Myth: Entrepreneurship Will Make You Rich
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2) Rich is a variable term, and intended to be so.
Entrepreneurship may not make you wealthy, but it can certainly make you rich.
I enjoy the freedom and independence afforded by starting EveryDNS and OpenDNS. Both contain a passion for a system I love, the DNS, and both have let me help millions of consumers around the world. I even like knowing I control the DNS for millions and millions of Internet users. That's an awesome responsibility and it certainly makes me feel rich about everything I do.
And when it comes to money, Eric is only somewhat right. He says you should get a job that rewards and promotes effort. But lots of lawyers and finance kids in New York thought they had stable jobs that would make them rich. Ask them today and most will tell you a different story altogether. Now they hate their jobs and have no job security or path to becoming really wealthy.
So like I said, being entrepreneur, for me, isn't about being wealthy, it's about being successful. That's a measuring stick that's far more important.
PS- Eric is awesome and I like that he's beating the drum on this stuff, I wish I were doing more of it. :-)
That is all.
People that I've spoken with in the past more often than not associated the idea of me doing a startup in the tech industry with gaining massive wealth. While I may entertain this, deep down I find it lacking as there's so much more than wealth to be had.
How about, living in a world... some distant future from the everyday-everyday where day-by-day you toil piecing together a vision, one day injecting it into the present, in order to influence a whole new set of social behaviors while also unfolding valuable opportunities. How about, the day of flipping that proverbial switch, releasing this vision out in the wild. How about, the potential of millions interacting with your vision, it becoming a staple part of a users online experiences. There's something undeniably provoking about all this, rush of my life.
Wealth, although a welcomed aside pales in comparison. Hell I would even go so far as to say, in a world where sex is constantly peddled as a cure all, let me say it, sex pales in comparison to the feeling I get from being an entrepreneur.
Ha, and they suggest that software developers are naturally weird.
http://ask.slashdot.org/story/09/10/18/1557210/Are-Software-...
Kidding.. sorta. ;)
And if we're not talking about being rich strictly, but are implicitly including a quality of life component, well, the information I've seen[1] implies that entrepreneurship is near the income level of other professionals and has a higher sense of well-being.
[1] http://www.gallup.com/poll/122960/business-owners-richer-job...
Sure the real estate market is in the dump right now, but that doesn't mean that a home isn't a solid investment.
A home may devalue a bit, it needs upkeep and so on. But it'll never 'crash'.
A home is only a solid investment if you're living in it. The real value of a home is in that it gives you something you want and need: a roof over your head in a place you want to live.
But if you're paying a home loan on a second home, it's an investment asset just like any other asset and is just as vulnerable to market fluctuations.
If you can buy property and then have other people pay the mortgage for you, now THAT is a solid investment.
The best thing about this strategy? It can happen slowly and sequentially with minimal risks.
*possibly very very long-term.
http://www.businessweek.com/the_thread/techbeat/archives/200...
"I eventually want to be rich, so I'm going to move to Ann Arbor to go to Michigan for law, instead of staying with my friends in Phoenix."
"I eventually want to be rich, so I'm going to join a major firm after law school, not a nonprofit."
"I eventually want to be rich, so I'm going to find out what the merit comp scheme is at my law firm, and put extra effort into doing that stuff."
"I eventually want to be rich, so I'm going to work 80 hour weeks to impress the partnership selection process".
etc, etc, etc.
Was that what you wanted to know?
In my experience everyone who got rich did it by owning a significant stake in a business (not necessarily a startup or even anything high tech.) I'm aware there are people who got rich from writing bestsellers or becoming movie stars but I don't know anyone like it and I think such people are extremely rare. And I may be wrong but I would be inclined to classify hackers who got promoted to VPs and CTOs together with the movie stars.
I don't really know much about the ownership structure of law firms, but I always assumed becoming a partner is a big deal because it means co-owning the firm in some sense, and getting a share of profits directly, not through salary and bonus. So that's why I figure this is different.
I don't know anybody that you know who became rich, and so that whole second paragraph sails right past me. Especially when it concludes with a suggestion that hacker VPs are as rare as movie stars.
As for the partner track at law firms, uh, fine. Substitute MBA -> investment banker, or CPA -> CFO, or Med School -> Anesthesiologist, or any number of other careers that don't have partner tracks.
Even if your salary never breaks $110k as a dev, you're still fantastically lucky to get that in any career, and perfectly capable of becoming a millionaire. So, I guess, cry me a river about how hard it is for techs to succeed without starting entirely new businesses?
Finally, let me just leave you with an uncomfortable truth: it is a safe bet that you will never get rich starting a company, or any number of companies.
I freely concede I could be wrong with respect to directors and partners. I work at a software company and my girlfriend works at a law firm.
I absolutely agree with you that the odds of getting rich by starting a company are low, all I'm saying they're better than the odds of getting rich by other means.
It was pretty obvious to me.
>> "I eventually want to be rich, so I'm going to be a lawyer, not an artist."
Of course, it should be possible to "get rich" making >$100k year. All it takes is money management.
> In my experience everyone who got rich did it by owning a significant stake in a business (not necessarily a startup or even anything high tech.)
Partnership is "a stake". It can be significant in dollars even if it is insignificant in percentage (and the reverse).
But it's just a conversational rat trap. Unless your definition of "rich" means "owning a private jet", you never have to come close to being a VP/Engineering to become rich over a carefully managed career. You just have to be good with money.
Plus you get to control your own destiny, which humans really crave.
Also, let's not confuse "startup", a single project requiring one's all, with "ventures", a diverse portfolio of small businesses seeded with one's capital but managed and run by domain experts.
Personally, I think the finger in many pies approach is far more interesting and rewarding, since you're hedging your bets.
The companies that go for mid/high 8 figures are all apparently VC-funded, most for multiple rounds, meaning that any given founder might be hovering near single-digit points of equity.
Going after a "fuck you" $50MM payday seems like an awfully bad idea. It's not going to happen.
Not to say there aren't entrepreneurial professionals, or entrepreneurial actuaries.
"Entrepreneurship certainly has vastly more potential to make you rich"? Well, you might be the next Larry Ellison, in the same way you might start a band and become as rich as U2. If wealth is your goal, an MBA and a job in investment banking is a far more reliable and reproducible path.
As I see it, most just hope to be able to make a living building software (/playing music/farming/etc) independently. Getting rich is a very rare byproduct.
> A more rational career path for money-making is one that rewards effort, in the form of promotions, increased security, salary and status.
You trade off a lot if you're getting paid for effort instead of for results. No one wants effort. No one wants a badly burnt steak, not well cooked pie, crummily engineered car, and so on. But people will gladly pay a lot for results. Desiring to get paid despite burning steak ("rewarding effort") is a path to much less wealth than you could make, but even more scary, it's a path to much less happiness. Getting paid while failing to deliver what people wanted destroys your self esteem. Doing interesting work and needing to get it right is engaging and stimulating. Harder, more risky, sure. But much more enjoyable and fulfilling.
> Startups, unfortunately, punish effort that doesn’t yield results.
Right - no wants to pay for burnt steak. You want to get paid for turning on the grill, regardless of how it comes out? Don't expect to get paid much, or to have a particularly stimulating work life.
But if you don't have serious economic commitments and can handle a little stress, why not freelance after hours for a little while and see how it goes? Can wade in slowly some. If you're willing to focus, you can make 3x, 10x what you'd make salaried if you go self employed.
I remember reading somewhere that the average employee gets something like 2.5 productive hours of work done every 8 hour day: The rest is shuffling papers, meetings, chatting, goofing off online. If you can focus intensely for 5-6 hours a day, you can make a lot more money and have a more free, stimulating, enjoyable life. It is legitimately more intense and stressful, but I'd recommend almost anyone take a crack at it. The rewards are very, very good, definitely worth taking a year or two to see if it suits you. And I mean, why not give it a try? It's huge for you if it works out, and employers more and more are respecting the guy coming back to industry after working for himself for a while.
It's liberating. In my old job, I was frustrated and not as happy... now I've got more money, do some really fun projects (because when freelancing you do get to pick your clients a bit more) and I'm trying to grow bigger so as to launch my own product... Life is good...
So to anyone frustrated with his work, I would definitely recommend trying to freelance...
My brother pointed out to me that being rich really isn't the goal. Being able to control your own schedule while paying all the bills is a pretty good life.
Some people make the transition happen really well, some don't.
A lot of things are easy to bear when you know they are temporary - and you don't have the locked in feeling.
Sometimes they go together, but the autonomy is more important. People who feel otherwise end up becoming investment bankers, not entrepreneurs.
See also http://www.skmurphy.com/blog/2007/11/23/success-for-a-boostr... which expands on this.
The best articulation of why I'm fond of entrepreneurship world instead of academic world...
Honestly, I am poor. Dirt poor. But I LOVE what I do. I consult to pay the bills. Right now, I'm hyper focused on starting a new business so I haven't been spending a lot of time getting new clients.
I had a client that fell on my lap the other day and I was so frustrated with them. The only reason they wanted to start their company was to make a lot of money and get rich. No passion, no iconoclastic idea's. Just, lets do this because it will make money.
I would love to see less money grubbing jerks and more passionate people who just love to create stuff. So i'm with Eric in getting the word out. This won't make you rich! Only do this if you love it. *pushes aside pulpit.
My hypothesis is that there are disjunct sets of employers who will value one over the other, but the set of employers who value startup experience value it more than the set of employers who value grad school experience value grad school.
I suspect that the founders of a company that put out an actual product with real users, hired non-founder employees, and perhaps got VC level funding at one point is much more valuable in the market than someone who filed the papers to officially incorporate but died while still working out of a garage with no non-founder employees and few users.
Of course, I don't expect us to fail, but it's nice to take a pessimistic view into account ^_~.
If you want to help entrepreneurs, help them refine their ideas, execute against them, and get closer to success.
Anything else is a waste of your time.
This was especially problematic during the dot-com bubble. This town filled up with MBA-holding locusts and greasily slick smooth talkers. They were in it for the money, and nothing else. Of course, most of their businesses failed, and they went off to plague somebody else. Good riddance, I say.
The problem still continues, though, and it's not limited to high tech. The big MLM scams are funded mainly through taking money from idiots who believe that they'll quickly get rich through this exciting new turnkey business opportunity, even though they've gotten totally screwed on the last three. You want some data points, go to an Herbalife convention.
But anyways if you ask me, entrepreneurship is about becoming successful, rather than rich, because once you are successful, the money will naturally come -- at least you'll love what you do, and not starve while doing it :)