How People Get Rich Now

You should look up the financial statements of the companies in your list.

Which I find weird, if I sell fruit at a loss to run a local competitor out of business as a major supermarket it's illegal predatory pricing (or at least was when I was growing up), yet do it to an entire industry and it's fine. Maybe this is just one of those US exception things.

Missing (or implied) by your list is that incumbents are not an all-or-nothing gamble based on other people's money, so are reluctant to engage in such tactics themselves and will suffer for it.

PG specifically states that the "main reason it's easier to start a startup now is that it's cheaper". And, "cheaper" comes in the form of lower infrastructure costs, lower advertising costs, and lower cost of capital.

>> But the main reason it's easier to start a startup now is that it's cheaper. Technology has driven down the cost of both building products and acquiring customers...now investors need founders more than founders need investors, and that, combined with the increasing amount of venture capital available, has driven up valuations.

I don’t disagree that Uber and Tesla and many of these are on life support currently, but from a game theory perspective, if you have unlimited access to money, why bother being profitable when you can just spend it getting bigger and smarter?

Indeed. Compare this gem from [1]:

You could probably work twice as many hours as a corporate employee, and if you focus you can probably get three times as much done in an hour. [1] You should get another multiple of two, at least, by eliminating the drag of the pointy-haired middle manager who would be your boss in a big company. Then there is one more multiple: how much smarter are you than your job description expects you to be? Suppose another multiple of three. Combine all these multipliers, and I'm claiming you could be 36 times more productive than you're expected to be in a random corporate job. [2] If a fairly good hacker is worth $80,000 a year at a big company, then a smart hacker working very hard without any corporate bullshit to slow him down should be able to do work worth about $3 million a year.

The process is: Start with a hidden conclusion, selectively pick convenient facts (or make up bullshit numbers), ignore that they don't make sense in context, and finally present your a-priori conclusion.

[1] http://www.paulgraham.com/wealth.html

Because that's precisely what he's doing.

I share your suspicion too. It seems most essays start with a prejudiced narrative, a climax in mind.

Then there are chains of weakly cohesive theories and numbers presented as pseudo-facts, some cherry-picked evidence to stretch the imagination, forever nudging towards the predetermined, targeted conclusion and a veneer of logic holding it together. All supporting the same narrative.

There's the same humble bragging, FOMO peddling, "trust me"isms; rinse and repeat.

Very much like a religious manifesto.

I believe this appeals to the hopes and false beliefs for those who already took the plunge. And at the same time trying to net newer fish.

I regard these essays now as promotional and propaganda material over substantiative, context driven sharing of knowledge from a unique perspective.

And so his point stands - why were the richest people in 1982 not the founders of companies?

How are they the richest? Per https://www.forbes.com/real-time-billionaires/ Gates is #4, Ellison is #7, and Apple/Bloomberg/etc are lower. Above Gates are the founders of the much later Amazon and Tesla (then there's FB, Google, etc)

PG has been a cheerleader for VC backed capitalism for a while, which has produced both anodyne and strained articles alike. I think the more interesting question after an article like this one is this: does he actually believe this stuff?

This exactly. PG arguing the relevance of the Gini coefficient is oblivious to the the crumbling state of the public infrastructure in the US and the declining accessibility of high quality public goods to the working and middle class.

The Gini coefficient is an indicator, not an objective in and of itself.

Investment in public goods might even make the super rich even richer by making the corporations they own more effective through better trained workers and less loss due to poor infrastructure.

For the average person, being born to a somewhat comfortable family, being able to train yourself into a good career, and being able to save and invest in a mundane way are far safer and comfortable ways to live a good, secure life. The gulf in security between someone like him now, and anyone but the very top percentiles in wealth is literally unimaginable for him, because he doesn't live the reality of an average person. His constant push in this direction is not much more than "let them eat cake", or "let them found startups".

If I were to read an article " How seaweed is making the entire human race more productive"; one trying to reason why you should consume seaweed if you want to be more productive, penned by someone who actively owns portions of companies involved in growing, packaging, promoting and distributing seaweed, it would feel suspicious and distasteful.

This is in the same league.

Because the main source of productivity growth in that period was technical change, and those who were not well positioned to adapt were stuck at the bottom of the income ladder. Of course there were other factors (globalization, increasing costs in some sectors putting pressure on real incomes etc.), but that's the main story. It's quite consistent with Graham's argument.

So yeah, rich guy writes a blog article saying essentially "people should just do what I did" and water is wet.

What about people that run a business and make a good living and some profit for themselves and their employees doing innovative stuff? Is that too inconsequential to even mention because VC's aren't interested?

In 2021 you look at the regulatory environment and overhead costs of starting a business, say "screw that" pick it up as a side gig and find a day job where you can coast. Maybe if you have some special love for the IRS you make an LLC and call yourself a consultant.

This change has affected both the blue collar trades and a growing share of white collar professions these days. The larger of a headache it is to be Real Business(TM) the larger the potential upside needed to justify it. Unless you think your ideas are gonna change your industry or you plan to become the regionally dominant player in your niche why start a real business when a cash only side gig will scratch that itch most of the time?

pg is obviously focused on the tech side of businesses, but if you look at the US business climate more broadly, tech is a poor indicator for what's been happening the last several decades.

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).

few, but actually it's quite reasonable to expect to become a millionaire as show in [1], given the age of the book I'd extrapolate to multimillionaire

https://www.goodreads.com/book/show/998.The_Millionaire_Next...

If that's your terminal investment, correct. But if you take that $100k you earned from your landscaping service, or in Buffet's case, selling newspapers and detailing cars, you can continue to apply business acumen and perhaps one day reach $1 Billion. Wealth begets more wealth.

.... because the number of total businesses is so much higher already? The number of existing businesses that didn't create a subsidiary for an additional business line is higher?

That data point doesn’t tell you enough of anything. I’m glad it got you to look in that general direction, so now let's dig deeper.

In fact, if I had to explain the change in technology over my lifetime it is that the people who understand technology and love elegance and efficiency are being pushed out by the people that want to be wealthy and get in on good deals.

CEO salaries today are still about 20-1, depending on the business. For instance:

- Doug McMillon of Walmart makes $1.2 million in salary.

- James Quincy of Coca-Cola makes $1.5 million in salary.

- JPMorgan's CEO Jamie Dimon has a $1.5 million salary.

- Sundar Pichai of Google makes $2 million in salary.

You only get 312-1 by adding in performance based stock and incentive alignment options. But these don't come from the cashflow of the business like wages and salary. They come from diluting Wall Street. Knowing this, the whole thing is way less of an outrage. The comparison is so uneducated.

If there is outrage over CEO pay, it doesn't make sense to come from the unions or left politicians, it should be coming from activist hedge fund billionaires, which it does. Carl Icahn for example is wildly against this level of CEO compensation because it dilutes his ownership.

John Doe on his forklift stacking pallets in the Coca Cola factory is not made poorer over excessive CEO pay. Carl Icahn is.

There was a lot more air travel in 2010 compared to 1970. The 5 deadliest flights makes up a much smaller portion of all flights in 2010 than it did in 1970. It's a misleading comparison. You should instead look at the number of deaths per passenger or per passenger mile.

You have to think of the same point when looking at the "top 350 companies in the USA in 1965 vs 2017".

Are the companies the same size in 2017? Do CEOs have the same amount of responsibility in 2017? Is the complexity of managing the company the same in 2017 as it was in 1965? What percentage of all companies do these top 350 make up?

These are all factors you might want to take into account when looking at a specific number of top companies.

I'd be curious to know what the numbers would look like if they looked at the top 1% or top 0.1% of companies in the US instead. Or perhaps even the average and median companies. My guess is that those stats wouldn't be politically as useful. I imagine that you'd still see a growing disparity, but a smaller one.

If you run a company that's 10 times as big, why is it surprising that you're getting 10 times the compensation? You'd need to compare to similarly sized companies today. Instead, they look at the top 350 companies now and then.

There's never been any such thing. In the US, salaries have always been determined by the supply and demand of skills, they've never been linked to profitability or some share of it.

And stock options and stock grants are relatively new (not really a thing in 1960), so if anything the actual employee share of profits -- since the value of stock is future profits discounted -- has gone up.

The idea that CEO compensation is somehow "at the expense of" employee compensation is a pure myth. If CEO's were paid less, the extra money would flow to shareholders, not employees.

Here's my intuition on that:

- it doesn't answer how much of the wealth was created (endogenous) or taken (zero sum): tech companies can simultaneously induce new demand and preferences while replacing older companies

- it doesn't answer whether the average worker or society as a whole is better or worse with a lower or higher compensation ratio, because by averaging you lose nuance; for example, are more or less people employed by tech companies now then by the companies that were replaced? are the worker salaries themselves higher or lower compared previous worker salaries?

For me, higher compensation ratios in _tech_ companies is good for people in tech: tech requires less labor for inch of market cap, while that labor is compensated higher. Whether or not that's an overall good for society though, idk.

Second, pg is talking about the Forbes 100 where the founders of tech companies are represented. The founders didn't get their stock by being granted it as compensation in stock options, they got it by virtue of founding the company. Whatever they have left, they have because that's what they were able to keep and not sell or get diluted.

For example, Bezos' wealth is mostly due to the fact that he owns ~13% of Amazon. He didn't get that as CEO compensation, he got it by founding the company.

It's pretty clear that a new class of people (founders, VCs and people close to them) are capturing a larger part of the resources today while the majority gets a decreasing share of that. And we should all be working at finding way to reverse that trend.

Having parents who are able to lend / invest / gift modest sums of money is yet another step up the ladder.

All the way up to having parents with business / political contacts in the industry you are trying to move into.

That takes a lot of luck and advantages, such as family advantages. I'm not saying that detracts from what they accomplished, but they can't take all the credit either and it's not reproducible.

The changes to the list over the decades could be more a function of wealth disclosure, which are mandated by the regulatory requirements of equity markets (e.g., we can all look up Zuckerberg's percentage ownership of Facebook).

Its interesting to note that many of our own prized meritocratic examples owe their parents in terms of intellectual inheritance or first-round funding.

I believe Trump's father (a billionaire in 2018 dollars) was given start up capital by his father who owned a diner in gold territory during the rush. Elon Musk I believe also was the beneficiary of a small amount of investment from his parents.

The question is whether or not that "counts". It certainly counts when discussing disparate outcomes between demographic groups when discussing success/failure with broad brush strokes but probably doesn't when comparing aristocratic-like inheritances to startup wealth.

I'd agree top 100 is too small a data set.

When argumenting based on statistics, labeling of the graph or text is where the ideology really shines through.

It seems to be very compelling. Most people spend more energy writing about, worrying about, or praising Bezos, Musk, and Gates than they do the rest of the top 0.1% richest people combined. Perhaps it's not a good argument. But it's compelling.

Having money doesn't automatically make you wiser or smarter than the average Joe down the race track. Many wealthy people still believe hedge funds have "the knowledge" or some sort of edge. This is re-enforced by many funds being exclusive to those investing through a financial advisor, or with a minimum amount of capital to invest. Having wealth actually does open doors that Joe with his $50K of life savings can't access.

Paying 2 and 20 is indeed less common than it used to be though.

Newer funds always start with a lower fee on AUM and sometimes have more creative fees on top of profits.

My point on universities is largely grounded in my experience at Carnegie Mellon which acknowledged they were going to just start charging more to make themselves more elite (and while some of that money did go back into making the programs better, a lot did not) and it worked...

What you are describing is how a bank or more conservative financial investment management firms work. These are the firms that manage mutual funds or sell life insurance.

Regulatory capture.

This is so true. I say the "tech" (~= internet software?) industry is now somewhere near the telecom level of maturity. We can think of these companies selling the raw (cloud) infrastructure as of something related to that. (Although the precise economics of this for customers is debatable, as discussed time and time again on HN). Selling ad placements is not predicated on huge innovation either, rather on trying to find untapped markets (as much as they still exist) and efficiency gains for the same thing.

The next stage, farther in the future, is these corporations becoming more like boring railroad companies. In fact, it's one of the few glimmers of hope for people aware of big tech's ramifications.

> The best VR experience right now is engineered by Facebook, not by some plucky start up acquiring new customers.

Maybe AI is a better example of something that has huge potential for sure, but is mixed in equal proportions with fantasy. To use similar analogies, I'd say it's in its (later phase of) dotcom era. And even then, as you say, it's not really made by startups built to get big, but - at best - by entities hoping to get bought.

But this way, we are still kinda able to sustain the public mythos of tech entrepreneur as a big idea person, and not an industry knowledge and capital efficiency person (related to really driven and good at making deals from the essay). It may be a result of fiscal policy, but it's certainly also beneficial for existing big corporations. Also, the romantic idea is more emotionally appealing.

I associate Paul Graham’s single cycle example to the one of petroleum. And the new cycle is of the computer age. And there will be S&Ps and world domination and boring climb-the-ladder careers and the stagnation of the 1990ies, but in 2090.

The bad news is, companies which exist during the ramp-up phase are also the major players until the stagnation phase. That’s why stakes are so high and valuations with dozens of multiples: A share of the right company today is a share in the control of the world in 2060.

This one is none of these.

I've commented my own objections, read others'. What strikes me is that this article was proof-read by (the usual) people, and no one realised it will blow up on HN.

That smells a bubble in which PG/YC is.

I worked for startups because I really wanted to “get rich”. And, I put way too many hours in trying. In the end, I did get moderately rich. But, honestly, it was mostly from saving and investing well, not from exit events. Unless you play the political game, I doubt you’re gonna get rich from options. And, they don’t write the options contracts like they used to.

When I started working, I made $30k / year, and I loved my work. Now, I make $180k / year, and I hate it. I hate the people mostly, and the politics. Lol. I do have enough to retire early, and I probably will because generally I feel the golden years of software development seem over. I liked it better when it was a bunch of nerds playing with tech - people who loved it. Now, it’s more people who would have otherwise gone into banking. Ymmv.

AirBnB, Uber, Tesla, FB, SnapChat (LA based, but a lot of friends moved there to join friends from the peninsula and knew about it because of being here/near Stanford), Lyft, Snowflake, Stripe, eventually Robinhood, Roblox, Palantir, etc.

I'm not saying luck isn't a factor - but the equation changes dramatically when you're in the bay area. A lot of people I know have been through exit events of some sort, many clear $1-5M via that (which is about enough to buy a house if you're closer to the $3-5M side). Fewer clear $20M+.

That said, you could also have just worked at a FAANG and probably have saved $1-2M if you just stayed there over the last ten years (and obviously if you were at FB pre IPO in 2012). There's also a lot of opportunity to grow in that environment which can lead to higher incomes (particularly at a place like Netflix that just pays a lot up front).

Doing a non-bay area startup seems riskier to me than working at a FAANG. If you live in the bay area for a bit - it's easier to learn which startups are likely to succeed.

There's a reason YC moved from Boston.

Speaking of breaking away from the pack, that brings us to the ultra-rich. AFAICT what pg has shown is not that building wealth alone is a path to riches (nor was that his intent AFAICT). The way to become ultra rich is to be one of the "lottery winners" among a cohort of relatively minor wealth creators. Playing the lottery is just as essential as building wealth, just as with literal lottery winners. The main difference is that this lottery isn't entirely random. Even among those who make it into the first round (founders), some players have certain innate advantages over others in the second. There's little demographic distance between Gates, Ellison, Bezos, and Musk - and Graham, for that matter. It's no accident. If you want to become seriously rich, it helps if you can afford to ride out risks - or even actual losses - that would force others out of the race.

FAANG compensations can be quite high. Arguably they are that high precisely to siphon up headcount that would in the past alternatively go into other ventures to seek wealth there. But I would say that these high compensations seem to me to be set precisely high enough to hoover up talent but not high enough for employees to achieve "escape velocity" entirely from the market (without extreme financial discipline anyways)

Probably holds for many people, but we mostly hear the success stories only.

So yeah, my experience tracks with yours -- all my wealth was made working for public companies (that I happen to catch during their biggest periods of growth). To be fair though, that may change if my investments work out. Then most of my wealth will be from investing in startups.

Most people's goal isn't (and shouldn't be) $1B. If your goal is a more reasonable $5M then joining an existing company is still your best bet. I am going to plan my own like around the MEDIAN result which makes startup stock $0, and the salary wins.

You need to be extremely lucky, extremely talented, extremely ambitious basically extremely everything to create a company and get rich from it.

It's pretty much a pipe-dream to create a company and get rich from it. The most likely result is ending completely burnt out and having wasted a couple of years.

FANG: low variance + moderate reward

vs

ENTREPRENEUR: high variance + high reward

The Kelly Criterion can probably be applied here on how much to "invest" in each opportunity. Ultimately it matters how often these opportunities come up.

I really hope I'm wrong, but the death of the web and the rise of the censored, anticompetitive app stores seems to be the writing on the wall.

I think where PG and others are conflating two topics is being Rich vs being Wealthy.

You can certainly become Rich working at FAANG (top 1% earner + appreciating stock ... and it's way less risky than other jobs).

Where you can become Wealthy starting your own company (super high risk, most likely won't even become "rich" doing it, but you have the potential to create limitless wealth)

EDIT:

If you're going to downvote, can you at least comment why you disagree ... so that we can have a productive conversation to hear a differing opinion.

Think of all the amazing writers across our civilization whose work is linkable, and we're worshipping these decent but not amazing blog posts?

This isn’t to say that, for example, wealth from finance companies doesn’t centralize in New York and London. That’s bad too. It’s not to say that good things don’t come from these companies (though Facebook seems to be a net negative for humanity.)

But this level of wealth concentration and inequality is detrimental to the fabric of a society. We’re not better off, we’re not more innovative, we’re not healthier or more cohesive or happier when this happens.

The book "The Great Leveler" https://www.goodreads.com/book/show/31951505-the-great-level... is probably the most comprehensive dive into history of inequality, and arrives at a fairly unexciting conclusion that periods of great inequality are correlated with significant economic growth (usually related to advances in automation, which tend not to be universally distributed) whereas periods of equality can generally be attributed to stagnation.

> "The reason the percentage of heirs has decreased is not that fewer people are inheriting great fortunes, but that more people are making them."

It's likely that many of the inheritances of 1982 were the echo of the corrupt and monopolistic industrialism in the 19th century. Is it a bad thing that the great individual fortunes that were built a century earlier couldn't be amassed in the 20th? Have we returned to a 19th-century environment now, with technology taking the place of railroads and telegraphs? On that note...

> "the major sectors of the economy were either organized as government-backed cartels or dominated by a few oligopolistic corporations."

Unless I see a FAANG company go out of business, soon, and as abruptly as it appeared, I'm inclined to think we're entering a new oligopolistic era. Just because these companies were recently startups doesn't mean they aren't entrenched now.

(As an aside regarding the wealth tax, that actually would have worked to reduce the number of heirs at the top of the list in 1982 had it been enacted some time earlier.)

Huh? Gini coefficient can be based on wealth just as well as on income. For example: https://en.wikipedia.org/wiki/List_of_countries_by_wealth_eq.... This essay doesn't specify which one PG is talking about.

He’s completely detached from the modern reality: content and options are ubiquitous relative to PG’s golden years.

It’s the same with Marc Andreesen and his call to build; hey Marc why not build a progressive tax system that enabled your generation and your parents to explore as they chose instead of suggesting we all just rally behind a billionaires blog post?

These guys are visible because they “won” an ephemeral challenge most people aren’t even aware of.

It’s stunning how smart folks seem oblivious to the extent which relativity commands reality.

And PG does PG. It's a classic pseudo-contrarian, startup rally cry, PG post. Which isn't to say it's worth getting annoyed at it. It's simply on brand.

To me, the implied message simply reads as "Startups and private equity is the number way to make money in 2021. Come do business with us."

Makes sense given PG's primary business.

The Gini coefficient can be applied to any statistical distribution, including wealth.

From Wiki:

> The Gini index or Gini ratio, is a measure of statistical dispersion intended to represent the income inequality or wealth inequality within a nation or any other group of people

First wealth appreciates over time. So if your wealth appreciates at 15% / year, and the govt. taxes it at 1%, the net effect is growth rate is slowed to 14%. With these assumptions, someone starting with $1mm in wealth ends up with $2.6 billion after 60 years!

Second - PG ignores that most wealth tax proposals have a high minimum wealth - in the $50mm range. So there is no early compounding of the tax. Adding this into the model, the wealthy founder ends up with $3.3 billion after 60 years.

With no wealth tax, this hypothetical founder ends up with $4.3 billion. So, yes the government has taxed a total of ~ 25% over 60 years, but the founder ends up quite wealthy.

Now, I can't speak to whether or not pg's implication here was intended and unsaid, or not intended: it is likely intentionally ambiguous.

One thing I can speak to though is that it seems common now to read something as if the thing it implies is the thing the author actually intended to communicate. We should be quite careful with this sort of assumption. Sometimes it's a safe one, other times it is not.

Consider someone's effective wealth as the amount of liquid USD they could hypothetically produce in a 24 hour period by selling all of their assets, including market dynamics, and then tell me who the top 100 richest people are.

Is this true?

If I simply look at the Gini wiki, there are clearly tables showing this data with percentages of population by income brackets[0].

[0] https://en.wikipedia.org/wiki/Gini_coefficient#Limitations

See [Table C. Household money income distributions and Gini Index, US]

Ya this confused me, because the geni coefficient measures inequality, the higher the number, the more inequality.

> A Gini coefficient of one (or 100%) expresses maximal inequality among values

So is PG saying it's normal the world is becoming less equal? Because of more people starting companies?

That is an overstatement of the article, but the article is actually defending the rise in inequality as a nature of the world today with no guilt (of participation) about it.

Reminds me of the call girls in H2G2 who specialize in sociology telling executives that it is okay to be rich and they earned every dollar in a dystopian war field (HanDod city?).

It is extremely important for a creator to truly believe that "they built all this value" (non zero sum value and that is often true) and not merely built an efficient transfer mechanism into their pocket. This in contrast to something like Warren Buffet's "lottery of birth" statements.

He is right about something though, the rules are the same as before.

"Welcome all. Everyone can play, the winners get to keep playing, the rich can play longer even if they lose - those who play longest, win big. Just remember there are no second acts in american life".

The winner-take-all only benefits those who can actually spread their investments around ,so that the investors can spread their money, but the workers can't spread their time around 10 possible jobs.

Also, picking oil and 1982 feels odd considering half the "gas crisis of the 70s" highlighted why oil is critical.

If I said medical tech would boom in the next five years, with vaccines for HIV and bespoke immune therapy for cancers, that would not be a bad bet because of the usual "events leading up to".

> But at the moment at least, there is definitely something they share in common that distinguishes them. What retailer starts AWS? What car maker is run by someone who also has a rocket company?

So your justification for how you're classify Amazon is something the company does (good) but your justification for how you're classifying Tesla is other things the CEO owns? Very sloppy, Paul. Very lazy.

Further, I think it is disingenuous to compact PGs meaning to “‘people like me are creating a lot of value, please acknowledge it. Also there are no downsides to this accumulation of wealth.’ ... it just seems like a desperate play to keep his wealth intact.” So much of the time argument betrays the arguer and rather demonstrates a perverse inclination to emotions such as jealousy rather than reasoned indifference. Why is he desperate in this case? Is he afraid of people taking his money away from him? Are there people actively attempting to do so? Is this not a natural human inclination? Is this something that only affects the wealthy? Do not all of us to a certain degree wisely protect what we have earned? It has indeed gone out of fashion to point out that the rewards of benefitting society are equal to the benefit ie what society is willing to pay for those benefits (if not less so, due to the existence of taxes). We should first admit that society is made of industrious and lucky individuals by varying degrees, admit this, and then stave away jealousy at the success of those more industrious and lucky than you or me - for success coming to the industrious and lucky remains just despite the existence of those who pursue lives of industry and are not as lucky. It is out of fashion to point out the simple and bare fact that ambition to improve the world is amplified in the environment where it is incentivized: if this be done through the respect garnered as a result of benefitting the world, that is great; if this be done as a result of rewarding the creator of those benefits commensurate to the benefits given, that is great also. In either case, the results are amplified; with both cases the results are amplified still further by the addition of the incentives. Yes, indeed the numbers by certain statistical methods appear disproportionate within studies of income inequality. Yet, simply because these figures impress upon us a knee-jerk reaction to decry the accumulation of great wealth by the few as unfair, does not make it so; it does not necessarily mean that something is wrong that these results should be allowed to occur. So long as the majority of we who inhabit the economy are not actively oppressed by the creators of great wealth, so long as our freedoms are not taken away, no reasoned argument can point to why the accumulation of great wealth is a damaging thing. Indeed, if it results from the great mutual benefit to society, this is in fact a very good thing. So long as the accumulators of such great wealth are not oppressing the majority of participants of the economy, the accumulation of great wealth ought to be a sign of the great benefits that the accumulators are providing to society, as it is society, as has now been remarked a number of times in this comment, that is paying for it. Indeed, if we continue to demonize wealth creators and go on to pass reforms that remove incentives to wealth creation, we would only de-incentivize the creation of future benefits to ourselves as members of society. Further, with certain reforms that constitute graded barriers to success, the freedom of economic mobility then being lessened, the entire economy and state as a whole is then oppressed by degrees - the oppression is then rather achieved by those who have sought to fix the “problem”. I’m not saying that income inequality does not exist - I’m saying that in this particular form the fact that there are disparities in income is not unfair, and that results from the just distribution of benefit to society that society is happy to pay for is not necessarily unjust by statistical analysis of income data alone.

To me this dismissal reads as a little blithe. Is it true that, now more than in the past, the rich are getting rich by innovating? I don't see you engaging with that argument.

Clearly people who create successful businesses add value. Clearly Jeff Bezos has added a lot of value. That doesn't mean he shouldn't be taxed but I constantly see people talking about Bezos as if he's an evil capitalist oppressor who has stolen his wealth from virtuous laborers. To me it seems obvious that Bezos' personal wealth is a drop in the bucket compared to the value he's added to the world (hundreds of thousands of jobs, changed the way we buy things).

It's totally fine to be in favor of higher taxes but it shouldn't be because you hate rich people or you think they are greedy parasites. Unfortunately I see a lot of that going around.

Where things become a problem is when people can't afford their needs. But lets be honest about what needs really are. Housing/shelter's needs demand a space for someone to stay dry/warm, with a toilet and running water (to keep things sanitary). We don't "need" a 3500 sq ft mansion even if you are a family of 16. Though the trend year after year, is we're spending more and more money on bigger and bigger homes for smaller and smaller family sizes (see https://www.aei.org/carpe-diem/new-us-homes-today-are-1000-s...), which subsequently cost more and more money to heat/cool. Not to mention the fact that more people are getting mortgages for larger and larger and longer and longer amounts... there are even mentions of > 30 year mortgages on the horizon... while mortgages help you get into a home, the typical 30 year mortgage today results in you paying ~1.5x+ over the cost of the actual home (300k home costs ~450-550k depending on interest rates). Not too long ago, many people built their own homes, mortgage free. Yea, they weren't fancy homes. Typically a box with a roof. But they lived within their means.

Back in the day more people heated homes "for free" using wood they chopped themselves back in the day. And few had AC (none did if you go back far enough). Back in the day people didn't have a microwave, toaster oven, toaster, oven, stove top, panini press, smoker, bbq, coffee maker, etc all in their one home. Depending on how far back you go, they had none of these things and still survived.

Back in the day you didn't "need" the latest iPhone every 12-24 months, or the biggest TV. You didn't need a new car every X years. You didn't "need" an international vacation every few years.

The point I'm trying to make is our spending habits can take on some amount of blame (how much can be argued)... especially when you consider the demand impact of everyone willing to overspend and go into debt on items they don't truly "need". Take a look at the FIRE community (financial independence, early retirement) and you'll see real life examples of people who scale back their living to their needs + a few wants, on small amounts of income and how they're able to still put money aside every month. The community tends to highlight those that can save 50%+ of their income on a 6 figure salary... but there are plenty of examples of people saving on small amounts of income.

With all that being said, I'd agree income to house cost ratio isn't great in a lot of areas in the country, and is trending in the wrong direction. That's a problem. Healthcare's rising costs isn't great--that's a problem. But also keep in mind people are living longer now than ever before (https://www.statista.com/statistics/1040079/life-expectancy-...), and I'd assume the longer people live the more expensive their healthcare becomes... so while this is a problem, I think it's false to say it was "solved" decades ago. Educational costs are skyrocketing too--that could be argued a problem. But there's also more of us spending more money going into more debt to get all of these things, driving the demand up for each of them. Massive corporations using anti-competitive practices to crush small up and coming competition is a problem. Companies failing to pay out a decent salary is a problem.

I think there are things that need to be addressed when it comes to peoples ability to cover basic needs + some ideal wants. However I have yet to hear a convincing argument that my neighbor getting filthly rich somehow leads to my inability to afford my basic needs.

- his two lifelong friends and business partners

- his wife

- two prominent libertarian economists.

Missing from that list are his children and Peter Thiel.

I don’t think it’s controversial to skim the top of the creation of value / rise in inequality to fund services that people need. But as long as a founder’s share of his value creation is greater than the share accruing to the homeless person down the street, his enterprise is still promoting inequality. From an inequality frame, even with a 99% tax rate it ought to be stopped. There are more than 99 other Americans; the founder’s share is still outsized.

Uh beer doesn't have to be refrigerated? England has a long history of drinking warm beer. Hell, they even hopped it up to ship it all the way to india (months!) without it spoiling.

They tried, tho, it just didn't work out because they were blinded by past success and the innovator's dilemma.

> The book thus argues that, unless capitalism is reformed, the very democratic order will be threatened.

https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce...

Every thread about money comes with some "if you don't want it, give it to me!", "I wish I had money", "If I had money I'd pay for my wife's college debt!!!", "I dream of a million dollars", just like every internet thread that hints of a woman posting gets some "no woman has ever spoken to me before, can I see your tits?" drooling.

Drool doesn't make a good comment.

The thing that bothers me the most about paper wealth is that not all of it can be exited. The economy may say that there are 500 new billionaires, but if all 500 of them try to buy a fleet of yachts at the same time, their divestment would crash (rug pull) their entire wealth.

Anyone who already owns a fleet of yachts is in a completely different category from someone who owns nominally the same value in paper.

No — this is not correct. In reality, multiples are driven by the company's growth rate, minus the prevailing interest rate. And while it's true that interest rates are historically low, the growth rates of today's successful companies are high enough that increasing the interest rate (from ~0% to, say, 5%) wouldn't really have a big effect on valuations.

As an example, note that Slack's 2020 revenue was around $1B, which represents an approximately 94% YoY increase over its 2019 revenue [1]. At 0% interest rates, that gets them a (very roughly) 10x valuation multiple. At a moderate-high 5% interest rate, their real growth rate drops to 94% - 5% = 89% YoY. One can argue that this should drop their multiple from 10x to maybe something like 9x. That drop is not nothing, but the reality is that it represents little more than a rounding error on the founder's wealth.

PG's point is that growth rate is by far the dominant factor in valuations. He correctly ignores interest rates in the essay because (barring out-of-band hyperinflation) their magnitude is too small to have a material effect on the conclusion.

[1] https://www.macrotrends.net/stocks/charts/WORK/slack-technol...

Do you believe that because you think that heirs are likely to hold their wealth in cash, bonds or in other assets that haven't been "artificially pushed higher by lower interest rates?"

It seems to me that if wealth of any kind is invested well, it's likely to generate exactly those same higher returns; the source of the wealth is kinda irrelevant, no?

So the bottom line is Tech can sell a hell of lot more of china's stuff per American worker than old retail.

> If that weren't the case, the top 100 would still likely be dominated by heirs.

Baloney. A (relatively) large number of people would still be getting really rich from startups. They might not be getting quite as rich - say, less rich by a factor of 2 or 4.

> All that's changed is the Fed is manipulating the market more now than before, and that's benefiting growth stocks and fund managers of growth stocks... among other things.

Yes, that has changed. No, that is not all that has changed. Far from it.

Where I come from, everyone wants to make MD/Partner, ether in law, finance, or consulting. More generally, MBA applications to top schools have been rising for years.

Besides, if 10x the median individual income isn't enough outside of SF/NYC, you got bigger problems.

Corporations are the boogeyman de jour but from personal experience, landlords / restrictive zoning / "anti gentrification" activists are the primary cause of my angst. I make more money now than I ever thought I would, but a truly staggering amount of it goes directly into my landlord's pocket.

That's not a positive, isn't it? Back in the mid-1990s there were entry-level jobs with a career trajectory, you could drop out of college, join a school district as computer herder, move to a hosting company and get into systems programming and then go to work for Google and Facebook. (Hi Rachel!)

That doesn't exist any longer, nowadays everyone goes and grinds leetcode for months to prepare for interviews.

That literally places you amongst the richest 1%. Not metaphorically, literally.

A couple of years worth of saving is enough to give you passive income to never need to work again for food or shelter.

I make less than $100k and support my family in an average area. It does feel like I'll work until I die. If I were making double that, it would be a huge difference.

I guess it is about expectations about what you think you should have. I don't have a Tesla for instance.

Imagine thinking 150-200K isn't that much while there are millions of minimum-wage workers trying to survive on under $30K. (EDIT: And in some states, only $15K!)

No FAANG company even made the list for Entry Level on the Levels.fyi 2020 list: https://levels.fyi/2020/

It wasn't super intuitive, but wish a modern browser had this.

The reason I picked a 4k giant monitor is to be able to place 3-4 browser windows, terminals, apps next to each other :)