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[3] When I say people are starting more companies, I mean the type of company meant to grow very big. There has actually been a decrease in the last couple deca

by jefftk 6y ago

[3] When I say people are starting more companies, I mean the type of company meant to grow very big. There has actually been a decrease in the last couple decades in the overall number of new companies. But the vast majority of companies are small retail and service businesses. So what the statistics about the decreasing number of new businesses mean is that people are starting fewer shoe stores and barber shops. People sometimes get confused when they see a graph labelled "startups" that's going down, because there are two senses of the word "startup": (1) the founding of a company, and (2) a particular type of company designed to grow big fast. The statistics mean startup in sense (1), not sense (2).

bo1024 6y ago
This seems to contradict his analogy between 2020 to, say, 1890. Instead of a bunch of people starting small local businesses and gaining moderate wealth, we have winner-take-all dynamics.
- WalterBright 6y ago
  > winner-take-all You can buy stock in winning companies and get your share of the winnings.
  - harimau777 6y ago
    That's only the case if you can afford to buy the stock (and more specifically afford to buy enough of the stock to make a difference).
    - dlp211 6y ago
      Not to mention that you miss out on one of the bigger wealth building opportunities, the IPO. While not true for every company, tech IPOs have been gangbusters as of late. I would have loved to invest in AirBnb at their last evaluation before IPO. But that is only available to the truly wealthy.
      - WalterBright 6y ago
        Take a look at what you'd have today if you bought AMZN the day after it started trading (it doubled on the first day). Didn't buy it because you couldn't afford to buy enough to make a difference? You lost big time! Unhappy about Bezos' compensation? He was there on Day 1. He bet the farm on AMZN. You didn't.
        dlp211 6y ago
        Way to miss the point.
    - WalterBright 6y ago
      Anyone can buy stock. You can invest for as little as $10 and buy fractional shares for zero commission. > afford to buy enough of the stock to make a difference Having that mentality will guarantee one never gets ahead. CEOs don't start at the top, either.
      - harimau777 6y ago
        What I mean buy "enough to make a difference" is enough to offset the increase in the increasingly unequal distribution of your company's profits.
jeffreyrogers 6y ago
PG is wrong about this. In the past it probably was easier to get rich (> $10mm) by starting what he will not call a startup than it is now. Lots of people used to get rich this way starting small businesses serving the automotive industry (making airbag assemblies and other important things) or providing specialized services to the Oil and Gas industry, etc. These are just examples, there are obviously tons of things like this. And while these opportunities still exist they are much rarer than they used to be. There are many reasons these opportunities are fewer, but I think the main ones are 1. Increased firm size means it is harder to compete since you don't have economies of scale. 2. High labor costs in the US mean many things are not profitable to do in the US, so no small US businesses can engage in them (they have to be big enough to engage overseas manufacturers or savvy enough to negotiate that environment as a small business... again, it can/has been done but it's harder). 3. Higher cost of living in the more dynamic parts of the country make it harder to start a business without getting VC funding, especially if that business requires some amount of R&D before generating revenue.
robocat 6y ago
Paul now uses “company” to mean unicorn, similar to how he uses “startup” to mean potential unicorn (startups are not companies trying to make only millions according to his meaning). He knows that this is confusing, yet he doesn’t choose to clarify his words except through a footnote. I find this frustrating. Talking about the Gini coefficient is just ridiculous, because the usual reason Gini is referenced is to talk about what has happened to the wealth of the majority of people, not the Forbes list. There may be more tech billionaires, and that may make the world a better place: however what many people are worried about is what happens to everyone else that isn’t a billionaire... His argument doesn’t reference them at all except perhaps to imply that “a few people can become ultra-wealthy and that is good”. Perhaps he could argue that Gini is a useless index because it depends on a few ultra-wealthy people, and that the index tells us nothing about the vast majority of people. An honest title would be “How a few people become very rich”. I want to see a graph by cohort of current wealth for all the founders inducted into YC: at a population level would that graph show that founding a company with YC was a worthwhile investment for your time? Even if the expected return is high, is the ergodicity such that it is still a loser’s bet? I”m curious whether it is a losing proposition for most, with a few big winners. Edit: re: Gini: here is the real graph of upward mobility: https://www.visualcapitalist.com/the-decline-of-upward-mobility-in-one-chart/ https://www.visualcapitalist.com/the-decline-of-upward-mobil... (edit: beware that the graphs are full of assumptions - think about them carefully because they are deceptive IMHO).

by jefftk 6y ago

bo1024 6y ago

This seems to contradict his analogy between 2020 to, say, 1890. Instead of a bunch of people starting small local businesses and gaining moderate wealth, we have winner-take-all dynamics.

WalterBright 6y ago
> winner-take-all You can buy stock in winning companies and get your share of the winnings.
- harimau777 6y ago
  That's only the case if you can afford to buy the stock (and more specifically afford to buy enough of the stock to make a difference).
  - dlp211 6y ago
    Not to mention that you miss out on one of the bigger wealth building opportunities, the IPO. While not true for every company, tech IPOs have been gangbusters as of late. I would have loved to invest in AirBnb at their last evaluation before IPO. But that is only available to the truly wealthy.
    - WalterBright 6y ago
      Take a look at what you'd have today if you bought AMZN the day after it started trading (it doubled on the first day). Didn't buy it because you couldn't afford to buy enough to make a difference? You lost big time! Unhappy about Bezos' compensation? He was there on Day 1. He bet the farm on AMZN. You didn't.
      - dlp211 6y ago
        Way to miss the point.
  - WalterBright 6y ago
    Anyone can buy stock. You can invest for as little as $10 and buy fractional shares for zero commission. > afford to buy enough of the stock to make a difference Having that mentality will guarantee one never gets ahead. CEOs don't start at the top, either.
    - harimau777 6y ago
      What I mean buy "enough to make a difference" is enough to offset the increase in the increasingly unequal distribution of your company's profits.

jeffreyrogers 6y ago

PG is wrong about this. In the past it probably was easier to get rich (> $10mm) by starting what he will not call a startup than it is now. Lots of people used to get rich this way starting small businesses serving the automotive industry (making airbag assemblies and other important things) or providing specialized services to the Oil and Gas industry, etc. These are just examples, there are obviously tons of things like this. And while these opportunities still exist they are much rarer than they used to be. There are many reasons these opportunities are fewer, but I think the main ones are 1. Increased firm size means it is harder to compete since you don't have economies of scale. 2. High labor costs in the US mean many things are not profitable to do in the US, so no small US businesses can engage in them (they have to be big enough to engage overseas manufacturers or savvy enough to negotiate that environment as a small business... again, it can/has been done but it's harder). 3. Higher cost of living in the more dynamic parts of the country make it harder to start a business without getting VC funding, especially if that business requires some amount of R&D before generating revenue.

robocat 6y ago

Paul now uses “company” to mean unicorn, similar to how he uses “startup” to mean potential unicorn (startups are not companies trying to make only millions according to his meaning). He knows that this is confusing, yet he doesn’t choose to clarify his words except through a footnote. I find this frustrating. Talking about the Gini coefficient is just ridiculous, because the usual reason Gini is referenced is to talk about what has happened to the wealth of the majority of people, not the Forbes list. There may be more tech billionaires, and that may make the world a better place: however what many people are worried about is what happens to everyone else that isn’t a billionaire... His argument doesn’t reference them at all except perhaps to imply that “a few people can become ultra-wealthy and that is good”. Perhaps he could argue that Gini is a useless index because it depends on a few ultra-wealthy people, and that the index tells us nothing about the vast majority of people. An honest title would be “How a few people become very rich”. I want to see a graph by cohort of current wealth for all the founders inducted into YC: at a population level would that graph show that founding a company with YC was a worthwhile investment for your time? Even if the expected return is high, is the ergodicity such that it is still a loser’s bet? I”m curious whether it is a losing proposition for most, with a few big winners. Edit: re: Gini: here is the real graph of upward mobility: https://www.visualcapitalist.com/the-decline-of-upward-mobility-in-one-chart/ https://www.visualcapitalist.com/the-decline-of-upward-mobil... (edit: beware that the graphs are full of assumptions - think about them carefully because they are deceptive IMHO).