5 ms·

Right, regardless of whether you agree or disagree with the point, PG doesn’t actually engage with it. He just says “compound growth + build something that peop

• Grombobulous 4mo ago
  There are extremely good arguments for why the act of becoming and remaining a billionaire is immoral and bad alone, without any need for you to have directly wronged someone else. PG just completely misunderstands and hand-waves over this basic concept and makes the excuse that "hey we worked really hard and made an amazing product that people loved, we aren't harming anyone." For one thing, founders and employees don't share equally in the high growth rate of the company even though at most a founder is working let's say 2x longer hours than a salaried employee. You can do nothing wrong but you're still taking more of your fair share by the basic structure of how the business is setup. I think anyone who is running a successful company and doesn't have a path to converting to an employee-owned enterprise is immoral, especially if you have managed to capture $1 billion just for yourself while your median employee is just making market rate salaries, or maybe they happened to gamble on your stock options and have a modest nest egg about 1/100th-1/50th the size of your wealth as a founder. So yeah, Jeff Bezos made $260 billion dollars, but an alternative that could have happened was "Jeff Bezos makes $50 million and every Amazon employee gets a much more fair share of the happy customers' money." More importantly, if you have $1 billion in net worth, that means that you can choose to do anything with your life on a daily basis. When I'm over here working my job in my cushy upper middle class life, it's still an objective truth that I need to be selfish in order to secure the future of my family. Nothing is guaranteed and we need to fend for ourselves. I can't stop working or the home finances collapse within months or a short number of years if I'm very lucky and have something significant saved up or my house paid off. I legitimately don't have the time or money to help many other people outside of my nuclear and extended family. But when you have a billion dollars (and some people have hundreds of those and one person even has a thousand of those), that means you have no limit to what you spend your time on. You can do anything, and deciding not to work on capitalist endeavors anymore has zero chance of turning you destitute. In other words, when you are a billionaire, what you choose to spend your time on says a lot about the content of your character compared to someone who is not that wealthy. Paul Graham is out here giving speeches to rich kids at Oxford Union, but he could be spending his morning in the local soup kitchen or building homes with Habitat for Humanity. He could be mentoring people who are struggling to escape housing insecurity, or he could be working with advocacy groups to expand healthcare access and end childhood hunger. He doesn't have to go to work every day like I do. But he is one of the people who has dedicated his life to capitalism, even after successfully taking care of his family for many lifetimes, and that says a lot about him.
  • giardini 4mo ago
    Pure envy.
  • clear-octopus 4mo ago
    [dead]
  • photon_lines 4mo ago
    I agree with most of what you're saying -- but just wanted to add some notes here: 1) founders should start companies where equity is distributed to the early employees much more evenly: this actually gives additional super-powers to the company since employee incentives are much more closely aligned with the vision of the founders (building something great that people love to use). 2) stop rewarding growth: there is nothing wrong with NOT growing 90% a month. The goal of most companies shouldn't be to grow or return maximum value to investors (or shareholders): it should be to provide a greater human good the markets will be willing to pay for 3) revenue growth also is not something to aim for: sustainable income growth is. 4) unless the billionaires start re-distributing their wealth -- history is not on their side. A revolution will happen: usually this is associated with the younger male population being unemployed (~15% is the magic number) and causing an uprising. The goal of most founders at this point should not be 'how do I get to 1 billion.' The massive unemployment caused by the AI revolution will cause a massive uprising. There is great danger I think if they do not figure out a way to re-distribute their wealth. Currently, the poor and middle class are taxed way more than the rich (as a percentage of their income): and from what I see are increasingly becoming more disgruntled with the situation they are in. Why in the world would anyone want to even be a billionaire in this situation is the question I want to ask?
  • derektank 4mo ago
    > For one thing, founders and employees don't share equally in the high growth rate of the company even though at most a founder is working let's say 2x longer hours than a salaried employee. You can do nothing wrong but you're still taking more of your fair share by the basic structure of how the business is setup. What is fair? Obviously hours worked is one metric to determine what is fair. But another way to arrive at what is fair is through negotiation. Neither the founders nor potential hires are obligated to work with one another. The only way it happens is if an early employee believes the compensation they are offered by the founders is fair. If it was unfair, they would presumably reject the offer outright.
• paulddraper 4mo ago
  > if the economy is growing at 2.5%, how do you sustain 15% over 5 years? By growing better than the average?
  • theptip 4mo ago
    How do you grow better than average?
    • HDThoreaun 4mo ago
      By creating a product that people find valuable?
      • preg_match 4mo ago
        Yes, but the bigger picture is that what people find valuable and what is actually valuable diverge. Because what people find valuable is through the lens of their constraints: the regulatory structure of their country, the limitations of the human condition, inertia, the limited nature of time. The most poignant example is tobacco. Tobacco is a net-negative product for the world. But many people find it very valuable, because it helps them with the stresses of their life and they have a biological dependency on nicotine. And so, it’s a multi billion dollar industry. But, for the world as a whole, it generates negative billions of dollars. Because of the health cost and the cost of lost work. If you did 10, 20 years early then that’s a lot of human productivity burned. Of course, most products are not tobacco. But every product is tobacco a little bit, I think, in the sense that they merely move some money from externalities into the product. In that sense, it’s not all value creation, it’s value siphoning or moving.
        • HDThoreaun 4mo ago
          Obviously externalities exist. I disagree with your tobacco take though. If someone knows about the health risks tobacco causes and still chooses to buy tobacco than the tobacco has created real value. Of course societal value can still be negative because of externalities, but externalities have to be external, a person making a decision you disagree with isnt an externality. Im not going to disagree that externalities are everywhere though. The question is to what extent and if, after correcting for them, there are still products which create so much value they make their founders billionaires. I think the most obvious case for this are artists. JK Rowling sold her writing for over a billion dollars. The work was, as far I know, created pretty much solely by her. You can point to the book publishing system as a whole, but she has nothing to do with that. All she did was write some books and sell them to an already existing system.
• throwaway89864 4mo ago
  I don't think you are the target audience. Here's the direct quote, does that apply to you: "You're young, and usually young founders should make something that they themselves want. You don't have enough experience yet to know what other people need. But at the same time your own needs are uniquely valuable, because your needs predict future demand. You're the age when people start using new things. Whatever you and your friends start using now, everyone is going to be using in ten years. Since your intuitions about other people's needs are usually a crap signal, and your own needs are an especially valuable one, you should usually listen to the second signal; you should make something you and your friends want. Making something you and your friends want doesn't mean you have to build a consumer product. Maybe you and your friends are molecular biologists, and there's something cool that could be done now to DNA that everyone else has overlooked. Maybe you and your friends are into drones. The idea doesn't have to have a wide appeal. It literally just has to appeal to you and your friends."
  • beepbooptheory 4mo ago
    "Just do whatever, don't mind other people. You don't need to focus on consumers, you can always sell drones to the military."
    • ozgung 4mo ago
      If your drone can deliver pizza, it can also deliver bombs. The latter always has demand.
      • s5300 4mo ago
        [dead]
• rayiner 4mo ago
  [flagged]
  • Avicebron 4mo ago
    > What exactly is inconsistent about this? Assuming invariance of scale between how growth works between a family's height and how a company worth a billion(s?) operates relative to the environment. It's the same error Paul makes when he has the politicians calculate the log base and form that connection about exponents in their minds.
  • theptip 4mo ago
    This is the level of detail I am asking for. “Subpopulation height increases because of the physical and understood processes of maturation and growth”. You could easily go into the biology involved, model the genetic, environmental, and random variance. You will note that PG does not provide such a mechanism for how a $100m company grows into a $10b company (thus producing $b wealth for founders). Just to be clear. I am not saying at the object level that such growth is impossible. I am saying that at the meta/causal level, PG did not adequately characterize it it.
  • runarberg 4mo ago
    Your analogy does not apply. Billionaires are growing faster than anybody else in the global economy. The impoverished are growing slowest. If you want to apply this to your family then the adults would be growing by 15% every year, while your kids growing the least (and your teenagers would be shrinking). If we take this analogy further, your kids would be the ones working the hardest to bring the food on the table required for this growth, and the adults would consume like 90% of it.
• zeroonetwothree 4mo ago
  Perhaps you realize this, but the way the economy grows 2.5% is through lots of entities growing faster than that. Growth comes from innovation, and innovators get rewarded with faster growth as non-innovators decline.
  • inigyou 4mo ago
    If so many entities are declining, why shouldn't I expect that my entities will also decline? Why should I expect them to be the ones that go up?
    • Noumenon72 4mo ago
      You don't. This only explains what was asked: how any entities can go up by 15% if the average is 2.5%. How to be the one to do that is hard.
  • analog31 4mo ago
    I would say it slightly differently: The average rate of growth comes from the average of the successful and unsuccessful innovators and non-innovators.
  • ElProlactin 4mo ago
    > Growth comes from innovation... I suppose it depends on how broadly you define "innovation". Lots of companies grow because of, among other things: regulatory capture, regulatory arbitrage, questionable use of other people's IP, offshoring, misclassification of employees/contractors, profit shifting and transfer pricing, subsidized predatory below-cost pricing, dark patterns, aggressive collection and monetization of user data, acqui-hires to stifle competition, implementing high-switching costs to create vendor lock-in, round-tripping, channel-stuffing, business models that intentionally externalize costs, outright fraud.
  • UncleMeat 4mo ago
    Bill Gates' wealth grew much more after he left Microsoft than while he was CEO. Was that wealth earned through innovation? No. He simply owned something that became more valuable as other people labored to innovate.
• UncleMeat 4mo ago
  Compound growth is also the exact thing that is being criticized here. Your wealth grows simply by virtue of ownership. No labor needs to be performed. When somebody says that you can't earn a billion dollars they are the same thing that PG is saying, he just doesn't think it is bad: the way to become a billionaire is to own things whose value rises over time. The issue is whether this can be meaningfully called "earning" it.
  • SoftTalker 4mo ago
    Are you doing something to create that value? If yes, then I think you are earning it. If you are simply an investor, then no, but we need investors to make the whole system work.
    • stanleykm 4mo ago
      we only really “need” investors because of the structure of our economic system. we need humans to do stuff regardless of the system. worth mentioning that our current system is setup by and for the people who own the stuff so its no surprise that we need them to make new stuff.
    • CityOfThrowaway 4mo ago
      Using your own logic, if we need investors to make the whole thing work, then an investor playing their role has obviously earned their take. If they didn't exist, many things would simply never have been created.
• stouset 4mo ago
  Even 15% for five years only doubles your original investment. To get a billion from a million you need to do 15% for fifty years, and that ignores inflation. Or 25% for thirty-one years. These numbers are ludicrous.
  • Robin_Message 4mo ago
    I think he's doing 15% every month, not every year. It's not an implausible growth rate for a unicorn startup; it is implausible to expect it.
  • virgilp 4mo ago
    He talks about 15% _per month_
    • theptip 4mo ago
      It’s a good point, I should have compounded the 15% m/m to compare with 2.5% economy annual growth rate.
  • SoftTalker 4mo ago
    > These numbers are ludicrous. They are also speculative, not real. They are based on the notion that the company would be worth that much based on projected cash flows, expenses, etc. If you actually tried to cash it all out at any point in time you could not get anything close to that because the very act of selling will lower the value by destroying confidence in the speculative valuations. None of these SV billionares have billions in cash or cash equivalents. Maybe a few of the largest companies do.
    • therealdrag0 4mo ago
      That’s not really relevant. Billionaires still get the perks of being billionaires. Diversifying may take time and financial engineering but billionaires clearly get benefits and usage from their assets. How do you think Bill Gates spent billions on his projects? Billions CAN be spent.
  • 4mo ago
• seanlinehan 4mo ago
  > if the economy is growing at 2.5%, how do you sustain 15% over 5 years? US GDP is $31.82 trillion dollars per year. Taking the 2.5% growth rate, that's nearly $800 billion dollars per year in new GDP. The economy very obviously does not progress as a bunch of soldiers marching in a straight line. Some firms will shrink 100%, some will growth 10,000%. This much is obvious by just looking around. But even if no businesses shrank, no wages were docked, nothing bad happened... even still there would be $800B in more GDP. So if the economy is growing at $800B per year, it's extremely obvious how a company could even grow from $1M to $1B in revenue per year without doing anything shady... Just capture some of the new economic activity that cropped up this year! And it's even easier when we're talking about an entrepreneur's net worth. Their net worth is going to be mostly holdings in company stock. The value of company stock is some multiple of the company's theoretical future financial earnings. So if a company is making $1M revenue today, and growths to $5M revenue by the end of the year (15% MoM growth), at let's say a 30% EBITDA margin, they have made $1.5M EBITDA. And let's say that fast growth is rewarded at an extremely rich 50x EBITDA multiple. That company is now worth $75M. If this founder is lucky and owns 50% of their business, they now are "worth" $37.5M. If they were only at $1M * .30 * 50 * 0.50 = $7.5M net worth at the beginning of the year, and then were at $37.5M at the end, their net worth increased by 500% in one year! And all they had to do was capture $4M / $8000M = 0.05% of the increase in GDP. Like, none of this is either shady or complicated.
  • verzali 4mo ago
    You should account for inflation.
  • theptip 4mo ago
    Thanks for engaging with this in a quantitative way. I particularly appreciate the earnings/valuation accounting, this really helps anchor the discussion. I agree you’ve demonstrated that there is enough economic growth to not contradict PG’s hypothetical numbers. But I think we should strive for a deeper understanding than “all they had to do was capture… 0.05% of the increase in GDP”. Just as a counter-example, a Robber Baron could monopolize all the profits in the rail sector and run a drug mafia on the side, and it would show up the same in your numbers; “all they did was capture 5% of the increase in GDP”. In other words, like PG you don’t actually prove the point you’re arguing; you just provided a story that doesn’t contradict it. (Capturing the annual wealth creation of ~350m*0.05% ~= 175,000 people doesn’t seem on its face to be obviously fair or routine, rather it seems like a tail outlier worthy of further investigation.) The way I would frame it is, what we actually need to do is look at the firm level metrics and figure out what is going on. (A founder becoming a billionaire typically means their company grew to the order of $10b - let’s look at the business practices of $10b companies or founders with confirmed liquidity valuations in our range.) If you look at founders like Jobs, I think it’s pretty clear he made his first $b (via Pixar) just by making things people loved. Companies like Uber obviously relied to some extent on regulatory arbitrage, and you can debate the timing of e.g. Google founders’ shift to monopoly rent extraction, I would likely argue they got their $b “fairly”. The second order question of course - would markets price your company at $10b if they didn’t think you had a future monopoly opportunity? Expectation vs current reality makes this all more complex. But I think for PG’s purposes you can ignore the second order and just talk about successful, billionaires who built things that people loved. The problem of course is that nobody likes billionaires these days (except politicians of course) and so it’s a much less marketable narrative. And there is the crux of the problem; this post is not an honest attempt to increase our understanding of the world, it’s a political slogan.