Comment by TrackerFF | Hacker News Reader

Comment by TrackerFF | Hacker News Reader

I think the distinction the politician tried to make, was that you don't "earn" a billion dollars the same way the vast majority of people make their money. You become a billionaire by company ownership, not getting cold hard cash.

The hierarchy of wage looks something like:

1. hourly pay (how many hours you can work sets the maximum possible salary)

2. base pay + cash bonus (the cash bonus starts to increase your earning potential. Sometimes the bonus can be huge, for traders, salespeople, etc.)

3. base pay + stock options (the stock options can outsize your base pay by big margins)

4. stock ownership (almost all your wealth is tied up to the stocks)

The vast, vast majority of people are stuck at (1), and will never move to (2). Nearly all billionaires are at (4).

The average worker will work around 100k hours in their lifetime. If you started working today, with a 2% inflation rate, you'd have to start getting paid close to $6000 / hour in order to reach a billion dollars (pre-tax) in total income by the time you retire 50 years from now.

Another factor to consider, is that salaried workers can't use leverage to increase their earnings. A startup founder can find investors and raise money, which works as rocket-fuel for their company. You can practically outspend your competition. That is simply not possible for regular workers, without breaking rules (as in outsourcing your job, taking on several jobs and outsourcing those, while collecting).

Add to that, if there exist individuals who have enough of the resource of highest utility, it can become a liability for society. One bad way is that they use it to suppress others, through lobbying or buying out media companies or whatever. The other is how vultures react to them, pushing up the prices whenever the billionaire individual is involved and pricing out others.

You say "stuck at (1)" as if most people actually desire this kind of wealth and are trying to become entrepreneurs.

The simple truth is that many people don't want to step into that kind of intensity and uncertainty, or lack the skills to succeed in a cutthroat industry.

The idea that founders are somehow "cheating" is hilarious to me. Anyone in the developed world can easily become a founder, why don't you try it?

I'm saying "stuck" in the sense that their earning potential is completely dependent on how many hours they put in, and how much their annual raise is.

While many don't necessarily value pay as #1, it is important to people. If a regular worker receives a 20% pay increase, that's huge compared to not getting anything, or something which barely covers inflation. Even though the dollar amount may not be much compared to others.

Also: Kansas City Chiefs quarterback Patrick Mahomes is well on his way to being a billionaire, assuming he’s not already there. He has natural talent, to be sure, but so do successful startup founders or successful bankers or successful lawyers. He didn’t “earn it”?

The idea that people don't want financial security or independence is absurd on its face. If you look at people who have founded billion dollar companies, you see that those people aren't a representative cross-section of society. You see factors such as:

1. Coming from a relatively affluent background (eg Bill Gates's father was a successful lawyer);

2. Social status. For example, Sundar Pichai came from a relatively modest socioeconomic background but he's also upper caste;

3. Even having access to a top-tier education (eg Stanford) generally shows a lot of privilege, Social connections, financial security, probably access to a quality education prior, tutors and so on;

4. Even just being white in the US means your family had access to create generational wealth that minorities didn't. The post-WW2 GI Bill famously discriminatory in providing cheap mortgages (as well as subsidized college eduation).

One cannot overstate the opportunities available to you if you are "free to fail". If your family can support you or even you can live at home then you have the option of starting a company and being unpaid for a long period.

As for founders "cheating", well that's a different story but also objectively true. Many companies extracted value by essentially breaking the law and getting large enough before enforcement caught up with them, which allowed them to buy those changes. AirBNB and Uber are good examples of this.

The myth of meritocracy has been so successfully propagandized it's no wonder that so many people see themselves as "temporarily embarrrassed millionaires".

> Even just being white in the US means your family had access to create generational wealth that minorities didn't.

My grandfather's business operated out of an 8*8 shack.

After my dad passed away, I was shocked to discover that my first salaried job paid more than his last salaried job.

These days, anyone can get a free K-12 education, and then loans for college. Generational wealth is not required.

> Generational wealth is not required.

Freedom from generational poverty is required. A lot of PoC in the US grow up in dire straights which weighs on their mental health. Their chance at a university education drops rapidly when they have a network that depends upon them working from adolescence onward.

My grandfather worked selling cookies for decades and retired with a pension. My father worked as a professional engineer and midlevel manager at least as long and had less to show for it. I'm trying to work my way into upper management and will likely retire later and with less than either of them.

People feel the walls closing in on them. Telling them to buy more lottery tickets, albeit in the form of founding companies, isn't an answer that scales.

> Freedom from generational poverty is required.

This is simply false. Oprah grew up on welfare and is a multi-billionaire.

> Telling them to buy more lottery tickets

The math on lottery tickets is negative. The math on stocks is positive.

The book "The Millionaire Next Door" is a recipe for ordinary people becoming wealthy. You can't afford not to read it.

People really do get all up in their feelings on this issue and end up making emotional arguments based on anecdotes. Oprah Winfrey is an anecdote. Somebody's grandfather starting a business in an 8x8 shack is an anecdote.

What isn't an anecdote is slavery, the politcal and economic disenfranchisement of the Reconstruction Era, segregation, redlining, HOAs (which were started to keep black people out [1]), access to free college education (with the GI Bill), access to cheap mortgages to create generational wealth through property, the resulting decay in infrastructure and education thanks to the resultant "White Flight", over-policing and disproportionate outcomes in the criminal justice system.

There are over 1000 billionaires in the US now, most of them homegrown most likely. There are about 14 black billionaires (27 globally, apparently). This includes Oprah, Michael Jordan, Tiger Woods and LeBron James. 15% of the US population is black.

The "just invest in stocks" pseudo-advice is this generation's "let them eat cake" A large percentage of the US population do not have disposable income. They are often working several jobs just to live. The "Millionaire Next Door" is more often than not just some guy who bought a house in the 1980s and sat on it.

[1]: https://www.homesweetheadache.com/post/the-true-origins-of-h...

> These days, anyone can get a free K-12 education, and then loans for college. Generational wealth is not required.

Our system is based around competition, where advantage compounds. How do you square this circle? In the case of two identical people, one burdened with student loans and one not, the one without the burden will win in the market due to being able to allocate more capital.

Amortized over a large population, this creates a systemic effect where those privileged with generational wealth will tend to be over-represented in the set of "winners" the system produces. This seems irrefutable to me. Obviously there will be anecdotes of exceptions, as there will be in any amortized system.

You'll get just as good a college education with a loan than without a loan. And employers don't care if you took a loan.

Besides, there's no evidence that someone with generational capital will be better at investing than one without. In fact, the arc is:

1. first generation makes the money

2. second generation spends it

3. third generation starts over

> Anyone in the developed world can easily become a founder, why don't you try it?

Because most of us have families and can barely afford rent and healthcare. Those of us with a bit more success are finding that extended family are falling into poverty and need help (thanks inflation and transition to lower wage jobs!). They cannot work more than 2 jobs and also found a company.

Most newly founded companies fail, so it's an expensive process unless you've a network of FFF or VCs to draw from.

Many founders get nothing out of the process but stress and bankruptcy.

Even if you're "stuck" at 1, a person with a reasonably high salary can buy equity in the public stock market and start capturing exponential growth. And if they can outperform the market by even ~5% that can really add up[0]. Not to billionaire status but maybe it's okay to not be a billionaire.

[0] Big "if" obviously but so is a 15% monthly growth rate in revenue.

Put the robinhood app on your phone and start investing in stocks for less than $100.

Did you build wealth that way? $100 fund and stock trading?

I started investing in stocks at my first job at Boeing, on an entry level salary.

That's not the question.

> salaried workers can't use leverage to increase their earnings

Of course they can. They can invest, say, 20% of their income into stocks. They can borrow money to invest into stocks, too.

Plenty of workers have to take loans just to pay rent or healthcare. And even if they did borrow to invest, they can't sell without paying CG. And what if they bet wrong?

When I couldn't pay the rent, I acquired a roommate. Very few young people need to see a doctor.

As for CG taxes, they don't apply if you don't sell, and no CG taxes are owed if the gains are less than $49,000.

> And what if they bet wrong?

Everything in life is a risk. The idea with stocks is to diversify, which you can do by buying an ETF.

I'm talking about the direct work output. As in your main income. Obviously many people can afford a mortgage, and maybe the house is worth much more in the future. Or stocks, or bonds, or other financial instruments.

But the work you produce - not so much, for many common professions. If you're working on a assembly line, your work input/output curve (transfer function) will look linear in the productive zone. If you work 20 hours producing 20 units, 40 hours producing 40 units, then working 60 hours will likely yield 60 units. But once you start moving up after that, it might not be very linear - fatigue will set in. There's some saturation point.

On the other hand, the difference between some entrepreneur working 20 hours and 60 hours will likely make all the difference. Even going up to 80 hours can make or break it (and I'm not saying this as someone who's glamorizing long hours). Throw in external forces like investor money, and your input could generate some factor N output.

You could give some factory worker a million bucks, and it would not increase their work output.

Sorry for the ramble, my point was just that the work people do is different. But you are of course correct that spending your resources on different kind of work will yield more. Investing your money in ownership (stocks, real estate, etc.) can (will) increase your wealth.

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