your wealth is far more important than increasing your salary (getting to 2x of your starting net salary is really hard). Aggressive volatile tech investing is worth it if you have a (safe) programming job. Volatility is your friend if you can stomach it.

DougN7 8y ago

B2B transactions are not nearly as price sensitive as B2C transactions, because the business people aren’t spending their own money (unless you’re selling to an owner). This was a revelation to me when I figured it out.

eb0la 8y ago
Also for B2B the end of the year makes people less price sensitive because if they will loose the money if they don't spend it.

chrisbennet 8y ago

If you give clients a low introductory rate, when you raise your rate to “normal” they will feel ripped off instead of grateful that you previously gave them a deal. Example: charging a startup 50% of normal “until they get an investor”. Either charge your full rate or zero.

PappaPatat 8y ago

That wages are basically "pay off" for the amount of abuse you're subject to. That running your own business takes a lot of energy & involvement and is not the route to make money easy. That every raise / significant amount of money, inspires for about 3 months, then it is the new normal. That there will be people around you who do less and get paid more. That budget is addictive and it hurts to shrink it. That people who work for you or live with you, will not doubt that the money flow is eternal and guarantied and take 0 measures to prepare for the day you can not provide. That it takes hard work & dedication to improve your income, and is freakishly easy to sustain. That there is one moment in time to do financial negotiations and that is before the contract is signed, after that you will have to move to improve. That when "the man" is hurting, employees instantly become assets that are let go in the blink of an eye. My initial projection to out perform my parents financial improvement compared to their parents took rather drastic risks and I guesstimate my kids will have a hard time to sustain that improvement. Money does not make you happy, the lack of it makes you creative. What hurts is having less then last year. Income, costs & (net) results varies greatly per geographic area. One man's fortune, is the other man's pocket money.

tim333 8y ago

That an awful lot of wealth changes are through real estate not enterprise. I was in Delhi back when almost everyone was poor and now loads of them are millionaires and it's mostly through having owned land or properties. Similarly in many other places. In London where I'm from also there are probably 10x people who are millionaires through owning a house or two over owning businesses.