Reaching the $5 Million Club Takes an Open Mind
finance.yahoo.com
finance.yahoo.com
The article claims there are 930,000 pentamillionaires in the united states. 80% of that is 744,000.
There are about 1.1 million lawyers in the USA. Let's say the top 10% have a net worth of 5 million. Thus 110,000 of those pentamillionaires are lawyers. So we've got 634,000 left.
There are about 700,000 doctors in the USA. 15% of those doctors are surgeons and anesthetists, specialties where you can make $500K/yr. So, 105,000 pentamillionaire doctors...
529,000 pentamillionaires left.
750 MLB players + 460 NBA Players + 1700 NFL players = 2910. Let's multiply that by the past 10 years = 29,000 current or former pro sports players who are pentamillionaires
500,000 pentamillionaires left
I'm getting a bit tired to do this math, but it seems like there must be 100,000 guys in the financial sector who have a net worth of 5 million dollars. So - 400,000 left.
Add in movie and TV stars, rock and pop music stars, guys who manage movie/TV/rock/pop stars, executives in the entertainment industry, the handful of other sport stars and entertainers who make a lot of money... that's probably another 100K. Down to 300,000.
Now think about all the guys who rose up the ranks of fortune 500 companies. There's probably 100 guys at each fortune 500 company who make a mil a year? Now we're down to 250,000.
Someone please correct me if I'm padding the numbers too much. I could be dead wrong on the number of rich finance sector guys, or totally wrong about how much money the top lawyers and doctors save. But, I also totally left out other rich people, like presidents of universities, university coaches, directors of rich nonprofit organizations, and so forth. Even if my math is off it really doesn't seem likely that 80% of the pentamillionaires in the USA came from startups. It seems closer to 10-20%, if that. Not trying to be a debbie downer but 80% seems way off the mark.
IIRC, from the survey done for "The Millionaire Mind" (<5, but anyway), many people had a family/lifestyle business. Technically, a start-up, but the corner fish n chip shop is probably not the first image evoked by the term. Another significant factor was frugality.
A theory: the enforced savings of a startup is a significant factor in the retention of the created wealth.
Also I don't think the 930k number includes people who have significantly more than 5 million. There are about 300 million citizens in the US 1% of that is 3 million not 930k.
A lot of people like Doctors that make 500,000 a year spend most of that money as they go. hence I would bet a lot of them never make it to the 5 million mark.
It is not that completely different players play each season. I don't have any numbers but I would say that 10% new players each year seems more likely.
Also, I don't know exact salaries but I would say that it is winner takes it all. Most players don't have so huge payoff.
"There are about 700,000 doctors in the USA. 15% of those doctors are surgeons and anesthetists, specialties where you can make $500K/yr. So, 105,000 pentamillionaire doctors..."
You don't know their savings habits. If you make such money and have guarantee of similar earnings in the future, it is hard to resist spending more.
EDIT: The problem with entertainment sector is that some of them actually have huge salaries, but they are also forced to spend a lot of money. If you're a celebrity, you're forced by society to rent a jet, wear Dior, own a mansion etc.
I used to read Disney's financial reports. They never had more than 3 people making a million/year (yes, including options). I'd be surprised if any company had 100 people making a million/year for more than a couple of years.
The article mentions the other 20% is made up of heirs (10%) and fortunes from passive income / stock picking. The other 80% made it from startups. Of course, this leaves out the career ladder; don't MBAs get rich too? I don't envy them, but I know they exist, and I know they have money, as do MDs and JDs. Where do they fit in?
Also:
"Getting rich also requires a certain amount of stubbornness and clarity of purpose. Consultant Joel Kurtzman, who evaluated 350 startups for his book Startups That Work, found that successful outlets usually have a team of two or three founders who share a common vision; the success rate for this model was a remarkable 50%. The odds for solo founders were more like the oft-quoted one in 10, in part because they often found themselves working at cross-purposes with hired guns who see things differently. That's what 34-year-old Justin Jarvinen learned the hard way. The entrepreneur saw two promising business ventures go down the tubes after he took on partners who tweaked his ideas beyond recognition. But three years ago he started VerveLife, a service that helps companies promote online marketing efforts with free music downloads. Knowing that his success depended on his enthusiasm for bringing the idea to market, he carefully chose partners who supported his vision."
So, according to this article: 80% of people who get rich do so w/ a startup 50% of good teams succeed 10% of solo founders succeed
So, MBAs will probably accumulate a few millions over their working life, if they're good at managing their money, but they're unlikely to find themselves with $5m at 35.
Very true for me and I'm sure a lot of the HN community. Once you get past a certain point with money it becomes an after thought, then you have the freedom to think of other things (like big ideas) that will make you more money. The rich get richer for a reason...
I think the only true freedom comes from within. Money can't give you this freedom; but this freedom can give you money.
You can domesticate programmers the way beekeepers tame bees. You can't exactly communicate with them, but you can get them to swarm in one place and when they're not looking, you can carry off the honey. You keep these bees from stinging by paying them money. More money than they know what to do with. But that's less than you might think. You see, all these programmers keep hearing their parents' voices in their heads saying "When are you going to join the real world?" All you have to pay them is enough money that they can answer (also in their heads) "Geez, Dad, I'm making more than you." On average, this is cheap.
This is not exactly in line with what we're talking about here - the founder type seems less likely to be satisfied in the described situation. But I think there is a parallel.
I mean if you think about it, with just 60K/yr you can afford 99% of the stuff a millionaire can(provided you don't live in California). Sure you aren't driving a Ferarri, and don't live in a bigger house, and don't go to the same restaraunts or take the same vacations, but chances are you have very similar electronics(maybe you keep yours longer), eat the same food(or at least can afford to) and sit in the same train/traffic on your way to work and shop at the same grocery store.
And if you think about it, most millionaires don't drive Ferraris, they drive average cars like Accords and Camrys and F150 trucks, so chances are, the guy making 60K/yr probably own a better car than that millionaire, because he wants to appear to others as if he has money.
I'd probably extend that to about 100K, but after that chances are you have way more responsibility and won't even be able to do anything with all that money.
Reminds me of this anecdote, can't say word for word, but it was something to do with a rich guy going to mexico on vacation, meeting a fisherman and telling him that he should work harder. The fisherman asks him why do you do it, and he tells him so that he can retire at 65, buy a house at a little village, so he can fish and spend time with his family. And the mexican says but I have that now, and I work only a few hours per week doing what I love.
there are many examples of entrepreneurs hitting it rich, buying some stupidly large house and not even ending up moving in -- it's more about making the big leagues than having more toys.
(whether this is a worthwhile or virtuous endeavor is another discussion, but the point is competitiveness is probably a bigger driver than wealth for its own sake.)
For example, "3,000 pentamillionaires to discuss their path to success. Perhaps not surprisingly, none of them had a cushy union job down at the DMV. The vast majority — 80% — either started their own business or worked for a small company that saw explosive growth. And almost all of them made their fortune in a big lump sum after many years of effort."
I'm sure Nasim would have laughed at this. Firstly, selecting a group of successful people and asking what made them successful makes u fall into a trap of believing that these factors led them to success and hence whoever adopts these factors will be as successful as them. Secondly, for each millionaire there would be many other normal people who did what the millionaire did but didn't see their bank account swelling. For a study to be insightful, the participants should have as many losers (if not more) as winners.
Moreover, article confuses correlation with causality.
The article is like: Google, Yahoo, Amazon, etc. have one thing in common: Silicon Valley hence being in Silicon Valley will get you to that status. Tell me how many startups actually become Google-like?
And what the article says is closer to: "Google and Yahoo and most other successful internet companies have being in Silicon Valley in common, hence if you want to be a successful internet company, being in SV will help." Which is absolutely true.
"To enter the nation's top 1%, you need more than $5 million."
I know 'more than' isn't the same as 'greater than or equal to' but doesn't this indicate 1 in 100 Americans are multimillionaires?
But, there were about 106 million 'households' in the US in the 2000 census. Perhaps there are 110-115 million households today. If 930,000 of those households have a net worth over $5 million, that's very roughly in the 1% range.
Wikipedia's article on {Millionaire} suggests about 9 million households have a million-dollar net worth, so 930,000 at the 5-million level seems plausible.
So it's not that 1-in-100 Americans are pentamillionaires as individuals, but almost 1-in-100 live in a pentamillionaire household.
This guy has his own special brand of math.
I guess it just reaffirms the pg/yc philosophy.
Good news folks. Its possible to get rich through hard work and a little cleverness. That's also the bad news.
PS: Rich means "Possessing great material wealth" which I think it stands for more than just the ability to support an upper middle class lifestyle without working.
To sustain a flamboyantly "rich" lifestyle on investments alone, the lower limit of necessary wealth is probably more like $30-$50M. That's, of course, significantly harder to achieve (Wikipedia says 95k people worldwide are this wealthy). In fact, the groups of people I can think of who are typically associated with such flamboyant lifestyles (Fortune 500 execs, financiers, entertainment icons) do not, as a rule, do so based on their investments alone - rather they continue to work and are merely paid large salaries.
... or massive inflation.