Hacker News Reader

Comment by dcolkitt | Hacker News Reader

> It's easier now to start and grow a company than it has ever been. That means more people start them, that those who do get better terms from investors, and that the resulting companies become more valuable.

This may be a quibble, because I think Paul Graham really means a certain type of high-growth startup in mind when he says "start a company". But the rate of new business formation in the US has fallen off a cliff in the past few decades.[1] The number of new companies as a percent of total businesses is 44% lower in 2012 than it was in 1978.

Again, I think this is different than what Paul Graham is talking about. When he says "many more people are starting companies", I think he's thinking more about a SaaS startup than a McDonalds franchise. Obviously that fits in much more with the theme of how people generate massive fortunes. Nobody becomes a billionaire from starting a landscaping service or an auto body shop.

But still, I think it's important to keep the context in mind. In the larger sense, entrepreneurship in America is very much dead. That doesn't mean that it isn't thriving in a specific Silicon Valley subculture, that to be fair makes massive contributions to the broader economy. But it should make us question what makes the Valley so different from Main Street, USA. If not just to figure out how to export the model from Palo Alto to Oklahoma.

[1]https://www.inc.com/magazine/201505/leigh-buchanan/the-vanis...

View on HN

Actually, I think this is almost the perfect response to his article. It's not hard to imagine that a guy who made his fortune off of startups would be biased to think that everyone should create a startup and get rich that way. So, after correcting for rich guy tunnel vision, the statement "more people are starting companies" translates to "more people are starting technology companies in Silicon Valley." And of course, as you point out, the reality that the rest of the country is living in is conveniently ignored.

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

Agreed. Maybe unpopular opinion, but entrepreneur insights from CEOs are rarely valuable because no individual contribution outweighs sheer luck. Every day millions of people make smart decisions, take good risks, and work hard without significantly improving their conditions. It is pure survivorship bias to think individuals are capable of more than slightly nudging the cosmic needle if it happens to land near the right place.

It makes people uncomfortable to think that success is mostly a matter of luck. I am extremely lucky to be where I am in my career, and I greatly respect people who can admit this instead of rambling about “hustle.”

Not even just luck, there are biases in who gets funding in the first place. PG himself says he's biased toward founders that remind him of Zuckerberg and other past founders. That group is very predominantly white and affluent with a small cut of Asian-american and affluent and a small cut of other.

It helps a lot to have an affluent background when you start a tech company because, like a lot of other risky endeavors, even though the potential rewards are enormous it's a lot less initial earnings than just joining a company as an employee. And you worry whether if your company doesn't take off and get its next round of funding in a few months if it'll be harder to get that first job. And you may be poorer than you were pre-startup.

Not to mention that poorer kids might not ever see starting a tech startup as an option. Both because of the biases in which founders get funding and because they may culturally never have the option floated to them.

> It makes people uncomfortable to think that success is mostly a matter of luck.

I constantly hear this sentiment and don't think it makes people uncomfortable at all. If anything it is the opposite, people cling to this idea to absolve themselves of responsibility for their own situation.

What makes people far more uncomfortable is the nagging feeling that success isn't mostly a matter of luck. Success is a choice in life that requires restraint, sacrifice, an appetite for risk, and resilience.

But if you follow some basic rules (finish high school, don't have kids before marriage, don't do drugs or smoke, minimise alcohol, eat healthy and exercise, don't buy things to impress others), you have a very good chance of being successful in life. Obviously we can't all be billionaires or whatever, but you can definitely live a fairly comfortable and modest life.

Ironically, people I know who did the most drugs in high school (myself included) are the most successful out of the people I know. The straight-laced A students are all way behind.

There’s a bifurcation.

Yes, I know kids who did drugs (partied as they say) and have some success in life. I also knew some kids who did drugs and barely graduated or dropped out and did poorly or are just hanging on and a handful who didn’t make it out of young adulthood due to those choices.

What we need are statistics to tell us what is more likely, not our particular anecdotes.

I did plenty of drugs too and am doing just fine as well. Not a million or billionaire, but that is a pretty tough standard to meet.

That being said, only drugs I ever did were weed, acid, shrooms, MDMA, and trying the odd pharmaceutical. Never any opoids of any sort, never meth etc.

And in terms of broad advice, I think not doing drugs is still a fairly consistent rule for good outcomes.

Yes, this is my point. You are the people who want to believe that all it takes to be comfortable in life is to “follow some basic rules.” Putting aside that the circumstances of your birth are already a huge matter of luck, I’ll point to the entire US working class and unemployed college graduates as evidence to the contrary.

At some point those of us who have grown up in this economy stopped believing in fairy tales and bootstraps. There were a million points from my upbringing to now that could have diverted me from the middle class, so I’m not looking down on my underemployed peers as inferior beings for their struggles.

> Putting aside that the circumstances of your birth are already a huge matter of luck

This is another one of those points that sounds superficially plausible on the surface but makes little sense once you think it through. The circumstances of my birth weren't a matter of luck. My (married) parents decided to have 4 children of which I was one. Before doing this they both finished high school, and stayed away from drugs. They also tried to live healthily etc (but certainly weren't monks). They weren't going to have sex and then a child might pop into existence in Uganda. The only way the whole "your birth was luck" thing makes any sense is if you perceive yourself to be an atomised individual with no deeper ties to the family you came from or the choices that were made by your ancestors who preceded you.

Like I said, people are EXTREMELY comfortable with the handwaving of "it's all luck anyway". They won't even take responsibility for themselves and their own lives, so asking them to also feel responsibility to their children/grandchildren/descendants is even more of a foreign concept.

As for "I'm not looking down on my underemployed peers as inferior beings for their struggles" those are your words, not mine. I certainly don't look down on my struggling friends/family either, but I am also not going to withhold judging them based on the actions they take. Because very often they also KNOW they shouldn't be doing what they are doing, but choose to do it anyway.

Weakness corrupts as much as power, and it is wise not to forget that.

Before you are conceived, before you even become a zygote, who rolls the dice for which womb you'll end up in? Who decides whether you'll be in the womb of a Japanese mother, an American mother, or a Greek mother? Do we as individuals have any control over which country we are born in?

To pretend as if this is not pure chance (luck) is bonkers.

The Japanese/American/Greek mother who had sex?

Or are you saying it was just luck my mom got pregnant then? She just fell asleep one night, the stork visited, and then she woke up pregnant?

I think you don't understand how sex or genetics work, I am 50% my mother's dna and 50% my father's. It's not like they were going to have sex and then I would be born with the genetic code of two entirely different people.

I'm talking about YOU, not what your parents did. YOU personally had no ability to determine in which country you were born in.

Well duh, noone who has ever lived has willed themselves into existence. But just because you didn't will yourself into existence, that doesn't then imply that the circumstances of your existence are based on luck.

My parents chose to have a kid, where else would I be born except in the country where my mother chose to live? There was 0 luck involved, I wasn't going to randomly pop into existence in Mongolia when my parents decided to have a kid while both living in Australia.

If you apply your reasoning to any other area in life you can see how silly it is. If you put in a lot of work/effort into building a car, is the existence of the car the product of "luck"? After all it had no more choice in where it was created than a person.

>If you apply your reasoning to any other area in life you can see how silly it is. If you put in a lot of work/effort into building a car, is the existence of the car the product of "luck"? After all it had no more choice in where it was created than a person.

That is a false analogy. We're talking about you being born, not you putting effort into building a car.

Why are you switching the argument around to where your parents decided to settle? The whole point is about where you are born, not the area your parents decide to give birth in.

If you can't intuitively understand the relevance of where my parents live (more specifically my pregnant mother) to where I am born, then I am not going to be able to make you understand it.

You seem to be getting hung up on the fact that when two people decide to create a car they are creating an inanimate object (which they own in totality) and when they create a child they create a person with human rights and that will develop into it's own autonomous individual.

But this difference has absolutely 0 relevance to the question of whether or not the circumstances of your birth are the result of luck. Either they both are (which I think you can see is silly) or neither are (which is true but seems to be an idea you are resistant to for some reason).

Like I said at the start, this whole "the circumstances of your birth are luck" is a truism (in the philosophical sense) without any real thought put into whether or not it makes any sense. It could be luck in the deterministic sense of "the entire universe is pre-ordained" but if you believe in free will for the individual at all in any area, then the circumstances of one's birth are not luck.

The circumstances of your birth are luck for you.

They are not luck for your parents but you are not your parents.

One of the problems here is that there is one position that everything is either the result of my decisions (ie under my control) or it is luck (ie it is not under my control) and another that defines luck much more narrowly.

Anything that happens to you as a result of someone else's decision is luck for you, even though it's a controlled decision for them. And you had no control over your conception because you didn't exist at the time.

Or, to put this in the simplest possible terms: "other people's free will is your luck".

> But if you follow some basic rules (finish high school, don't have kids before marriage, don't do drugs or smoke, minimise alcohol, eat healthy and exercise, don't buy things to impress others), you have a very good chance of being successful in life.

The discontent in millenials nowadays is exactly because they are peddled that fairy-tale myth.

"Get a degree and get a job, you can will be able to afford a house and a family with children."

It might have worked for the older generation but it sure as heck doesn't work now. Why do you think "hustle" culture is so pushed right now? Our parents didn't need to "hustle" to afford these basic things.

> "Get a degree and get a job, you can will be able to afford a house and a family with children."

This is still true, you just might have to move to a different place from where you grew up to get it. You know, like enormous amounts of our parents/grandparents/ancestors did (why did people come to the USA in the first place? Lack of access to housing where they were from ;p )

> finish high school, don't have kids before marriage, don't do drugs or smoke, minimise alcohol, eat healthy and exercise, don't buy things to impress others,

none of these correlate at all with the successful people I know.

Keith Richards might disagree with you...

I recall the 1999 tech bubble. Lots of companies went under in the crash that might have made it today.

There is a ton of VC money in Sillicon Valley again.

So where is that VC money getting spent besides salaries? What's the modern equivalent of selling shovels to the miners? AWS?

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

I think it's even better. Rich guy that became reach by funding tech startups says: "wanna become a billionaire? The easiest way nowadays is funding a tech company! I can help!"

I am a bit of a PG critic myself at times but he became rich from selling his own startup. He became richer by starting YC but he didn't need to start YC. Based on his essays he basically had enough money to be set for life from selling Viaweb and when he started YC he was looking for something to do next other than just retire.

He didn’t become famous until YC.

I’m also annoyed when people make the argument that goes: “person X became rich from A he didn’t need to do B”. Maslows hierarchy holds true for all of us. Once he got wealth he desired influence (and power).

This is a huge part of "start up culture" though - like any religion (or lottery, or whatever), superstition plays a large part, and the most important superstition is that those who have been successful before know how to do it again.

It's not religious to observe that founders who made a successful exit are well-poised to do it again.

They're swimming in money, they have a bunch of investors in their phone contacts, and they know all the ins and outs from the last time they put a startup through its life cycle. How could they not be in better shape than some kid slurping ramen in his first YC cohort?

This does leave two big wildcards: the idea (specifically its product-market fit) and pure dumb luck. From what you wrote, I'm guessing that you think this isn't realized by the "cult of YC" as well as it should be, whereas I guess differently, but it doesn't matter that much. We all recognize that it's there, and without those two ingredients you can't succeed.

As an aside, I've seen two different kinds of 'luck' come up in these kinds of conversations: the sort I'm referring to above, and the sundry genetic and social inheritances to which a person is heir.

They're both valid uses of the word, I think the first is more obviously lucky than the latter. It is luck of a sort that someone is 2 meters tall, but I bet their parents were also taller than average, so saying that it's lucky that they were able to be a pro at basketball is going to confuse some people. There was no "them" before the peculiar genetic combination which conceived them, and after that, we're talking about some favorable circumstances (adequate time, a court, no crippling car accidents or stray bullets) and a great deal of hard work.

Similarly, you can call it luck that Jeff Bezos was able to borrow a quarter million from his family, or that Elon Musk apparently can sleep for four hours and work for twenty, constantly, for decades (a genetic quirk no less special and rare than being two meters tall): but you can call it fate as well.

> It is luck of a sort that someone is 2 meters tall, but I bet their parents were also taller than average, so saying that it's lucky that they were able to be a pro at basketball is going to confuse some people. There was no "them" before the peculiar genetic combination which conceived them, and after that, we're talking about some favorable circumstances (adequate time, a court, no crippling car accidents or stray bullets) and a great deal of hard work.

Hmmmm, I think it's obviously lucky. Luck in this context means everything in life that is not under your control (most things are part luck part control, of course). Since you did not exist when you were conceived, your genetic inheritance is obviously not under your control at all.

It's exactly equivalent to saying that someone with a genetic disorder is unlucky, which I think is a much more accepted valuation.

Certainly, the hard work is absolutely a fair point - within the universe of people who are over two meters tall with high hand-eye coordination (as someone 1.98m tall with terrible hand-eye coordination, I'm very conscious of how that affects sporting ability) those who work hard at sport are more likely to be successful professionals than those that don't.

There is a more subtle question about whether we should count the mental disposition to work hard, one that is likely in large part from genetic and social inheritance, as being luck. Some people are much better at it than others, and it does not seem to be the case that those who aren't can become much harder working purely through an effort of will (somewhat, by will and regular practice and it becoming habit? sure. Reaching the level of those who are doing so anyway? No). So is that disposition a matter of luck? If it is, what does that mean? What do we do differently as a result? Do we say that it doesn't matter how hard people work, they should be rewarded the same? Obviously not. So what does that actually mean?

No real argument with this! I think we're talking about different things.

If I could put my difference in opinion in my own words, it would be that I believe many people play the startup game with the right "intrinsic" qualities - hard work, brilliance, etc - many more than the number who exit with a billion dollars. Hence, "lottery". Of course, some of that luck can carry forward in terms of experience, networking... That's not really my point either.

If Paul Graham wants to join our startup, I wouldn't have to disavow my beliefs to welcome him with open arms. That would obviously be to our great benefit. The leadership team would tout his resume, and look forward to his insightful contributions. I, on the other hand, believe that his primary contribution would be to generate a bunch of "Paul Graham Joins X Startup" headlines, increasing our value in the eyes of VC.

The religion is this: you can hire Developer X or Developer Y. "X" was an early employee at a successful startup, where "Y" seems much more technically proficient. I think many startups choose "X" and don't even consider whether they're doing that for status within the startup world (which is what I believe), or because they genuinely believe that having a successful startup under their belt means - even in the face of evidence to the contrary - that the company is more likely to achieve a billion-dollar valuation with "X" than with "Y". You could argue for either justification, honestly, but it's the failure to see a distinction that strikes me as religious.

And also, Paul Graham's ability to found another successful company aside, the clinging to his every word is /definitely/ religious to me.

> even in the face of evidence to the contrary

This is the problem though. There really isn't any clear evidence one way or the other in your example. Predicting how someone will perform in a particular context is incredibly difficult (see the frequent disagreements on HN surrounding the hiring process). More technical proficiency might or might not translate to better overall performance in your particular case.

Meanwhile, the other candidate has already been in what was presumably a substantially similar situation. Given that the previous startup succeeded, I'd assign good odds (but no guarantee, of course!) of that candidate having performed well (all else being equal, a startup with dead weight seems statistically unlikely to succeed).

> You could argue for either justification, honestly, but it's the failure to see a distinction that strikes me as religious.

It might not be that someone else is failing to see a distinction (social status vs technical proficiency vs something else), but rather that they disagree with your estimates of how much various factors will contribute to the likelihood of success for a candidate in the first place. In other words, I think someone might reasonably disagree with you that there's a meaningful distinction to be made here. Such a view would of course be expected to lend their actions the appearance of religious dogma from your perspective.

The first part of your comment is arguing for the second justification. Which I agreed was logically fine to do, and I think you laid out the case well.

The second part seems to reveal a difference in opinion unlikely to be resolved easily in this forum. Food for thought, though - thank you!

Whoops, I didn't mean it to read like that. I actually happen to agree with you (that social status is a likely factor in certain cases for VC, and that people often seem uncomfortable about acknowledging such things). I was just trying to illustrate that it's at least possible for someone's behavior to appear dogmatic when in reality their mental model is carefully reasoned but differs from yours.

For sure, point well taken. There is a question of differing goals and values there between me and the "startup" or "get rich" people, I think, but I suppose we all have our own dogma in the end.

I think there's another factor you've missed, which is the market. And I think the market is a pretty important factor in the success of a company.

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

Are you actually seriously complaining about the argument that you'd be better off starting a tech company than a non-tech company? I didn't realize that was even up for debate. Sure, that's how PG made his money, but that doesn't make his argument any less accurate. Just because there's a concept of a success bias, it doesn't automatically apply to every argument.

When Paul Graham says "get rich" it goes without saying that he means "billionaire rich" by virtue of being a founder of a unicorn that goes IPO. That's nice for those that can do it but it's such a tiny number of people, it's irrelevant and non-actionable advice for practically everyone. Right off the bat, he's talking about the "100 Richest".

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?

Paul Graham's world doesn't include those. They are doing it wrong by his rules.

You're a successful machinist/plumber/accountant/chiropractor/electrician/IT specialist/etc with a couple decades under your belt working for other people. In decades past you'd strike out on your own.

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?

I had the exact same thought when I read pg's statement, "Why are people starting so many more new companies than they used to, and why are they getting so rich from it?". People aren't starting so many more new companies than they used to - they're starting significantly fewer, and that's a bad thing.

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.

[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).

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.

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.

> winner-take-all

You can buy stock in winning companies and get your share of the winnings.

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).

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.

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.

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.

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.

Way to miss the point.

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-mobil... (edit: beware that the graphs are full of assumptions - think about them carefully because they are deceptive IMHO).

> Nobody becomes a billionaire from starting a landscaping service or an auto body shop.

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...

The statistic that PG didn't write about but seems to pertinent is that the number of millions has increased more than 10 fold from 1980 to 2020.

1992 story: https://www.washingtonpost.com/archive/politics/1992/07/11/n...

Recent statistic: 18.6 million families, https://spendmenot.com/blog/what-percentage-of-americans-are...

He specifically addresses this in footnote [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.

The news has gone from bad to worse. Winner-take-all regulations, customs, and market manipulations are good for Bezos, but not for normal humans and not for the economy as a whole. It has been even worse in pandemic time, since the small shops just closed down while the bigger firms were somehow exempted from those requirements.

And he tries to spin it:

> So what the statistics about the decreasing number of new businesses mean is that people are starting fewer shoe stores and barber shops.

He might like to point out that the decrease is disproportionately higher among those types of businesses that are part of a thriving community, but the reality is the overall number of businesses being started has gone down.

> Nobody becomes a billionaire from starting a landscaping service or an auto body shop.

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.

> The number of new companies as a percent of total businesses is 44% lower in 2012 than it was in 1978.

.... 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.

Note he addresses this directly in the corresponding footnote.

Reply on news.ycombinator.com