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Comment by CyrusL | Hacker News Reader

The median outcome is low, but the expected value is pretty high for starting a startup.

Mark Zuckerberg is worth $20 billion after 7 years. That's about the same as 25,000 engineers working for 7 years. There aren't any singers or ballerinas with that kind of outcome.

That's part of why seed-stage startup investing exists even though the capital costs for startups are so low. The investors are paying the founders' salaries for a couple years in exchange for a small chance at seeing a huge return. No one invests in ballerinas like that.

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Expected value is a function of both value and probability. Sure, $20 billion is a lot, but Zuckerberg's success is as likely as winning the state lottery.

Even with Y-Combinator, not every accepted startup raises funding, and dies without a congratulatory TechCrunch post.

How come investors give money to startup founders but not state lottery ticket buyers? Isn't their entire job to professionally evaluate these expected values?

Being accepted to YC actually means being funded. With YCVC it's ~$100k.

Because they can buy their own lottery tickets.

Investors give money to organizations that either they perceive as having a significantly above-average chance of "winning the lottery", or that have basically already "won".

I wouldn't be at all surprised if there's a bunch of people out there offering to loan money to people who have already won the lottery. :-)

> but Zuckerberg's success is as likely as winning the state lottery.

I'd say it's even less likely than that. How many state lottery winners have we seen since Facebook went huge? How many grand slam successes have we seen?

The median outcome is low, but the expected value is pretty high for starting a startup.

Mark Zuckerberg is worth $20 billion after 7 years

This is such a fallacy, though. And not just on the maths. Financial incentives don't drive artists and hackers.[1] Your one empirical datapoint even demonstrates that. Financial incentives drive the second or thrid generation of followers, sure. But the creators and the momentum players are often cut from different cloth.

[1] because as pointed out, they are on average flawed.

It's a bit of a stretch to say becoming one of the wealthiest people in the world is the 'expected outcome'. If I'm not mistaken the most common outcome for ventures such as this is not even a sustainable business that lasts a few years and is profitable. I'd say the expected outcome for the confident and capable with good ideas is lucrative self employment and/or a lucrative exit within a few years - probably a lot less than 20 billion dollars.

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