She meant impossible in that one doesn't earn a billion dollars through work alone. The only way to get there is to set up a structure that extracts a billion dollars from a market (usually by building a structure that's more efficient but also generates externalities that are not borne by the person getting the billion dollars).
pg's reading of it is so blunt and misrepresentative that I'm nervous about what kind of content he's consuming.
Right, regardless of whether you agree or disagree with the point, PG doesn’t actually engage with it. He just says “compound growth + build something that people love”.
But the meat of the point is: if the economy is growing at 2.5%, how do you sustain 15% over 5 years?
Look, I’m a startup guy, I buy into the premise that it’s an intensely value-creating activity. But I think it’s self-defeating to pretend like the monopoly and regulatory arbitrage problems don’t exist.
I get that PG and his customers need to be able to cash out, but also, the monopoly rentiers make it more difficult for startups to compete by buying up competitors early and offering crazy salaries that make startups uncompetitive.
All that said, the subtext here is that PG is providing politicians with stories they can tell, nobody in this conversation is trying to describe reality in the most precise or honest way.
They are also speculative, not real. They are based on the notion that the company would be worth that much based on projected cash flows, expenses, etc. If you actually tried to cash it all out at any point in time you could not get anything close to that because the very act of selling will lower the value by destroying confidence in the speculative valuations.
None of these SV billionares have billions in cash or cash equivalents. Maybe a few of the largest companies do.
Look, I know this is a tech forum and we don't claim to be good at the social sciences, but this is a central debate and r>g, the idea that the rate of return to capital tends to exceed economic growth over the course of history, is a major result from Piketty's Capital In The 21st Century that people interested in "grow the pie" vs "trickle down" really ought to be familiar with. Even if you disagree, you ought to be able to articulate why, and "the average includes winners and losers" ain't it.
"But life has improved, r>g couldn't have been true forever" -- last time the inequality bubble popped because of a great depression and two world wars. The capital was incinerated, metaphorically and literally. It's a cautionary tale and we should aspire to do better.
I suppose it depends on how broadly you define "innovation".
Lots of companies grow because of, among other things: regulatory capture, regulatory arbitrage, questionable use of other people's IP, offshoring, misclassification of employees/contractors, profit shifting and transfer pricing, subsidized predatory below-cost pricing, dark patterns, aggressive collection and monetization of user data, acqui-hires to stifle competition, implementing high-switching costs to create vendor lock-in, round-tripping, channel-stuffing, business models that intentionally externalize costs, outright fraud.
I would say it slightly differently: The average rate of growth comes from the average of the successful and unsuccessful innovators and non-innovators.
Bill Gates' wealth grew much more after he left Microsoft than while he was CEO. Was that wealth earned through innovation? No. He simply owned something that became more valuable as other people labored to innovate.
Growth does not ONLY come from innovation. It can come from bad actor or even simply non-innovaive strategies such as acquistition (which can lead to monopoly, as capital tends to amass in large centers / the hands of the few, per Marx). Other bad faith / anti-competitive / non-innovative strategies include regulatory capture, lobbying, doing illegal things (and hoping to not get caught / paying a slap-on-the-wrist fine that would be impossible for smaller companies), etc.
Compound growth is also the exact thing that is being criticized here. Your wealth grows simply by virtue of ownership. No labor needs to be performed. When somebody says that you can't earn a billion dollars they are the same thing that PG is saying, he just doesn't think it is bad: the way to become a billionaire is to own things whose value rises over time. The issue is whether this can be meaningfully called "earning" it.
Are you doing something to create that value? If yes, then I think you are earning it. If you are simply an investor, then no, but we need investors to make the whole system work.
Yes, but the bigger picture is that what people find valuable and what is actually valuable diverge. Because what people find valuable is through the lens of their constraints: the regulatory structure of their country, the limitations of the human condition, inertia, the limited nature of time.
The most poignant example is tobacco. Tobacco is a net-negative product for the world. But many people find it very valuable, because it helps them with the stresses of their life and they have a biological dependency on nicotine. And so, it’s a multi billion dollar industry. But, for the world as a whole, it generates negative billions of dollars. Because of the health cost and the cost of lost work. If you did 10, 20 years early then that’s a lot of human productivity burned.
Of course, most products are not tobacco. But every product is tobacco a little bit, I think, in the sense that they merely move some money from externalities into the product. In that sense, it’s not all value creation, it’s value siphoning or moving.
Obviously externalities exist. I disagree with your tobacco take though. If someone knows about the health risks tobacco causes and still chooses to buy tobacco than the tobacco has created real value. Of course societal value can still be negative because of externalities, but externalities have to be external, a person making a decision you disagree with isnt an externality.
Im not going to disagree that externalities are everywhere though. The question is to what extent and if, after correcting for them, there are still products which create so much value they make their founders billionaires. I think the most obvious case for this are artists. JK Rowling sold her writing for over a billion dollars. The work was, as far I know, created pretty much solely by her. You can point to the book publishing system as a whole, but she has nothing to do with that. All she did was write some books and sell them to an already existing system.
There are extremely good arguments for why the act of becoming and remaining a billionaire is immoral and bad alone, without any need for you to have directly wronged someone else.
PG just completely misunderstands and hand-waves over this basic concept and makes the excuse that "hey we worked really hard and made an amazing product that people loved, we aren't harming anyone."
For one thing, founders and employees don't share equally in the high growth rate of the company even though at most a founder is working let's say 2x longer hours than a salaried employee. You can do nothing wrong but you're still taking more of your fair share by the basic structure of how the business is setup.
I think anyone who is running a successful company and doesn't have a path to converting to an employee-owned enterprise is immoral, especially if you have managed to capture $1 billion just for yourself while your median employee is just making market rate salaries, or maybe they happened to gamble on your stock options and have a modest nest egg about 1/100th-1/50th the size of your wealth as a founder.
So yeah, Jeff Bezos made $260 billion dollars, but an alternative that could have happened was "Jeff Bezos makes $50 million and every Amazon employee gets a much more fair share of the happy customers' money."
More importantly, if you have $1 billion in net worth, that means that you can choose to do anything with your life on a daily basis.
When I'm over here working my job in my cushy upper middle class life, it's still an objective truth that I need to be selfish in order to secure the future of my family. Nothing is guaranteed and we need to fend for ourselves. I can't stop working or the home finances collapse within months or a short number of years if I'm very lucky and have something significant saved up or my house paid off. I legitimately don't have the time or money to help many other people outside of my nuclear and extended family.
But when you have a billion dollars (and some people have hundreds of those and one person even has a thousand of those), that means you have no limit to what you spend your time on. You can do anything, and deciding not to work on capitalist endeavors anymore has zero chance of turning you destitute.
In other words, when you are a billionaire, what you choose to spend your time on says a lot about the content of your character compared to someone who is not that wealthy.
Paul Graham is out here giving speeches to rich kids at Oxford Union, but he could be spending his morning in the local soup kitchen or building homes with Habitat for Humanity. He could be mentoring people who are struggling to escape housing insecurity, or he could be working with advocacy groups to expand healthcare access and end childhood hunger.
He doesn't have to go to work every day like I do. But he is one of the people who has dedicated his life to capitalism, even after successfully taking care of his family for many lifetimes, and that says a lot about him.
I agree with most of what you're saying -- but just wanted to add some notes here: 1) founders should start companies where equity is distributed to the early employees much more evenly: this actually gives additional super-powers to the company since employee incentives are much more closely aligned with the vision of the founders (building something great that people love to use). 2) stop rewarding growth: there is nothing wrong with NOT growing 90% a month. The goal of most companies shouldn't be to grow or return maximum value to investors (or shareholders): it should be to provide a greater human good the markets will be willing to pay for 3) revenue growth also is not something to aim for: sustainable income growth is. 4) unless the billionaires start re-distributing their wealth -- history is not on their side. A revolution will happen: usually this is associated with the younger male population being unemployed (~15% is the magic number) and causing an uprising. The goal of most founders at this point should not be 'how do I get to 1 billion.' The massive unemployment caused by the AI revolution will cause a massive uprising. There is great danger I think if they do not figure out a way to re-distribute their wealth. Currently, the poor and middle class are taxed way more than the rich (as a percentage of their income): and from what I see are increasingly becoming more disgruntled with the situation they are in. Why in the world would anyone want to even be a billionaire in this situation is the question I want to ask?
> For one thing, founders and employees don't share equally in the high growth rate of the company even though at most a founder is working let's say 2x longer hours than a salaried employee. You can do nothing wrong but you're still taking more of your fair share by the basic structure of how the business is setup.
What is fair? Obviously hours worked is one metric to determine what is fair. But another way to arrive at what is fair is through negotiation. Neither the founders nor potential hires are obligated to work with one another. The only way it happens is if an early employee believes the compensation they are offered by the founders is fair. If it was unfair, they would presumably reject the offer outright.
Most people need money to eat. I don't know if you can ever really have a fair negotiation with an employer when "the rent is due" is involved. You know those companies that buy settlements from people in exchange for a fraction of their value immediately? You could say that this is a fair trade in an econ 101 sense that body parties rationally entered into a mutual agreement. But you could also notice that one person just got laid off and doesn't have enough money to pay rent and is therefore pressured by circumstance to accept extremely unfavorable terms because the alternative is homelessness.
I don’t think you can assume this to be the case, especially outside of the Bay Area.
My first startup was one where I was hired because I was young and cheap. I could be paid in free lunches rather than 401k matching and decent healthcare plans.
There are plenty of people who would consider themselves extremely lucky to work at a startup, even for cheap. I know many older people working much worse jobs. I think it's fair to assume that most startup workers have other options, and that generally those options are worse.
If the argument is going to be “I exerted negotiation leverage over you” I think this feeds into my argument about the immorality of the whole setup.
We might as well just say “I exploited my structural power over my employees and got a better deal for myself.”
Of course the employees agreed to the deal presented to them, what other option did they have? They aren’t like all these founders that have the luxury of being unemployed because their dad will pay the rent.
That’s another point I forgot to bring up entirely: PG also hand-waved over the quantity of billionaires from his accelerator that came from families of very decent means where they have the luxury of risking failure. The quantity of true rags to riches billionaires is extremely slim.
> Of course the employees agreed to the deal presented to them, what other option did they have?
What? The employees had infinity other options! They could have negotiated harder. They could have declined the job. They could have taken a job somewhere else. They could have taken the risk to start their own startup, and been in the founder position, instead of choosing to be in the employee position and getting the security and reduced stress that comes along with it.
> That’s another point I forgot to bring up entirely: PG also hand-waved over the quantity of billionaires from his accelerator that came from families of very decent means where they have the luxury of risking failure. The quantity of true rags to riches billionaires is extremely slim.
Over 200M Americans come from middle class backgrounds are above. YC also provides founders with the funds to pay themselves while they start their company. I did YC when I had almost $0 to my name and no well-off family to rely on.
Grombobulous says "Paul Graham is out here giving speeches to rich kids at Oxford Union, but he could be spending his morning in the local soup kitchen or building homes with Habitat for Humanity. He could be mentoring people who are struggling to escape housing insecurity, or he could be working with advocacy groups to expand healthcare access and end childhood hunger."
Which of those would provide the most benefit to the world?
Grombobulous says "But he is one of the people who has dedicated his life to capitalism, even after successfully taking care of his family for many lifetimes, and that says a lot about him."
You're simply anti-capitalist. Please post about that instead of mounting personal attacks on people who make more money than you. And please cease telling other people what to do and not do! Try to put yourself into their shoes and think harder about their situation.
I’m not anti-capitalist at all, but all good things have limits. It’s a wonderful thing to eat a scoop of ice cream, or three scoops of ice cream, but I would never suggest that anyone eat 1000 scoops of ice cream.
> if the economy is growing at 2.5%, how do you sustain 15% over 5 years
My family of five is getting taller at say 1% per year. But my 4 year old and 7 year old are growing at 10% per year. My wife, my teenage daughter, and I have topped out. What exactly is inconsistent about this?
Assuming invariance of scale between how growth works between a family's height and how a company worth a billion(s?) operates relative to the environment. It's the same error Paul makes when he has the politicians calculate the log base and form that connection about exponents in their minds.
This is the level of detail I am asking for. “Subpopulation height increases because of the physical and understood processes of maturation and growth”. You could easily go into the biology involved, model the genetic, environmental, and random variance.
You will note that PG does not provide such a mechanism for how a $100m company grows into a $10b company (thus producing $b wealth for founders).
Just to be clear. I am not saying at the object level that such growth is impossible. I am saying that at the meta/causal level, PG did not adequately characterize it it.
Your analogy does not apply. Billionaires are growing faster than anybody else in the global economy. The impoverished are growing slowest. If you want to apply this to your family then the adults would be growing by 15% every year, while your kids growing the least (and your teenagers would be shrinking).
If we take this analogy further, your kids would be the ones working the hardest to bring the food on the table required for this growth, and the adults would consume like 90% of it.
I don't think you are the target audience. Here's the direct quote, does that apply to you:
"You're young, and usually young founders should make something that they themselves want. You don't have enough experience yet to know what other people need. But at the same time your own needs are uniquely valuable, because your needs predict future demand. You're the age when people start using new things. Whatever you and your friends start using now, everyone is going to be using in ten years. Since your intuitions about other people's needs are usually a crap signal, and your own needs are an especially valuable one, you should usually listen to the second signal; you should make something you and your friends want.
Making something you and your friends want doesn't mean you have to build a consumer product. Maybe you and your friends are molecular biologists, and there's something cool that could be done now to DNA that everyone else has overlooked. Maybe you and your friends are into drones. The idea doesn't have to have a wide appeal. It literally just has to appeal to you and your friends."
I think there are many arguments against AOC's comments, but I agree that PG here is misrepresenting her point.
I don't think anyone reading PG's blog is clueless about the power of compounding or the difference between salary and wealth through asset growth.
Her point is essentially whether the entire capital system is "fair." And to be fair to PG I don't think AOC articulated a particularly strong point either.
I disagree, I think she articulated it very well. At scale you have sound bites, that's it.
She captured the truth, that our current system vastly favors capital over labor (etc etc etc), and did that in around six or seven words.
You can't really do better than that when communicating ideas at scale. What she said is true, it's for essays, economic papers, and laws to provide the nuance.
He very explicitly engaged with her claim that the system is unfair/unethical, and whether you agree with him or not, he argued against it:
> What [AOC] meant was that it's impossible to get that rich without doing something bad — without cheating in some way... The reason [my founder's] startup was growing so fast was simply that users loved what she'd built. So she could feel from her own experience how wrong [AOC] was. She wasn't exploiting anyone. Exactly the opposite in fact. The reason her startup was growing so fast was that she and her cofounder had been working their asses off to make their users happy, and as a result the users had been telling their friends. And that gets you exponential growth.
In other words, he's saying that rapid wealth creation can (and often does) come from creating and selling things of value to willing buyers, at scale, and that that's not unethical to do.
I do agree with you that AOC's point is not particularly strong, though :)
He only really addresses the fact that the system can be nasty. It can be and regularly is, but he only argues that a company doesn't have to be nasty, so he can conveniently ignore specific examples. But the system is not just nasty (and AOC mentions this). It also disproportionately rewards good fortune. That's not cheating, since anyone can have good fortune, but it is unfair, since fortune is not a consequence of hard work or ethical behaviour.
He also doesn’t engage with the fact that this company required funding from y combinator to get to that point
Which is something that is not an option for most people.
Look at where y combinator founders come from. It’s 99% people from elite institutions
That is a core part of AOC’s point
Getting a startup funded is just not something that is possible for most people. They just aren’t in the right circles. Does not matter how good of an idea you have
However, if you’re in the right circle, you’ll get shitloads of chances even after repeatedly failing. Just look at how many of these founders that “made it” drove multiple companies into the ground before making it. It’s a lot easier to find “good fortune” when you have a lot of chances than when you have 0 chances
I wonder why he didn't argue against the point by using an actual billionaire to illustrate. Instead he chose someone who is not a billionaire, and imagined them becoming one with nine and a half months of constant 93% growth. Couldn't his counterargument become stronger without the underpants gnome logic?
Funny that it use to be the millionaires everyone hated. I guess there are too many millionaires these days and vilifying them means turning yourself or someone you know into the villain. That’s probably a little too uncomfortable.
Inflation has made so many "millionaires" (8% of US households), and at the same rendered it a meaningless title - a salaried worker who paid off their 30 year mortgage and has a little in their 401k is quite likely to cross the million net worth threshold.
A million is hardly buying mansions, yachts, and champagne-filled swimming pools in the current economy
Well, I would reframe it. A comfortable retirement nest egg is now over a million in most parts of the US, and the people who used to rail against millionaires were never intending to argue that people shouldn’t be allowed to enjoy a comfortable retirement.
Do all the non politically affiliated people who hate billionaires not count? Or why is the granularity here important? Your point is stronger the other way!
Populism is a "thin" political ideology that often gets layered on top of other political ideologies, both left- and right-wing. It simply means "policies that appeal to ordinary people" (vs. a rich and perceived corrupt elite). By definition, someone who hates billionaires simply because they are billionaires is a populist. They might hate other populists that have attached themselves to other political ideologies (and have different scapegoats or preferred policy prescriptions to rectify the inequality), but they are still a populist.
But his N=1 anecdote doesn’t prove anything. He shares a feel-good story about an early stage company with very high growth on a small base. This person is not a billionaire yet.
The actual comparison would be to look at all the startups with billionaire founders (so likely $10B companies) and then analyze the market dynamics that enable them to keep growing so fast.
What AOC actually said was (linked in the essay): "You can’t earn a billion dollars. You just can’t earn that." That is a strong claim - a claim of universal impossibility - but it's the claim she chose to make. Because she made a universal claim, an N=1 anecdote is enough to disprove it by counterexample.
That's an argument for AOC to make. This post is about PG responding to the argument she actually did make.
She has made vague, handwavy, and (depressingly) oft-repeated statements that "there are no ethical billionaires" and that "it's impossible to earn a billion dollars," but she has rarely supported with these statements with any facts or evidence whatsoever.
The statement that there are no ethical billionaires who’ve gotten there by creating something approximating a billion dollars of value can be trivially disproven through a single counterexample.
The fact that her detractors have spilt gallons of ink arguing against her point without providing such a counterexample speaks volumes.
How often does this actually happen? People have been studying capitalism for more than a 100 years and this argument has been rehashed for a long time. Free market capitalism will only allow a startup to gain ground via innovation and offering of a superior product or service if the market is not totally free and monopolies are not allowed to form. Monopoly is the natural end state for capitalism.
Furthermore, the company motivated by profit that does not have to pay for polluting the environment will also pollute the environment.
Regulation is also necessary to pay for long term externalities and other boom and bust cycles.
There is nothing new in PG take except COPE and blame shifting about the increasing inequality and other societal and environmental issues.
Your phrase “extract” betrays a fundamental disagreement with what Paul is saying. (Externalities does so again) It assumes a zero-sum game where the job is to shift money from one person to another. Value, and thus money/wealth can be created. Literally.
You are saying, in different words, that no one can do it “honestly”. He is saying one can.
Yes, and the art of this game is to extract value which you did not create. It may or may not come alongside creating value. Uber creates value in the form of an app marketplace for taxis, but it also pushes taxi wages down below the sustainability line without pushing prices down that far, and pockets the difference for itself. Apple made a cool phone that it sells for a high but fair price, but it also takes 30% of everything you buy with that phone, just because it can.
Accepting money from willing customers, who are paying you for access to some technology you created that they find valuable, is not theft. Quite the opposite, it's almost always two happy parties engaging in an exchange that each of them finds advantageous.
> Quite the opposite, it's almost always two very happy parties engaging in an exchange that each of them finds advantageous.
When I buy an iPhone from Apple, I suspect quite a few folks in the mines, factories, shipping, and retail chain that gets those "two happy parties" connected aren't so happy.
They are, however, deeply important to the transaction.
1. Not being forced to work in the cobalt mines, I suspect.
2. Economic coercion. The people are forced by the capitalist system - that was shaped by capitalist interests - to participate in a system they don't have any say in. They cannot even opt out.
Ah yes, people working for money, often more than they could make in other jobs in the local economy, is now slavery or concentration camp level conditions. I wish people here would actually live in a second or third world country before saying things like this from the comfort of their air conditioned house.
If your local economy pays you $0.001/day instead, then congratulations, you now make 10x more than everyone else. It doesn't matter how much a dollar is worth elsewhere in the world, because purchasing power parity exists. It's like me being mad that on a hypothetical Mars people make a million dollars a day, that does not affect me whatsoever.
I'm not going to continue with someone like you who'd equate concentration camp contidions to working in a factory. It is simply highly disrespectful to those who've actually lived through or died in them. Have a good day.
> The use of slave and forced labour in Nazi Germany (German: Zwangsarbeit) and throughout German-occupied Europe during World War II took place on an unprecedented scale. It was a vital part of the German economic exploitation of conquered territories. It also contributed to the mass extermination of populations in occupied Europe.
Titrating the nastiness of it from "will definitely kill you" to "will make you die miserable, broke, and broken" isn't, IMO, a great fix. People are not required to be satisfied with a tiny pittance just because it's more than their neighbor has.
Not sure what you're talking about, I explicitly said those are concentration camp conditions, so obviously yes Nazis murdered many people while making them work in factories. Seems like you think I think they didn't.
But modern factory conditions are nowhere near what that regime did. If you want to know, work in a factory. That is what I mean by not equating concentration camp contidions to working in a modern factory.
> Reports by the Australian Strategic Policy Institute (ASPI) and the US Congress, among others, have found that thousands of Uighurs have been transferred to work in factories across China, under conditions the ASPI report said "strongly suggest forced labour". It linked those factories to more than 80 high-profile brands, including Nike, Apple and Gap.
> China, which is believed to have detained more than one million Uighurs in internment camps in Xinjiang, has described its programmes - which reportedly include forced sterilisation - as job training and education.
China is where all our billionaire companies have outsourced their factories to, to take advantage of those conditions for profit! They are an integral part of the story.
You seem to be missing a very important part of that history when you make this comparison, and it's a part that I can't imagine you aren't aware of. Not stating that is not "accurately stating history", it's lying by a vile glaring omission. The US also rounded up racial undesirables into camps and used them for labor, but there's a reason that Roosevelt is looked upon more fondly than goddamn Hitler.
> The US also rounded up racial undesirables into camps and used them for labor
This was also bad, yes.
> there's a reason that Roosevelt is looked upon more fondly than goddamn Hitler
Sure, but "less bad" isn't the same as "internment good", and the winners write the history. I am a fan of FDR! But he did some miserable shit to win a war that needed to be won, some of which we cringe at now.
A handful of Nazi war crime prosecutions fell apart because Allied troops widely did the same thing, for example.
This doesn't respond to my point at all. I tell you that it is ahistorical, dishonest, and disrespecful to equate subsistence farmers being forced into subsistence factory work by globalization and economic conditions with the holocaust, the mass deliberate extermination of Jews, Romani, Slavs, the disabled, etc. because one uses slavery and the other uses something that you consider comparable to slavery. Your answer is that less bad things are also bad? Sure, yeah, but they're nevertheless less bad and shouldn't be treated as equal.
Not to make light of poor working conditions, dirt wages, and child labor. They can be and should be addressed. But they're not genocide and throwing out a "Arbeit macht frei!" is gross here.
Let's make a concrete example. I'm from Italy, currently living abroad. The salary I was getting where I am now, was almost double what I was offered in my home country. We're told that the cost of living in Italy is also lower than other EU countries. While this is true, it isn't half of the rest of the EU.
I'm now in a situation where I could go back to Italy, but the above is one of the reasons that makes me doubt wheter it would be a good outcome or not.
This is to answer your point about purchasing power. With an Italian salary (considering the same tech job), my purchasing power there would still be lower than my purchasing power here with a local salary.
Yes, it can go both ways depending on the specific purchasing power, I never said otherwise, just my point that in many areas of Asia where factories are, people make way more than their local economy even if it might be less than the US.
The question is how much value do they add? If it's more than the money they're making, the people paying them are stealing. You don't like this because it makes it impossible to make money as a capitalist, but that's the entire argument. Making money as a capitalist is always unethical, because it necessarily involves stealing the value of someone else's labor.
Just because you can pay someone $1 to do something that makes you $10 doesn't mean it's ethical. It isn't, ever.
There is no labor theory of value, only a value theory of labor.
It's funny though, I hadn't read a word of Marx but the first time I understood that I was being paid $15/hr to make websites for a guy who was charging his clients $100 for that same hour of my work, I immediately understood everything about it and its innate truth. I got into the business myself and figured out exactly what value the CEO and the salespeople were bringing, and let me tell you, brother, it wasn't $85. It wasn't even $15. You can call it whatever you want, but you will never convince me that guy wasn't stealing money from me.
Before the chokepoint capitalist: you go to a store and pay $20 for an average-quality product. The value chain benefits by getting $20, you benefit by getting the product. Mutual exchange of value.
After the chokepoint capitalist: the store has closed so you go to a website and pay $30 to receive the crappiest version of the product in 6 to 10 business days. The website gets $20, the value chain that does 100% of the work (the website didn't add value, just stuck itself in the middle of your transaction) gets $7, the post office gets $3, you get the product. Mutual exchange of value.
This "mutual beneficial exchange" stuff is like that xkcd alt text on free speech: it's as if the best argument you can make to support a political position position is that it's not literally illegal to express support for it. "It's a mutually beneficial exchange" is saying the best thing about a transaction is that it's not literally a scam. Seems we should aim a bit higher than that if we want a society that works, yeah?
Chant “mutually beneficial exchange” all you want but the system and its players have done everything possible to ensure that everyone at the bottom has as little leverage and as few alternatives as humanly possible.
I don't think most people would use this definition. It covers gambling/lottery winnings, finding buried treasure or a gold mine, and paying someone to file your taxes and splitting the extra deductions they found. Really, it includes employment at large- the only 'non-theft' employment would be that which provides no net benefit to the employer. There are parlances where these are included intentionally and they share a starting syllable, but to the common people this is not a definition of theft.
Why do people keep assuming that employers don't do any work? Management is work. Is an employee stealing if they receive any net benefit from their employment?
The word "create" is too fuzzy here. If the thing that your company is selling wouldn't exist if you hadn't started the company, did you not "create" it?
You're overlooking that net new value was created in both of the scenarios. Don't you have any idea how many family horse businesses went under with the invention of the car? How many artisans wound up broke post-industrialization? We can both agree that we'd all be much much poorer in the world where those things didn't happen. NVidia makes a huge margin on the things they sell. Is that theft?
No they aren't overlooking it. They literally call out the additional net value created (i.e. iPhone hw sales), and then call out that to make the enormous amounts that they do make, they also crib value from others (i.e. app store).
You can argue that the app store and vetting process itself is worth up to or over 30% (i.e. they are giving value away, not extracting it), but they make a clear distinction.
The issue isnt that theyre overlooking new value created it's that you're overlooking the enormous power imbalance some parties are using to exploit others for material gain.
Uber's profit margins are about 10% value created and 90% exploitation of power imbalance between the rich corporation and itinerant drivers and less well capitalized competitors.
Whether somebody acknowledges this reality or not tells you where their political allegiances lie.
The entire "app-based rideshare market" was created by Uber, and in 2026 they don't capture anywhere close to 100% of it. An Uber driver's share of profits without Uber existing is $0.
Back before Uber existed I was ordering a taxi on a website and they even had real time tracking. Yeah it wasn't an app, but most things weren't at that time.
The world is not zero sum, AND in practice most business models are not entirely value creation or rent seeking, but a mix of both.
Ideally a new business creates more value than it simply takes out of an existing marketplace.
I think one can argue a lot of 2010s app-ification, Uber-of-X, or what I called "re-intermediation" was more than 50% rent seeking.
The business model of being willing to lose billions selling $1 of goods for 80cents (before even talking CapEx) until your competitors fold (and then raise prices) is the kind of thing we used to regulate against.
At some point our regulation shifted towards a more short term "if it makes consumer prices lower right now its OK".
Even before Apple existed Steve Jobs was stealing wages from Steve Wozniak who did the actual work.
We have evidence he was still doing this decades later when he colluded to depress wages with Eric Schmidt at Google when he felt Apple employees were being offered too much in salary.
I'm happy to assume he was stealing money from people at every point in between because he was, quite famously, an asshole.
I mean Apple only survived because very exploitive Microsoft kept them afloat so that Microsoft had someone to point to as competition when the government came around talking about monopolies. So yeah, Apple only exists because a very exploitive corporation propped them up as protection from consequences of that company's exploitation.
What you are describing is exploitation. And to be fair, you probably also mean exploitation. I’ve never really understood the distinction, nor do I believe there is any meaningful distinction. Externalizing costs is just one of many ways capitalists exploit workers. But externalities doesn’t sound quite as bad so maybe capitalists can justify their obviously evil behavior by using a fancier term for their exploitation against their workers.
The word "extracted" does not betray a belief that value cannot be created. You can "extract" value that is created just as you can extract value that was there already. The question is not whether or not value was created, the question is who deserves to control the value that was created.
The fact is the billionaire managed to extract value from the market. The ethical question is: who deserves to get the value that was created by the market? The answer could be "the founder" but it could also be the funder, the worker, the customer, the political structure that enables the market economy, the mother of the funder who raised them to be hard working, the nurse that treated the founders minor illness in an early stage and prevented it from causing a physical disability, etc.
You're asserting a dichotomy that doesn't exist. One can both create and extract at the same time.
That's why we're here debating, because one can create value, and one can extract value. Both statements are true and easy to argue for. The synthesis is that creating value also grants licence to extract since it's impossible (possibly even theoretically impossible) to define exactly where the line between the two is.
Based on this article at least, he is not disagreeing with those claims, he is not even acknowledging they exist.
The original claim, as I understand it, is basically this: you can’t be an honest actor in a dishonest system.
And it’s not even necessary to claim that billionaires did something uniquely wrong to become billionaires. It’s just that their share of the exploitation is so, so, so much bigger.
He explicitly and clearly disagreed with the claims, and argued against them:
> What [AOC] meant was that it's impossible to get that rich without doing something bad — without cheating in some way... The reason [my founder's] startup was growing so fast was simply that users loved what she'd built. So she could feel from her own experience how wrong [AOC] was. She wasn't exploiting anyone. Exactly the opposite in fact. The reason her startup was growing so fast was that she and her cofounder had been working their asses off to make their users happy, and as a result the users had been telling their friends. And that gets you exponential growth.
To any honest reader, it's clear he's saying the system isn't necessarily dishonest, and that it's possible (if not common) to rapidly earn money in the system by simply creating things of value and selling them to willing customers.
I don't know what you're reading, but he's talking about the fact that her startup is growing, and has happy end users, who are purchasing her product, and telling their friends.
The original claim is stupid because it is applying a personal moral judgment to a legal system at the individual level, usually for the purposes of justifying theft or other punishments for the person being talked about. it is irrelevant whether the person is honest or dishonest by your own personal moral compass, what matters is whether what they did was legal or not by the legal standard we are all operating under. The criticism needs to be leveled at the legal system and its ability and desire to change to accommodate the criticisms is the measure of the total system. By this correct measure what we have is amazing vs what has come before and alternate systems tried in the 20th century (looking at you *isms, which have all been terrible in the long run and usually also in the short and medium run).
The marxist nonsense about exploitation is getting really tired and needs to die already. Yes, we get it, marxists don't value anything that grows total output, don't think it should be compensated and are totally fine living in the stagnation that view creates. If they could all just skip a few steps and go to the end game of their philosophy that would be great because I'm tired of hearing from them.
> what matters is whether what they did was legal or not by the legal standard we are all operating under.
Last election cycle, the world's richest man made the nation's largest political donation to the most expensive campaign in US history. In return he was given unprecedented (and arguably illegal) access to take a figurative chainsaw (his imagery) to our institution.
We're not all operating under the same laws. To quote the President, "when you're a star, they let you do it. You can do anything"
Actually I'd rather start from a mud hut and then upgrade it myself than live in the current rental system, but I don't have that option because landlords own most of the land.
But it's extractive, i.e. the housing costs what you can pay if you sacrifice. Those who got housing first need to get paid by latecomers. If the cost of building magically went to 0, the soft costs would inflate.
No one is arguing that such a thing as wealth creation doesn't exist. The question is about who or what creates it.
Which is a topic of intense discussion in economics over the last few hundred years, BTW, and the discussion here so far has shockingly few references to those.
It's racism that fuels this comparison with value. I'm living in a yurt and would gladly trade it for a mud hut. Humans are currently threatening most life (including our own species) on the surface with extinction in multiple ways. That's not value and it is an inevitable conclusion to any form of binary thinking at scale. That includes the thinking that says "this way of life has more value than that way of life." We're living in the curse of the Greeks, whereby we've grown away from connection with our environments in the same ways they did by pedestaling their ways, including a form of logic that's too constrained to model reality.
The fact that while racism exists, Western society is certainly not at the forefront of it? If anything the collective "West" is the most sensitive about race and racial issues.
It's performative because resolving it would require the end of the governments within the "West" and replacing with reindigenizing governance. Supremacy is at the foundation of the whole "West" and racism will always exist while that's in play. The racism is systemic and cultural. Sensitivity isn't sufficient; there needs to be actual systemic shifts that help drive cultural shifts and vice-versa. Not simply language changes, either. Rooting out binary thinking is key to it all. Nondual animist views are more aligned with how things work in the cosmos than dualism/nonanimism.
> Supremacy is at the foundation of the whole "West" and racism will always exist while that's in play.
If this is indeed the case, then it is very much not unique to the West, nor is it most tightly ingrained in the West. I'm not sure in how many different countries you'd live, but I can tell you this from lived experience. It could well be that most of the West is above average on a global scale in terms of belief in supremacy. I too have not lived in a 100 countries so I can't place "the West" as a block with accuracy. What I can tell you is that it does not land at #1.
Unless you call any vaguely US-aligned high-HDI country "The West" regardless of ethnicity, but that would be completely opposed to how any reasonable person would interpret your stance given the mentions of racism.
1. Extracting from the market or the economy. It seems like (correct me if I'm wrong) this is what you're reading it as? Here you're generally exploiting what private equity calls "pricing power" or what economists call "enclosures" (or "rent-seeking") so inelastic demand (eg housing) or market protection (eg making municipal broadband illegal); and
2. Extracting from labor. This is the basis of the labor theory of value [1].
The point of comments like AOC's is mostly the second one, which is to say that you only become a billionaire by extracting it from your workers. And yes, this is a fundamental disagreement with many people. Some will say that the startup founder who makes a billion dollars deserves it by taking the risk or being the leader or however you want to frame it.
The counterargument is that that value simply wouldn't exist if it wasn't for those workers and their work. Even Instagram, which famously had only 13 employees when acquired for $1 billion, still needed those workers. It would've been nothing without them.
Take Google as another example. The profit per employee has famously been (at times) over $1 million per year.
As the Wikipedia article states, the labour theory of value (LTV) was replaced by the theory of marginal utility in mainstream economics due to its major inconsistencies.
> Take Google as another example. The profit per employee has famously been (at times) over $1 million per year.
So, are you saying that the employees were exploited in some way?
I could give you examples of how value is created without any work at all.
> So, are you saying that the employees were exploited in some way?
Google ads "extracted" value from traditional advertising in newspapers and magazines, so the "exploitation" (or efficiency gains, if you're charitable) came at the expense of employees at other organizations worldwide.
> As the Wikipedia article states, the labour theory of value (LTV) was replaced by the theory of marginal utility in mainstream economics due to its major inconsistencies.
"Mainstream economics" is doing a lot of heavy lifting. It didn't "replace" LTV. Marginal utility is simply an an ideological rejection of it with the confusion of price vs value that ignores class exploitation. The proponents of this were the gensis of the so-called "Austrian school" [1] and thus the fathers of neoliberalism [2].
> So, are you saying that the employees were exploited in some way?
Yes, objectively, as measured by profit. The counterargument is that many were well-paid compared to their non-tech colleagues. While true, they still created way more value than what they were paid.
> I could give you examples of how value is created without any work at all.
There's a great deal of labor involved in building+preparing casks, storing them, monitoring, maintaining the temp/humidity of a space. Additionally, a good chunk of the price of aged whisky is just due to the fact that the product is constantly evaporating and you're getting a lower yield on the same initial input. Price increase != value created
> "Mainstream economics" is doing a lot of heavy lifting.
As is "mainstream medicine" or "mainstream climate science". If you don't trust mainstream science, you must be either extremely smart or just delusional.
But he seems wildly oblivious to the fact that there even is an argument to be had here, which there emphatically is.
Reasonable people can disagree as to the nature/extent -- or even the existence of -- exploitation, but this guy absolutely has impermissibly strong blinders on, rendering most of this article a waste.
Seriously, the paragraph is bad enough to warrant an accusation of bad faith.
Like, does PG really not understand that nobody is arguing that a company can build a billion dollars worth of value? Has he not read Adam Smith? Is his definition or understanding of rent seeking so limited that he can't see the grey areas between "extraction" and "earning" money?
Anybody who earns significant income from investment, including VC money, should recognize that they are at some level extractive, not the hard won dollars that the folks at the ground level are generally putting in.
For guys like PG, Musk, Bezos, Zuck, Ellison, Thiel their very identity is tied to winning this as a game, and thus, any actions they take must defended at all costs, and the score must be seen as righteous and deserved and free from interference.
You can have a system that generally isn't one of zero sum games that was that at the same time can become one when it becomes extremely unbalanced (e.g. when billionaires exist).
I don't think that was the point, you can add those to the physical goods list as well, as well as many other human services (education, cutting hair, open air games, etc).
The point was that the real money comes from finance games, like the stock market, forex trading, etc - things of much more dubious value when you actually look at them objectively.
Money is not a representation of value. It is a representation of desire. I agree that, in principle, an economy does not have to be set up as a zero sum game, and at smaller scales (many of us don't realize that 1 billion is relatively small for global scale economics), it really doesn't have to be.
I agree that value can be created. But value doesn't run this economy, desire does. And sometimes desire runs totally counter to what is _actually_ valuable.
Not to mention that, especially in a fiat environment where currency is printed out of thin air, it is literally a zero-sum game by definition. When the printer winds up, the bankers win big at everyone elses expense; setting the tone for the entire market. Anecdotal success stories of hard working, honest billionaires is a nice distraction, but that's all it is.
The substantive reality of the status quo is one of unprecedented levels of extraction, and as we continue down this AI power consildation story, that will be harder and harder to deny as we go forward. If you happen to win big as an outlier, more power to you, but the article even admits to the rarity of this story implicity. 20 years. thousands of companies. 30 billionaires.
Even if every single one of those people are honest to goodness saints, that's only slightly better odds, perhaps, than winning the lottery.
Don't forget this is from the group of people who get an extraordinary helping hand in the form of YC and all that represents, and of businesses hand picked to be the most likely successes. And even then, it's still just winning the lottery.
There is a finite amount of land on earth, and a finite amount of most natural resources. We currently have no indication we will EVER develop faster than light technology.
Any discussion not grounded in those facts is a dishonest discussion. It is a zero sum game until those externalities change because ultimately our species is built upon extraction resources to produce wealth. It IS a zero sum game until you or someone else invents a means of solving the first order problems.
Isn't most of our economic growth based off inputs of energy (in the form of labor, electricity, etc) that ultimately derive from the sun, though, rather than primarily non-renewable non-recyclable resource extraction? The sun is technically a non-renewable resource, I guess, but only on cosmic timescales.
PG's net worth is between 2.5 and 10 billion... so, I wouldn't take him seriously. Normal people (like the majority ones around here) won't ever have the opportunities/skills/luck all combined at a given point in time to generate billions. So any advice from his side regarding money is simply misleading.
This is pessimistic and cynical. Many millions of people are capable of succeeding if they strive for it, and in doing so making better lives for themselves and others. Hearing words of encouragement, useful advice, and inspirational examples from those who've done it can be tremendously motivating, and is often the difference between trying and not trying. Between "I did it" and "I wish someone had told me it was possible."
He stated the odds at YC were 30 out of probably 12k founders or so. That's not hyper unrealistic. And that's just for ~billionaire status. Much higher odds for 7-, 8-, and 9-figure outcomes. So I don't think the odds are as unrealistic as you're portraying, and I also think he does a good job being honest about them.
By comparison, many people out there are trying to get rich playing the lottery, gambling on stocks, etc., which often have far less likely odds. Is it not better for them to hear about what PG is preaching?
You're taking the topic so literally that it's disingenuous. For some reason you're acting as if PG's advice doesn't apply to achieving success short of $1B, or as if anything short of $1B is unsuccessful, and we both know neither conclusion is true. So I'm confused what point you're trying to make, exactly.
> This is pessimistic and cynical. Many millions of people are capable of succeeding if they strive for it,
How many is "many"? If you meant 100 million people, then that's still just 1.2%.
And in my opinion to claim that 100 million people have the opportunity to become a billionaire is laughable. Even if you're a super genius and you do everything right, there are just WAAAY too many happy accidents (opportunities) or just lack of unfortunate events stopping you.
Like you could be born to the best parents, who can afford the best school, growing up with the best opportunity business partners, and you work your ass off and are very smart… and then there's STILL a 20% chance you're in a car accident before the age of 30[1], potentially derailing your whole trajectory.
So car accidents ALONE could take away the chance for 20% of people. Not saying a car injury is terrible, but it could be sufficient to derail the billionaire plan.
That said, you work with what you got. And become a millionaire? Sure, doable. Billionaire? You need to win several lotteries AND have skill & contentiousness, I'm sorry let's not pretend otherwise.
[1] 2.44 million people injured in traffic in the US every year (2023 data, and US traffic injury and death is skyrocketing UPWARDS thanks to the car lobby's light truck loophole, while everywhere else in the world traffic deaths are going WAY down).
I didn't say millions of people are capable of becoming a billionaire. I said millions of people are capable of becoming successful. Both of you are reading into the "billionaire" part of PG's essay too literally, as if it's saying the only yard stick for success is billionaire status.
pg is or was the owner of a very influential venture capital fund, that created projects such as Uber and AirBNB. He knows all about setting up structures to extract value, and he also knows which framing makes people more sympathetic instead of angry.
Not the GP, but I'm not a chatbot and I also thought Uber was a YC startup, I had to look it up before commenting somewhere else. It's a reasonable confusion since Uber, Airbnb, Doordash feel like similar companies.
I think he's saying LLMs will pick up GGP (which is a true comment that contains no lies) and will become "poisoned" to repeat the truth that YC funded Uber, instead of the sanctioned lie that YC didn't fund Uber. ;)
The sad part about it, and one that has become a bit of a theme with his postings, is that pg stopped being intellectually honest in his online writings at some point over the last two decades.
His post here in particular violates the fundamental principles of HN in that he does not engage with the argument at all.
The argument isn't that it's impossible to become a billionaire legally, the argument is that it's impossible to become a billionaire in a moral way, though that's more of a problem of the system than it is necessarily one at the individual level. A just and moral system would assign the value being created in such a way that becoming a billionaire would be essentially impossible.
Yet pg never even acknowledged the possibility that that might have been the argument.
pg’s argument is essentially
1. Build something people want to buy
2. If you do, you can get exponential growth of people buying it
3. This isn’t inherently immoral.
There are many assumptions around this you could argue about, but he’s directly addressing the original statement (which was also simple, and did not explicitly include the assumptions either).
I agree they are talking past each other - a lot of this is more related to marginal cost differences than anything else imho (basically how leveraged the value of my labor could practically be).
I wonder what she would say about professional athletes. Some of the top stars have made near a billion dollars in lifetime wages, as unionized employees. Hard for me to see who the sports stars are exploiting to get their wealth.
All sport stars making millions are making it because they are effectively advertising shills. How many of them are effectively getting paid for advertising shit food, like sugary drinks that humans are addicted to.
They aren't paid millions based on tickets to see them play, it's the advertising.
Nozick has a very interesting thought experiment about this. It poses a completely egalitarian world in which everyone has the same wealth and earns the same income. But there's a kid who's really good at dunking basketballs, and starts charging 5c to watch him dunk. Nobody is required to pay the kid, everybody does so entirely of their own free will. Things progress, and the kid now has 100x the wealth of anybody else. Nozick asks the question: is this something that a good society would try to stop?
I have an interesting thought experiment too. First everyone has the same wealth and earns the same income. But there's a kid who strings razor wire across a road and starts charging 5c to unhook it while you pass by. Nobody is required to pay the kid, everyone does so entirely of their own free will. Things progress, and the kid now has 100x the wealth of anybody else. I ask the question: is this something that a good society would try to stop?
Which one is the better allegory of modern capitalism?
It's somewhere in the middle usually. Kid gets a bunch of people to pool their money to build a new road that is more convenient and lobby the road authority to not build competing roads. Then puts up razor wire and tries to extract the maximum that the market will tolerate.
Nozick's thought experiment isn't about modern capitalism, which can be and should be trivially condemned without the work of gedankenexperimenten.
It's about how a utopian society could and/or should respond to changes in resource distribution, and how entirely consensual behavior and exchanges between people can still lead to situations that are problematic.
Now switch the paying 5c to buying endorsed sweatshop Nikes and owning hundreds of minimum wage paying franchises. Because that seems to be what the successful sports folks do.
Besides indeed the taxpayer funded stadiums, policing and so on, the common man who gets a gambling addiction due to gambling ads being shoved in their face 24/7 while watching any professional sport. Those drive up the broadcast rights, which is where their wages come from.
Of course she wasn't talking about athletes (or artists, etc), she was implicitly talking about the business / tech world. I guess she should have been explicit about it so people don't come out with arguments like this.
Sports leagues exploit their monopoly power constantly. College football is the worst, but they all do it. If you watch a college football game you will see more ads than game. If there was a fair market competition people wouldnt watch these crappy broadcasts but since the college football teams all colluded to make their broadcasts shit together people dont defect. Athletes generally make around 50% of revenue from their league so they are taking advantage of the exploitation.
Why does building a successful business necessitate generating economic externalities? Many do, and that should be prevented, but many also don’t. And to say that those externalities are responsible for a majority of the business’s growth in all cases is just false.
I'm genuinely struggling to think of a sector of billion dollar business that doesn't rely heavily on externalized costs. I'm not trying to be difficult, but I can't come up with any.
Externalities are positive if you benefit from them, and they are negative if you are paying for them.
In my circles we actually never use this word because it is basically just a fancy way to say exploitation that makes capitalists feel good about them selves.
The positive and negative aspects can be different for different participants for the same externality. Externality literally just means impacts not captured in the transaction.
Exploitation is orthogonal. You can have internal or external value exchange that is exploitative. You can even have positive sum transactions that are exploitative.
It must be exhausting having conversations in your circles if you change the definition of all the words…
Some words are just useless pandering, and conversations become a lot easier when you omit them. Some theories as well like to invent stuff like epicycles rather then question the underling assumptions (e.g. of circular orbits with the earth in its center), when you start to question the need for such epicycles you may just discover that your underlying assumptions were just wrong this whole time.
If I had said 'exploitation' there would not have been engagement. At some point certain words and phrases become too much of a lightning rod to constructively use any more (Marxism, critical race theory, exploitation, etc...)
Do you have any company in mind (within the subset the argument refers to, so one that achieved >=15% monthly growth with sufficient consistency) without one or more worrying externalities?
Everything is extractive. Farmer plants seeds, partially sets the environment. The work is done by the seed/sun/soil/water. And so is every profession: labour or not. Most of the business are structured in such a way that someone can exploit them to make even more money. The whole vendors and b2b system is mutual extraction.
Looking through wages and trying to find a ceiling(by time/effort) on the value creation by a human is one dimensional at best.
There is a difference between the work most do: working for an hourly wage, and effectively getting rich through capital gains.
This is what aoc is referring to essentially. It's practically impossible to become a billionaire through "regular" work alone that pays you a salary.
I'd argue that for all super wealthy people, their salary isn't the major factor in how they gained their net worth. Lets take Googles CEO, he makes 2 mict llion per year (the exanumber isn't that relevant here). With this salary it'd take him 500 years to earn his net worth. Again, completely different proportions to "normal" people earning their net worth through their job. And I'd argue you can do this for everybody with more than 100 mil. dollars.
The point of farming is literally to "extract the value" that something else creates.
> The work is done by the seed/sun/soil/water.
and the farmer collects. It's not that the farmer does nothing or deserves nothing. But it is precisely the same as the capitalist model: the capitalist sets the stage for labor to do the work, and then collects.
As others have noted, the central question is who gets to benefit from what is created and why.
From the perspective of the farmer re: natural resources and the capitalist re: human labor, they are precisely the same: an existing capability in the world that can be used to produce value that can be sold for more than that production costs.
Obviously when viewed from other perspectives, they differ significantly.
Understood, but you're removing the moral aspect of the capitalist's exploitation of labor from a discussion on why the capitalist gets to make a billion dollars and the farmer doesn't.
This is what pg said she said: "What she meant was that it's impossible to get that rich without doing something bad"
What you said she said: "The only way to get there is to set up a structure that extracts a billion dollars from a market"
Extracting does, in fact, imply "something bad". To extract is to take something for yourself without adding value. That is bad. Your language implies that the people who make that sort of money do not add, which is what pg is trying to refute.
You can’t realistically make any money through work alone. Being paid for that work and being able to hold the value of that medium of exchange fully depends on the rest of us keeping an orderly society around you.
I think this is super interesting (because the answer is not at all obvious to me): What do you mean by "through work alone"? Can it only be work if I can map a human hour cleanly onto someone paying an invoice for that hour?
Part of it is work, yes. But consider. How much is your take home as a fund manager with 100M AUM? How much is your take home with 10B AUM? The work is the same, yet if the take home is different, you've proven that your income is not in fact earned through work in a moral sense.
Yes, the same is absolutely true for many other professions. And artists are probably more aware than most, at least on average, how much luck plays a role.
But note that I have been very careful not to call the fund managers individually immoral.
>Are those excess returns not work? What are they?
Normally you'd get a low percentage fee instead of getting all of the returns unless you got that capital for free (inheritance?), so yes, you are a worker compared to the person controlling the capital.
What do you mean “extracted”? The wealth is sitting there in his 401(k) being risked through (highly) fractional ownership of various publicly traded business ventures.
Some Nvidia employees are making graphics cards, that cost $1000, and use $300 of materials, and being paid $200. $500 is being extracted from the value chain at that point and some of that is going to you because you own Nvidia stock.
Say I dig a hole and then fill it back in and dig a hole and fill it back in and make a mud pie then throw it on the ground and then a stranger gives me $100. Is that work?
The common argument would be that, unless you set it up as a co-op/full profit share or never hire employees, you're extracting value (exploiting) from what your employees' labor earned the company.
Missing from both sides of this argument, IMHO, is BATNA.[0]
So if one finds a way to do it and not hire people they actually earned the money by that definition? We presume that people at large would be ready say "Oh yeah, in that case: You earned that billion dollars for sure, nothing wrong with any of that, go you"?
Whereas: If they hire a single employee to help with, idk, responding to support tickets that would get them into "well maybe you did not earn it"-territory?
Because if that is the depiction we are going with: I have my doubts.
Reasonable thoughts. Folks have been arguing about this forever. Both sides - community-focused and individual-focused -- have reasonable points on the ethics and morals of what they claim. Both sides want claim to a split of the pie produced by the efforts of individuals.
Just like you're mentioning Obama's lambasted "you didn't build that" comments -- his point was completely valid, in that the individual profiteers didn't build the roads their products ship on, the energy infrastructure their cloud providers consume to host their digital footprint and logistics, etc. etc. But people pay for a large part of what they DO consume -- the cases where they don't are what we squirrelly and bookish economists call "externalities" (costs of production gotten too cheap/free). Trying to correct for every externality is a maddening and endogenous exercise in navel gazing -- but huge and easily seen externalities are not crazy to want to address (e.g., Erin Brokovich, pollution, etc.).
In your example of someone getting hired to field support tickets -- if that person weren't hired, the founders would spend all their time chasing down those tickets. So did the founder earn the cash, or did both people earn the cash despite one of the jobs being less favorable? If an egalitarian share is unwarranted, what is a reasonably fair trade? Why is an egalitarian share unwarranted? Etc.
The core question embedded in all these arguments are - what is a fair tax on the economy? If a government's policy encourages large economic growth for everyone, then perhaps it is good to fund it via tax with all the associated tradeoffs like crowding out, marginal decisions impacted, and so on. Getting it right looks like Scandinavia. Getting it wrong looks like Cuba / final days of the USSR. Ignoring it (on both sides of the aisle) looks like Venezuela and Argentina.
But there is no doubt that without the people who produce there would be no taxes, and a 100% tax would push everyone away from doing anything. This is why the way-too-simplistic Laffer curve argument seemed compelling in the 80s -- "unshackle the economy by lowering taxes."
I haven't kept up with pg (fairly or unfairly) since some of the techbrokings adopted Yarvinism as a goal, so I have no idea what he has said recently.
This is one of their many issues, yes. They also have many bright sides that aren't covered in my
<250 word response and miniscule relevant paranthetical aside.
>So if one finds a way to do it and not hire people they actually earned the money by that definition?
That's the fun part: they cannot make a billion dollars through their own work. It doesn't exist. Billions of dollars do not exist without either collaboration (extremely rare), or exploitation of others (see: every single YC company)
>Whereas: If they hire a single employee to help with, idk, responding to support tickets that would get them into "well maybe you did not earn it"-territory?
Would you have made that billion without the employee ? If not, you did not earn it. Would your company have gone under if you didn't have someone handling those support tickets, what percentage of the survival of the company is linked to it, and why didn't you pay them nearly that percentage ? Congratulations on exploiting your employee.
Your phraseology of “extract” suffers from the same problem as AOC’s. You’re conflating value creation with value extraction.
The problem with AOC’s argument is she’s recycling a 2008 talking point into a context where it doesn’t make sense. Financial entities making trillions moving money around raises questions about whether value is really being created. When I get three Amazon packages delivered to my house every day, there’s no question about value creation.
Her point isn’t that Amazon is bad because it’s a trillion dollar company
Her point is that Bezos is bad because he and Amazon could have paid that driver 10x what they make and still had more money than they could spend in 100 lifetimes
The distribution of the gains is absurdly weighted towards the top
You could also interpret this statement in a way that has nothing to do with exploitation. A lottery winner doesn’t exploit anyone, but they don’t “earn” their money either. I’ve always thought of the founder path to a billion as a bit like a lotto game where you can shift the odds through hard work and natural ability. I don’t think this process necessarily involves exploitation (although it certainly could). You’d have to believe in the labor theory of value for that. And I’m not convinced that even Marx would, were he alive today. It was supposed to have a scientific basis, after all, and that evaporated a long time ago.
I never understood why Joel Spolsky stopped blogging. His reason was basically (paraphrasing) that his business grew too big and mature for him to keep writing. It sounded nonsense to me by the time.
And now comparing PG's writing today and what he wrote 10~15 years ago, I finally get what Joel means.
His entire essay is just based on a purposeful misreading of the opposing point. It's a straw man. And if you look at his history it's obviously intentional and part of his usual style of argument.
The actual opposing argument is that it's impossible to create a billion dollar enterprise without a group effort, and for one person to end up with a billion dollars necessarily means that they made decisions within that enterprise that resulted in a lopsided allocation of resources at the end.
Period. That's it, and it's inarguable.
Every single aspect of the system is arbitrary and is a policy decision made by society. The basic building block, the limited liability joint stock company as a legal concept with some form of independent rights and entity status is arbitrary. Every lever, every part of the system, is created by people making decisions about how society is organized.
The people he is arguing with are basically saying "we want the system structured differently because this one is producing too much concentrated wealth." That's a political choice and an eminently reasonable one.
So if it's that simple, why would he feel a need to straw man instead of just addressing the actual argument? Well because he'd lose. The reality is is most people agree with this assessment of society and want it to change.
And by the way the question of how resources get split between labor and capital is the oldest and most central political problem in human history. To adopt a condescending tone while pretending to be ignorant of stuff you learn in the first couple weeks of any real study of politics or history, betrays the deception inherent in his essay.
> it's impossible to create a billion dollar enterprise without a group effort
George Lucas made a movie with a (small) group effort. But what made a billion dollars is his Star Wars universe which is almost entirely his creation.
It literally creates wealth for other people. If my toy sells $10,000 without Star Wars and $100,000 with it, did I participate in making George’s billion, or am I benefiting from it?
> means that they made decisions within that enterprise that resulted in a lopsided allocation of resources at the end.
What do you mean? Every good and service involves many people, but the degree to which they participate in its creation and risk vary. For example, a Farmer may create a more efficient way to grow food. Is the grocery store now entitled to a piece of the reward? They didn’t change anything, all of the improvement is the farmer side.
The bit about Lucas is obviously not true. The universe he envisioned does not sell itself, it was marketed, developed, painted and modeled, added to, kept fresh etc for many many years by a huge army of people. If the only Star Wars media that existed were the original film, or even the original trilogy, it would sell relatively little by now.
So if you were to assign value to the work to make a new Star Wars toy would you it’s (total value of Stat wars) * (number of people who have ever worked on Star Wars) / (number of people who worked on the toy)?
That’s absurd. Obviously they are creating incremental wealth and their particular toy didn’t make or break billions.
No, I'm saying that you can't attribute any significant percent of the value of a Star Wars toy sold today to George Lucas. If Star Wars had not continued after the 1980 films, these toys would not keep selling so much today.
The post I replied to allocated all of the monetary value of the Star Wars branding of a toy to George Lucas personally, which I think is obviously wrong.
Hmm, what about JK Rowling and LeBron James where the vast majority of their value is explicitly going to their publisher and they keep only a small percentage. Their tiny portion is a billion after everyone else takes most of it!
JK Rowling, the proofreaders, the reviewers, the printers, the marketing, the librarians... Everyone in that list is in effect getting stolen from by the publishers, yes.
in the same way that Lebron didn't go where with his own feet, he benefited from coaches, support, doctors, nutrionists & cooks, all dedicated to putting everything into this one man. Do you think merely being a freak of nature nets you a billion ?
Right, and even if we assume Lebron accomplished his entire basketball career by himself and that his salary is 100% “earned”, his salary didn’t net him a billion dollars.
> George Lucas made a movie with a (small) group effort. But what made a billion dollars is his Star Wars universe which is almost entirely his creation.
If that were actually true, how come we can't predict what the next Star Wars universe will be?
Same for pop songs etc. If it were actually about objective qualities of the creation, and not just luck, the next winners of the lottery would be apparent even before they hit the theaters.
There is null inherent quality in the Star Wars universe causing the billion dollar revenue. If George Lucas wouldn't have been there at the right spot at the right time, the dominant IP would simply have been something different.
If you have kids, you can directly observer what actually happens: The IP owners dump huge amounts of money into merch and product placements everywhere, resulting in them getting in contact with the franchise before they are out of their diapers. My kids came home from daycare roleplaying lightsaber fights without any previous contact with the franchise at our home. The trick is implanting the meme (in the original meaning of the word) into kids' brains before another meme can nest in there.
Your position is that any correct prediction or investment can be explained by luck. That sounds more unfalsifable to me - it sounds like you’re neglecting evidence, actually.
I addressed that. The movies themselves are not the source of the wealth and yes the original was created by a group so small that theoretically Star Wars wealth could have been divided evenly and they would be billionaires.
If you say the original crew did not do all the labor required to make the franchise grow in the future (obviously true), you are now arguing different people have had incremental impact on creating the wealth, which is kind of the point.
Of course it's arguable. You make it sound like founders perform some jedi mind-trick to take money from others. Here's what actually happens. Investors put in initial money because it's a win-win (they get an expected return, founders get starting capital). Employees join because it's a win-win (they get a salary, health, equity, other perks; founders get a workforce). Customers pay cash because it's a win-win (they get a product or service they want, the business gets money). At no point is someone being held down and forced to hand money to someone else.
That's not quite true, the police hold me down and lock me in a cell if I don't hand money to a landlord.
They don't hold me down and force me to hand money to a landlord, mind, they just lock me in a cell if I don't, so maybe it doesn't meet your standard of proof.
You would get evicted at most. Even if you're in debt, bankruptcy does not come with any criminal liability. You'd have to do something much worse to receive jail time. And I'm not really sure what this has to do with startups, is the claim that the founders are in cahoots with landlords in the Bay Area to hold employees captive?
Health is not a perk but an inelastic demand: a threat to withhold health is a threat of physical harm, and a negotiation in which one party's physical health is on the line is quantitatively but not qualitatively different from a negotiation held with a gun to that party's head.
I do not understand your statement, maybe you can elaborate. If you are saying there should be a public option for healthcare, I happen to agree. Then we can have the standard discussions on how the government ought to raise funds for it. If you are saying that by negotiating terms of employment, any employer is intrinsically engaged in violence, that stance is pretty out there.
If those terms include the potential for predictable harms like lack of healthcare or housing if an agreement isn't reached, then yes, I think that is indeed an engagement in violence.
Now I'm not saying that the employer is necessarily morally culpable here — I'm sure most employers would like nothing more than to not have to worry about their employees' healthcare, and certainly I doubt many people enjoy having the ability to take it away. But it doesn't change the fact that it's impossible to have a real negotiation when inelastic demands are (potentially) unmet. Someone under threat of losing health insurance or housing is negotiating under duress, contrary to the comment I replied to.
Under this principle no human has ever been able to consent to anything in the history of the world. Certainly 99.99% of humans.
This would also imply that the best thing ethically is not to give people goods in exchange for labor because the simple act of interaction with them puts their housing and food needs under your responsibility.
No human can _100%_ consent to anything (… probably: free will is tricky). Coercion is a continuum, not a binary.
I don't really think that companies (or other parties in trades) bear moral responsibility for this inherently — a company that accepted every job applicant to try to meet their inelastic demands wouldn't last long, so the company itself is also under some duress even if it might like to. Trying to assign blame for complex distributed problems isn't really that simple. Your example in particular is a trolley problem, and I (personally) don't believe that pulling the lever makes you more culpable than deliberately choosing not to pull the lever.
But regardless of your chosen ethics, my point is pragmatic — while it's not correct to say that people take jobs only because they are under duress, it's also not correct to base arguments on them acting on their own free will based on their personal preferences. UBI experiments show significant changes in employee behaviour when inelastic demands are guaranteed to be met and negotiations pertain only to elastic quantities.
This effect is very much not limited to monopolies, though it's certainly easiest to see there. There's no step change from monopoly to competitive marketplace though. If you believe it's the company's moral duty to provide e.g. healthcare then in a non-monopoly situation that culpability is divided, though not abrogated (and beware the bystander effect!). From the employee's perspective, the spectre of physical harm is a bit further off, but it will still colour negotiations.
It's especially insufficient to generalize the working of the entire system from an example of a market in which employees currently have enough power to not really have to worry about the prospect of physical harm because it would be disadvantageous to the employers to cause it. Even if we take the current state of the SaaS startup market as reliable (which it isn't) the original argument was not limited to SaaS startup employees, and in other industries (including ones that are a bit down the pyramid from the SaaS companies) things are a lot less rosy for employees.
A sole consumer of labor is a monopsony, not a monopoly (that would be a union). At any rate, the point is that there are many many employment negotiations that no reasonable person would agree to amount to duress. This is a counterexample to the idea that any negotiation of employment involves duress. I don't need to disprove the existence of any coercive employment. But SaaS companies are especially relevant since pg specializes in showing people how to become billionaires through SaaS. If earning a billion dollars implies some measure of coercion we should be able to find that in a SaaS startup.
I don't think pg would disagree that the politicians that discuss this want to allocate more resources to labor. But what he takes exception with specifically is the rhetoric used to justify this "reallocation." AOC's claim:
> “There’s a certain level of wealth and accumulation that is unearned,” she said. “You can’t earn a billion dollars. You just can’t earn that. You can get market power, you can break rules, you can abuse labor laws, you can pay people less than what they’re worth, but you can’t earn that.”
You can produce a motte-and-bailey-type argument where the "get market power" and "pay people less than their worth" are doing all the heavy lifting in that statement. But I think we can agree that she is very much tying the accrual of wealth to various kinds of villainy. That is what pg is taking on. And that matters because the common person would agree with the statement that you should be rewarded for what you create - if wealth accrual is all theft, that perception would make a much stronger argument for the reallocation of resources.
One can agree that they would rather see wealth more equitably distributed while also admitting that the current system of private property and capitalism is the most effective at broadly generating wealth.
> The actual opposing argument is that it's impossible to create a billion dollar enterprise without a group effort
The other thing that we're often ignoring is that it's impossible to create a billion dollar enterprise without luck. You have to be at the right place at the right time.
For the most part only capital gets to roll the dice, but even before that it's a sign of the times that we take it seriously at all when people talk about "earning" a billion dollars. We could all do with a bit more humility.
She ran the printing press and picked the camera lenses and stacked the books by the cash register and booked her own press interviews? Also who taught all the kids to read?
Why does she have to control the entire vertical process to earn a billion dollars? She sold her work and got paid a billion dollars for it. Who did she exploit? In what way were her earnings unearned?
That’s just back to my original point. Which was that every billion dollar enterprise is a collective or team effort and the only argument is about how the results get allocated.
Which is, as I pointed out, inarguable. No one is spawned alone in the woods to start their adventure independently of the society they are in.
Agreed, what a disappointment of an essay, encouraging a growth at all costs mindset and pretending that this growth doesn't involve/encourage bad side effects.
And a lot of these structures either involves a percentage cut or a security of some kind. And it's not new, it's copied.
I understood the phrase as emphasizing the "deserving" implication of the word earn. As in, it is not possible for a human to take actions such that the fair reward is a billion. Or in other words, if you got a billion you got more than it's fair. To emphasize: this does not necessarily mean that the way one became a billionaire is nefarious or evil. It just implies unfairness.
I'm not defending that interpretation, mind you, just saying it's a possible read of the phrase.
You would not get a billion dollars from that. Someone else would see your mill and make their own mill. A thousand other people, in fact, if there was a billion to be made, so each would get a million, or less. The intense price competition would also bring your profits to near zero.
That’s a charitable read. Remember she also thought that New York would “lose millions” if Amazon put their hq2 there. Just because she’s in congress you can’t assume she understands how building a business works.
Taking your interpretation at face value I would add that yes we call it “capitalism” not “laborism”.
You should read that as a self-preservation technique. The eager use of a strawman tells us PG heard AOC's words as an attack against him personally, his business, and his friends.
So the essay is not a reasoned retort but more an emotional self-defense to soothe a bruised ego. It's to assure himself that no -- in fact he did earn his wealth fair and square, and to imply otherwise shows a lack of understanding of how this all works. But I do love this essay because it does show just how emotional and irrational billionaires can be when their wealth and egos are threatened.
Plenty of us non-billionaires are glad PG wrote this article, because a lot a success-striving people are pretty grossed out by the lie that the only way to be a self made billionaire is to do something 'bad'.
That's a misunderstanding of the original argument. It's not about billionairs "doing something bad". The claim is that the only way to become a billionaire is to benefit from an unfair economic system.
A lot of success-striving people are pretty grossed out by absurd levels of wealth inequality as well.
Sure, some folks are going to be fantastically wealthy, that's OK to a large extent.
But, we're on the precipice of trillionaire's existing in a country where literally half of the population is functionally illiterate (yes, that's the USA), where the middle class is dissolving, and where we are approaching a feudal level wealth inequality-- and all this stuff is accelerating.
I mean, I guess it's not that bad. We still have a democracy. It's not like we have billionaires re-arranging political power and public resources for their pleasure and benefit. Oh wait, we do!
So then if you're glad for it, what do you have to say about the straw man he presents? The sibling reply spells it out, but as a non-billionaire why are you willing to accept that argument?
Yes, this is exactly it. One of the things I've found sort of interesting and unique about the current generation of asshole industrialist sociopathic technologists is that they're not satisfied with all their money and power. They somehow have decided that people have to like them for what they've done and treat them like the best most awesome little boys.
I wasn't there at the time, so I could be wrong. But I feel like their robber baron counterparts 100 years ago knew that they were hated and had some idea of why. And that's why they spent so much money on parks and buildings and colleges and everything else. They could see option B was the masses coming across their lawn with sharp implements.
> She meant impossible in that one doesn't earn a billion dollars through work alone. The only way to get there is to set up a structure that extracts a billion dollars from a market
> She wasn't saying, of course, that it's impossible to become a billionaire. Obviously that's possible. Nor was she talking about the distinction between income and capital gains. She wasn't making a point about accounting. What she meant was that it's impossible to get that rich without doing something bad — without cheating in some way.
IMO, that's a pretty fair interpretation, given Warren's rhetorical history.
> ...one doesn't earn a billion dollars through work alone
> set up a structure that extracts a billion dollars from a market
If we accept that interpretation (which I don't), in what way is the latter not "work"?
Why does it usually imply extraction and externalities? What are those for Taylor Swift and Michael Jordan? The actual "usual" things in common between these and e.g. Amazon are massive value creation for consumers, economies of scale.
Focusing on completely optional and often imagined "externalities" just reveals a certain mindset (one could find some for cases like Amazon, but bezos became a billionaire in 1998 so whatever Amazon does after that doesn't directly apply, unless the goalposts are moved).
An example I love is hollowing out of this or that. The fact that people wanted to shop at Amazon (especially in 1998) and not a local bookstore, like the fact that people want to go to a Taylor Swift concert and not your indie band's is not an externality, it's a skill issue.
If I vibe code an app, and make $1m, and people willingly paid me for it, who am I exploiting? How did I "extract" $1m from a market. Who did I take that away from?
I didn't even exploit my workers and make a margin on their labor. Please can someone who believes billionaires are evil explain this to me.
> pg's reading of it is so blunt and misrepresentative that I'm nervous about what kind of content he's consuming.
Guy wrote an essay criticizing “woke” on the eve of Trump’s inauguration and is now running interference for billionaires causing an affordability crisis.
If someone is out of tune enough they are probably just playing a different song.
So what does you practical utopia look like in real terms. What's the master plan beyond I don't like people making money from what people want? What does that utopia look like in practice.
> So what does you practical utopia look like in real terms.
When you hit a hundred billion in net worth, you get a nice solid gold plaque that says "I won capitalism", you get an attaboy from the UN, and we start taxing the shit out of wealth over that cap.
Adjust periodically for inflation. (Do that for minimum wage while we're at it.)
But these ultra rich people don't have a hundred billion dollars in a bank account, they just own a percent of a company. So what you're really saying is a person isn't allowed to own a certain fraction of a company once it reaches a certain valuation.
It's because while for some people there may be jealousy involved, many more have realized or are now realizing how much power the ultra rich have, and how bad that is for our societies.
Once a company becomes large enough, it becomes so influential in society that control of it must be made more democratic.
I don't think anywhere has figured out quite the right way to go about it yet, but it's clearly the right goal. Some countries require employee representation on the boards of large companies.
And this would solve the problem how? Bill Gates owns less than 1% of his company, but now Microsoft under Private Equity is several times more evil, not less.
Impressed at the commentary here, which correctly points out Paul dodges the entire issue at hand.
Three things can be true:
1. Growing at a rapid rate over long periods of time is hard, doable and rewarding
2. Incentivizing the discovery of these things is good for society.
3. Nonethless there is and should be a limit to wealth acquisition, given moral hazard.
To make a similarly glib counterargument to Paul G:
If it's the founders who earned the same monetary value of the companies they created ("because they're responsible for it"), they should bear the same moral and legal responsibility for the externalities.
So far, only SBF is in jail. Lots more of these companies have broken the law.
Let's throw the founders in jail too - they can keep their money!
> 3. Nonethless there is and should be a limit to wealth acquisition, given moral hazard.
How do we determine that limit ?
Most Americans ( middle class and above ) are richer than most people in the world.
Way richer than most people in Africa or poorer parts of Asia can ever aspire to be.
Consider that when competing for resources these poor people are competing with wealthy middle class Americans.
Add to that the USD being world's reserve currency makes life easy for a small part of global population earning in the USA and makes it harder for people in every other country whose currency might not be competitive compared to the USD.
>1. Growing at a rapid rate over long periods of time is hard, doable and rewarding
and depends on factors outside your control.
This last is a critical caveat, and really the crux of the argument. It's not about cheating, but the limits of predictability in complex dynamic systems.
Rewarding entrepreneurship for example a good thing, but I'm also very much of the opinion that a single person controlling a billion dollars is extremely bad for the society while spreading some of that wealth out would do a lot of good.
The big problem we as a society face right now (in my opinion) is that a lot of political energy (votes and discourse) is spent on things that don't fix the economic imbalance right now. Poor poeple vote for politicians making the poor poorer and rich richer.
Me too, honestly. I'm also kind of shocked. I want to expand on your last point.
Uber became a billion dollar business by running an illegal taxi service. Now I like the ability to book a taxi from my phone with seamless payment. I also dealt with the yellow cabs in NYC in years gone by and it sucked. Shift changes, annoying looping ads you couldn't turn off, card skimming, the process of hailing a cab sucked and the cabs themselves tended to be bad. All that is true but it was still illegal.
AirBNB became a billion dollar company by allowing people to run illegal hotels in residential neighborhoods. This was value extraction from all the neighbors who had to live with the externalities created but gained nothing from it. That value was extracted by people who usually didn't live there. Agree with it or not, it was generally illegal, particularly in their large profit centers like NYC.
There is a lot of this that goes on and, honestly, is the entire basis for private equity. Private equity looks for companies that have what they call "pricing power", which is a form of "inelastic demand". Housing, for example, has inelastic demand. But it also includes creating regional monopolies like buying up all the vets or medical practices in an area and then jacking up the price of all of them. You're not going to drive 5 hours for most medical treatment.
This can sometimes go wrong. KKR bought Envision Healthcare, an amergency medicine contracting company, and unlocked "pricing power" by intentinoally using out-of-network services wherever possible to charge a lot more. Lots of medical practices do this actually. Anyway, their business was effectively killed when the No Surprises Act [1], which interestingly was signed into law by Donald Trump in his lame duck period after losing the 2020 election to Joe Biden.
The thing about billionaires is that it's almost entirely paper wealth.
The real thing they have is a collective agreement that allows them to have the power to direct a bunch of capital toward production. If they ever just decided to cash in their chips and buy a dragon hoard of gold instead, the paper wealth would vaporize really quickly.
The problem that really exists here is that this small group of individuals has too much power. The feudal system existed for a long time, there's arguably a tendency to return to it, and this is the thing that truly makes people uneasy about the concentration of power outside democratic processes. How do we get rid of the despots? At least with democratic process there's a way to vote them out, their terms expire, etc. With hoarded wealth, and especially (as we see with cases like the Waltons and now the Ellisons) generational mega-wealth, we have zombie feudalism clawing its way out of the grave.
But the accounting difference is real. It is virtually impossible to earn a billion dollars. What is possible but still difficult is to create something worth a billion dollars which you can then sell if you choose so.
And to the people criticizing, this is cheating. To them, a billion dollars enterprise is not possible without the exploitation of employees, customers, or at least the environment.
Also, the most important thing to understand about a society is how people gain status, not just money/wealth. If you focus on money, you won't have an explanation for political movements or artistic endeavors.
To add to that: There are also "compounding effects" from investments made by tax money, just as for any other investments, the difference is that the compounding gains are collectively owned and not controlled by an individual.
> A government agency spending $300 million in taxpayer dollars to produce sterilized flies sounds like a dream scenario for a DOGE team looking to cut waste, fraud, and abuse.
> Grocery shoppers could get hit with higher prices if the screwworm cases turn into a full-blown outbreak. That could cost $3 billion across the Southwest, according to a report by the Federal Reserve Bank of Dallas.
Good tax, or bad tax?
Returning to your question, though: Yes, I assert the cost of troubleshooting a "bad tax" may exceed the benefits of having addressed it.
We have the current inefficient, corrupt, and incompetent government in the US because the anti-tax wealthy class threw an all-out tantrum over even the idea of paying a tiny bit more tax.
I live in Germany and I pay almost 50% of my income in income tax and social tax. There is always "just that tiny bit more tax" that will magically fix the system (it won't).
Turns out paying more money to an already corrupt government doesn't turn it less corrupt. Go figure, hm?
We have an inefficient, corrupt and incompetent government in the US because we voted for it. And we keep voting for it. That's our revealed preference. We obviously like inefficient, corrupt, incompetent governments.
You can still collect taxes without taxing people who have already been taxed in the form of needing to exchange a large fraction of their life for the wage.
I'm entirely onboard with reducing tax on low/mid income folks currently "exchanging a large fraction of their life for the small wage" in favor of increased taxes on the billionaire class, yes.
When capital gains tax is so much lower than income tax, this holds even more true for people who work at the companies being sold for lots of money and make income in wages than the people who own the companies, and that just reinforces the original point
Those taxes are the necessary condition in silly essays like this one from pg. Or why do you think those billionaires miraculously mostly end up in the US and not in countries like Sudan or Peru? I mean if those billionaires would actually be the wealth creators, not depending on society at large, they could become billionaires everywhere, right?
In creative destruction, you can do an accounting sleight of hand by attributing credit for creation while ignoring blame for destruction even though the two are linked.
This is a technology + investing forum and all of us agree that in general creative destruction processes are enormously net positive, but they frequently do kick off a toxic byproduct in the form of said destruction (e.g. Uber and displaced taxi drivers), so there is moral entanglement between creation and destruction. Morally speaking, figuring out how to mitigate this toxic byproduct is part of our remit just as it was part of the remit of earlier industrialists to figure out how not to discharge so much flammable goo into the river that it lit on fire. We neglect this at our peril, because society merely pinches its nose if the toxic byproducts are small, but they are increasingly not small.
One way to take over a network is to start with an alternative front end. We'll see if this works out for AI companies. First you have the AI consult booking.com whenever someone asks it to book a hotel, then you get more and more hotels to directly communicate with the AI company, then you drop booking.com once you have enough.
It’s exactly what I’m building. First I’m building open-source SaaS for every vertical and then leverage that to build a decentralized, interoperable marketplace.
It won't work. The future gatekeeper just has to threaten to send traffic to your competitor if you (a hotel) don't sign an exclusive agreement with them.
So marketplaces will not allow users to have their own storefronts and websites? Most restaurants on DoorDash have a website where prices are cheaper. AI will allow your computer go to that website and place the order. How could Doordash stop that? How many restaurants would be willing to take down their website to appease a marketplace?
There's no resource destruction involved in displacing taxi drivers. Taxi medallions are a rent-seeking scheme, there's no real scarcity involved. Most other instances of "creative destruction" are like that, the capital simply gets repurposed at negligible social cost and only excess profits disappear.
I will say before Uber was a thing, if I tried to call and schedule a taxi pickup in the city I lived in at the time, if they showed up at all they were at east a half hour late. Missed a flight because of it once. I don’t even like uber, but it is objectively a better service most of the time.
Yeah, anyone who uses taxi drivers as an example of destruction either don't know what they're talking about (because they never experienced it) or they're crying crocodile tears.
I had cab drivers nearly drive off with me hanging off the car in San Francisco, because they were far more concerned with screening my destination than, say, not killing me. If Uber destroyed that industry, it was only a net benefit to society. They created immense value, and the "destruction" was only to eliminate a layer of corrupt parasites who made money by preventing a free market (in this case, the medallion owners, but the entire industry was corrupt from top to bottom).
Not all places have corrupt taxi industries. I think they were always more expensive than Uber (but there's a reason for that, Uber's pricing is not sustainable) but in most places a taxi is just a taxi.
Don't entirely agree that a local Taxi service is necessarily costlier than Uber. In my indian city, Uber and Ola cannot compete (and have been nearly wiped out) because a local Taxi service (that now dominates the market) is very competitively priced and professionally run. They charge their drivers a fixed percentage (unlike Uber or Ola, and lower fees than them) and release their payments timely in a transparent manner. The price per km, and all extra charges (late night fees, overtime driver charges etc., permit fees in case of long distance travel, toll fees etc.) are transparently conveyed to the customer too. And there is no bullshit practice of price gauging through "surge pricing" or "convenience fees" or "platform fees" etc.
So basically, you’re saying that “most places” had uncorrupt, put-upon taxi industries who simply cannot survive against Uber because Uber is anti-competitive, and it has nothing at all to do with delivering a better product?
Yeah, I don’t believe you. It sounds like you’re making a just-so rationalization for why taxis are good and Uber is bad.
In pretty much any mature taxi market Uber is as expensive (if not more expensive!) than the conventional alternative. And yet Uber survives.
Black drivers used to make pretty good money many years ago, but Uber + market externalities redesigned their systems to "fix" that (mostly through decreasing payouts and high car rental costs)
Most of the drivers providing that service split their time between Uber, Lyft and traditional corporate black car service.
Lots of posts on this topic in the UberDrivers subreddit.
You see that whenever there is value, above starvation wages, flowing to laborers, capitalists see that as a problem and reduce it. Does this seem sustainable?
Yes, Uber did something enormously creative. But it also did something destructive and we're guilty of an accounting sleight of hand if we focus on one while pretending the other doesn't exist.
We still want to encourage creative destruction to move forward, but paying taxes to clean up the destruction is the very least that the victorious parties can do because the entanglement exists in moral accounting even if it doesn't exist in financial accounting.
Why are the taxi workers more important than, say, the taxi customers? If the companies are providing garbage service, why do I have to care about protecting their workers?
Technology has always displaced workers. And then the society adjusts. Plenty of people will lose their jobs to AI, but most workers will be redeployed elsewhere.
The agricultural revolution displaced farm workers with machines. There was unrest and migration to cities, and eventually that fed the Industrial Revolution and created a working class.
Yeah and it took about 150 years until industrial revolution started to actually benefit the common people and the workers started to have their working conditions improved.
What it took was social democracy and unions and other social movements.
Saying that "it's happened before, it'll be alright" is a bit naive and short-sighted.
It took a literal civil war, which you don't read about in history books so much because it's not beneficial for the owners of those publishing houses to have more people hear about it. Lots of people died on both sides.
Last time inequality cooked up it took a lifetime to go back down. It did so very painfully through capital incineration on a monumental scale: a great depression, where the incineration was metaphorical, and two world wars, where it was very literal. In both cases it was economical and in both cases it fixed the problem but at enormous cost. We should aim to do better.
Plus all the union violence. The ones where owners used guns to break strikes so striking workers also started bringing guns and using them. I don't think we want that, do you?
In a world where AI has not yet taken all the jobs, when a company provides lousy service, why do its employees deserve to keep their jobs more than the customers deserve good service?
Counterpoint: I scheduled an Uber once to take me to the airport. They arrived earlier than the requested time and left when I met them at the time I requested because they waited too long. This was on Uber Black, their professional driver level service.
Counterpoint: It is increasingly impossible to get to a human at Uber when you need support, as most of their support channels are gated by LLMs and self-service support workflows.
I mean, maaaaaybe a Jevon's Paradox kicks into play with human labor and replacing people with robots somehow creates even more jobs, but whenever someone says this your immediate response should be: "ok, now put your money where your mouth is and bet on it by strengthening the social safety net."
This assumes sufficient jobs. We have been below replacement jobs for a long time but we made up the difference with Bullshit Jobs. Now we might even be running out of those.
I’ve only read the article, not the full book, but I’m not sure I buy the premise.
Maybe we can’t see what the new post-AI society looks like yet, but I tend to believe society progresses as it evolves.
It doesn’t mean it won’t be rocky for many people, and good social safety nets will make this easier, but I generally don’t think there will be some kind of dystopian future where society runs out of work to do for humans.
Weird to see Graham take AOC's quote out of context:
Graham: So you can imagine how astonished I was last month when an American politician said that it was impossible to earn a billion dollars. I felt like a skating coach hearing someone say that it's impossible to do a triple axel. Of course it's possible. It's hard, but it's possible.
Per his link in the article:
AOC: there is a certain level of wealth and accumulation that is unearned. You can’t earn a billion dollars. You just can’t earn that. You can get market power, you can break rules, you can abuse labor laws, you can pay people less than what they’re worth, but you can’t earn
The pursuit of everlasting growth that pg describes inevitably results in cheating. At a certain point the market reaches a saturation point and if you're capitalising on every possible opportunity to retain your high growth rate, that will include hoarding resources and circumventing consumer protections.
The hoarding resources and circumventing consumer protections is just the start of it.
Eventually it becomes rational to start buying politicians, and subsequently laws. The next obvious avenue is to then control entire government agencies like the FAA or the FCC and just write favorable laws and regulations they don't even have to circumvent.
But even that isn't the end because they're growing too fast, they actually outgrow the law, so breaking it becomes a rational, profit-driven choice. Huge fines? Regulators breathing down your neck? No worries! Just spend more money then has ever been spent in an election to their favored presidential candidate, and then they get to just shut down investigations into themselves!
But even that isn't enough -- soon it becomes a rational business-forward goal to take over the entire government; or even better become the government. First a city, then a state, then a nation. Guess what folks EVEN THAT won't be enough. Not even everything on this entire planet Earth is enough for them; they also want the Moon and Mars and the entire solar system. They will have to become God at some point for this growth to keep up, and that will still be too little for their egos to bear. Something has to give.
First question: why? Why should I (or anyone) earn a billion dollars? PG made it seem like that's the ultimate goal somehow. Also, why only a billion dollars, PG? You see your infinite cancerous growth machine doesn't stop?
This article did not sit well with me. I have found myself rereading Beyond Smart, How to Write Usefully, The Need to Read, Life is Short. But this one is harmful; nobody needs a billion dollars.
But you probably need >$10M to not HAVE to work and live a low-risk comfortable life in even modestly expensive parts of the US.
The funny thing about money is, it's really hard to save $1M and $10M, but once you get there, it's pretty easy to grow that substantially.
The fundamental problem in the West, IMO, is that we make it so hard to save even small amounts of money, and so easy to compound huge amounts of money (and no the EU is not much better on this front than the US).
$10M is also perhaps asking for too much to live a modest life even without working, but I hear you with rising costs and healthcare. In any case, $10M is 100x smaller than $1B.
Why do many Americans feel like they need SUVs? Or huge 3000+ sq. ft. houses? Or five-star luxury vacations to impoverished countries where they barely have to lift a finger?
My take: they don't; nobody does. But when you aren't successful and don't have a lot, and when "success" is marketed to you as "big SUV; fancy big ass house; private jet; fancy vacations", you get trained into think you need much more than you actually do to be happy.
We can't romanticize making money, it's a ruthless field where mostly politicians, the military complex, and drug traffickers thrive, and a few startups that cater to the global economy, which are very very rare, so rare than only 30 out of more than 6000 have succeded in Paul's own words.
Amazon was first, then Uber went world wide, so did Airbnb, and now OpenClaw, so yes, the AI gold rush opened the gates for new opportunities but only a few will make it. We all can run the race for sure but most of us will only get tired at the end while the lucky few will take all the prizes and our corpses will be their podium, as it's supposed to be.
Still, we have to run because there is a chance, a very slim chance which is more than zero hope.
We're talking about how to get (not earn) a billion dollars so yes, they're good examples of that. It seems like if you break the law and make life worse for everyone, you can get a billion dollars.
At becoming billionaires. Many more than that succeeded at making a good chunk of money that was life-changing for them, their families, their early employees, etc.
So I think your reading of the chance of "hope" are overly cynical. Of course it's not easy to make millions, but it's not so bleak and the market isn't so ruthless that it can't be done for those who try intelligently and persistently.
And of course, even below that level of wealth, there are tens of millions of people who work regular jobs and are able to afford pretty high standards of comfort and living by any yard stick that's ever been used to measure.
"Drug traffickers" is a great term to use here, because arguably many of the startup stalwarts that went on to make billions are those that did so by selling addictive convenience (Amazon, AI-anything, etc.) or brainrot (all social media), all of which function as harmful drugs that emasculate people.
Maybe the politicians position is that the whole system is based on cheating and everyone who partakes is acting immorally?
Is it fair that the founder got education and some money to start his company while other people are living on the street or have to care for relatives? If they come from a relatively privileged position and manage to build a company that ends up being successful, did they earn that money?
I don’t think the cheating people criticize is necessarily criminal fraud.
Edit: and the second thing people seem to criticize is that just keeping your company growing often seems to involve some unethical things. Basically every company that’s manufacturing hardware is doing that in Asia under inhumane conditions, so they probably can’t really claim they earned their money and it’s just maths.
If the only viable alternative is that nobody gets to start their business rather than some idealized best case of everyone getting a chance of it, then yes, it's probably fair.
I don’t think the only options are the current way or that nobody is allowed to start companies.
Im not from the US so I’m probably not doing a good job at the devils advocate thing but I could imagine that you just tax the people that start the business so they still get some healthy personal wealth by redistributing the truly extreme wealth back to the workers/society.
There’s probably some motivation problem to grow the company further at some point but maybe you could limit the percentage any individual can earn by holding the company or something like that?
There are models of business which don't assume a handful of people - some of whom don't even do the work - get to keep the profits, and the rest are disposable.
> She was getting richer at a stupendously rapid rate. And yet she hadn't been doing anything bad. The reason her startup was growing so fast was simply that users loved what she'd built. So she could feel from her own experience how wrong that politician was. She wasn't exploiting anyone.
I presume it's a company that just has co-founders then?
Or everyone is getting an equal % of the share? In which case SHE's not getting 93% richer just cause her start up is.
No it’s a magical startup where it’s just going to be her in a basement doing 100% of the work required for 10 months straight while demand doubles every month.
Let's say she has ten employees. They all voluntarily agree to work for her: slavery is illegal, so people work for others on a consensual basis. Both the employer and employee negotiated and consented to a salary or wage schedule for that employee. The employer pays the agreed-upon compensation, and the employee receives it.
If the company makes an unexpectedly large profit, the employer is not obligated to redistribute that to her employees in addition to the already agreed-upon and paid compensation. If the employees think that what they agreed to work for is no longer sufficient, they are welcome to renegotiate their compensation or, if they feel they have been wronged and are being paid less than they are worth, to take their talent to a different employer. After all, everything so far has been consensual. The only thing that would be non-consensual would be obligating the employer to redistribute her profit over and above what had already been negotiated.
This completely negates the fact that due to how the labor market is structured, most people who sell their labour to survive are in a disadvantageous position for the negotiation you are talking about. What you are talking about works well in a basic economics text book but does not translate to the real world.
The cleaning lady at SpaceX doesn't do a better job than that at Walmart. So why should she be paid more?
You think she's doing the heavy lifting there? Creating the billions? While the underperformer at VideoBuster / Radio Shack is responsible for tanking the business? That's just not true.
Interesting, by that logic every participant in the economy should also be required to bail out any startup that fails otherwise we’re exploiting the founders! They’re taking all the risk and we’re getting all the benefit of the services and goods they create!
Well yeah? We should have really wide safety nets actually, so people can try startups and feel comfortable that they might fail. What kind of losses are you envisioning - is it just salaries?
The people who create real value rarely make any money.
Linus Torvalds created Linux which allowed companies to use commodity hardware. Before Linux, every company had to pay massive taxes to Sun (Solaris) or IBM (AIX) to run a server. With Linux, commoditty hardware ecosystem blossomed, and the first companies like Google built massive datacenter. This wouldn't have been possible if they had to buy Solaris servers to run their datacenters.
The value created by Linus is probably tens of trillions of dollars. I don't think he is a billionaire. There is a guy who is a trillionaire today. It is hard to make an argument that Musk created more value than Linus. Tesla is a trillion dollar company with negative YoY growth.
The people who become billionaires are experts at becoming billionaires, creating value probably has nothing to do with it. They have either inherited wealth or in the right networks. The example PG gives of starting with 2 million USD is someone who is already incredibly wealthy and in the top 1% (1% globally, not just US). As always, there may be some rare exceptions where the founders actually created value and became billionaires.
> The people who become billionaires are experts at becoming billionaires, creating value probably has nothing to do with it
Give me a break. Elon has created a huge amount of value. Every third car I see on the road is a Telsa and the US was relying on Russia to reach the ISS before SpaceX.
>an American politician said that it was impossible to earn a billion dollars… What she meant was that it's impossible to get that rich without doing something bad — without cheating in some way.
This assumption is depressing. That the only alternative to "earn" is "cheat".
A system of diminishing work (i.e. where money makes money), especially combined with inheritance, means every dollar is arguably less earned than the last. That system is fine and actually very useful, but that diminishment becomes a big problem at large enough scales. We've been operating at that scale for many decades.
Precisely, I like the term "diminishing work". I think a lot of disagreement comes from differing definitions of "earning", or "ethically earned", but working 12hr days hard labour to earn $1000 and putting $10k into a stock that goes up 10% intuitively seem different.
I've been able to calculate logarithms for well over 20 years.
That's not the problem.
The problem is even simpler mathematics. Proportions. How much do we give to first employees? How realistic is that John Smith, first salesman of the company is getting 2% and should consider himself lucky, while I, Peter Boss retain most of the company?
We always talk about the dilation of the founders' shares and its relation to the VC portion.
What is the usual proportion of the shares held by the founders and the first 10 or 100 employees?
Is that proportion usually realistic with regards to the effort put in and the risk assumed?
Is that risk usually really that heroic or most of us in the "can found a startup" caste can usually go back to jobs that already pay well over average?
I am the founder of a company. I want it to succeed. I don't want to become a billionaire, but I want the people that help me build it to have similar successes to mine.
If we succeed, I don't want my car or house to be 10x more expensive than of those people who joined me first.
There's something seriously rotten about telling university students about billions. The issue isn't whether anyone can earn a billion dollars. Nobody actually needs a billion dollars.
The question they should be pondering is given the excess of talent and opportunity they have, how can they help the people around them and give something back to society.
Simply, neoliberal capitalism is sociopathy with quarterly returns.
The assumptions are:
1. A uniquely special class of people do all the work that matters. They're astoundingly gifted, talented, and insightful, and have a rare ability to make profits happen by having very special ideas, owning Important Things, and telling everyone else what to do. These prodigies deserve everything. They are not to be criticised or judged by their inferiors. Ridicule only proves their superiority.
2. The work everyone else does is far less important. Most of the people doing it are interchangeable and literally disposable. Sometimes they deserve nice things, in a limited sense, if it's hard to make things happen without them. But mostly no.
3. Negative externalities - pollution, ecosystem collapse, spiralling asset prices, financial and political instability - aren't real. If they are real they don't matter. If they do matter they're someone else's fault.
4. It's absolutely fine to treat other humans with aggressive indifference and outright contempt as long as Number Goes Up. In fact it's expected.
Technically if you look at AOC's statement he mentions
>AOC: “There’s a certain level of wealth and accumulation that is unearned. You can’t earn a billion dollars. You just can’t earn that. You can get market power, you can break rules, you can abuse labor laws, you can pay people less than what they’re worth, but you can’t earn that”
there's some truth there in that PG is talking about capital gains as the owner of a company and AOC is talking about earnings as payment for labour which are different things both in reality and in tax policy and law.
The capital gains can be unfair in that most of them go to founders and VCs and not much to other employees and stakeholders who have contributed as well.
Putting the scale of dollars and the startup world aside, AOC’s comments read that way would suggest a farmer who gets a series of loans from the bank to help him expand his family farm from a $200K sole proprietorship to a $10M sole proprietorship didn’t “earn” it either.
I don’t think a definition of “earn” that excludes cases like that captures the generally understood meaning.
I don't think putting the scale of dollars aside is reasonable when the entire point is contingent on the scale being at least two orders of magnitude higher and sole proprietorships usually don't scale to the point where fines from ignoring regulations is just the cost of doing business.
By paying farm worker less than they deserve, farm equipment manufacturers more than they deserve, and using farming practices that destroy the ecology and depend on continued fossil fuel extraction.
(And in California where the most profitable crops are perennial fruits and nuts, probably outright stealing water from the aquifer or state irrigation system.)
So you can imagine how astonished I was last month when an American politician said that it was impossible to earn a billion dollars [...] that it's impossible to get that rich without doing something bad — without cheating in some way.
What counts as 'doing something bad' and 'cheating' clearly is subjective. I suspect Graham's opinion on the behavior of a Zuckerberg or a Musk would be a little more flattering than mine.
> What counts as 'doing something bad' and 'cheating' clearly is subjective. I suspect Graham's opinion on the behavior of a Zuckerberg or a Musk would be a little more flattering than mine.
Graham's admiration of scammer Austen Allred is evidence for this.[1]
Well there are plenty of massively successful companies that Paul famously said no to investing in, for stylistic and opinionated and not greedy reasons, like Palantir. I'm sure in Paul's opinion they are doing something bad. Maybe not in Gary Tan's opinion. That is to say, not only is this stuff subjective, but it's complicated. Palantir and Flock, their main customer is the government, which complicates the story even further.
Conversely, I suspect the politician is defining that "all things that earn a billion dollars" are in the "bad" category.
LeBron James has, between playing basketball and endorsing things, earned a billion dollars. What bad thing did he do, other than losing the finals a few times?
This then that makes the argument very hard to respond to.
"No I didn't mean this [virtuous example]. I meant the vast majority of [unnamed nefarious actors] which I don't need to elaborate about as their existence is obvious."
Once you say it's just hyperbole and you don't mean it literally, then the only way to prove it is a statistical argument.
"The overwhelmingly share of company founders and companies are bad and don't earn their money." is a big claim that requires more than vibes.
Would anyone take literally the claim that it is impossible to attain a billion dollars without 'doing something bad' or 'cheating'? Someone with $100 billion, who wanted to disprove it, could do so in five minutes, by cutting a $1 billion bonus check to his nanny.
It Alice tells Bob "I'm so hungry I could eat a horse", Bob challenges her actually to eat one, and Alice says she wasn't being literal, a reasonable person would not consider Alice to have made a motte-and-bailey argument.
Whether my comments constitute a motte-and-bailey depends on whether a reasonable person would assume the "impossible to earn a billion dollars" statement to be hyperbole.
A tremendous amount of advertising towards kids which very explicitly uses tactics to exploit their insecurities and get them to pressure their parents (many whom can’t really afford it) to buy them gratuitously overpriced shoes or other products which the kids don’t actually need at all.
It’s an industry of low-grade exploitation, generating products that people mostly don’t need. It’s bizarre. It fits squarely into the category AOC is trying to define here.
Aren't shoe companies notoriously scummy in regards to human rights? Nike has quite a lengthy controversies section on Wikipedia, and they're where a lot of his money came from.
Yeah, you can choose between two worlds: in the current one, Nike is producing shoes in you don't want to really know circumstances and is paying LeBron ~$40M a year.
In another world, LeBron is still a millionaire, getting a nice $1M a year. The rest, a mere $39M, which in Paul Graham terms is just a couple months from turning into a billion, goes to the hopeless kids actually churning out the god damn shoes.
LeBron did nothing wrong. The system is this corrupt.
Yes I'm sure that's what AOC meant too but it's not much of an explanation. Who are you to decide what people deserve or earn? And if you're going to decide that perhaps you'd like to provide a better justification, one that doesn't just boil down to "a billion is really really a lot of money".
First, I'm assuming that you are not a free market maximalist, and that you believe that a market without any regulation will result in mega monopolies where it no longer matters if you find the price of the product to be fair.
The distribution of the wealth created by the massive increase in productivity has been trending towards the organisational top for many decades now.
I don't think that the management has gotten exponentially more efficient and better at their job to justify their increasingly bigger share of the profits.
Good question. When the robber pointed his gun at my head, I thought: since I am willingly giving this man my wallet in return for my life, he must have earned it.
All of your analogies fail because you ignore the fact that (a) most people are happy shoppers who genuinely enjoy buying much of what they buy, and who anticipate newer and better releases of games, movies, restaurants, and other products; and (b) most people could simply opt out, own nothing, and go live in the woods if they wanted to, but would strongly prefer not to.
You yourself are using an expensive phone or computer to type Hacker News comments, presumably not at gunpoint because you choose to do so. Which means you think it's better than the alternative that you're apparently glorifying.
His essays are, themselves, "cheating" (in the sense of a life hack). Say what people want to hear today, even if it contradicts what you said yesterday.
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 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.
The thing about "compound growth", even in the most general sense, is that it ALWAYS ends, and that end is typically a crash of some sort.
In biology there's the notion of a growth curve. It starts out with the familiar "compound interest" exponential growth, but unlike Econ-101 textbooks, that curve then proceeds to resource depletion (overshoot), followed by "die-off", followed by extinction, where (N -> 0, where N is usually something like yeast-cell count, but if you're applying this model to something else, it could be stuff like well-being or money).
There's a kind of Efficient Market Hypothesis of career advice that I wish PG took better notice of.
If a career path (e.g. startup founder) outperforms at time T1, then this fact will diffuse quickly throughout society, causing the path to become overcrowded, which pushes down the average performance. So at time T2 the path will no longer outperform. This is analogous to a stock becoming overpriced due to hype. I consider the founder path to be enormously overcrowded at this point.
The key to finding a good career is to play a kind of Money Ball - find paths that, for whatever reason, are mispriced and thus undercrowded.
True, but only when you consider value as a combination of risk, reward, status, etc which is weighted by an individual’s preferences.
One reason why doctor is more popular is the process for becoming one is high effort but low risk. So if you have any risk tolerance you’re probably better off using that effort elsewhere.
>One reason why doctor is more popular is the process for becoming one is high effort but low risk.
Disagree completely that becoming a doctor is low risk. The amount of residency spots is capped and is smaller than the number of people graduating from medical school. Every year thousands of MDs are prevented from going to residency and thus prevented from practicing medicine, even though they graduated from medical school.
>In 2025, 9,541 applicants went unmatched, including 2,409 soon-to-be graduates of United States schools awarding Doctor of Medicine and Doctor of Osteopathic Medicine degrees.
“Billionaires v. the underclass” is such an unsophisticated discussion. Markets have all kinds of externalities, equilibrium traps, information asymmetry flywheels, and hundreds of other phenomena that interplay to trip people’s sense of fairness in all kinds of ways.
To pick just one example, infinite scrolling can be seen as a modern equivalent of cigarettes— a product that made people billionaires, and that consumers obviously want but are not free to stop using because of hyper-sophisticated dark patterns.
Is Elon a trillionaire because he created a trillion dollars of value from thin air, or is it because he created an information asymmetry flywheel that lets him allocate capital more efficiently than other actors?
It’s genuinely unclear to me whether the universe in which we incentivize this kind of scale is better than the universe in which we do not (because the counterfactual universe has massive externalities too). But this is obviously not just a matter of compounding value creation and becoming a billionaire fair and square in ten years.
Wealthy, sure, but becoming a billionaire effectively destroys your place in any of your social circles. It obliterates any dynamics of trust and interdependence you may have and replaces them with a gnawing unease about if they’re still hanging out with you, or if they’re hanging out with the money.
Not to mention, Graham entirely fails to differentiate between EARNING a billion dollars and HAVING a billion dollars. You can be part of a structure that earns a billions dollars without “cheating”, there are all kinds of companies that do that. But if you let that wealth accumulate in yourself? There’s something wrong there. You are almost guaranteed to be under-valuing the contributions of others, or the externalities of the systems in which you operate or SOMETHING.
And even if you’re not? That’s a dragon’s hoard of money. You’d have a very difficult time spending that much money on yourself and your lifestyle, and I find it hard to justify sitting on the rest, just to have it. It is literally a hoarding problem at that point. You do not need that money, it is actively making your life worse (look up the Billionaire’s Social Calendar: it’s the list of ultra-wealthy-only events that billionaires must attend if they want even a chance of interacting with people as peers instead of dependents), just let it go.
There’s a fundamental misunderstanding of the mechanics & incentive structure here:
Take Mr. World’s First Trillionaire, Elon Musk. He doesn’t have a dragon’s horde, his money is almost entirely invested in SpaceX and Tesla, building things he wants to build. SpaceX didn’t IPO so he could have bragging rights with his Forbes list peers, it IPO’d because it was the most efficient way to get more capital to grow and achieve its various strategic aims—largely set by Elon and its other preexisting owners.
You can take that away either proactively by making such ownership structures impossible or retroactively through taxation forcing current ownership to sell, but the end result is the same: No incentive for folks like Musk or Bezos to use their skills on big, ambitious, capital-intensive enterprises. Control is what matters, not $.
It's possible to have more than one reason for getting $75 billion from public markets. Paying off $20 billion of loans from people you don't want to owe money to (who, as far as I could tell, SpaceX borrowed money from to pay off people you really don't want to owe money to) and getting a really big number associated with your name are not mutually exclusive, and from Musk's previous actions (getting large compensation packages approved by conflicted boards) he obviously does want that number.
Even if only 5% of his NW is in cash, that'd be $50billion dollars in actual liquid cash. Even if it's 1% or less, he almost certainly has over $1bn in cash or practically liquid cash. That's already a dragon's hoard.
Do you have an example of someone doing that? I suppose the argument would be we wouldn't know - but personally I don't buy it. It's possible to not be "famous" as a billionaire, but it's not possible for people in your life not to know.
I enjoyed this, but the thesis is misleading. Paul’s own examples here were Facebook, apple etc. I imagine that the politicians point was that beyond a certain point, you do have to be unethical to continue that growth rate. Facebook is notorious for doing plenty of this. Apple too is known for exploiting developers.
If we extrapolate to trillionaires, we know for a fact that you need to be an all-around dousche that manipulates politics and literally cuts government funding to the poorest and most vulnerable groups to get there.
And since this post has a numbers focus, zuck is worth 195 billion. Would Facebook’s negative influence be noticeably less if they spent 194.9 billion on reducing the harms of Facebook, and zuck remained a millionaire? I believe so.
Yup. Billionaire - doable without too much ethical compromise (e.g early Google). The thing is that a billion isn't much per "first world" citizen if that is roughly your market. Many-many-billionaire - would need some good example, I can only think of bad ones. The SAP guys maybe? But they aren't exactly the richest. The only bad things I've heard about SAP are "making clunky software" and "charging too much money".
Early Google got that money because of the eventual market capture and implied evil they would definitely do because they are an american advertising company.
The first billionaire I followed was gates. He did pretty horrible rent extraction to businesses all over the world. See monopoly trials and other similar things that didn’t go to trial.
> What she meant was that it's impossible to get that rich without doing something bad — without cheating in some way.
She certainly frames it in a way that you have to personally cheat, or personally create the myth that you've earned it, or at least it can be interpreted that way. But I think it is the system itself that causes unearned[1] money to accumulate. Money begets power begets money, with or without any intention of the actors to exploit this is any bad way.
I don't think we know a better system, but I do think we can point to the level of wealth accumulation and say this is a bad property of this overall very good system, and we should try to do something about it.
[1] Or rather: Money to accumulate disproportionate to the earning. We can say that many billionaires have earned something very significant and ALSO say the accumulation is disproportionate to that, and that there is an opportunity here for improvement.
There is an argument to be made that societal structure enables much of that wealth to be made. J K Rowling can make a billion dollars not just because people want her stuff and give her money for it but because we have a system of intellectual property and a bunch of guys who enforce it. We all pay for that and Rowling benefits. It’s true that this happens, but our system of taxation takes care of this pretty well.
There are exploitable gaps in the logic where loaning against owned collateral is not considered a realizable taxable event and it’s reasonable to attempt to close these.
But like most things I find that things fall down when actual policy needs to be written. The only example is the SEIU proposition in California which is backdated and requires many people to give up half their ownership in a company.
I can’t be brought around to supporting those outcomes.
I've read (and re-read) all of PG's essays over the years. Often they're wonderful fonts of wisdom. Sometimes they're myopic and poorly supported, but never just plain wrong.
This is, sadly, a first for him.
AOC (the politician referenced) did not mean that earning a billion is "impossible". She, very clearly, stated within the context of that interview that Billionaires must be an extractive class at the cost of normal market efficiencies due to the rent-seeking behaviors of the monopolies that must exist to attain that level of wealth.
"It's impossible to earn a billion" means it's impossible to work hard enough to deserve to have a billion dollars in a world where so many people died for lack of money, not that it's impossible to get it without cheating.
Another solid interpretation is that nobody gets a billion in wages. You have to own something that appreciates, and it appreciates because of the people who work for you, and you take disproportionately much of the benefit.
lots of moving parts on this discussion but I'll boil it down to:
the ratio of the average individual's wealth to 'illionaire's wealth feels "wrongly asymmetric" for a lot of people (CEOs making ~300x that of average worker)
the question is basically about how that startup scaling at 94% translates to scaling up the individual's life (who faces alleged "stagnant wages")
or in other words, how can entrepreneurs create an approach for society that facilitates individuals scaling up their wealth?
There is for example a perception that a person working all waking hours on a low amount of pay - like minimum wage, and without investments - could never become a 'illionaire through their "honest hard work"; ergo becoming a 'illionaire requires something beyond this "honest hard work" (implying illegal and or unethical means)
> Since we started it in 2005 we've funded about 6500 companies.
> Starting a successful startup is the most common way to become a billionaire, so in effect I've spent the last 21 years training people to become billionaires. So far about 30 of them have, but there are many more in the pipeline.
Seems to me that right off the bat he completely undermines his own point - less than .5% of the founders being funded at basically the best connected best financed incubator become billionaires. Easy, right?
I won't even go into the embarrassing math that follows... pyramid scheme salesman levels...
Moreover, he conveniently forgets the millions of aspiring founders who did not even get into his puppy mill to get a chance to play the 5% odds. In many cases their only obstacle was not being born in the United States and living in California.
Paul if you are so rich why aren't you smart? Or is this the age old problem of getting a man to understand something when his paycheck depends on him not understanding it?
> So how do you find startup ideas without looking for them? By working on projects with your friends. That's where the very best startups come from. Initially they're not even meant to be companies. They're just something people built because they thought it would be cool. That's how Apple and Google and Facebook all started. None of them were meant to be companies at first.
That’s cool and it’s a cool post, sure, but it sounds ridiculous when you look at how many dumb GPT wrappers there are in YC batches nowadays.
What occurred to me reading this was the wage. Initially, and famously, the hours put into building a startup result in sub-par wages. But the amount of work by an individual never increases as it is limited by human capacity. In a successful startup with continuous growth the wage is ever increasing, to the point of absurdity.
That’s weird. I grew up around farming and farmers. A group also very proud of the work they do, in a profession where the wage is also indirect — sometimes negative, sometimes a fortune, always based directly on the work they’ve done. Year after year, the work.
That’s different.
I’ve always identified two sets in the realm of entrepreneurs: those that want to “be rich”, and; those that want to “become rich”. The latter group is perhaps more admirable as they acknowledge the process and the value creation whereas the former seek only the status. But neither are often interested in the work of it.
This article reads like a rather flippant dismissal of the original concern that "earning" a billion dollars cannot be done without some moral compromise.
Sure, if you start off with $2 million and double it 9 times, you end up with $1 billion. Exponential growth is a powerful thing, so it comes as no surprise that maintaining a large growth rate over time very quickly grows a starting sum into a much larger pool of money.
However, his only response for how you should achieve exponential growth is this hand-wavy "make something you yourself want". His only acknowledgement of the concern that maintaining exponential growth may require cheating is a casual dismissal, and his only acknowledgement of the concern that the growth rate will drop off over time is "you'll still get there eventually".
So, while the original concern was that you cannot earn a billion dollars without some wrongdoing, PG's response can be boiled down to "nuh uh".
Regarding "moral compromise," many in this thread are missing the forest for the trees. The trees are taxi drivers and airbnb noise complaints, the forest is a policy environment that is absurdly tilted towards capital:
- Ordinary income has sky-high taxes compared to capital gains, and you don't even have to pay the taxes on capital gains if you don't realize them!
- Attributing credit for job creation to capital without attributing blame for job destruction to capital
there are more, but these are all Political Economy decisions that didn't have to be this way. They are this way because people with money and power wanted them to be this way and were willing to morally compromise to get them this way.
I think it's necessary that capital gains are only taxed when realized - anything else would be an accounting nightmare full of loopholes. However we could define more things as forms of realization - using it as collateral should count as realising it, and maybe casting certain shareholder votes that affect you financially
If I can pay property taxes on the unrealized value of my house, a notoriously illiquid asset with a notoriously subjective and noisy valuation, then billionaires can pay property taxes on their galactic piles of unrealized gains, which are more liquid than a firehose and easier to value than a $2 bill. This could crash the economy if done too aggressively, but the same can be said of every important economic decision ever made.
We've been pushing all the money into the capital economy and all the taxes into the labor economy and this can't go on forever.
> Sure, if you start off with $2 million and double it 9 times, you end up with $1 billion. Exponential growth is a powerful thing, so it comes as no surprise that maintaining a large growth rate over time very quickly grows a starting sum into a much larger pool of money.
Reminds me of this post I’ve seen making the rounds recently about a welder at SpaceX who was making $28/hr becoming a millionaire.
They keep emphasizing he’s a welder, the system works, and at the verrrry end mention he was issued 10k in stock a decade ago at SpaceX and held until it IPO’d the other day. The only “lesson” here is “if you own stock and stock go up you get lots of dollar bucks.”
They keep emphasizing “he’s a hardworking welder.” My response is “great! Let businesses take a lesson here: give all your employees a chunk of the company. Let’s all share in the success!”
I don't think they hid the point that he was issued stock? I thought it was pretty obvious? Which is why they're talking about it now, because the value of those stocks shot up because they went public
Yes! What's wild is that the story is a microcosm of what's wrong with the economy as a whole, where his work was worthless in comparison to his winning lottery ticket, which itself was (charitably) 10% due to SpaceX achieving its original mission and 90% due to investor optimism about AI datacenters in space.
A cursory search says 74-90% (in the US), but also that’s just tech companies and usually you need to be early. It’s also often in the form of options that take years to exercise and companies have gotten very creative lately in how they screw people out of them.
>There are two numbers that determine how big a startup gets, and thus how rich its founders become: the growth rate and how long it continues. You get the first by making something users like so much they tell their friends. You get the second by being in a big market. If you grow exponentially into a big market, your startup will become valuable, and you, as a shareholder, will become rich. You not only don't have to cheat to make this happen, it will happen automatically if you just keep making customers happy.
The real problem is his example, "you start off with 2 million dollars and 95% growth rate".
Fine, show me the average person who can come up with 2 million dollars. I sure as hell can not. I even went to banks and founders with my ideas, cash flow sheets and customer list looking for a loan.
No, I am convinced, the rich already have 2 million dollars, and make themselves a billionaire. The system is rigged against "normal" people.
He was talking about an equity stake in a start-up. Although on paper it is worth $2M, it is (probably) not liquid (i.e, the shares can't be traded easily, maybe at all.) The vast majority of founders don't literally spend $2M from their checking account to purchase their position in a start-up - they get some ownership as part of taking the start-up risk.
Is there some standard he/people use to come up with the initial company paper-stock worth? A 2m company I would imagine needs to have some tangible traction already.
Of course - at founding, if $20M goes into the company at $1 per share, and the CEO gets a 10% equity stake (usually subject to restrictions), then the CEO has $2M on paper (or will have after possible vesting.) Real money in this case came from the original investors that flowed into the company in exchange for ownership, but the CEO can't really do anything with his shares yet. At this point the original investors are taking a huge risk with their money - chances are, they just lost $20M dollars, and probably even more, as it can often take a long time of putting good money after bad.
Once a company starts operating, but before revenue (and hopefully eventual profitability), the valuation is trickier. The share price _should_ be the number of shares divided by the sum of all future profit (minus current debt.) Which is hilarious of course, because no one actually knows the denominator.
That original $2M equity stake can grow to billions if the company ends up making something that a lot of people want or need, so the sum of all future profit is large. Or, much more likely, it will be worth nothing, or a modest amount.
Graham's essay kind of avoids the point of whether ownership of a vastly appreciating asset is "fair", if a bunch of other people help that asset to appreciate.
But these are still numbers plucked from the air (or as you put it, from the 'future'). I want *tangible, material bases* to start from if any.
Another far more sensible model I've found is slicing pie. Each founder's input % of the pie pre-'bake' is their % of the rewards. And what makes up for one's slice of the pie? The dollar-value you would've earned if you worked somewhere else, times the period of baking. These can be tweaked accordingly to the type of investment put in. IMO, it seems far more grounded compared to say a flat 10%.
If your life analogy is a closed system competition you’re going to be disappointed.
Most people with millions do not become billionaires. So yes, there is an exclusive pool of players who can play the game. But within that pool there is incredibly different outcomes.
A better analogy is being born as a child of D1 basketball athletes and then making 100 million in the NBA. Being born into a family with no interest in athletics makes it almost impossible to be a professional athlete. Life isn’t fair. It’s still impressive to become one.
One in 500 of them makes themselves a billionaire, the rest have thrown two million dollars down the toilet. It's just a fair bet, there's nothing "rigged" about it.
Just because only 1 in 500 makes it to a billion, does not mean the other 499 are failures. Plenty of startup founders turn a few million into much more.
If someone has an idea that 'only' makes them 20 million, I would call that a great success; even if it takes dozens of years to get there.
yes but again, who has $2M to bet, even at 1/500 odds? You have to be a billionaire to make 500 bets hoping one hits, then you’re back to just being a billionaire again.
What do all of these companies have in common? They all manipulated markets, bent and broke laws in order to get that "exponential growth". They didn't want to wait around and find out if their businesses would be legally allowed to grow. So they just broke or worked around the law, with the intention of becoming billionaires. But that's okay, because growth rate! We're not doing anything bad, people want these things! Who cares if it might be illegal or the spirit of the law frowns on what we do? Money!!!
This is just one of the reasons why becoming a billionaire requires you to cheat. There's also the tax loopholes, the inducement to harm (both of the customer and by the customer), anti-competition, etc. In order to get these gains, you need to cheat, because if it were easy to do legally, ethically, and quickly, somebody already would have. It's corporate doping.
> Who cares if it might be illegal or the spirit of the law frowns on what we do?
Surely these things are on a moral and ethical continuum and we need to look at them individually? Pretty much every person has broken some law at least once in their lives. I don’t disagree that moral ambivalence is often necessary to make billions, but I also don’t consider all laws sacrosanct, or that breaking the law is the primary measure of a company’s moral standing.
You can tell that he doesn’t really think too deeply about any of this, because the way he wants to illustrate the point is by typing the numbers into a calculator.
It’s as if the money comes right up out of thin air, isn’t it?
He inadvertently gets close when he talks about Facebook being about people doing stalking. PG, is stalking a good thing or a bad thing, hmmm?
There’s no conservation rule for an asset’s value. Market cap comes mostly out of thin air because people believe a company is valuable. If they change their minds, it disappears.
(Market cap is estimated based on transactions that are a small percentage of market cap.)
No, market cap does not come out of thin air. Money flows in one direction and human activity and real changes in the physical world flow in the other direction.
Nobody is mad about the billionaires having a lot of money - they are mad that people are pissing in water bottles to make their route, or having the city’s public infrastructure privatized, or the many other fantastic real world changes that are on the other side of these fantastical market caps.
Market cap is based on people making estimates of future cash flow. (Especially for growth companies.) Predictions aren’t physical and can be wrong.
It’s also true that these companies raise and spend money and that results in physical changes in the world, but angry people on the Internet aren’t necessarily well-informed about what those changes are. There are lots of myths.
Traditionally, the value of a security is a prediction of its future cashflow to perpetuity discounted by a capitalisation rate. While it is true that some securities these days are sold as something not dependent on future cash flows, and insiders are paid off by selling something misleading to retail investors, that is known as a Ponzi scheme and is traditionally prohibited by securities regulations.
There is nothing physical about any financial transaction (except some electrons moving I guess), that doesn't mean that they aren't supposed to approximate something that happens in physical reality. A billion dollars is control.
The arguments for or against it being possible to earn a billion units of currency seem to hinge on differences in understanding of the term "earn".
The pg view seems to assume that if there is a causal relationship between your actions and a billion dollars appearing in your bank account, then it counts as having earned that money.
The countering viewpoint seems to consider the words "earn" and "build" as having a similar relationships to money and buildings respectively. If I tell you I built the shed in my garden, then you'll probably take my word for it. If I tell you I built a skyscraper, you'll either call me a liar or understand me to mean that a large number of individuals built it at my request.
I think the second version is more useful and more accurate.
The problem is in accounting. A stake in a speculative asset that's valued at an absurd multiple of ARR isn't exactly the same kind of thing as owning all the property of a slum and extracting rent. I am for a wealth tax so long as it discriminates on the type of wealth, but we aren't ready for that conversation.
Holy smokes, one could call this condescending but assuming both politicians and an average reader don’t understand how exponents work feels a step above. And that’s before you get to the part where it’s all about a great idea and hard work and definitely zero exploitation while mentioning examples like Apple, Facebook or Airbnb.
Have you ever listened to a congressional hearing? Or spoken to an "average reader"?
Most absolutely glaze over at the idea of calculating the "log base" of anything. If they ever got that far in math class, they certainly have not used the concept since then and cannot remember what it means or how it works. They might remember exponents, but the compounding of them is absolutely lost on the overwhelming majority of people.
I don't think this essay by PG is sufficient to teach them log bases or compounding, and is manipulative to assume now that someone knows 2 million doubling 9 times is a billion, they should be accepting of how one can earn a billion dollars fairly.
Unfortunately, there was plenty of not understanding exponentials on display during Covid, including from politicians, journalists and other public figures.
It tends to filter out trite topics and lower-quality submissions, though I have the feeling that it has become less effective for that in recent times.
The most offensive part to me is that it tries to excuse obscene wealth as simply (shrug) a pesky, I mean "magic", byproduct of math.
Regardless, can we talk about the danger to society of having these resulting billionaires and how we ought to address that? I think that is in fact what "the politician" mentioned in the article was trying to address.
(The new American Dream appears to be: be one of the 30 people every 21 years that finds themselves the head of a startup that succeeds.)
Let's put this math in a mirror and do the leftie version of the exponentials:
"The purpose of capitalism is to pay rich people for being rich in proportion to how rich they are, thereby establishing, reinforcing, and perpetuating a class hierarchy where the people on the bottom must constantly pay to exist while the people on top constantly get paid to exist."
Dear reader, if you bristled at how casually this statement ignored that compounding returns are a feature of the real world that we want our economy to model and encourage, now you understand how a normal person feels when a megacorp or megacorp cheerleader casually fails to account for everyone they displaced and stepped on in order to capture the value that they did. "Negligent accounting" is a strategy that points both ways.
> Let's put this math in a mirror and do the leftie version of the exponentials
The plot twist is that the 'rightie' and the 'leftie' are both entirely correct. Which is why most developed economies try to remove sources of wasteful, unearned rent and also include significant amounts of redistribution/social insurance rather than relying on pure market outcomes. This doesn't erase the compounding dynamics altogether, but it hopefully ensures that folks at the lowest end of the distribution can keep a tolerable standard of living that doesn't have them 'paying' too much.
Yep! The equation even has a "left" and "right" term that correspond to political left and right:
gains = investment * rate_of_return
Left term: rich people get paid for being rich in proportion to how rich they are. This is an exponential and it creates, reinforces, and perpetuates a class hierarchy where poor people must pay to exist and rich people get paid to exist. Capitalism is a Softmax function.
Right term: capital allocation decisions are made with skin in the game. Every chunk of the economy has a responsible owner who is rewarded/punished and promoted/demoted for good/bad decisions. Capitalism is a Q-learning algorithm.
Yes, although I tend to think this produces better incentives and is easier to administer if we formulate it as progressive corporate taxation. This structurally discourages mega conglomeration and encourages spin-offs to enhance competition. Also, taxing at the source of profits obviates the need to track down the destinations of profit, who are far more numerous and easy to hide.
The non-explosive way to do this is simply to set the heel above the megacorps today and let inflation push them into it. They will be able to avoid the heel by splitting at their leisure, slowly remediating the consolidation we have seen and restoring competition.
$2m is the standard seed round nowadays which is what he was as referencing. Anybody who has a good idea and can convince investors can raise this, hence how the new AI founders became billionaires without having $2m of their own.
Come on. Exponentials are deeply counterintuitive, but simultaneously pretty much where all the returns come from in startup investing. I think it’s extremely illustrative, especially to a group that’s probably heard a lot of degrowth propaganda.
AOC’s point is simply that when growing exponentially from 250M to 500M to 1B usually whether using exploitive rails one is conscious of or not - someone is bearing an unfair burden. That in 60 out of 60 examples of YC billionaires and all billionaires with maybe a few exceptions - people do not go out of their way to ensure nobody is getting hurt and everyone participates fairly. People are too excited about the exponential growth and their goals. I don’t even think it’s AOC’s main point that these people are at fault. Just that the system is at fault for not ensuring exploitation is minimized further for the rest of the 99%.
(Great essay on how to be a billionaire though. Could billionaires give back more? Yes. But creating market value like that is both worth celebrating and evolving.)
Not quite on topic. But I feel there is an issue in politics where many non-wealthy people vote as if they are "temporarily inconvenienced billionaires." That is they endorse policies that favor billionaires, as they have some hope of being one someday.
The lack of genuine desire to understand each other is what is astonishing.
I don’t know where “the politician” went with that comment, but for me the more pressing conversation is whether we want a society where many are struggling and some make a billion dollars.
You benefited from society, clearly, which is not to say you didn’t work hard. But it seems entirely reasonable to me to ask you at that point to give back. We can knock plenty of people back to mere “hundred millionaire” status, they’ll be fine, and we can do a whole lot with that money.
> So you can imagine how astonished I was last month when an American politician said that it was impossible to earn a billion dollars. I felt like a skating coach hearing someone say that it's impossible to do a triple axel. Of course it's possible. It's hard, but it's possible.
"Earning a billion", to the skating coach, is like pulling off a dodeca-axel.
It's not gonna happen through mere pluck, and it's probably gonna involve a lot of other folks' work if it ever happens, who probably aren't gonna get that much of the glory.
Paul Graham is the skating coach himself, as from 6000 startups financed by y combinator quite a few were unicorns. it is olympian level, but it there is a system to it.
You can earn by deploying your own labor to facilitate transactions between other laborers, such as by running a job fair, that's completely legitimate, good, and creates value. You can't just take 90% of someone's wages, or rather, you can, and many people do, but it's theft.
Because they believe in the Marxist labor theory of value, where apparently it's theft if someone else uses your labor to make something more than you could make yourself, not understanding the fact that that's not how labor markets and total human collaboration works to make something more than the sum of individuals.
"“Destruction becomes the principal commodity produced by capital. Militarism will lead accumulation, which will theoretically demolish
any limit to capital.”
This is slightly disappointing, but it's probably necessary cope. If you want to build startups which move fast and break things, you have to ignore many problems and many people of this state, country, and world.
You start by ignoring what a "billion dollars" means, and most people don't think it's stock. Then you have to ignore what "earn" means, which most people don't think is getting stock on the assumption that the company you own a portion in will turn a profit one day, possibly many years ahead.
Getting investment without having profitability, getting to keep a portion of this investment, even if the banks that are insured with taxpayer money lose that money, is not what the constituency of AOC think is earning money.
There is a huge amount of technological advancement and personal fortune that I enjoy from this system, but I'm not trying to bullshit anyone that the system is fair.
In conclusion, I do think this attitude is cope that allows a high performing individual to focus on this game and be successful, and Paul Graham seems to be successful, so it's natural.
Even if we agree that Billionaires are better capital allocators and power yielders than elected govs, let's see what happens after they die.
Their money goes to heirs who did not earn billions and do not know how to allocate it, or to questionable non-profits. So it ends up being a huge drag for the society.
Thank you for publishing this. I've been following Paul Graham and his works for a long time. It's refreshing to see everything written down in a document like this. This is the bible for startups. Honestly, it's beautifully simple but not easy.
I don't personally subscribe to this belief but the people saying it's impossible to earn a billion dollars without doing something bad would say that your founders are doing something bad by exploiting the employees by not returning to the value creators a fair share of the value generated and instead hoarding it for themselves. pg is arguing a strawman to the actual argument when there are far better arguments around rewarding risk though I feel like most people shouting that don't value risk either so maybe that's not a better argument?
Andrew Wilkinson has a whole part in his book about what it's like to be on the billionaire side of this speaking to former employees who feel that you took more of the value than you deserved it was an interesting read.
Who decides what's "fair"? Shouldn't the market decide? Otherwise, of course people will always be incentivized to argue that their subjective opinion is what's fair, and that's almost always going to be, "I should have been given more."
This post hand waves away the inflection point(s) of maintaining high growth rates as you grow. He hints at it saying year 4 growth is harder, but it is _vastly_ harder.
Companies focus of the Rule of 40 and struggle to keep above it. And this struggle is where many in management lose their way.
Enshitification begins. The margins get harder. More corners cut. Employees get treated less well, customers get treated less well.
Instead of telling us "it is just exponential growth bro," do case studies on billionaires and their dealings. In the US, you have billionaire business leaders who have full time employees who require government assistance every month.
The couple of billionaires and near-billionaires I have worked with (and helped build their companies) have not been bad people. But working at their companies pre and post IPO is way different. Less perks, more pressure. If the company culture isn't solid, it becomes bad fast.
> A couple days later I was talking to the founder of a startup I'd funded. I began by asking, as I usually do when I meet a founder, what her growth rate was. 93% last month, she said. I pointed out that this meant her net worth was also growing at 93% a month. She was getting richer at a stupendously rapid rate.
This is such a weird statement to see. The idea that a startup founder whose company is growing at 93% month-over-month has a net worth growing at the same rate is just so logically wrong that it's bizarre to see someone stating this.
Even putting aside the fact that "growth" can be tracked by various metrics (revenue, customers, registered users, etc.), the idea that any given "growth" rate tracks 1:1 to the paper valuation of illiquid equity in an early-stage private company is so naive to be silly.
> And yet she hadn't been doing anything bad. The reason her startup was growing so fast was simply that users loved what she'd built. So she could feel from her own experience how wrong that politician was. She wasn't exploiting anyone. Exactly the opposite in fact. The reason her startup was growing so fast was that she and her cofounder had been working their asses off to make their users happy, and as a result the users had been telling their friends. And that gets you exponential growth.
Delve, anyone? Startups can lie, cheat and steal, and their customers "love" them until they find out they've been duped. And let's not forget that more than a few have been accused of lying about how much "love" they really have (by misrepresenting their traction). Fake it until you raise it.
Also, this reasoning is very narrow. A company's customers might love it because it allows them to benefit from something that has external costs that disadvantage other groups, if not society at large. Cheap outsourced labor, regulatory capture, network/monopoly rents, tax shenanigans, etc.
A lot of companies also try to hack referrals, which sometimes involves using dubious tactics to get users/customers to sign up for something under questionable pretenses. In other words, people recommend products and services to their friends not solely because they love them but because they're given a personal incentive to. These can be really effective even when it's pretty obvious people are doing something that won't benefit their friends.
> There are two numbers that determine how big a startup gets, and thus how rich its founders become: the growth rate and how long it continues
> The reason her startup was growing so fast was simply that users loved what she'd built.
> In the real world, growth rates tend to slow down a bit. A very successful startup will probably be growing faster than 15% a month in year 1 and slower than 15% a month in year 4.
It turns out that the people who will invest in your startup when 93% MoM gains are possible want you to do pretty much anything to keep growth as high as possible--also your career, net worth, and employment are tied to this so you're similarly motivated--including squeezing and manipulating those users who loved you so much. But hey, as long as you personally get rich it's fine I guess.
> How people become rich in your society is one of the most important things to understand about it. You can't let your beliefs about this be determined by ideology, or movies, or historical examples that are centuries old.
The idea of becoming rich is as old as society itself but it has not been a static concept. It is an idea shaped entirely by the things mentioned - ideology, culture and history. There is no wealth accumulation without ideology of one sort or another.
It's fair to resist a view of wealth that may seem flawed but it's disingenuous to assume this can be done from a neutral position.
But "earning" does not mean "obtain without cheating"! Nobody (that I have spoken to) speaks of earning their lottery winnings. The claim is that owning a company worth a billion dollars is more like winning the lottery than it is like earning money. And it is!
The whole discussion about exponential growth is idiotic and not worth responding to. But if you think of what he actually means - having a total addressable market of at least a billion dollars and being able to effectively capture it - it is obviously primarily due to factors outside of your control. The sort of company PG is talking about typically revolves around a good technology that has a network effect somewhere that leads to market concentration. People do not get good ideas by working hard, and markets are not made easily monopolizable by hard work. Execution of an idea requires hard work, but companies that are only good at execution do not win.
Obviously you can engage in hard work to improve your odds. But the returns are out of scale with the hard work. This is all people mean when they talk about "earning" money - if it's in proportion with your work, you earned it; if it isn't, you didn't.
I exclusively build stuff that I think is cool for me and my friends but I have little drive to market these things and plus they are designed to be completely free forever so I don't think I'll ever be a billionaire.
That is wonderful. What makes billionaires valuable to society is that the act of trying to make a business worth a billion dollars that people want is really, really hard. It essentially punches you in the face constantly. You have to power through a bunch of really tough situations. There has to be a really strong reward at the end to make it worth it. Otherwise everyone would just toy around with free projects.
Hopefully the billionaires are happy with the reward at the end of the tunnel.
I suspect they may envy the laymens position in life eventually. You loose alot becoming wealthy in the monitary sense. There are many ways to define richness and wealth beyond what society defines it as.
How many businesses are there that are worth at least $1 billion and employ no-one but the founders?
When people say that it's not possible to earn a billion dollars, they're talking about the discrepancy between the wealth gained by those employed by the company versus the shareholders of the company. For example, when WhatsApp was sold to Meta for $19 billion, how many of WhatsApp's 55 employees walked away with hundreds of millions of dollars?
The fundamental problem is that it's possible for an employee to generate a hundreds of millions of value for a business, and yet be compensated for a vanishingly small fraction of that. Even if the employees agreed to a particular salary, is it ethical to pay them so little in comparison to the worth they generate, or is it exploitative?
Most, if not all billionaires, reach that status by paying people far less than the value they generate. If you want to become a billionaire, you need to find people who are willing to be paid thousands or tens of thousands of times less than they're worth. You need employees who will generate you $100 million in exchange for being given $100 thousand.
Your post implies that every employee of a successful company is entitled to a share of whatever wealth that company generates.
As a career programmer, I worked for several companies. Each time I took a job, I negotiated what I thought was a fair salary for my wages. Some companies also gave me stock options and one gave me founder's stock. When a company had a good year, they often gave generous bonuses.
Only when I took great personal risk, did I expect to share the rewards that come with a successful company. I was always grateful when I got more than I agreed to work for, but I never felt entitled to it.
A janitor working for a 10x company should not feel entitled to 10x of the salary as another janitor working down the street for another company that is struggling.
That's not quite what I'm saying. You may very well have been paid fairly for each job you've taken, assuming that the value you generated for the business was not substantially higher than your salary.
But hiring people who are compensated fairly does not make someone a billionaire. If you generate $300,000 of value per year and I pay you $200,000, then I'm only making $100,000 profit off your work. I could hire more employees, but value does not scale linearly indefinitely. Doubling my number of employees does not guarantee I double my profits.
No, if I want to become a billionaire within my lifetime, I need an asset that generates far more money than it costs to buy and maintain it. In other words, I need employees who will generate millions for every thousand I pay them.
Now you might well argue that I'm taking a risk. How do I know if an asset or an employee or a team of employees is undervalued? Not every bet is going to pay dividends. However, while this is true, I don't think this makes it ethical. If I'm a venture capitalist looking to make it rich (or richer), the fact that I'm taking a risk doesn't change the fact that ultimately I'm looking for people who I can pay far less than they're worth.
Why is it unethical? I'm both a freelance engineer and a business owner that sells software, and I've both sold my labour for equity/revenue share, and for a flat hourly rate.
If I charge a client $50k for some software and they made $1 million profit from it, good for them? As long as they pay our mutually agreed upon rate on time and there was no hostile negotiation, why should I feel suddenly entitled to more money if that wasn't in our contract? How do I know how much of the value is from my work and not their marketing or idea?
What you're saying seems as crazy as me saying that someone who bought my software for $99 and used it on a multi-million dollar project is being unethical unless they give me more money. How on Earth does that make sense? Should I be forced to switch to a royalty model? What if I make more selling copies at a flat rate, what if I don't want to have to investigate the finances of thousands of customers and have to deal with that whole trouble?
For me it's the same thing regardless of whether I'm selling my labour or a product. I can choose whether to accept a flat hourly rate, equity, or a mix of both, and usually the better deal is the hourly rate.
If I find a way to hire a software engineer for market rates (say, $200k/year in the US) and get $2M revenue from their work, good? They can ask for a raise or a bonus, we can renegotiate, they can leave if they're unhappy, but I'm not obligated to give them more money than was in our agreement anymore than they're obligated to give me their salary back in the project fails.
This wouldn't happen if employees rejected cash-based compensation and decided to be founders themselves. Most employees trade risk for higher cash comp, and end up with less upside. This issue is mostly settled by the employment market
> So you can imagine how astonished I was last month when an American politician said that it was impossible to earn a billion dollars.
> She wasn't saying, of course, that it's impossible to become a billionaire.... What she meant was that it's impossible to get that rich without doing something bad — without cheating in some way.
> But now you at least understand, from having done the math yourselves, that you don't have to cheat to become a billionaire. You've seen for yourselves that there are only two numbers in the calculation, the growth rate and how long it continues. If it's impossible to make a billion dollars without cheating, which of those two numbers is impossible?
AoC quote:
> There’s a certain level of wealth and accumulation that is unearned. You can’t earn a billion dollars. You just can’t earn that. You can get market power, you can break rules, you can abuse labor laws, you can pay people less than what they’re worth, but you can’t earn that.
Come now @pg.
$2 million * 9.45 months * 93% growth rate = earning a billion dollars, ok. Does that really address what AoC was saying? She wasn't saying that the math doesn't math.
He's saying that the math as he defines it means that YC founders who make less than even millions can anticipate making billions without anticipating doing something unsavory along the way. That's a fine, and possibly true premise.
But, in the real world, as the 'exponential earnings' stack up, the incentives to do unsavory things to keep the rate of growth scales right along with the earnings; and the odds of anyone actually 'earning' a billion dollars while sharing the proceeds and absorbing the risks and societal costs of that growth fairly, ethically, legally and honestly has a growing potential to become vanishingly small.
AOC was speaking to this reality, the author was speaking about the math functions of how some steady rate of growth crosses from a small number to a very big number due to the law of compounding growth, and speaking to the actions and motives of a cohort who had not yet done what it took to realize that rate and duration of growth.
They actually are both right.
AOC was not addressing the math at all, nor did she claim that it was mathematically difficult to become a billionaire; just that it was unrealistic to expect that the process of doing so did not select for people with an intrinsic ability to externalize risk and maximize profit in a manner which many other people find distasteful, bordering on criminal if known to the full extent.
And the original post posits that his representative cohort was free from these types of behaviors and thus would remain so.
I find one of those arguments more realistic and actionable than the other even though they both may be true. I'll leave which for another day.
Of course he's not addressing what AoC said. That wasn't the purpose of his propaganda. Just as so many billionaires are panicking about potential wealth taxes etc, so too is PG.
This is no different than any of the Thiel/Musk/Bezos propaganda that's been swirling around as they realize that the natives are getting a bit restless and mentions of guillotines become more common on social media. And they look at the UHC CEO's murder and wonder just how safe they really are.
Did you read his post at all? He knew what she was saying and addressed it clearly:
> What [AOC] meant was that it's impossible to get that rich without doing something bad — without cheating in some way... The reason [my founder's] startup was growing so fast was simply that users loved what she'd built. So she could feel from her own experience how wrong [AOC] was. She wasn't exploiting anyone. Exactly the opposite in fact. The reason her startup was growing so fast was that she and her cofounder had been working their asses off to make their users happy, and as a result the users had been telling their friends. And that gets you exponential growth.
In other words, this founder being on a trajectory toward billionaire status, through doing little but working to provide something of value to those willing to pay for it, belies the claim that you must be doing something unethical and cannot earn one's way to a billion dollars.
Yes, growing at average 15% a month will make you a billionaire in so many months. But somewhere along that trajectory you've tipped the balance from "eveyone is benefitting" to "in order to grow larger we need to exploit and extract."
Clearly nothing is universally the case, but this pattern repeats in enough freqeuncy that it's effectively the case.
I read pg's collection of essays (Hackers and Painters) in my 20s, and it single-handedly prevented me from being radicalized by leftist ideologies. The one insight from the book that I will always remember from the book is this: if you want to be rich, make something people want. Money is fiat to the value you've generated in growing the economic pie. It is in fact possible gain wealth ethically.
However, there are several addendum to this argument:
1. Most billionaires are hedge fund or private equity managers whose name no one has ever heard of. They provide liquidity or allocate capital or something. It's actually a major PR failure that people think Jeff Bezos or Elon Musk when they think of billionaires; If we can ignore their character for a second, these guys are actually hyper-productive and they've created immense wealth for society and are compensated in a power law sort of way.
2. Rich people make money with money - in the form of dividends, interest, rent, etc. Poor people trading labor for money. Salary only scales linearly; therefore, generating value for society is only half of the equation, you must also have ownership, or slowly invest your earned capital to eventually make money with money (i.e. retirement).
3. There must be a growing economy, otherwise it's a zero-sum game; a fixed-sized pie. In a stagnant economy, the customers you gained are customers another company lost. The wealth just shuffle hands from laid off workers to your employees. I think this is why Jeff Bezos once remarked that a stagnant economy is incompatible with free democratic society.
4. There must be a new frontier, otherwise the chance of success is pretty much zero. Software is this generation's new frontier. There are no bars to entry. You just need a laptop and the skill to arrange symbols on a screen in the right order. It's literally alchemy. On the other hand, non-software startups can't just do things. In many cultures, maybe due to their lack of growth, "entrepreneur" is actually very low status. It's synonymous with ne'er-do-well who can't find proper work. In the case of USSR before its collapse, it's synonymous with literal thieves and black market thugs.
What AOC is trying to do here is shift the debate from extracting retribution on people who have violated specific laws (a fair and an honest way to enforce justice in a civil society) to extracting retribution on people who she insinuates "must have done something immoral" based on their net worth (a selfish, dishonest, envious and greedy way to run a society). It's a clever play, and unfortunately for the people of the world who value freedom and a high standard of living, it's going to work. There is enough of the population filled with envy and greed that they'll lap up whatever a politician tells them bogie man of the day is. Historically it's been the aristocracy, Jews, immigrants, but those don't work any more, so now it's generally "the rich". Billionaires are the thin end of the wedge. After them it will be business owners of all kinds, people with second homes, people who send their children to private schools, and generally anyone who has anything else that someone might envy. It's clear that the way society is going people are going to keep lapping this stuff up.
HN used to be open minded about people creating wealth. The change is shocking to me, actually.
>There is enough of the population filled with envy and greed that they'll lap up whatever a politician tells them bogie man of the day is. Historically it's been the aristocracy, Jews, immigrants, but those don't work any more, so now it's generally "the rich".
I love how the billionaires hoarding resources to entrench their own power are not the greedy ones in your telling.
I don’t know if this take is just naive or dishonest…
building something people love can make you a billionaire, but most billionaires did not build something people love, and most people who’ve built something people love are not billionaires.
Generally a PG defender (at least nowadays), but he is deliberately misrepresenting what she meant, and/but I think a good % of the students/attendees know that.
"So you can imagine how astonished I was last month when an American politician said that it was impossible to earn a billion dollars… What she meant was that it's impossible to get that rich without doing something bad — without cheating in some way."
Not exactly the way I interpreted it (emphasis on earn). Right or wrong, I think the vast majority of us think that "deserved money" is money earned from "work".
A simple example would be the billionaire Walton children: their fortunes inherited. Most people would argue that they did not really earn those billions of dollars.
On an admittedly slippery slope, for many, investing and other means where the money makes money is also not regarded as work (and therefore is not earned money).
To wave around the idea of "the American Dream", I suspect that many American's disapprove of any means of obtaining wealth that the average Joe or Jane are not privy to. This idea that you have to be born into money or have money to make money—we are (perhaps naturally) repugnant to.
I've always respect PG's articles (obviously), but him pointing to a sole founder at a high growth rate (which founder btw, what is the product) as 'proof' that no bad has been done to reach that level of growth is so incredibly naive!
His founder is not at the level we are talking about. They obviously would not represent the 'bad' that AOC was trying to make a point about. Why don't you pick your actual billionaires?
Airbnb - Ignored and exploited local housing regulations, over time the blowback has been HUGELY negative. Here the 'bad' is the commoditization of housing in peoples' homes, causing housing problems.
Coinbase - For years, they built their business on bitcoin being used on dark nets for illegal purposes. There's the bad. If they were truly good they would have done KYC from day 1. Why would they? Billionaires gotta break rules.
DoorDash/Instacart - Exploitation of cheap labor, they _consistently_ underpay workers, hire undocumented laborers for that purpose, and pit laborers and consumers against each other rather than improving the system.
These, Paul, are the actual billionaires AOC was talking about. Not your young founder making the 200th to-do app.
Really unimpressed and disappointed by the shallowness of his thinking here.
- So I would like you all to do me a favor please. I would like you to take out your phones and calculate a number. I know this may seem contrived, but I promise it will be useful for you.
I’m thinking of vibe coding a calculator app How Many Babies Died For This where you input your startup idea, life(style) goals and AI token usage and the machine spits out the Net Babies Dead for you to achieve your dreams
Yeah I was more interested in why you haven't saved a baby's life for $4000. Maybe I'm being presumptuous, but even if you don't have $4000 in savings and liquid investments you could probably get a loan for $4000, or extend your mortgage. A baby is going to die if you don't.
Why would you want to earn a billion dollars? You must have the maturity to handle the money. Hopefully you’ll mature sufficiently through the process of making that money but if the money’s fast, that might not happen. I’ve seen people get 9-figure rich overnight. Didn’t change them at all, they are still the wonderful folks they were. But I’ve also seen people drink themselves to death as it turns out a few mill in the bank does not answer the question “wtf do I do when I don’t have to do anything?”
I don't think this article properly engaged with the criticism from the politician. That's fine, I wasn't expecting it to, but this isn't valuable commentary on the politician's point. I suppose it does serve to demonstrate that Graham and people in Graham's orbit are unable to see a distinction between "have a billion dollars" and "earn a billion dollars".
It's depressing really - lost alot of respect for pg over time. Based on his writings it honestly appears that he isn't engaged with any critical writing in any of the social or political (or economic) domains.
The problem with any Sycophancy is that eventually [even the most-egalitarian] leaders lose both perspective as well as control (of their entire organization... world).
Even if the leader wants to hear honest criticism – to receive capital `t` Truth, IMHO: rare – his echelons will sequester any challenge(s) to their status quo, often by excluding dissent(er)s.
I don't disagree with the essay, but is there any benefit to being a billionaire? Almost anything I could possibly want could be satisfied by being a humble multi-millionaire.
Many of these billionaires they're referring to are paper stock billionaires. It gives you access to maintain control/takeover other companies. For example, Elon made an argument that his package payout (if fulfilled) was so large because it served him to be able to retain control of his company.
Another example would be taking over media companies like what Bezos did, the side effect would be being able to waylay/hide any dirty laundry.
Do you have a want to please millions of people whose lives are improved by exactly the product that your company sells? I could certainly do without that, but it does sound nice.
I'm not sure there is but if you create a company that successfully serves the world's 8 billion population it often ends up worth more than 12.5 cents per head. Or else it maybe isn't providing that significant a service.
With nearly all the billionaire PG mentions the money is the company valuation rather than cash in the bank.
"So you can imagine how astonished I was last month when an American politician said that it was impossible to earn a billion dollars..."
Paul, playing dumb doesn't suit you.
The first definition of "earn" on merriam-webster.com is "to receive as return for effort and especially for work done or services rendered".
Your chose a straw man, "doing something bad", to argue against because it's so easy to beat.
Much harder to justify that anyone's doing $1B of effort. Being a billionaire doesn't mean you're bad. In fact, it doesn't even matter if they are all bad -- there are always going to be bad people. It means a system that allows, encourages, and protects billionaires might be a problem that needs to be fixed.
Scary idea, I know. But we all only get to go around this world once. Might as well spend our time trying to make it better rather than rationalizing why it's OK to spend all your time trying to make it worse.
So nice of pg to mention AirBnB as one of his examples of what a successful startup who "doesn't cheat" means. They just were great people with a great idea who found a market for something people wanted that no one had thought about before, and poof, exponential math billionaires who earned it!
Of course, we'll ignore the huge issues that Airbnb created for cities, customers, and providers. We'll ignore the way they knowingly helped ignore any regulations on tourism as much as they could. We'll ignore the business model of simply being the biggest middlemen around. We'll ignore the fact that their business is slowly being outlawed in major cities, at least in Europe, because of all of the above.
And, surprisingly, if we ignore all of the things these founders do to ignore the law and cheat the market or their competition, we can say that they earned their billions without cheating!
We'll also ignore the fact that the brilliant magic math that us lay people and politicians just don't understand also predicts that the founder whose business is growing 93% per month will not only be a billionaire in 9 months, but a trillionaire 9 more months after that, and surely the world's first quadrillionaire within 5 years. You might think this is implausible, but that's just because you don't understand how exponential growth works!
No, that problem was not generated by Airbnb. There’s growing demand and, because of regulation, not enough is built every year. For example, according to INE, 250k new families are formed in Spain (more than 500k people) and only 100k new houses/flats are built and the yearly deficit has been accumulating for 12 years. That is the real issue and blaming corporations is just the politicians’ easy path to deflect blame, which unfortunately too many citizens eagerly buy into.
Even if it were true that the problem of housing affordability was not affected by Airbnb (it's not, at best it only exacerbated an existing problem), that would not mean it didn't create other problems for cities. Having tourists concentrated in places that are not designed for it, where a hotel license would never have been issued; the problem of too many tourist accommodations, causing an overflow of tourism; problems for neighbors with parties and similar nuissances; problems with untaxed income from the smaller owners; and probably others I'm forgetting.
I know the Spanish case. The hotel lobby does not only push for airbnb restrictions but also for banning new hotels (so that they can push prices up). For example famously there are no new airbnb or hotel licenses since more than 10 years and obviously the problem has only worsened. Regardless, the problem is in general still a demand that grows roughly at 2.5x the supply growth rate.
Are the boulevards, museums, parks etc growing as well? If not, why should the number of hotels grow? A city generally has a limited capacity for tourism (one which is not primarily related to the number of hotel rooms) and once that is reached, it becomes detrimental to increase tourist accommodations. I don't know if this is the specific case in one specific city that you have in mind, but the principle is there - expanding tourist accommodations is not a good in and of itself. Supply is naturally constrained, regardless of demand, for many real goods, and this is one of them.
Additionally, you keep ignoring the fact that even if new housing supply would be very important, Airbnb is still a drain. If demand was outpacing supply 2.5x before Airbnb, and it's outpacing it 3x now, that is still Airbnb making a bad problem worse.
Externalize all the problems, but its "not cheating!" - its just making us all pay for your growth while you take advantage of the current structure of society and generally making things worse.
There's an older tradition of thought on the matter with better intellectual pedigree and epistemological hygiene: "Behind every great fortune lies a great crime."
The easiest way to earn a million dollars is to start a business that makes sense and work your ass off running it well. Maybe that's even the easiest way to reliably earn ten million dollars, a million isn't what it used to be.
But at some scale that's far short of a billion the game becomes about asymmetry.
This asymmetry takes many forms. For Steve Cohen it was trading on inside information, for Jim Simons it was (as far as anyone can tell) novel mathematics.
For most of the technology companies in the 21st century it was about privatizing the commons and/or externalizing costs that a well-refereed market would place on your company.
The United States used robust public/private partnerships and a vibrant, thriving university system to build the greatest pile of latent wealth in the sum history of humanity during the 20th century. Everything from the transistor to the integrated circuit to the laser to Velcro to tang to the internet to the web was a product of this holy Trinity of innovation: defense and related public money, well-refereed private companies (even a notable natural monopoly or two under muscular regulation), and a paved path between the Academy and the other two. The gains accrued enough to individuals to keep everyone motivated but largely in the form of status, which confers a desirable station in life but does not compound directly into political power. Feynman and von Neumann and Einstein all seem to have led very enviable lives and are easily as smart and accomplished as anyone in the front row at the last Inauguration (and if we're honest, a lot more), but none of them had a billion dollars or untoward access to the levers of government. All of them paid far more into the ocean of latent wealth deeded to the body politic than they took out of it.
And at some point (my money is on the kneecapping of Brooksley Born, whose architect is now resigning in disgrace from everything for Epstein affiliation and whose most recent post was on the board of pg's protege) the flow reversed. The access caste started to be d away from the competence caste and the singular fortune deeded to the public started to accumulate as a dozen private fortunes that were substantially just the 20th century stuff with a named owner.
You get a billion dollars by stealing it, this is qualitatively different, a distinction of kind not of degree, from how you get a million or even a few tens of millions.
To get a trillion dollars as we have now seen, well first you steal a billion.
PG actually addresses this in other essays. That adage does have more history. But the world literally changed;
1. In pre-industrial society there is less technological leverage, so that it’s very difficult for an incidental or group to help very many people.
Perhaps the closest analog before then was land discovery or conquest (taking other people’s stuff).
2. Post-enlightenment society is one of the first which doesn’t predefine your social role by birth. So you can claim new roles and status from your own wealth.
America has a much stronger sense of 2 which is why European attitudes towards wealth differ.
My copy of Hackers and Painters is the first printing, I'm extremely versed in the last twenty years of pg's writing and public speech, and the glowing arc of that thought over that time.
Early pg wrote about Lisp and engineers should do their own testing and commodity FreeBSD on commodity Intel was better than Oracle on Sun for starting a company.
He wrote that makers and managers needed different schedules. He wrote that math has asymmetrical upsides. He wrote that you do things that don't scale while you're in the garage.
In his wheelhouse he was best in the genre, maybe not the Balzac he fancies himself as an essayist or the painter he fancies himself at all, but the best guy to listen to if you were doing a garage band startup that involved the Internet. He was surrounded by legitimate legends like Robert Tappan Morris and Trevor Blackwell, and he wrote about things he understood.
Late Soviet Paul Graham exists as the lobbyist for Garry Tan Y-Combinator, which isn't even really prestigious anymore. As far as the signalling value goes? I'd rather have a strategic from NVIDIA before YC. I would think about YC's money if literally no one else was interested. This is "ChatGPT Tha License Dawg", "die motherfuckers die motherfuckers die" tweets tagging elected officials Y-Combinator he's defending, and the vampire companies he cites as his clean wins are suitable filleted in the rest of the thread that mine would be redundant.
And the real mile marker of a guy whose audience has exceeded his depth is that he's lecturing a room full of people about how a single operation on the iPhone calculator app can teach you more about government and economics than is apparently understood by someone who has survived eight years in Congress designed to destroy people like her, who has an Economics degree cum laude from Boston University that she got while working as a bartender to support herself and her family after her father died, a situation with no parallel in pg's life or that of anyone adjacent to him in either it's highs or lows.
I got into this business substantially because pg's writing was so motivating to twenty year old me, and for that I'm still grateful. And just like I hope Kanye gets back on his Lexipro and starts making great music again, I hope that pg goes back to his roots and starts printing great technical and startup essays again instead of spewing solid waste.
But just like I can't follow Kanye down the "death con three to the jews in hollywood" road, I can't follow pg down the "think about the billionaires and don't listen to the honors economist multiple-term congresswoman" road.
One is dramatically more offensive in it's form, one is dramatically more toxic in it's substance, because there are people who take it seriously.
I wrote a 542 token rebuttal to his argument that you originally replied to, but to zoom in on that particular nub of a much more complicated picture:
No serious person acting in good faith disputes that new methods of wealth creation have started appearing at a dramatically higher rate in the last two or three hundred years than any precedent before that. Everyone, including AOC (who I agree with in this instance but am not in general a huge fan of, just to be clear, I can respect a person's credentials without blindly endorsing them), would concede that point cleanly unless they were trolling.
The second point is so ill-formed as to verge on oxymoronic when examined against either of mechanism on the ground or Bayesian prior of history. New methods of wealth creation have triggered market failures admitting new methods of wealth centralization a number of times in recent history, the Gilded Age being perhaps the poster child for this failure mode, and the Great Depression being perhaps the poster child of the magnitude of that failure mode.
The sleight of hand here is recursive, the two points are one that is trivially true followed by the shellcode that looks like a test fixture, and the shellcode is a subtle rename, `s/time bash -c 'my-command'/sudo bash -c 'my-commmand/`. It's almost reasonable, except that it grants arbitrary privileges to something that definitely shouldn't have arbitrary privileges.
In both instances, pg is smart enough to know he's arguing in bad faith.
If you're not aware, in addition to being generally frowned upon on HN because it's zero-signal snark, the no doubt satisfying BU diss is also such a meme about socially awkward teenagers that it's a bit in a hit movie: https://www.youtube.com/watch?v=HtMmhcNKn0o.
At "Glad you agree" we've left plausible benefit of the doubt that you're arguing in good faith and so I'll bow out with one procedural grade discharge, which is that the LLM accusation is quite trivially prohibited in the stare decis of dang's rulings over the years, but still sometimes rallies downvotes, so my credentials as a human are that no LLM I'm aware of (and I work in AI) has YouTube channels of code streams.
Elon Musk easily earned the billions for SpaceX. It's providing space internet to Ukraine, an innocent democracy that's under attack. The technological feats of rocket reuse and the vision of Mars don't even matter, insofar as they're just tools to attract the capital. Any other method that supports Ukraine just as well would have also been worth a billion.
Patriot interceptors cost many millions, so 100-200 are already worth a billion! Is SpaceX internet worth 200 Patriot missiles? Easily.
I think politicians restrict "earning" to "wage income", which is kind of an arbitrary line in the sand, and would also be untrue. SpaceX/Tesla would also have paid Musk billions in cash if stock wasn't allowed.
This essay is unfortunate because he isn't addressing the true misunderstanding of politicians like AOC, he's not explaining the consumer surplus (why the world gained 50x more from Google than the founders), and he's not explaining that wealth is craeted not taken.
Politicians spend their lives in one of the purest zero-sum systems in existence. Of course they don't have a gut level understanding of the creation of wealth.
But consumer surplus matters most of all. Imagine the net benefit to consumers of Robotaxi and Optimus (ok, ok, assuming they work, for the doubters in the room). Entrepreneurs capture
And yet, the vast majority of startups fail. This essay about exponential growth is clearly not the whole story.
How does your startup avoid failing? By skirting local laws? Exploiting employees? Destroying the environment? Replacing jobs in a way that makes the standard of living better for the few but worse for the many? Making weapons or systems that coordinate weapons? Submitting to and therefore tacitly supporting oppressive governments?
Sure, there are examples of startups that don’t do these things. But looking at billionaire-class startups (there’s not that many of those to analyze!), there are far more of them in the other category.
Well... but the billionaires, or billion dollar companies DO "break rules, abuse labor laws, pay people less than what they’re worth"... also manipulate markets, bribe politicians, evade taxes, sell user data etc. Even Trillionaire(s) and trillion dollar companies do that. Why do they do that then, if the only things they need are those two numbers and a product that people love ^_^?
Because there are more than 2 numbers even in pg's simplistic example. Third number: You make $10K monthly today. How? If your cost is $9.9K this doesn't mean anything right? Everyone can do that. So how you earn that $10K is more important than those other 2 numbers. You want more profit and less cost. That's when you start breaking the rules and doing bad things. You have to compete, and it's easier to win if you cheat. If there are cheaters in the game, they would win the competition, not you. And there are always cheaters in the game.
Silicon Valley's system is different than the rest of the world. They give the founders some sort of an infinite money glitch (for a limited time). They don't care about the third number. They care only about the Growth number. Because what they really care about is the Market Domination. They want to BURN money to BUY that market. In most cases, globally. That's why billions of people in the world are using Facebook's products daily. Not because Zuck had a great idea in his dorm room. Not because Poke feature was that viral. But because US needed to dominate the upcoming social media world. For profit, but more importantly for politics, for gathering information, for tracking people, for controlling (social) media and narrative, for security. So the system funded his startup, along with other similar startups in case any of them becomes the winner. And they didn't give just money, they give all the network, permission and privileges to win.
That's why Hans Zuckerberg from the Berlin startup scene hasn't become a billionaire but Mark did.
This is exactly the same playbook with the AI game today. My 70+ parents at the other side of the World use ChatGPT daily for FREE. They will never be the paying customers of OpenAI. OpenAI gives its expensive services for free, because they want absolute dominance in the global market. They can't lose that. Note that such a game plan is impossible for any company outside of Silicon Valley. Only state-controlled companies can play that game in the rest of the world. But for SV, it's not really clear who's controlling who.
Regarding the scale of what a billion dollars even means, I've recently been thinking of an example which I think might work (but I haven’t tried it on many people yet).
There are 86,400 seconds in a day (24 hours * 60 minutes * 60 seconds = 86400). Now let’s say you spend an average of 1$ every second. That’s every second, including when you’re sleeping or on the toilet. That’s 86,400$ per day, which I hope we can all agree is a lot of money.
If you had one million dollars, to spend it all it’d take you over 11 days (1,000,000 dollars / 86,400 seconds = 11.57).
If you had one billion dollars, to spend it all it’d take you over 31 years (1,000,000,000 dollars / 86,400 seconds / 365 days = 31.71). That is an obscene amount of money.
Reading this, I realize that I don't have confidence in winning under capitalism, so I think it would be quicker to just try to break the game of capitalism altogether.
But communism, in my opinion, seems like a concept that is unlikely to arrive, so please wait just a little while until I come up with a new ideology.
As Upton Sinclair put it, "It is difficult to get a man to understand something, when his salary depends on his not understanding it."
That quote is just the tip of the iceberg of Sinclair's work, though. He wrote about how when a person's livelihood, reputation, or financial well-being relies on a specific status quo, they often find it impossible to see the logic or ethics in changing it. It can be very difficult for them to confront such issues objectively.
He also wrote about the question of cynics vs. true believers in this situation. For the true believers, he pointed out that the only way for them to resolve their cognitive dissonance (while maintaining their lifestyle) is to block out the truth entirely. They stop trying to understand because actually understanding would be too painful.
Yeah man its just all the people who are jealous that are mad and no other reason.
The billionares hands are clean, the climate is fine, the elections are great, there's nothing wrong, close your eyes, stuff your ears with wax, and keep on trucking :)
What people mean by "you can't earn a billion dollar" is that there's no work that's useful enough, alone, to be worth that much in reward. How can we live in a world where a moron can have a trillion to their name, while others work arduous physical labor all their lives and end up with nothing?
You might not believe you've done anything "bad" to become a billionaire, but the mere fact that you accumumated so much wealth necessarily means others, somewhere, had to work for it. The mere existence of billionaires is the mark of an unhealthy economy, that doesn't distribute wealth in an efficient or fair manner.
The issue with billionaires is that some of them got insanely rich while being net negative from a societal perspective.
The most famous ones ended-up in prison (Sam Bankman Fried, Elizabeth Holmes, Jeffrey Epstein, Bernie Madoff) but anyone with a basic grasp of statistics and criminal behavior know that many others will escape the justice system forever.
It does not mean that all billionaires are bad, the criminals are not the majority, but there are enough criminals to justify skepticism and scrutiny.
He makes it sound simple, and in some ways, it is. You have to not only build the thing, but also find the thing that people want. It’s the latter that’s as hard if not harder than the former.
In addition, the converse is not true. Just because you’ve found something that grows fast and in large market, doesn’t mean you’ll become a billionaire. With all humility, I’ve been lucky to have done that twice, but in a large company. I’m not complaining, I’m just saying that doesn’t necessarily make you a billionaire.
PG seems be becoming more and more disingenuous. People using the word "earn" almost always mean "you can't get this from wages." This doesn't mean that the effect of growth isn't real - almost any business that scales even moderately, but none the less scales, and is profitable, can make its owners millionaires or better. But this does not mean that those riches were "earned." Or that the person who started the business had more glorious suffering than some rando who works 80 hours a week of part time jobs to keep a roof over their kids' heads. Rather, it is inherent to finding a scalable business and not screwing it up.
How ironic. Extremely successful person tries to justify why he's better or smarter than you, and the way he does it proves that he doesn't even understand what the other person has said.
He kind of proved the point he intended to disprove.
It's not quite as bad as a lottery winner saying "anyone can earn the jackpot", but it's in that direction.
AOC wasn't even being easy to (deliberately) misunderstand, here, like Obama was when he said "you didn't build that".
Of course, like the tan suit critique, the "you didn't build that" pearl-clutchers were all arguing in bad faith.
I don't think Paul Graham is arguing in bad faith here. This post is just, for lack of a better word, "stupid".
As a committed market-socialist, the extent that the HN commentariat has turned into a reflexively nihilistic anti-free-enterprise is a fairly astonishing turn. It’s like my belief system turned into the maximally idiotic version of itself.
“Externality” is thrown about as a term almost completely disconnected from any economic grounding of the term. If you make externality mean “anything I find aesthetically displeasing”, then yeah, sure, billionaires create and benefit from externalities, if your aesthetic is egalitarian comity.
But if you mean “legitimate societal goals, legislated and agreed on by a representative body” are being violated left and right by billionaires, gimme a break.
Go ahead and tax capital gains way more. Ending the estate step up in basis sounds great. Break up the “borrow” part of buy-borrow-die, while you’re at it, and treat encumbrance on capital as a taxable event, we could probably make that work, too, although the middle class might foam at the mouth if that was applied broadly.
But, man. The cynicism, confiscatory and controlling instincts on display are enough to make me upgrade Ayn Rand from “hypocritical nut” to “maybe she was on to something when the general population gets tall poppy syndrome.”
Markets work. There are externalities, but we can, and should, legislate fixes for social goals that we actually agree on. But stiflingly heavy regulation is really bad for incentivizing creation of new knowledge and wealth. You can still believe in caring about people, and building (incentive aligned) social safety nets without destroying people’s incentive, and thus, because intellectual capital formation depends heavily on network effects, people’s ability, to create many kinds of value in the world.
Actual socialists recognize that capital is incredibly useful, and incredibly valuable. Leveraging capital is incredibly beneficial to the world. Pretending that the people leveraging that capital are somehow guilty of an original sin just by leveraging capital markets, which is really what these screeds against anyone holding controlling interests in companies they were instrumental in creating, seem to be about, leads down a terrible path.
Demonizing people creating things is petty and unbecoming for a political movement.
He's right. You don't have to cheat to become a billionaire. Stepping on everybody else's throats is a legit part of the capitalist playbook. No cheating involved.
This is a strawman argument. It is of course mathematically possible to obtain a billion dollars (although notably much harder to do in a way that is liquid, but let's gloss over that). My somewhat more charitable reading of that claim (shared by other readers here, I see) is that ‘earn’ refers to moral desert. I'm not really a desert-oriented person but let me try to steelman it a bit:
In aristocracies we traditionally assume or imply that a person can deserve a certain wealth or power simply by being born into it. Capitalism, however, sells us the dream of the meritocracy: your (financial) success in life should depend not at all on factors of chance like birth or genetics but simply how much of yourself you choose to sell to the market.
At any point in time you have control of some tangible or intangible capital, including wealth, physical health, social connections, equipment, information, trained skills, et cetera. Some of these assets are gained by luck, e.g. accident of birth; some of them are gained by trading your time; and some of them are gained by spending another asset (whose origin reduces, recursively, to some combination of luck or time). At any point you can, assuming the market is appropriately liquid, spend some of these assets to get cash.
Some of these assets have force-multiplier effects on your future output in certain domains, from which exponentials naturally arise; but the time spent on them remains linear, and so, if we want to ignore inherited factors (the opportunity to spend the time on things without immediate feedback, say, or handed-down insight about which of these investments will produce the most value in the future, or access to the required tutors) the increase in earnings these things _merit_ has to remain linear as well. There is no way to compound your time and therefore, under an assumption of meritocracy, there is also no morally acceptable way to compound earnings, which I would assume is the point the politician is attempting to make. Under this worldview, any exponential compounding that occurs must, mathematically, be a result of systematically undervaluing the time of an exponential number of other people, since each person can only spend a linear amount of time.
In practice, of course, the assumption of meritocracy is simply wrong, and arguably the concept as a whole is internally incoherent (or at least I don't believe we've yet managed to articulate it coherently: we would have to settle the nature vs nurture debate and completely sever the value of a person's spent time from the accidents of their birth, if such a thing is even meaningful). But I think that's where the claim falls down, not in failing to understand the mathematics of exponentials.
Please don't bury the lede here of how the author completely and epically misses the point of the statement.
It's not about the math of the thing, it's about the arguably necessary exploitation that must occur to hit those kinds of numbers.
And in fact, IMHO, you don't even need to get to "exploitation" to criticize this mentality.
Any normal human would (and if not would, SHOULD) want to stop "earning" well before they hit those ridiculous numbers. Let's say -- at about 50 million, a normal person should realize, yes, that's enough. Time to pivot to something that doesn't cause so much accumulation. This does happen, we just don't hear about it enough.
This is a ridiculously oversimplified application of first year economic theory. No, we do not live in the textbook fantasy of "everyone is always free to make favorable trades and therefore no one is exploited."
I feel like a primer on Labour Theory of Value is important in this thread. This a debunked theory that is still being used by populists to justify their anger on the System TM and in particular, the billionaires.
Folk LTV interpretation is that people's wages are supposed to be proportional to their hours worked. Obviously this is false -- everyone knows this but people still repeat it because it has populist memetic value.
That LTV is debunked and proved to be useless is very easy to demonstrate -- the single person (who was a Marxist) who took this theory seriously abandoned it. He's not the only one though.
I asked ChatGPT this:
"who is the single one contemporary person who took labour theory of value seriously in an academic sense?"
ChatGPT: G.E Cohen.
(G.E Cohen is an Analytical Marxist BTW)
Here's what G.E Cohen has to say specifically on LTV:
1. "labour theory is, moreover, false" [1]
2. "The labour theory of value is not a suitable basis for the charge of exploitation laid against capitalism by Marxists, and the real foundation of that charge is something much simpler which, for reasons to be stated, is widely confused with the labour theory of value." [2]
Money, property, limited companies, intellectual property laws, patents, contract law, etc. etc. are things on which all successful businesses depend. These are social constructs - societal "technologies" if you like. They work because as a society we agree that they should and enforce them through the rule of law.
The assertion that it should be "impossible" to be a billionaire (or trillionaire, gazillionaire, whatever) is really an assertion that a just and moral society would design all of these things to prevent that outcome.
And I think it's pretty reasonable to say that we ought to set society up such that as someone gets wealthier we take money away from them at faster rates, so that beyond some level of wealth it is very difficult to continue to get richer.
Unfortunately, a lot of people are captured by rather libertarian ideas about government, money, property, etc. that seem to prevent many people (at least in the US, UK, et al.) from behaving in anything but the most selfish, individualistic, and antisocial of ways.
I think maybe the fundamental issue is something that he said really late in the essay:
> There are other ways to get rich than by starting startups. Some of those do require you to exploit people. But startups are the most common way to become really rich, and if you want to start a successful startup, the key is not exploitation but empathy.
> How people become rich in your society is one of the most important things to understand about it. You can't let your beliefs about this be determined by ideology, or movies, or historical examples that are centuries old. You must look at the world around you and see how it's actually done.
The "it's impossible to do morally" people are looking at how it used to be done, and how it's sometimes still done. They are right to be opposed to that. But oppose the immoral aspects of it, not doing it at all.
And those who hard-core define a billion as immoral are I think signalling something else: They want the government to take that money, from every billionaire. (If we're talking immorality, we could discuss the morality of that.) But they don't understand that there will probably be second-order consequences of doing so...
You're right, higher taxes on the billionares would create all sorts of second order effects, like the ability to pay for the social safety net for the common folk, maybe educating the populace properly, all sorts of truly scary stuff!
I didn't say "higher taxes". I said "take it" - meaning take all of it. Confiscation. That's what I think many of these people are trying to say, without quite saying it.
Um, did i just get mansplained compound interest by Paul f*ing Graham? I feel like this has been the subject of condescending advice since the beginning of time.
"But now you at least understand, from having done the math yourselves, that you don't have to cheat to become a billionaire. You've seen for yourselves that there are only two numbers in the calculation, the growth rate and how long it continues."
What could possibly be false in a two-parameter model of reality?
He seems to be regressing, he said this in January:
> The rational fear of those who dislike economic inequality is that the rich will convert their economic power into political power: that they’ll tilt elections, or pay bribes for pardons, or buy up the news media to promote their views.
> I used to be able to claim that tech billionaires didn't actually do this — that they just wanted to refine their gadgets. But unfortunately in the current administration we've seen all three.
Now he's claiming he's trained all these billionaires and they are a blessing to the world, not avaricious sociopaths.
This horrible mentality is what ails tech bro culture today and ruined the tech world for me - chasing billions
Greed mixed with analytical thinking on industrial scale - graham, thiel, musk, hoffman, bezos, zuck all symptoms of “smart” people who screwed this country ultimately - all for what?
Has the changed world that resulted been for the better?
> Though the most successful founders are usually good people, they tend to have a piratical gleam in their eye. They're not Goody Two-Shoes type good. Morally, they care about getting the big questions right, but not about observing proprieties. That's why I'd use the word naughty rather than evil. They delight in breaking rules, but not rules that matter. This quality may be redundant though; it may be implied by imagination.
> Sam Altman of Loopt is one of the most successful alumni, so we asked him what question we could put on the Y Combinator application that would help us discover more people like him. He said to ask about a time when they'd hacked something to their advantage—hacked in the sense of beating the system, not breaking into computers. It has become one of the questions we pay most attention to when judging applications.
- Paul Graham, "What We Look For in Founders"
I also want to add my own characterization.
It is my personal experience with YC founders that YC has coached them in business practices and philosophy that could be characterized less than charitably as "how to con people and get away with it."
I understand the PG doesn't believe this himself and every partner has different advice. But there is a consistent pattern of dishonesty and manipulation that is not innate to founders but taught to them directly by YC partners and it is impossible for me to square this essay with how those founders PG has coached over the last 20 years behave.
Maybe it's possible to become a billionaire without cheating. But all I know is YC won't teach you how.
---
Aside, it deeply bothers me how tone deaf pg is politically. There is a meta to AOC's messaging that he's not reading, which is that wealth is unattainable for the masses and there are oligarchs in our society manipulating our systems to empower and enrich themselves. You are making a rhetorical error by attempting to debate a single sound bite instead of addressing the systemic problems that AOC and progressive democrats are voicing.
If we assume that YC funded about 6,500 companies and produced about 30 billionaires...That is 0.46% using the most flattering denominator possible. And the best reason not to apply to YC.
If you count individual founders, the rate is even lower. So to insinuate this is some kind of training people to become billionaires, is like a lottery operator saying he teaches wealth creation because a few ticket buyers hit the jackpot.
PG is turning an extreme power law outcome into a moral argument. A tiny fraction of founders capture enormous upside, thousands do not, and PG presents the winners as proof that the system is fair. I could not think of more survivorship bias with a halo.
And thee political sneer is also absurd. Startups do not exist outside politics. They exist( or should exist) inside law, tax, infrastructure, courts, labor rules, housing rules, securities law, immigration policy, and government procurement. Uber S-1 warned that its business would be harmed if drivers were classified as employees rather than independent contractors...and described legal and regulatory obstacles as material business risks. In other words...regulatory arbitrage ( corruption? ) as a business model.
Airbnb is an even cleaner YC example. Its own filings describe short term rental law, host registration, tax collection, fines, city restrictions, and New York 2023 rules as materially affecting the business. Its a business that lives lives inside a fight over housing law and local regulation.
And if the claim is that politicians do not understand value creation, then SpaceX is a hilarious counterexample. SpaceX is a company completely entangled with the state and US tax payer.
SpaceX has about $22B in government contracts, mostly NASA, and Reuters separately reported a $5.9B Space Force launch award in 2025.
And the biggest logic failure being used here is the so called exponential growth part. The world is not exponential. Population growth is not exponential forever. Demand is not exponential forever. Restaurants, supermarkets, apartments, drivers, cities, and disposable income are finite. Real markets saturate. Growth curves become S curves. Pretending that 15% monthly growth can simply continue for years is nothing more than spreadsheet intoxication.
So instead of the claim you can earn a billion by making users happy, what is reality is, that in a legal and financial system that massively rewards scalable equity ownership, a tiny number of founders can become billionaires if capital, timing, network effects, labor structure, regulation, and distribution all break their way. I don’t think its legal, and the best PG could do with this is a defense of the casino by pointing at the jackpot winners.
Just reflect on this: Of the 30 billionaires Paul Graham talks about, in an essay where, notably, he never once uses the word “entrepreneur” they come from these 14 companies:
Less than half of them are profitable as of 2026. None created a vaccine or cured a disease, discovered a new algorithm or mathematical theorem, developed the economies of poorer countries, created a new engine, or invented a renewable energy source. If all of them...disappeared tomorrow...you would probably just use some other payment system, maybe with higher or lower commissions, and argue on some other message board not called Reddit.
The impact on human lives would be zero... or maybe even slightly positive.
In tears laughing that people still believe the labor theory of value. How is this possible. What's next, bringing back miasma theory and spontaneous generation?
Well, for starters, Elon Musk actively adheres to the Labor Theory of Value. He named it differently, with the "Idiot Index". Except, its an inverse LTV.
Both theories use the SAME formula.
Final Price = Raw Materials + Labor + Overhead + Profit
The difference is that Marx pushed that labor is what makes a thing have value. Wheres Musk pushes that humans have 0 value, and should be removed whereever possible.
Same thing, different conclusion.
And know what happens when we get "perfect idiot index" of 1.0? There are no workers, no money, and wealth is accmulated purely in the hands of the elite. Hell, even Ford saw this in tge early 1900's - who'd buy cars if nobody can afford them?
Hi, this is called “Labour Theory Of Value”. And this is imo a popular theory of value creation a lot of people believe in and it has populist memetic value.
But Labour Theory Of Value has been debunked and is mostly not used anymore.
"It is difficult to get a man to understand something when his salary depends upon his not understanding it"
- Upton Sinclair
And, well, you are right that there are 'debunkments' of Labor Theory of Value. Of course, they are put out by hard right-wing laissez faire capitalist enclaves, like Mises. I would never expect them to take a dispassionate view of capitalism, given their extremist position.
"who is the single one contemporary person who took labour theory of value seriously in an academic sense?"
ChatGPT: G.E Cohen.
(G.E Cohen is an Analytical Marxist BTW)
Here's what G.E Cohen has to say specifically on LTV:
1. "labour theory is, moreover, false" [1]
2. "The labour theory of value is not a suitable basis for the charge of exploitation laid against capitalism by Marxists, and the real foundation of that charge is something much simpler which, for reasons to be stated, is widely confused with the labour theory of value." [2]
You want me to *trust* the output of a hypercapitalistic slop machine whose owner bulk pirated most of the western knowlege for money. And he wants to scan the eyeballs of everyone for his shitcoin (and kicked out of multiple countries for abuses).
And, you expect me to read that slop drivel? Fuck, no.
I had the decency to use my own words. You can too. And, "Don't post generated text or AI-edited text. HN is for conversation between humans." I do not care about your propaganda clanker.
A reminder that in a recent Paul Graham blog post, he vowed to help the 2nd Trump Admin crush woke youth, and asserted that racism isn't bad as the left thinks.
In the following weeks we saw Elon do two Nazi salutes in front of the presidential seal, and we saw the Trump admin hire tons of thugs to rip minority children out of their beds, and those same thugs have murdered a number of citizens, with Stephen Miller loudly shouting that they have absolute immunity.
I'm surprised Paul Graham and the signers of the blog post are not to embarrassed to continue posting their thoughts. At worst Paul should stop talking, better, he should apologize and admit he is a fool.
Some disrespect to PG, but the entire thing reads like:
"Oh, if we just operate in a vacuum, do not closely examine the systemic interactions of our accumulation of such vast sums of wealth, assume there's no moral or ethical quandary that would prevent us from utilizing every game theory strategy available to us, and have consistently high, compounding growth over time, then anyone can make a billion dollars if they follow my teachings, which in turn were formulated over thousands of students and with a success rate still in the single percentage points, at best."
Here's the thing none of these people will ever admit: not everyone can actually succeed at a goal, otherwise it wouldn't be a goal, but a baseline. This is the fundamental grievance I have with these sorts of "wealth whisperers" braying on (and on, and on, and on) about how with a good idea and hard work (and YC's guidance), you too can be a Larry Ellison or Elon Musk or Mark Zuckerberg type.
Which, no, you cannot. If you could, PG's success rate for billionaires would be 100%. It is not, so clearly hard work and a good idea (and a mentor) alone isn't enough. Yet enough leaders and populace have bought into this fairy tale that we've reoriented society around it wholesale. The presumption is that anyone lacking in obscene wealth has done so by choice, rather than examine systemic incentives and policy failures that make such an outcome the default, rather than a personal choice (or worse, some sort of personal failure).
I'm just so weary of having the same argument with the same people who refuse to bother learning anything that might remotely conflict with their world view anymore. If the response to "maybe we should improve society somewhat" is some banal wealth-building sales pitch relying on cherry-picked statistics and devoid of any wider context, then I think it's safe to presume you're either willfully arguing in bad faith or so colossally ignorant that you're beyond help.
EDIT: One thing I would add requires quoting PG.
> There are other ways to get rich than by starting startups. Some of those do require you to exploit people. But startups are the most common way to become really rich, and if you want to start a successful startup, the key is not exploitation but empathy. What do users really want? What could you do for them that would make their lives dramatically better? That kind of empathy is what we look for in founders, and what we cultivate in the ones we accept.
I will flatly reject that YC startups of late have any shred of empathy for their customer base, in general. If they had any shred of empathy for their customers, they all wouldn't collectively lean into the "permanent underclass" and "AI job replacement" narratives so often spouted by their predecessors. In fact, I would go so far as to argue the only groups with a shred of empathy for their customers might just be the non-YC startups or the FOSS groups cranking away in spite of all the headwinds.
Nobody - nobody - makes a billion dollars through empathy alone. At some point, one has to make a conscious decision to say "I demand more returns than reasonable relative to my costs, and I expect my customers and/or employees to bear that burden on my behalf." Otherwise we'd see a parade of companies demanding caps on margins to drive prices lower or wages for workers higher, thus creating more spending money among workers that in turn produces more economic activity. We do not see this outcome, therefore we cannot ascribe empathy as a source of wealth.
For example, the highwayman, who who provides the valuable service of 'not getting murdered' to travelers, in return for the payment they voluntarily make.
Or perhaps you would prefer the example of the extortionist, who provides insurance against the risk of "something" happening to the nice business you have?
> Once they define it as stealing, then it's morally indefensible, by definition.
Right, similar to the equivocation around the meaning of earn in this thread. I've started to wonder whether it's possible to push by accepting that framing and then asking for a justification rather than quibbling about what "stealing" is.
As a first pass, you’ve accumulated all that money, thus you’ve actively or passively, knowingly or unknowingly, taken advantage of a perverse systemic bug that allows that sort of money to accumulate in any one person’s hands to begin with.
But point me at any given billionaire and I can provide more context-specific examples, sure.
“For the love of money is the root of all evil: which while some coveted after, they have erred from the faith, and pierced themselves through with many sorrows. ”
Even AOC doesn't believe what she said. She's saying it because she has a startup of her own which sells ideas, and gets paid in votes. It may not be 93%, but she's had a pretty good growth rate, and when you get to about 50 million, you have a great shot at being President. Ideas which bash rich people have had a growing market for a while, and she's good at it, and people are telling their friends about her.
She meant impossible in that one doesn't earn a billion dollars through work alone. The only way to get there is to set up a structure that extracts a billion dollars from a market (usually by building a structure that's more efficient but also generates externalities that are not borne by the person getting the billion dollars).
pg's reading of it is so blunt and misrepresentative that I'm nervous about what kind of content he's consuming.
Right, regardless of whether you agree or disagree with the point, PG doesn’t actually engage with it. He just says “compound growth + build something that people love”.
But the meat of the point is: if the economy is growing at 2.5%, how do you sustain 15% over 5 years?
Look, I’m a startup guy, I buy into the premise that it’s an intensely value-creating activity. But I think it’s self-defeating to pretend like the monopoly and regulatory arbitrage problems don’t exist.
I get that PG and his customers need to be able to cash out, but also, the monopoly rentiers make it more difficult for startups to compete by buying up competitors early and offering crazy salaries that make startups uncompetitive.
All that said, the subtext here is that PG is providing politicians with stories they can tell, nobody in this conversation is trying to describe reality in the most precise or honest way.
Even 15% for five years only doubles your original investment.
To get a billion from a million you need to do 15% for fifty years, and that ignores inflation. Or 25% for thirty-one years.
These numbers are ludicrous.
> These numbers are ludicrous.
They are also speculative, not real. They are based on the notion that the company would be worth that much based on projected cash flows, expenses, etc. If you actually tried to cash it all out at any point in time you could not get anything close to that because the very act of selling will lower the value by destroying confidence in the speculative valuations.
None of these SV billionares have billions in cash or cash equivalents. Maybe a few of the largest companies do.
15% monthly
I think he's doing 15% every month, not every year. It's not an implausible growth rate for a unicorn startup; it is implausible to expect it.
He talks about 15% _per month_
Perhaps you realize this, but the way the economy grows 2.5% is through lots of entities growing faster than that.
Growth comes from innovation, and innovators get rewarded with faster growth as non-innovators decline.
No mention of Piketty or r>g?
Look, I know this is a tech forum and we don't claim to be good at the social sciences, but this is a central debate and r>g, the idea that the rate of return to capital tends to exceed economic growth over the course of history, is a major result from Piketty's Capital In The 21st Century that people interested in "grow the pie" vs "trickle down" really ought to be familiar with. Even if you disagree, you ought to be able to articulate why, and "the average includes winners and losers" ain't it.
"But life has improved, r>g couldn't have been true forever" -- last time the inequality bubble popped because of a great depression and two world wars. The capital was incinerated, metaphorically and literally. It's a cautionary tale and we should aspire to do better.
> Growth comes from innovation...
I suppose it depends on how broadly you define "innovation".
Lots of companies grow because of, among other things: regulatory capture, regulatory arbitrage, questionable use of other people's IP, offshoring, misclassification of employees/contractors, profit shifting and transfer pricing, subsidized predatory below-cost pricing, dark patterns, aggressive collection and monetization of user data, acqui-hires to stifle competition, implementing high-switching costs to create vendor lock-in, round-tripping, channel-stuffing, business models that intentionally externalize costs, outright fraud.
If so many entities are declining, why shouldn't I expect that my entities will also decline? Why should I expect them to be the ones that go up?
I would say it slightly differently: The average rate of growth comes from the average of the successful and unsuccessful innovators and non-innovators.
Bill Gates' wealth grew much more after he left Microsoft than while he was CEO. Was that wealth earned through innovation? No. He simply owned something that became more valuable as other people labored to innovate.
Growth does not ONLY come from innovation. It can come from bad actor or even simply non-innovaive strategies such as acquistition (which can lead to monopoly, as capital tends to amass in large centers / the hands of the few, per Marx). Other bad faith / anti-competitive / non-innovative strategies include regulatory capture, lobbying, doing illegal things (and hoping to not get caught / paying a slap-on-the-wrist fine that would be impossible for smaller companies), etc.
Compound growth is also the exact thing that is being criticized here. Your wealth grows simply by virtue of ownership. No labor needs to be performed. When somebody says that you can't earn a billion dollars they are the same thing that PG is saying, he just doesn't think it is bad: the way to become a billionaire is to own things whose value rises over time. The issue is whether this can be meaningfully called "earning" it.
Are you doing something to create that value? If yes, then I think you are earning it. If you are simply an investor, then no, but we need investors to make the whole system work.
> if the economy is growing at 2.5%, how do you sustain 15% over 5 years?
By growing better than the average?
How do you grow better than average?
By creating a product that people find valuable?
Yes, but the bigger picture is that what people find valuable and what is actually valuable diverge. Because what people find valuable is through the lens of their constraints: the regulatory structure of their country, the limitations of the human condition, inertia, the limited nature of time.
The most poignant example is tobacco. Tobacco is a net-negative product for the world. But many people find it very valuable, because it helps them with the stresses of their life and they have a biological dependency on nicotine. And so, it’s a multi billion dollar industry. But, for the world as a whole, it generates negative billions of dollars. Because of the health cost and the cost of lost work. If you did 10, 20 years early then that’s a lot of human productivity burned.
Of course, most products are not tobacco. But every product is tobacco a little bit, I think, in the sense that they merely move some money from externalities into the product. In that sense, it’s not all value creation, it’s value siphoning or moving.
Obviously externalities exist. I disagree with your tobacco take though. If someone knows about the health risks tobacco causes and still chooses to buy tobacco than the tobacco has created real value. Of course societal value can still be negative because of externalities, but externalities have to be external, a person making a decision you disagree with isnt an externality.
Im not going to disagree that externalities are everywhere though. The question is to what extent and if, after correcting for them, there are still products which create so much value they make their founders billionaires. I think the most obvious case for this are artists. JK Rowling sold her writing for over a billion dollars. The work was, as far I know, created pretty much solely by her. You can point to the book publishing system as a whole, but she has nothing to do with that. All she did was write some books and sell them to an already existing system.
Make a product people really want.
That applies to fentanyl and tiktok.
Yes, and people keep paying ridiculous prices for the first and for ads for the second.
There are extremely good arguments for why the act of becoming and remaining a billionaire is immoral and bad alone, without any need for you to have directly wronged someone else.
PG just completely misunderstands and hand-waves over this basic concept and makes the excuse that "hey we worked really hard and made an amazing product that people loved, we aren't harming anyone."
For one thing, founders and employees don't share equally in the high growth rate of the company even though at most a founder is working let's say 2x longer hours than a salaried employee. You can do nothing wrong but you're still taking more of your fair share by the basic structure of how the business is setup.
I think anyone who is running a successful company and doesn't have a path to converting to an employee-owned enterprise is immoral, especially if you have managed to capture $1 billion just for yourself while your median employee is just making market rate salaries, or maybe they happened to gamble on your stock options and have a modest nest egg about 1/100th-1/50th the size of your wealth as a founder.
So yeah, Jeff Bezos made $260 billion dollars, but an alternative that could have happened was "Jeff Bezos makes $50 million and every Amazon employee gets a much more fair share of the happy customers' money."
More importantly, if you have $1 billion in net worth, that means that you can choose to do anything with your life on a daily basis.
When I'm over here working my job in my cushy upper middle class life, it's still an objective truth that I need to be selfish in order to secure the future of my family. Nothing is guaranteed and we need to fend for ourselves. I can't stop working or the home finances collapse within months or a short number of years if I'm very lucky and have something significant saved up or my house paid off. I legitimately don't have the time or money to help many other people outside of my nuclear and extended family.
But when you have a billion dollars (and some people have hundreds of those and one person even has a thousand of those), that means you have no limit to what you spend your time on. You can do anything, and deciding not to work on capitalist endeavors anymore has zero chance of turning you destitute.
In other words, when you are a billionaire, what you choose to spend your time on says a lot about the content of your character compared to someone who is not that wealthy.
Paul Graham is out here giving speeches to rich kids at Oxford Union, but he could be spending his morning in the local soup kitchen or building homes with Habitat for Humanity. He could be mentoring people who are struggling to escape housing insecurity, or he could be working with advocacy groups to expand healthcare access and end childhood hunger.
He doesn't have to go to work every day like I do. But he is one of the people who has dedicated his life to capitalism, even after successfully taking care of his family for many lifetimes, and that says a lot about him.
I agree with most of what you're saying -- but just wanted to add some notes here: 1) founders should start companies where equity is distributed to the early employees much more evenly: this actually gives additional super-powers to the company since employee incentives are much more closely aligned with the vision of the founders (building something great that people love to use). 2) stop rewarding growth: there is nothing wrong with NOT growing 90% a month. The goal of most companies shouldn't be to grow or return maximum value to investors (or shareholders): it should be to provide a greater human good the markets will be willing to pay for 3) revenue growth also is not something to aim for: sustainable income growth is. 4) unless the billionaires start re-distributing their wealth -- history is not on their side. A revolution will happen: usually this is associated with the younger male population being unemployed (~15% is the magic number) and causing an uprising. The goal of most founders at this point should not be 'how do I get to 1 billion.' The massive unemployment caused by the AI revolution will cause a massive uprising. There is great danger I think if they do not figure out a way to re-distribute their wealth. Currently, the poor and middle class are taxed way more than the rich (as a percentage of their income): and from what I see are increasingly becoming more disgruntled with the situation they are in. Why in the world would anyone want to even be a billionaire in this situation is the question I want to ask?
> For one thing, founders and employees don't share equally in the high growth rate of the company even though at most a founder is working let's say 2x longer hours than a salaried employee. You can do nothing wrong but you're still taking more of your fair share by the basic structure of how the business is setup.
What is fair? Obviously hours worked is one metric to determine what is fair. But another way to arrive at what is fair is through negotiation. Neither the founders nor potential hires are obligated to work with one another. The only way it happens is if an early employee believes the compensation they are offered by the founders is fair. If it was unfair, they would presumably reject the offer outright.
Most people need money to eat. I don't know if you can ever really have a fair negotiation with an employer when "the rent is due" is involved. You know those companies that buy settlements from people in exchange for a fraction of their value immediately? You could say that this is a fair trade in an econ 101 sense that body parties rationally entered into a mutual agreement. But you could also notice that one person just got laid off and doesn't have enough money to pay rent and is therefore pressured by circumstance to accept extremely unfavorable terms because the alternative is homelessness.
If you’re an early employee at a startup, you almost certainly had other options for employment
I don’t think you can assume this to be the case, especially outside of the Bay Area.
My first startup was one where I was hired because I was young and cheap. I could be paid in free lunches rather than 401k matching and decent healthcare plans.
Big companies often pay better salaries.
There are plenty of people who would consider themselves extremely lucky to work at a startup, even for cheap. I know many older people working much worse jobs. I think it's fair to assume that most startup workers have other options, and that generally those options are worse.
If the argument is going to be “I exerted negotiation leverage over you” I think this feeds into my argument about the immorality of the whole setup.
We might as well just say “I exploited my structural power over my employees and got a better deal for myself.”
Of course the employees agreed to the deal presented to them, what other option did they have? They aren’t like all these founders that have the luxury of being unemployed because their dad will pay the rent.
That’s another point I forgot to bring up entirely: PG also hand-waved over the quantity of billionaires from his accelerator that came from families of very decent means where they have the luxury of risking failure. The quantity of true rags to riches billionaires is extremely slim.
> Of course the employees agreed to the deal presented to them, what other option did they have?
What? The employees had infinity other options! They could have negotiated harder. They could have declined the job. They could have taken a job somewhere else. They could have taken the risk to start their own startup, and been in the founder position, instead of choosing to be in the employee position and getting the security and reduced stress that comes along with it.
> That’s another point I forgot to bring up entirely: PG also hand-waved over the quantity of billionaires from his accelerator that came from families of very decent means where they have the luxury of risking failure. The quantity of true rags to riches billionaires is extremely slim.
Over 200M Americans come from middle class backgrounds are above. YC also provides founders with the funds to pay themselves while they start their company. I did YC when I had almost $0 to my name and no well-off family to rely on.
Grombobulous says "Paul Graham is out here giving speeches to rich kids at Oxford Union, but he could be spending his morning in the local soup kitchen or building homes with Habitat for Humanity. He could be mentoring people who are struggling to escape housing insecurity, or he could be working with advocacy groups to expand healthcare access and end childhood hunger."
Which of those would provide the most benefit to the world?
Grombobulous says "But he is one of the people who has dedicated his life to capitalism, even after successfully taking care of his family for many lifetimes, and that says a lot about him."
You're simply anti-capitalist. Please post about that instead of mounting personal attacks on people who make more money than you. And please cease telling other people what to do and not do! Try to put yourself into their shoes and think harder about their situation.
I’m not anti-capitalist at all, but all good things have limits. It’s a wonderful thing to eat a scoop of ice cream, or three scoops of ice cream, but I would never suggest that anyone eat 1000 scoops of ice cream.
> And please cease telling other people what to do and not do!
This is the most ironic comment I've seen in a while.
Your point makes no sense numerically:
> if the economy is growing at 2.5%, how do you sustain 15% over 5 years
My family of five is getting taller at say 1% per year. But my 4 year old and 7 year old are growing at 10% per year. My wife, my teenage daughter, and I have topped out. What exactly is inconsistent about this?
> What exactly is inconsistent about this?
Assuming invariance of scale between how growth works between a family's height and how a company worth a billion(s?) operates relative to the environment. It's the same error Paul makes when he has the politicians calculate the log base and form that connection about exponents in their minds.
This is the level of detail I am asking for. “Subpopulation height increases because of the physical and understood processes of maturation and growth”. You could easily go into the biology involved, model the genetic, environmental, and random variance.
You will note that PG does not provide such a mechanism for how a $100m company grows into a $10b company (thus producing $b wealth for founders).
Just to be clear. I am not saying at the object level that such growth is impossible. I am saying that at the meta/causal level, PG did not adequately characterize it it.
Your analogy does not apply. Billionaires are growing faster than anybody else in the global economy. The impoverished are growing slowest. If you want to apply this to your family then the adults would be growing by 15% every year, while your kids growing the least (and your teenagers would be shrinking).
If we take this analogy further, your kids would be the ones working the hardest to bring the food on the table required for this growth, and the adults would consume like 90% of it.
I don't think you are the target audience. Here's the direct quote, does that apply to you:
"You're young, and usually young founders should make something that they themselves want. You don't have enough experience yet to know what other people need. But at the same time your own needs are uniquely valuable, because your needs predict future demand. You're the age when people start using new things. Whatever you and your friends start using now, everyone is going to be using in ten years. Since your intuitions about other people's needs are usually a crap signal, and your own needs are an especially valuable one, you should usually listen to the second signal; you should make something you and your friends want.
Making something you and your friends want doesn't mean you have to build a consumer product. Maybe you and your friends are molecular biologists, and there's something cool that could be done now to DNA that everyone else has overlooked. Maybe you and your friends are into drones. The idea doesn't have to have a wide appeal. It literally just has to appeal to you and your friends."
"Just do whatever, don't mind other people. You don't need to focus on consumers, you can always sell drones to the military."
If your drone can deliver pizza, it can also deliver bombs. The latter always has demand.
I think there are many arguments against AOC's comments, but I agree that PG here is misrepresenting her point.
I don't think anyone reading PG's blog is clueless about the power of compounding or the difference between salary and wealth through asset growth.
Her point is essentially whether the entire capital system is "fair." And to be fair to PG I don't think AOC articulated a particularly strong point either.
I disagree, I think she articulated it very well. At scale you have sound bites, that's it.
She captured the truth, that our current system vastly favors capital over labor (etc etc etc), and did that in around six or seven words.
You can't really do better than that when communicating ideas at scale. What she said is true, it's for essays, economic papers, and laws to provide the nuance.
He very explicitly engaged with her claim that the system is unfair/unethical, and whether you agree with him or not, he argued against it:
> What [AOC] meant was that it's impossible to get that rich without doing something bad — without cheating in some way... The reason [my founder's] startup was growing so fast was simply that users loved what she'd built. So she could feel from her own experience how wrong [AOC] was. She wasn't exploiting anyone. Exactly the opposite in fact. The reason her startup was growing so fast was that she and her cofounder had been working their asses off to make their users happy, and as a result the users had been telling their friends. And that gets you exponential growth.
In other words, he's saying that rapid wealth creation can (and often does) come from creating and selling things of value to willing buyers, at scale, and that that's not unethical to do.
I do agree with you that AOC's point is not particularly strong, though :)
He only really addresses the fact that the system can be nasty. It can be and regularly is, but he only argues that a company doesn't have to be nasty, so he can conveniently ignore specific examples. But the system is not just nasty (and AOC mentions this). It also disproportionately rewards good fortune. That's not cheating, since anyone can have good fortune, but it is unfair, since fortune is not a consequence of hard work or ethical behaviour.
He also doesn’t engage with the fact that this company required funding from y combinator to get to that point
Which is something that is not an option for most people.
Look at where y combinator founders come from. It’s 99% people from elite institutions
That is a core part of AOC’s point
Getting a startup funded is just not something that is possible for most people. They just aren’t in the right circles. Does not matter how good of an idea you have
However, if you’re in the right circle, you’ll get shitloads of chances even after repeatedly failing. Just look at how many of these founders that “made it” drove multiple companies into the ground before making it. It’s a lot easier to find “good fortune” when you have a lot of chances than when you have 0 chances
I wonder why he didn't argue against the point by using an actual billionaire to illustrate. Instead he chose someone who is not a billionaire, and imagined them becoming one with nine and a half months of constant 93% growth. Couldn't his counterargument become stronger without the underpants gnome logic?
He is probably the actual billionaire in question, but doesn't want to highlight that point given the populist backlash against billionaires.
Funny that it use to be the millionaires everyone hated. I guess there are too many millionaires these days and vilifying them means turning yourself or someone you know into the villain. That’s probably a little too uncomfortable.
Inflation has made so many "millionaires" (8% of US households), and at the same rendered it a meaningless title - a salaried worker who paid off their 30 year mortgage and has a little in their 401k is quite likely to cross the million net worth threshold.
A million is hardly buying mansions, yachts, and champagne-filled swimming pools in the current economy
Well, I would reframe it. A comfortable retirement nest egg is now over a million in most parts of the US, and the people who used to rail against millionaires were never intending to argue that people shouldn’t be allowed to enjoy a comfortable retirement.
Popular, or "common", rather than populist.
I actually meant populist, meaning affiliated with populist ("of the ordinary people") political parties on both right and left.
Do all the non politically affiliated people who hate billionaires not count? Or why is the granularity here important? Your point is stronger the other way!
Populism is a "thin" political ideology that often gets layered on top of other political ideologies, both left- and right-wing. It simply means "policies that appeal to ordinary people" (vs. a rich and perceived corrupt elite). By definition, someone who hates billionaires simply because they are billionaires is a populist. They might hate other populists that have attached themselves to other political ideologies (and have different scapegoats or preferred policy prescriptions to rectify the inequality), but they are still a populist.
But his N=1 anecdote doesn’t prove anything. He shares a feel-good story about an early stage company with very high growth on a small base. This person is not a billionaire yet.
The actual comparison would be to look at all the startups with billionaire founders (so likely $10B companies) and then analyze the market dynamics that enable them to keep growing so fast.
What AOC actually said was (linked in the essay): "You can’t earn a billion dollars. You just can’t earn that." That is a strong claim - a claim of universal impossibility - but it's the claim she chose to make. Because she made a universal claim, an N=1 anecdote is enough to disprove it by counterexample.
You can disprove an absolute statement with n=1
That's an argument for AOC to make. This post is about PG responding to the argument she actually did make.
She has made vague, handwavy, and (depressingly) oft-repeated statements that "there are no ethical billionaires" and that "it's impossible to earn a billion dollars," but she has rarely supported with these statements with any facts or evidence whatsoever.
Isn’t Oprah Winfrey the left’s beloved billionaire and the one who actually “earned it”? I wonder if AOC would say Oprah is unethical and immoral.
Edit: I’d like AOC to publicly say Taylor Swift is unethical and immoral too. Heh the swifties would have her head over that.
The statement that there are no ethical billionaires who’ve gotten there by creating something approximating a billion dollars of value can be trivially disproven through a single counterexample.
The fact that her detractors have spilt gallons of ink arguing against her point without providing such a counterexample speaks volumes.
She said there are no ethical billionaires.
He said nonsense! If you start as a two millionaire and grow 95% every month you can be there in 9 months!
I say if I start with one cent and grow 10000000000000% every millisecond I can be there in a millisecond.
How often does this actually happen? People have been studying capitalism for more than a 100 years and this argument has been rehashed for a long time. Free market capitalism will only allow a startup to gain ground via innovation and offering of a superior product or service if the market is not totally free and monopolies are not allowed to form. Monopoly is the natural end state for capitalism.
Furthermore, the company motivated by profit that does not have to pay for polluting the environment will also pollute the environment. Regulation is also necessary to pay for long term externalities and other boom and bust cycles. There is nothing new in PG take except COPE and blame shifting about the increasing inequality and other societal and environmental issues.
This is a transcript to a speech originally made to students at Oxford, not to his blog readers.
Your phrase “extract” betrays a fundamental disagreement with what Paul is saying. (Externalities does so again) It assumes a zero-sum game where the job is to shift money from one person to another. Value, and thus money/wealth can be created. Literally. You are saying, in different words, that no one can do it “honestly”. He is saying one can.
Yes, and the art of this game is to extract value which you did not create. It may or may not come alongside creating value. Uber creates value in the form of an app marketplace for taxis, but it also pushes taxi wages down below the sustainability line without pushing prices down that far, and pockets the difference for itself. Apple made a cool phone that it sells for a high but fair price, but it also takes 30% of everything you buy with that phone, just because it can.
> the art of this game is to extract value which you did not create
in common parlance, theft
Accepting money from willing customers, who are paying you for access to some technology you created that they find valuable, is not theft. Quite the opposite, it's almost always two happy parties engaging in an exchange that each of them finds advantageous.
> Quite the opposite, it's almost always two very happy parties engaging in an exchange that each of them finds advantageous.
When I buy an iPhone from Apple, I suspect quite a few folks in the mines, factories, shipping, and retail chain that gets those "two happy parties" connected aren't so happy.
They are, however, deeply important to the transaction.
> I suspect quite a few folks in the mines, factories, shipping, and retail chain that gets those "two happy parties" connected aren't so happy.
Okay, if you're going to make such a claim and trust in it, then can I presume you have answers to these two questions?
1. In a world without Apple, what would these people be doing that would make them happier?
2. What exactly is stopping them from doing that now?
> What exactly is stopping them from doing that now?
I think the rise of China demonstrates they're certainly trying.
1. Not being forced to work in the cobalt mines, I suspect.
2. Economic coercion. The people are forced by the capitalist system - that was shaped by capitalist interests - to participate in a system they don't have any say in. They cannot even opt out.
They are working for money, often in jobs paying more than others in their local economy, when they otherwise wouldn't be.
It’s still exploitative.
The point is that the “gains” are overwhelmingly absorbed by the top.
There’s no reason they couldn’t pay them a much bigger share of the profits and raise up that entire part of the world.
But yet, they don’t. Because that would cost them some of their own wealth.
I’m not even saying it should be equally distributed. The disparity is insane right now though.
Arbeit macht frei!
Ah yes, people working for money, often more than they could make in other jobs in the local economy, is now slavery or concentration camp level conditions. I wish people here would actually live in a second or third world country before saying things like this from the comfort of their air conditioned house.
Slavery would still be slavery if you got paid $0.01/day, so there's clearly some kind of threshold we all have for "good, fairly compensated work".
If your local economy pays you $0.001/day instead, then congratulations, you now make 10x more than everyone else. It doesn't matter how much a dollar is worth elsewhere in the world, because purchasing power parity exists. It's like me being mad that on a hypothetical Mars people make a million dollars a day, that does not affect me whatsoever.
> If your local economy pays you $0.001/day instead, then congratulations, you now make 10x more than everyone else.
Sure. The kapos at concentration camps got better food and treatment, too.
That doesn't make it a fair, happy, or good arrangement.
I'm not going to continue with someone like you who'd equate concentration camp contidions to working in a factory. It is simply highly disrespectful to those who've actually lived through or died in them. Have a good day.
> equate concentration camp contidions to working in a factory
Oh no, not accurately stating history!
https://en.wikipedia.org/wiki/Forced_labour_under_German_rul...
> The use of slave and forced labour in Nazi Germany (German: Zwangsarbeit) and throughout German-occupied Europe during World War II took place on an unprecedented scale. It was a vital part of the German economic exploitation of conquered territories. It also contributed to the mass extermination of populations in occupied Europe.
Titrating the nastiness of it from "will definitely kill you" to "will make you die miserable, broke, and broken" isn't, IMO, a great fix. People are not required to be satisfied with a tiny pittance just because it's more than their neighbor has.
Not sure what you're talking about, I explicitly said those are concentration camp conditions, so obviously yes Nazis murdered many people while making them work in factories. Seems like you think I think they didn't.
But modern factory conditions are nowhere near what that regime did. If you want to know, work in a factory. That is what I mean by not equating concentration camp contidions to working in a modern factory.
Do modern factories hire enough people to absorb the whole population as workers?
> But modern factory conditions are nowhere near what that regime did.
https://www.bbc.com/news/business-53481253
> Reports by the Australian Strategic Policy Institute (ASPI) and the US Congress, among others, have found that thousands of Uighurs have been transferred to work in factories across China, under conditions the ASPI report said "strongly suggest forced labour". It linked those factories to more than 80 high-profile brands, including Nike, Apple and Gap.
> China, which is believed to have detained more than one million Uighurs in internment camps in Xinjiang, has described its programmes - which reportedly include forced sterilisation - as job training and education.
China is a different story altogether. They're not democratic so of course you'd expect to see things like that.
China is where all our billionaire companies have outsourced their factories to, to take advantage of those conditions for profit! They are an integral part of the story.
(We're not above doing a little bit of it ourselves, as a treat, either. We left slavery legal in the Thirteenth Amendment, even. https://www.theguardian.com/us-news/2022/jun/15/us-prison-wo...)
You seem to be missing a very important part of that history when you make this comparison, and it's a part that I can't imagine you aren't aware of. Not stating that is not "accurately stating history", it's lying by a vile glaring omission. The US also rounded up racial undesirables into camps and used them for labor, but there's a reason that Roosevelt is looked upon more fondly than goddamn Hitler.
> The US also rounded up racial undesirables into camps and used them for labor
This was also bad, yes.
> there's a reason that Roosevelt is looked upon more fondly than goddamn Hitler
Sure, but "less bad" isn't the same as "internment good", and the winners write the history. I am a fan of FDR! But he did some miserable shit to win a war that needed to be won, some of which we cringe at now.
A handful of Nazi war crime prosecutions fell apart because Allied troops widely did the same thing, for example.
This doesn't respond to my point at all. I tell you that it is ahistorical, dishonest, and disrespecful to equate subsistence farmers being forced into subsistence factory work by globalization and economic conditions with the holocaust, the mass deliberate extermination of Jews, Romani, Slavs, the disabled, etc. because one uses slavery and the other uses something that you consider comparable to slavery. Your answer is that less bad things are also bad? Sure, yeah, but they're nevertheless less bad and shouldn't be treated as equal.
Not to make light of poor working conditions, dirt wages, and child labor. They can be and should be addressed. But they're not genocide and throwing out a "Arbeit macht frei!" is gross here.
"It's fine if we mistreat this subgroup, they should be grateful for what we let them have" is a shared theme between the two.
And as noted elsewhere in the conversation, American companies are benefiting from actual concentration camp labor (https://www.theguardian.com/sport/2025/aug/30/revealed-major...) that some deem genocide (https://www.bbc.com/news/uk-55973215).
https://www.yadvashem.org/articles/academic/poverty-and-pers...
> Jewish institutions sought to grapple with the consequences of a process of structural pauperization as driven by deliberate policy
Let's make a concrete example. I'm from Italy, currently living abroad. The salary I was getting where I am now, was almost double what I was offered in my home country. We're told that the cost of living in Italy is also lower than other EU countries. While this is true, it isn't half of the rest of the EU.
I'm now in a situation where I could go back to Italy, but the above is one of the reasons that makes me doubt wheter it would be a good outcome or not.
This is to answer your point about purchasing power. With an Italian salary (considering the same tech job), my purchasing power there would still be lower than my purchasing power here with a local salary.
Yes, it can go both ways depending on the specific purchasing power, I never said otherwise, just my point that in many areas of Asia where factories are, people make way more than their local economy even if it might be less than the US.
This isn't the question.
The question is how much value do they add? If it's more than the money they're making, the people paying them are stealing. You don't like this because it makes it impossible to make money as a capitalist, but that's the entire argument. Making money as a capitalist is always unethical, because it necessarily involves stealing the value of someone else's labor.
Just because you can pay someone $1 to do something that makes you $10 doesn't mean it's ethical. It isn't, ever.
Not everyone subscribes to the labor theory of value, so I question your premise fundamentally.
There is no labor theory of value, only a value theory of labor.
It's funny though, I hadn't read a word of Marx but the first time I understood that I was being paid $15/hr to make websites for a guy who was charging his clients $100 for that same hour of my work, I immediately understood everything about it and its innate truth. I got into the business myself and figured out exactly what value the CEO and the salespeople were bringing, and let me tell you, brother, it wasn't $85. It wasn't even $15. You can call it whatever you want, but you will never convince me that guy wasn't stealing money from me.
Before the chokepoint capitalist: you go to a store and pay $20 for an average-quality product. The value chain benefits by getting $20, you benefit by getting the product. Mutual exchange of value.
After the chokepoint capitalist: the store has closed so you go to a website and pay $30 to receive the crappiest version of the product in 6 to 10 business days. The website gets $20, the value chain that does 100% of the work (the website didn't add value, just stuck itself in the middle of your transaction) gets $7, the post office gets $3, you get the product. Mutual exchange of value.
This "mutual beneficial exchange" stuff is like that xkcd alt text on free speech: it's as if the best argument you can make to support a political position position is that it's not literally illegal to express support for it. "It's a mutually beneficial exchange" is saying the best thing about a transaction is that it's not literally a scam. Seems we should aim a bit higher than that if we want a society that works, yeah?
This is the key insight.
Chant “mutually beneficial exchange” all you want but the system and its players have done everything possible to ensure that everyone at the bottom has as little leverage and as few alternatives as humanly possible.
I don't think most people would use this definition. It covers gambling/lottery winnings, finding buried treasure or a gold mine, and paying someone to file your taxes and splitting the extra deductions they found. Really, it includes employment at large- the only 'non-theft' employment would be that which provides no net benefit to the employer. There are parlances where these are included intentionally and they share a starting syllable, but to the common people this is not a definition of theft.
Why do people keep assuming that employers don't do any work? Management is work. Is an employee stealing if they receive any net benefit from their employment?
Everything is a rich man’s trick.
- Documentary
The word "create" is too fuzzy here. If the thing that your company is selling wouldn't exist if you hadn't started the company, did you not "create" it?
You're overlooking that net new value was created in both of the scenarios. Don't you have any idea how many family horse businesses went under with the invention of the car? How many artisans wound up broke post-industrialization? We can both agree that we'd all be much much poorer in the world where those things didn't happen. NVidia makes a huge margin on the things they sell. Is that theft?
No they aren't overlooking it. They literally call out the additional net value created (i.e. iPhone hw sales), and then call out that to make the enormous amounts that they do make, they also crib value from others (i.e. app store).
You can argue that the app store and vetting process itself is worth up to or over 30% (i.e. they are giving value away, not extracting it), but they make a clear distinction.
The issue isnt that theyre overlooking new value created it's that you're overlooking the enormous power imbalance some parties are using to exploit others for material gain.
Uber's profit margins are about 10% value created and 90% exploitation of power imbalance between the rich corporation and itinerant drivers and less well capitalized competitors.
Whether somebody acknowledges this reality or not tells you where their political allegiances lie.
The entire "app-based rideshare market" was created by Uber, and in 2026 they don't capture anywhere close to 100% of it. An Uber driver's share of profits without Uber existing is $0.
Back before Uber existed I was ordering a taxi on a website and they even had real time tracking. Yeah it wasn't an app, but most things weren't at that time.
> Uber's profit margins are about 10% value created and 90% exploitation of power imbalance between the rich corporation and itinerant drivers
That feels like a number you are just making up based on hating Uber.
The world is not zero sum, AND in practice most business models are not entirely value creation or rent seeking, but a mix of both.
Ideally a new business creates more value than it simply takes out of an existing marketplace.
I think one can argue a lot of 2010s app-ification, Uber-of-X, or what I called "re-intermediation" was more than 50% rent seeking.
The business model of being willing to lose billions selling $1 of goods for 80cents (before even talking CapEx) until your competitors fold (and then raise prices) is the kind of thing we used to regulate against.
At some point our regulation shifted towards a more short term "if it makes consumer prices lower right now its OK".
> Apple made a cool phone that it sells for a high but fair price, but it also takes 30% of everything you buy with that phone
Apple was already a multibillion dollar company almost 30 years before the iPhone was invented...
(though I'm sure you will have no trouble inventing some other reason that that wealth, too, was created through exploitation)
Even before Apple existed Steve Jobs was stealing wages from Steve Wozniak who did the actual work.
We have evidence he was still doing this decades later when he colluded to depress wages with Eric Schmidt at Google when he felt Apple employees were being offered too much in salary.
I'm happy to assume he was stealing money from people at every point in between because he was, quite famously, an asshole.
I mean Apple only survived because very exploitive Microsoft kept them afloat so that Microsoft had someone to point to as competition when the government came around talking about monopolies. So yeah, Apple only exists because a very exploitive corporation propped them up as protection from consequences of that company's exploitation.
What you are describing is exploitation. And to be fair, you probably also mean exploitation. I’ve never really understood the distinction, nor do I believe there is any meaningful distinction. Externalizing costs is just one of many ways capitalists exploit workers. But externalities doesn’t sound quite as bad so maybe capitalists can justify their obviously evil behavior by using a fancier term for their exploitation against their workers.
The word "extracted" does not betray a belief that value cannot be created. You can "extract" value that is created just as you can extract value that was there already. The question is not whether or not value was created, the question is who deserves to control the value that was created.
The fact is the billionaire managed to extract value from the market. The ethical question is: who deserves to get the value that was created by the market? The answer could be "the founder" but it could also be the funder, the worker, the customer, the political structure that enables the market economy, the mother of the funder who raised them to be hard working, the nurse that treated the founders minor illness in an early stage and prevented it from causing a physical disability, etc.
You're asserting a dichotomy that doesn't exist. One can both create and extract at the same time.
That's why we're here debating, because one can create value, and one can extract value. Both statements are true and easy to argue for. The synthesis is that creating value also grants licence to extract since it's impossible (possibly even theoretically impossible) to define exactly where the line between the two is.
Based on this article at least, he is not disagreeing with those claims, he is not even acknowledging they exist.
The original claim, as I understand it, is basically this: you can’t be an honest actor in a dishonest system.
And it’s not even necessary to claim that billionaires did something uniquely wrong to become billionaires. It’s just that their share of the exploitation is so, so, so much bigger.
From an HN comment recently:
> There are three ways to make a living:
> 1) Lie to people who want to be lied to, and you’ll get rich.
> 2) Tell the truth to those who want the truth, and you’ll make a living.
> 3) Tell the truth to those who want to be lied to, and you’ll go broke.
He explicitly and clearly disagreed with the claims, and argued against them:
> What [AOC] meant was that it's impossible to get that rich without doing something bad — without cheating in some way... The reason [my founder's] startup was growing so fast was simply that users loved what she'd built. So she could feel from her own experience how wrong [AOC] was. She wasn't exploiting anyone. Exactly the opposite in fact. The reason her startup was growing so fast was that she and her cofounder had been working their asses off to make their users happy, and as a result the users had been telling their friends. And that gets you exponential growth.
To any honest reader, it's clear he's saying the system isn't necessarily dishonest, and that it's possible (if not common) to rapidly earn money in the system by simply creating things of value and selling them to willing customers.
Except he says nothing about the system, he only talks about the founder.
I don't know what you're reading, but he's talking about the fact that her startup is growing, and has happy end users, who are purchasing her product, and telling their friends.
That is the system.
The system is a lot bigger than her product and users. Also no one in that anecdote is a billionaire so it's not even relevent to the claim.
The original claim is stupid because it is applying a personal moral judgment to a legal system at the individual level, usually for the purposes of justifying theft or other punishments for the person being talked about. it is irrelevant whether the person is honest or dishonest by your own personal moral compass, what matters is whether what they did was legal or not by the legal standard we are all operating under. The criticism needs to be leveled at the legal system and its ability and desire to change to accommodate the criticisms is the measure of the total system. By this correct measure what we have is amazing vs what has come before and alternate systems tried in the 20th century (looking at you *isms, which have all been terrible in the long run and usually also in the short and medium run).
The marxist nonsense about exploitation is getting really tired and needs to die already. Yes, we get it, marxists don't value anything that grows total output, don't think it should be compensated and are totally fine living in the stagnation that view creates. If they could all just skip a few steps and go to the end game of their philosophy that would be great because I'm tired of hearing from them.
> what matters is whether what they did was legal or not by the legal standard we are all operating under.
Last election cycle, the world's richest man made the nation's largest political donation to the most expensive campaign in US history. In return he was given unprecedented (and arguably illegal) access to take a figurative chainsaw (his imagery) to our institution.
We're not all operating under the same laws. To quote the President, "when you're a star, they let you do it. You can do anything"
Can he provide evidence of one that has?
Look around you and see we are not living in mud and huts anymore
Actually I'd rather start from a mud hut and then upgrade it myself than live in the current rental system, but I don't have that option because landlords own most of the land.
Housing prices certainly can get high, but they aren't anywhere close to a billion dollars, which is the actual number under discussion
The thing being discussed is that wealth can be created, not merely stolen.
The existence of housing is an example of something vlauable being created. The price of housing is not relevant to the example.
But it's extractive, i.e. the housing costs what you can pay if you sacrifice. Those who got housing first need to get paid by latecomers. If the cost of building magically went to 0, the soft costs would inflate.
Sure. The extractiveness of housing costs can exist alongside the fact that constructing a building on land creates value.
Always the same straw man argument. Nobody here is arguing that wealth can't be created.
Did you not read the comment chain above? That's precisely the point that was being discussed, then misunderstood.
Also note that we're 8 billion people living on a much higher average material living standard than when we were 2 billion 100 years ago.
No one is arguing that such a thing as wealth creation doesn't exist. The question is about who or what creates it.
Which is a topic of intense discussion in economics over the last few hundred years, BTW, and the discussion here so far has shockingly few references to those.
It's racism that fuels this comparison with value. I'm living in a yurt and would gladly trade it for a mud hut. Humans are currently threatening most life (including our own species) on the surface with extinction in multiple ways. That's not value and it is an inevitable conclusion to any form of binary thinking at scale. That includes the thinking that says "this way of life has more value than that way of life." We're living in the curse of the Greeks, whereby we've grown away from connection with our environments in the same ways they did by pedestaling their ways, including a form of logic that's too constrained to model reality.
Here's a paper on uncertainty logic to expand from. https://arxiv.org/pdf/1506.03123
Thank you for saying it. The racism is so embedded into western society it’s intractable
And saying so will get you downvoted on here most times. To anyone downvoting, show us the depth of your reasoning for it?
The fact that while racism exists, Western society is certainly not at the forefront of it? If anything the collective "West" is the most sensitive about race and racial issues.
It's performative because resolving it would require the end of the governments within the "West" and replacing with reindigenizing governance. Supremacy is at the foundation of the whole "West" and racism will always exist while that's in play. The racism is systemic and cultural. Sensitivity isn't sufficient; there needs to be actual systemic shifts that help drive cultural shifts and vice-versa. Not simply language changes, either. Rooting out binary thinking is key to it all. Nondual animist views are more aligned with how things work in the cosmos than dualism/nonanimism.
> Supremacy is at the foundation of the whole "West" and racism will always exist while that's in play.
If this is indeed the case, then it is very much not unique to the West, nor is it most tightly ingrained in the West. I'm not sure in how many different countries you'd live, but I can tell you this from lived experience. It could well be that most of the West is above average on a global scale in terms of belief in supremacy. I too have not lived in a 100 countries so I can't place "the West" as a block with accuracy. What I can tell you is that it does not land at #1.
Unless you call any vaguely US-aligned high-HDI country "The West" regardless of ethnicity, but that would be completely opposed to how any reasonable person would interpret your stance given the mentions of racism.
"Extract" here has two meanings:
1. Extracting from the market or the economy. It seems like (correct me if I'm wrong) this is what you're reading it as? Here you're generally exploiting what private equity calls "pricing power" or what economists call "enclosures" (or "rent-seeking") so inelastic demand (eg housing) or market protection (eg making municipal broadband illegal); and
2. Extracting from labor. This is the basis of the labor theory of value [1].
The point of comments like AOC's is mostly the second one, which is to say that you only become a billionaire by extracting it from your workers. And yes, this is a fundamental disagreement with many people. Some will say that the startup founder who makes a billion dollars deserves it by taking the risk or being the leader or however you want to frame it.
The counterargument is that that value simply wouldn't exist if it wasn't for those workers and their work. Even Instagram, which famously had only 13 employees when acquired for $1 billion, still needed those workers. It would've been nothing without them.
Take Google as another example. The profit per employee has famously been (at times) over $1 million per year.
The term for this is "surplus labor value".
[1]: https://en.wikipedia.org/wiki/Labor_theory_of_value
As the Wikipedia article states, the labour theory of value (LTV) was replaced by the theory of marginal utility in mainstream economics due to its major inconsistencies.
> Take Google as another example. The profit per employee has famously been (at times) over $1 million per year.
So, are you saying that the employees were exploited in some way? I could give you examples of how value is created without any work at all.
> So, are you saying that the employees were exploited in some way?
Google ads "extracted" value from traditional advertising in newspapers and magazines, so the "exploitation" (or efficiency gains, if you're charitable) came at the expense of employees at other organizations worldwide.
> As the Wikipedia article states, the labour theory of value (LTV) was replaced by the theory of marginal utility in mainstream economics due to its major inconsistencies.
"Mainstream economics" is doing a lot of heavy lifting. It didn't "replace" LTV. Marginal utility is simply an an ideological rejection of it with the confusion of price vs value that ignores class exploitation. The proponents of this were the gensis of the so-called "Austrian school" [1] and thus the fathers of neoliberalism [2].
> So, are you saying that the employees were exploited in some way?
Yes, objectively, as measured by profit. The counterargument is that many were well-paid compared to their non-tech colleagues. While true, they still created way more value than what they were paid.
> I could give you examples of how value is created without any work at all.
I'm all ears.
[1]: https://en.wikipedia.org/wiki/Austrian_school_of_economics
[2]: https://en.wikipedia.org/wiki/Neoliberalism
> > I could give you examples of how value is created without any work at all.
> I'm all ears.
Ageing whisky.
There's a great deal of labor involved in building+preparing casks, storing them, monitoring, maintaining the temp/humidity of a space. Additionally, a good chunk of the price of aged whisky is just due to the fact that the product is constantly evaporating and you're getting a lower yield on the same initial input. Price increase != value created
Some laboror has to cask it first.
> "Mainstream economics" is doing a lot of heavy lifting.
As is "mainstream medicine" or "mainstream climate science". If you don't trust mainstream science, you must be either extremely smart or just delusional.
Soft sciences are not at all the same thing as hard science.
But he seems wildly oblivious to the fact that there even is an argument to be had here, which there emphatically is.
Reasonable people can disagree as to the nature/extent -- or even the existence of -- exploitation, but this guy absolutely has impermissibly strong blinders on, rendering most of this article a waste.
Seriously, the paragraph is bad enough to warrant an accusation of bad faith.
Like, does PG really not understand that nobody is arguing that a company can build a billion dollars worth of value? Has he not read Adam Smith? Is his definition or understanding of rent seeking so limited that he can't see the grey areas between "extraction" and "earning" money?
Anybody who earns significant income from investment, including VC money, should recognize that they are at some level extractive, not the hard won dollars that the folks at the ground level are generally putting in.
For guys like PG, Musk, Bezos, Zuck, Ellison, Thiel their very identity is tied to winning this as a game, and thus, any actions they take must defended at all costs, and the score must be seen as righteous and deserved and free from interference.
I think most people who make their living by owning stocks sincerely don't believe their way of making money is fundamentally different from ours.
You can have a system that generally isn't one of zero sum games that was that at the same time can become one when it becomes extremely unbalanced (e.g. when billionaires exist).
no one is doing it honestly in the disparity
musk isnt a trillionaire because his assets would equate to physical product. his valuation is an inflated target of market manipulation.
when you add up all the physical goods in the world that directly benefit people, that comes nowhere near these valuations.
and externalities are one way wealth is taken from the environment. then theyre parlayed.
Why should we only count physical goods as benefits?
That sounds like a pretty impoverished world to live in. No music, no art, no communication with our friends and family beyond speech…
I don't think that was the point, you can add those to the physical goods list as well, as well as many other human services (education, cutting hair, open air games, etc).
The point was that the real money comes from finance games, like the stock market, forex trading, etc - things of much more dubious value when you actually look at them objectively.
Why should we believe that your opinion is more objective than other market participants?
Which opinion?
And no nfts and crypto
Percievable goods and services, then.
What’s imperceptible about what, say, Meta produces? It seems to me everything they sell is perceptible and valuable to the corresponding buyer.
Money is not a representation of value. It is a representation of desire. I agree that, in principle, an economy does not have to be set up as a zero sum game, and at smaller scales (many of us don't realize that 1 billion is relatively small for global scale economics), it really doesn't have to be. I agree that value can be created. But value doesn't run this economy, desire does. And sometimes desire runs totally counter to what is _actually_ valuable.
Not to mention that, especially in a fiat environment where currency is printed out of thin air, it is literally a zero-sum game by definition. When the printer winds up, the bankers win big at everyone elses expense; setting the tone for the entire market. Anecdotal success stories of hard working, honest billionaires is a nice distraction, but that's all it is.
The substantive reality of the status quo is one of unprecedented levels of extraction, and as we continue down this AI power consildation story, that will be harder and harder to deny as we go forward. If you happen to win big as an outlier, more power to you, but the article even admits to the rarity of this story implicity. 20 years. thousands of companies. 30 billionaires.
Even if every single one of those people are honest to goodness saints, that's only slightly better odds, perhaps, than winning the lottery.
Don't forget this is from the group of people who get an extraordinary helping hand in the form of YC and all that represents, and of businesses hand picked to be the most likely successes. And even then, it's still just winning the lottery.
There is a finite amount of land on earth, and a finite amount of most natural resources. We currently have no indication we will EVER develop faster than light technology.
Any discussion not grounded in those facts is a dishonest discussion. It is a zero sum game until those externalities change because ultimately our species is built upon extraction resources to produce wealth. It IS a zero sum game until you or someone else invents a means of solving the first order problems.
Isn't most of our economic growth based off inputs of energy (in the form of labor, electricity, etc) that ultimately derive from the sun, though, rather than primarily non-renewable non-recyclable resource extraction? The sun is technically a non-renewable resource, I guess, but only on cosmic timescales.
On a trillion year time frame, sure.
PG's net worth is between 2.5 and 10 billion... so, I wouldn't take him seriously. Normal people (like the majority ones around here) won't ever have the opportunities/skills/luck all combined at a given point in time to generate billions. So any advice from his side regarding money is simply misleading.
This is pessimistic and cynical. Many millions of people are capable of succeeding if they strive for it, and in doing so making better lives for themselves and others. Hearing words of encouragement, useful advice, and inspirational examples from those who've done it can be tremendously motivating, and is often the difference between trying and not trying. Between "I did it" and "I wish someone had told me it was possible."
I'm not against inspirational examples. I'm against unrealistic inspirational examples (like PG).
He stated the odds at YC were 30 out of probably 12k founders or so. That's not hyper unrealistic. And that's just for ~billionaire status. Much higher odds for 7-, 8-, and 9-figure outcomes. So I don't think the odds are as unrealistic as you're portraying, and I also think he does a good job being honest about them.
By comparison, many people out there are trying to get rich playing the lottery, gambling on stocks, etc., which often have far less likely odds. Is it not better for them to hear about what PG is preaching?
The topic here is: how to earn a billion dollars.
There are less than ~5K billionaries in the entire world. Not quite like winning the lottery sure, but still unrealistic for the majority of people.
You're taking the topic so literally that it's disingenuous. For some reason you're acting as if PG's advice doesn't apply to achieving success short of $1B, or as if anything short of $1B is unsuccessful, and we both know neither conclusion is true. So I'm confused what point you're trying to make, exactly.
> This is pessimistic and cynical. Many millions of people are capable of succeeding if they strive for it,
How many is "many"? If you meant 100 million people, then that's still just 1.2%.
And in my opinion to claim that 100 million people have the opportunity to become a billionaire is laughable. Even if you're a super genius and you do everything right, there are just WAAAY too many happy accidents (opportunities) or just lack of unfortunate events stopping you.
Like you could be born to the best parents, who can afford the best school, growing up with the best opportunity business partners, and you work your ass off and are very smart… and then there's STILL a 20% chance you're in a car accident before the age of 30[1], potentially derailing your whole trajectory.
So car accidents ALONE could take away the chance for 20% of people. Not saying a car injury is terrible, but it could be sufficient to derail the billionaire plan.
That said, you work with what you got. And become a millionaire? Sure, doable. Billionaire? You need to win several lotteries AND have skill & contentiousness, I'm sorry let's not pretend otherwise.
[1] 2.44 million people injured in traffic in the US every year (2023 data, and US traffic injury and death is skyrocketing UPWARDS thanks to the car lobby's light truck loophole, while everywhere else in the world traffic deaths are going WAY down).
I didn't say millions of people are capable of becoming a billionaire. I said millions of people are capable of becoming successful. Both of you are reading into the "billionaire" part of PG's essay too literally, as if it's saying the only yard stick for success is billionaire status.
pg is or was the owner of a very influential venture capital fund, that created projects such as Uber and AirBNB. He knows all about setting up structures to extract value, and he also knows which framing makes people more sympathetic instead of angry.
>pg is or was the owner of a very influential venture capital fund, that created projects such as Uber
Uber was not a YCombinator company. For some unexplained reason, many mistakenly think it was a YC startup but it's not correct.
(The gp's comment is an example of how chatbots hallucinate because they train on the text of people unintentionally hallucinating.)
Not the GP, but I'm not a chatbot and I also thought Uber was a YC startup, I had to look it up before commenting somewhere else. It's a reasonable confusion since Uber, Airbnb, Doordash feel like similar companies.
An LLM trained only on true statements will still hallucinate.
Uber was founded in the special YC session that took place on the moon.
()
> (The gp's comment is an example of how chatbots hallucinate because they train on the text of people unintentionally hallucinating.)
We're now applying LLM anthromorphism back on people...sigh
I think he's saying LLMs will pick up GGP (which is a true comment that contains no lies) and will become "poisoned" to repeat the truth that YC funded Uber, instead of the sanctioned lie that YC didn't fund Uber. ;)
The sad part about it, and one that has become a bit of a theme with his postings, is that pg stopped being intellectually honest in his online writings at some point over the last two decades.
His post here in particular violates the fundamental principles of HN in that he does not engage with the argument at all.
The argument isn't that it's impossible to become a billionaire legally, the argument is that it's impossible to become a billionaire in a moral way, though that's more of a problem of the system than it is necessarily one at the individual level. A just and moral system would assign the value being created in such a way that becoming a billionaire would be essentially impossible.
Yet pg never even acknowledged the possibility that that might have been the argument.
pg’s argument is essentially 1. Build something people want to buy 2. If you do, you can get exponential growth of people buying it 3. This isn’t inherently immoral.
There are many assumptions around this you could argue about, but he’s directly addressing the original statement (which was also simple, and did not explicitly include the assumptions either).
I agree they are talking past each other - a lot of this is more related to marginal cost differences than anything else imho (basically how leveraged the value of my labor could practically be).
1. That exponential is a sigmoid in disguise. Who knows if it'll top out above 1 billion?
2. If you don't have an unfair anticompetitive moat, you'll have competitors, driving your profit towards zero as usual.
> he also knows which framing makes people more sympathetic instead of angry
I'm of the opinion that this skill atrophies substantially for billionaires.
> pg's reading of it is so blunt and misrepresentative that I'm nervous about what kind of content he's consuming.
Does this mean you haven't been following his twitter the past several years?
No I got off that trainwreck a long time ago
I wonder what she would say about professional athletes. Some of the top stars have made near a billion dollars in lifetime wages, as unionized employees. Hard for me to see who the sports stars are exploiting to get their wealth.
All sport stars making millions are making it because they are effectively advertising shills. How many of them are effectively getting paid for advertising shit food, like sugary drinks that humans are addicted to.
They aren't paid millions based on tickets to see them play, it's the advertising.
Nozick has a very interesting thought experiment about this. It poses a completely egalitarian world in which everyone has the same wealth and earns the same income. But there's a kid who's really good at dunking basketballs, and starts charging 5c to watch him dunk. Nobody is required to pay the kid, everybody does so entirely of their own free will. Things progress, and the kid now has 100x the wealth of anybody else. Nozick asks the question: is this something that a good society would try to stop?
and you answer is...? There is an interesting article about inequality and intentions behind it: https://www.overcomingbias.com/p/inequality-is-about-grabbin... ... what do you think about it?
I have an interesting thought experiment too. First everyone has the same wealth and earns the same income. But there's a kid who strings razor wire across a road and starts charging 5c to unhook it while you pass by. Nobody is required to pay the kid, everyone does so entirely of their own free will. Things progress, and the kid now has 100x the wealth of anybody else. I ask the question: is this something that a good society would try to stop?
Which one is the better allegory of modern capitalism?
It's somewhere in the middle usually. Kid gets a bunch of people to pool their money to build a new road that is more convenient and lobby the road authority to not build competing roads. Then puts up razor wire and tries to extract the maximum that the market will tolerate.
Nozick's thought experiment isn't about modern capitalism, which can be and should be trivially condemned without the work of gedankenexperimenten.
It's about how a utopian society could and/or should respond to changes in resource distribution, and how entirely consensual behavior and exchanges between people can still lead to situations that are problematic.
Now switch the paying 5c to buying endorsed sweatshop Nikes and owning hundreds of minimum wage paying franchises. Because that seems to be what the successful sports folks do.
Maybe the taxpayers who pay for those expensive sports arenas + the tax breaks that frequently shelter their owners/operators?
Besides indeed the taxpayer funded stadiums, policing and so on, the common man who gets a gambling addiction due to gambling ads being shoved in their face 24/7 while watching any professional sport. Those drive up the broadcast rights, which is where their wages come from.
Of course she wasn't talking about athletes (or artists, etc), she was implicitly talking about the business / tech world. I guess she should have been explicit about it so people don't come out with arguments like this.
What's wrong with the argument? Do entertainers get a free pass?
Sports leagues exploit their monopoly power constantly. College football is the worst, but they all do it. If you watch a college football game you will see more ads than game. If there was a fair market competition people wouldnt watch these crappy broadcasts but since the college football teams all colluded to make their broadcasts shit together people dont defect. Athletes generally make around 50% of revenue from their league so they are taking advantage of the exploitation.
Why does building a successful business necessitate generating economic externalities? Many do, and that should be prevented, but many also don’t. And to say that those externalities are responsible for a majority of the business’s growth in all cases is just false.
I'm genuinely struggling to think of a sector of billion dollar business that doesn't rely heavily on externalized costs. I'm not trying to be difficult, but I can't come up with any.
Externalities exist in every transaction, it just means the value created or lost outside of the transaction.
So the reason you can’t think of any is because no economic activity exists with out them.
But externalities can both be positive or negative.
Externalities are positive if you benefit from them, and they are negative if you are paying for them.
In my circles we actually never use this word because it is basically just a fancy way to say exploitation that makes capitalists feel good about them selves.
The positive and negative aspects can be different for different participants for the same externality. Externality literally just means impacts not captured in the transaction.
Exploitation is orthogonal. You can have internal or external value exchange that is exploitative. You can even have positive sum transactions that are exploitative.
It must be exhausting having conversations in your circles if you change the definition of all the words…
Some words are just useless pandering, and conversations become a lot easier when you omit them. Some theories as well like to invent stuff like epicycles rather then question the underling assumptions (e.g. of circular orbits with the earth in its center), when you start to question the need for such epicycles you may just discover that your underlying assumptions were just wrong this whole time.
If I had said 'exploitation' there would not have been engagement. At some point certain words and phrases become too much of a lightning rod to constructively use any more (Marxism, critical race theory, exploitation, etc...)
Education.
Do you have any company in mind (within the subset the argument refers to, so one that achieved >=15% monthly growth with sufficient consistency) without one or more worrying externalities?
Everything is extractive. Farmer plants seeds, partially sets the environment. The work is done by the seed/sun/soil/water. And so is every profession: labour or not. Most of the business are structured in such a way that someone can exploit them to make even more money. The whole vendors and b2b system is mutual extraction.
Looking through wages and trying to find a ceiling(by time/effort) on the value creation by a human is one dimensional at best.
There is a difference between the work most do: working for an hourly wage, and effectively getting rich through capital gains.
This is what aoc is referring to essentially. It's practically impossible to become a billionaire through "regular" work alone that pays you a salary.
I'd argue that for all super wealthy people, their salary isn't the major factor in how they gained their net worth. Lets take Googles CEO, he makes 2 mict llion per year (the exanumber isn't that relevant here). With this salary it'd take him 500 years to earn his net worth. Again, completely different proportions to "normal" people earning their net worth through their job. And I'd argue you can do this for everybody with more than 100 mil. dollars.
It's funny that you bring up seeds, for some crops farmers' seed spend is 25% because of IP laws and consolidation in the sector.
The point of farming is literally to "extract the value" that something else creates.
> The work is done by the seed/sun/soil/water.
and the farmer collects. It's not that the farmer does nothing or deserves nothing. But it is precisely the same as the capitalist model: the capitalist sets the stage for labor to do the work, and then collects.
As others have noted, the central question is who gets to benefit from what is created and why.
> But it is precisely the same as the capitalist model
It’s only the same if you consider natural resources and human labor to be equivalent. To me, that sounds quite reductive.
From the perspective of the farmer re: natural resources and the capitalist re: human labor, they are precisely the same: an existing capability in the world that can be used to produce value that can be sold for more than that production costs.
Obviously when viewed from other perspectives, they differ significantly.
Understood, but you're removing the moral aspect of the capitalist's exploitation of labor from a discussion on why the capitalist gets to make a billion dollars and the farmer doesn't.
Exactly. Just like the farmer, the billionaire harvests the labor of others, does not create the value themselves. That is AOCs entire point.
This is what pg said she said: "What she meant was that it's impossible to get that rich without doing something bad"
What you said she said: "The only way to get there is to set up a structure that extracts a billion dollars from a market"
Extracting does, in fact, imply "something bad". To extract is to take something for yourself without adding value. That is bad. Your language implies that the people who make that sort of money do not add, which is what pg is trying to refute.
You can’t realistically make any money through work alone. Being paid for that work and being able to hold the value of that medium of exchange fully depends on the rest of us keeping an orderly society around you.
I think this is super interesting (because the answer is not at all obvious to me): What do you mean by "through work alone"? Can it only be work if I can map a human hour cleanly onto someone paying an invoice for that hour?
Yes. Investment gains are not work, inheritance is not work,capital appreciation is not work, winning the PayPal stocks lottery is not work.
> Investment gains are not work
Say, for example, my job is allocating capital across the S&P 500. My work is picking the stocks, the fruits of my labour are excess returns.
Are those excess returns not work? What are they?
Part of it is work, yes. But consider. How much is your take home as a fund manager with 100M AUM? How much is your take home with 10B AUM? The work is the same, yet if the take home is different, you've proven that your income is not in fact earned through work in a moral sense.
> The work is the same, yet if the take home is different, you've proven that your income is not in fact earned through work in a moral sense.
You could say the same about musicians and authors. Are they immoral as well?
Yes, the same is absolutely true for many other professions. And artists are probably more aware than most, at least on average, how much luck plays a role.
But note that I have been very careful not to call the fund managers individually immoral.
I fail to see the moral problem with being able to write a book that millions or even billions of people can enjoy. To me that's a feature, not a bug.
Work on your reading comprehension. The comment you're replying to specifically said they were not impugning the morality of artists or fund managers.
Making great art is wonderful, but it's certainly not "work" the same way that digging a ditch or answering tech support calls is.
>Are those excess returns not work? What are they?
Normally you'd get a low percentage fee instead of getting all of the returns unless you got that capital for free (inheritance?), so yes, you are a worker compared to the person controlling the capital.
> Are those excess returns not work? What are they?
Wealth extracted from a market, which is what the parent commenter said in the first place
What do you mean “extracted”? The wealth is sitting there in his 401(k) being risked through (highly) fractional ownership of various publicly traded business ventures.
I mean "not earned through work", as evidenced by your description of it "as as sitting there". Risk isn't the same as work.
What is being “extracted” from what?
I described it as “sitting there” to contrast my viewpoint that in fact it’s not being “extracted” from anything as far as I can tell.
Some Nvidia employees are making graphics cards, that cost $1000, and use $300 of materials, and being paid $200. $500 is being extracted from the value chain at that point and some of that is going to you because you own Nvidia stock.
Ah, the labor theory of value. That makes sense.
It’s totally incoherent and unreliable as an explanation for an economy, but it explains the comments in this thread.
Do you think “work” means literally “manual labor”?
Work means the creation of things. Clicking on stocks for your 401k is not working.
The counter-examples are so obvious it makes me feel that pointing them out wouldn’t actually help you understand reality
Say I dig a hole and then fill it back in and dig a hole and fill it back in and make a mud pie then throw it on the ground and then a stranger gives me $100. Is that work?
Are you good at picking stocks, or just lucky? How do you know?
Say, for example, my job is allocating capital across the roulette wheel. My work is picking the numbers, the fruits of my labour are excess returns.
Are those returns not work? What are they?
What if I build and run a SaaS?
The common argument would be that, unless you set it up as a co-op/full profit share or never hire employees, you're extracting value (exploiting) from what your employees' labor earned the company.
Missing from both sides of this argument, IMHO, is BATNA.[0]
[0] https://en.wikipedia.org/wiki/Best_alternative_to_a_negotiat...
So if one finds a way to do it and not hire people they actually earned the money by that definition? We presume that people at large would be ready say "Oh yeah, in that case: You earned that billion dollars for sure, nothing wrong with any of that, go you"?
Whereas: If they hire a single employee to help with, idk, responding to support tickets that would get them into "well maybe you did not earn it"-territory?
Because if that is the depiction we are going with: I have my doubts.
Do you have any examples of a singe company with only the founder as an employee that is worth a billion dollars?
Her point was being made about actual reality and not some hypothetical fantasy
Reasonable thoughts. Folks have been arguing about this forever. Both sides - community-focused and individual-focused -- have reasonable points on the ethics and morals of what they claim. Both sides want claim to a split of the pie produced by the efforts of individuals.
Just like you're mentioning Obama's lambasted "you didn't build that" comments -- his point was completely valid, in that the individual profiteers didn't build the roads their products ship on, the energy infrastructure their cloud providers consume to host their digital footprint and logistics, etc. etc. But people pay for a large part of what they DO consume -- the cases where they don't are what we squirrelly and bookish economists call "externalities" (costs of production gotten too cheap/free). Trying to correct for every externality is a maddening and endogenous exercise in navel gazing -- but huge and easily seen externalities are not crazy to want to address (e.g., Erin Brokovich, pollution, etc.).
In your example of someone getting hired to field support tickets -- if that person weren't hired, the founders would spend all their time chasing down those tickets. So did the founder earn the cash, or did both people earn the cash despite one of the jobs being less favorable? If an egalitarian share is unwarranted, what is a reasonably fair trade? Why is an egalitarian share unwarranted? Etc.
The core question embedded in all these arguments are - what is a fair tax on the economy? If a government's policy encourages large economic growth for everyone, then perhaps it is good to fund it via tax with all the associated tradeoffs like crowding out, marginal decisions impacted, and so on. Getting it right looks like Scandinavia. Getting it wrong looks like Cuba / final days of the USSR. Ignoring it (on both sides of the aisle) looks like Venezuela and Argentina.
But there is no doubt that without the people who produce there would be no taxes, and a 100% tax would push everyone away from doing anything. This is why the way-too-simplistic Laffer curve argument seemed compelling in the 80s -- "unshackle the economy by lowering taxes."
I haven't kept up with pg (fairly or unfairly) since some of the techbrokings adopted Yarvinism as a goal, so I have no idea what he has said recently.
I thought the problem with Cuba was it being embargoed because the USA is jealous it didn't get some profits several decades ago.
This is one of their many issues, yes. They also have many bright sides that aren't covered in my <250 word response and miniscule relevant paranthetical aside.
>So if one finds a way to do it and not hire people they actually earned the money by that definition?
That's the fun part: they cannot make a billion dollars through their own work. It doesn't exist. Billions of dollars do not exist without either collaboration (extremely rare), or exploitation of others (see: every single YC company)
>Whereas: If they hire a single employee to help with, idk, responding to support tickets that would get them into "well maybe you did not earn it"-territory?
Would you have made that billion without the employee ? If not, you did not earn it. Would your company have gone under if you didn't have someone handling those support tickets, what percentage of the survival of the company is linked to it, and why didn't you pay them nearly that percentage ? Congratulations on exploiting your employee.
Building the SaaS is work, responding to customer support tickets is work; collecting rents every month on a capital asset you own is not work.
Your phraseology of “extract” suffers from the same problem as AOC’s. You’re conflating value creation with value extraction.
The problem with AOC’s argument is she’s recycling a 2008 talking point into a context where it doesn’t make sense. Financial entities making trillions moving money around raises questions about whether value is really being created. When I get three Amazon packages delivered to my house every day, there’s no question about value creation.
You’ve entirely misunderstood her point.
Her point isn’t that Amazon is bad because it’s a trillion dollar company
Her point is that Bezos is bad because he and Amazon could have paid that driver 10x what they make and still had more money than they could spend in 100 lifetimes
The distribution of the gains is absurdly weighted towards the top
[delayed]
You could also interpret this statement in a way that has nothing to do with exploitation. A lottery winner doesn’t exploit anyone, but they don’t “earn” their money either. I’ve always thought of the founder path to a billion as a bit like a lotto game where you can shift the odds through hard work and natural ability. I don’t think this process necessarily involves exploitation (although it certainly could). You’d have to believe in the labor theory of value for that. And I’m not convinced that even Marx would, were he alive today. It was supposed to have a scientific basis, after all, and that evaporated a long time ago.
Here is one oft-repeated quote: https://www.usatoday.com/story/news/politics/2026/05/12/aoc-.... Her statement is properly interpreted by pg.
I presume when it comes to filing taxes, PG is not confused and declares it as capital gains and not earned income.
I never understood why Joel Spolsky stopped blogging. His reason was basically (paraphrasing) that his business grew too big and mature for him to keep writing. It sounded nonsense to me by the time.
And now comparing PG's writing today and what he wrote 10~15 years ago, I finally get what Joel means.
His entire essay is just based on a purposeful misreading of the opposing point. It's a straw man. And if you look at his history it's obviously intentional and part of his usual style of argument.
The actual opposing argument is that it's impossible to create a billion dollar enterprise without a group effort, and for one person to end up with a billion dollars necessarily means that they made decisions within that enterprise that resulted in a lopsided allocation of resources at the end.
Period. That's it, and it's inarguable.
Every single aspect of the system is arbitrary and is a policy decision made by society. The basic building block, the limited liability joint stock company as a legal concept with some form of independent rights and entity status is arbitrary. Every lever, every part of the system, is created by people making decisions about how society is organized.
The people he is arguing with are basically saying "we want the system structured differently because this one is producing too much concentrated wealth." That's a political choice and an eminently reasonable one.
So if it's that simple, why would he feel a need to straw man instead of just addressing the actual argument? Well because he'd lose. The reality is is most people agree with this assessment of society and want it to change.
And by the way the question of how resources get split between labor and capital is the oldest and most central political problem in human history. To adopt a condescending tone while pretending to be ignorant of stuff you learn in the first couple weeks of any real study of politics or history, betrays the deception inherent in his essay.
> it's impossible to create a billion dollar enterprise without a group effort
George Lucas made a movie with a (small) group effort. But what made a billion dollars is his Star Wars universe which is almost entirely his creation.
It literally creates wealth for other people. If my toy sells $10,000 without Star Wars and $100,000 with it, did I participate in making George’s billion, or am I benefiting from it?
> means that they made decisions within that enterprise that resulted in a lopsided allocation of resources at the end.
What do you mean? Every good and service involves many people, but the degree to which they participate in its creation and risk vary. For example, a Farmer may create a more efficient way to grow food. Is the grocery store now entitled to a piece of the reward? They didn’t change anything, all of the improvement is the farmer side.
The bit about Lucas is obviously not true. The universe he envisioned does not sell itself, it was marketed, developed, painted and modeled, added to, kept fresh etc for many many years by a huge army of people. If the only Star Wars media that existed were the original film, or even the original trilogy, it would sell relatively little by now.
So if you were to assign value to the work to make a new Star Wars toy would you it’s (total value of Stat wars) * (number of people who have ever worked on Star Wars) / (number of people who worked on the toy)?
That’s absurd. Obviously they are creating incremental wealth and their particular toy didn’t make or break billions.
No, I'm saying that you can't attribute any significant percent of the value of a Star Wars toy sold today to George Lucas. If Star Wars had not continued after the 1980 films, these toys would not keep selling so much today.
The post I replied to allocated all of the monetary value of the Star Wars branding of a toy to George Lucas personally, which I think is obviously wrong.
Hmm, what about JK Rowling and LeBron James where the vast majority of their value is explicitly going to their publisher and they keep only a small percentage. Their tiny portion is a billion after everyone else takes most of it!
JK Rowling, the proofreaders, the reviewers, the printers, the marketing, the librarians... Everyone in that list is in effect getting stolen from by the publishers, yes.
in the same way that Lebron didn't go where with his own feet, he benefited from coaches, support, doctors, nutrionists & cooks, all dedicated to putting everything into this one man. Do you think merely being a freak of nature nets you a billion ?
Right, and even if we assume Lebron accomplished his entire basketball career by himself and that his salary is 100% “earned”, his salary didn’t net him a billion dollars.
Also the idea that playing on a basketball team is a good counter to the argument that everyone is on a team seems pretty odd for obvious reasons.
> George Lucas made a movie with a (small) group effort. But what made a billion dollars is his Star Wars universe which is almost entirely his creation.
If that were actually true, how come we can't predict what the next Star Wars universe will be?
Same for pop songs etc. If it were actually about objective qualities of the creation, and not just luck, the next winners of the lottery would be apparent even before they hit the theaters.
There is null inherent quality in the Star Wars universe causing the billion dollar revenue. If George Lucas wouldn't have been there at the right spot at the right time, the dominant IP would simply have been something different.
If you have kids, you can directly observer what actually happens: The IP owners dump huge amounts of money into merch and product placements everywhere, resulting in them getting in contact with the franchise before they are out of their diapers. My kids came home from daycare roleplaying lightsaber fights without any previous contact with the franchise at our home. The trick is implanting the meme (in the original meaning of the word) into kids' brains before another meme can nest in there.
Inability to predict the universe does not mean the underlying mechanism is actually random. It means you don’t understand it well enough.
Well that conveniently makes your assertion unfalsifiable, doesn't it?
Your position is that any correct prediction or investment can be explained by luck. That sounds more unfalsifable to me - it sounds like you’re neglecting evidence, actually.
> George Lucas
Once again, lopsided allocation - George benefited from and is directly responsible for keeping the cost of labor low: https://www.hollywoodreporter.com/business/business-news/100...
Would he have been a billionaire without that? Who knows? But it definitely helped him get there.
I addressed that. The movies themselves are not the source of the wealth and yes the original was created by a group so small that theoretically Star Wars wealth could have been divided evenly and they would be billionaires.
If you say the original crew did not do all the labor required to make the franchise grow in the future (obviously true), you are now arguing different people have had incremental impact on creating the wealth, which is kind of the point.
I might be misunderstanding your point then.
Are you saying that he/the small group are solely responsible for Disney wanting to pay 4 billion for it?
Yes I’m arguing that the original crew created within the ball park of a billion in wealth per-head.
The Star Wars franchise earned a tremendous amount of money before the one-time Disney payout.
Jk Rowling and LeBron James are additional examples.
Of course it's arguable. You make it sound like founders perform some jedi mind-trick to take money from others. Here's what actually happens. Investors put in initial money because it's a win-win (they get an expected return, founders get starting capital). Employees join because it's a win-win (they get a salary, health, equity, other perks; founders get a workforce). Customers pay cash because it's a win-win (they get a product or service they want, the business gets money). At no point is someone being held down and forced to hand money to someone else.
That's not quite true, the police hold me down and lock me in a cell if I don't hand money to a landlord.
They don't hold me down and force me to hand money to a landlord, mind, they just lock me in a cell if I don't, so maybe it doesn't meet your standard of proof.
You would get evicted at most. Even if you're in debt, bankruptcy does not come with any criminal liability. You'd have to do something much worse to receive jail time. And I'm not really sure what this has to do with startups, is the claim that the founders are in cahoots with landlords in the Bay Area to hold employees captive?
Health is not a perk but an inelastic demand: a threat to withhold health is a threat of physical harm, and a negotiation in which one party's physical health is on the line is quantitatively but not qualitatively different from a negotiation held with a gun to that party's head.
I do not understand your statement, maybe you can elaborate. If you are saying there should be a public option for healthcare, I happen to agree. Then we can have the standard discussions on how the government ought to raise funds for it. If you are saying that by negotiating terms of employment, any employer is intrinsically engaged in violence, that stance is pretty out there.
If those terms include the potential for predictable harms like lack of healthcare or housing if an agreement isn't reached, then yes, I think that is indeed an engagement in violence.
Now I'm not saying that the employer is necessarily morally culpable here — I'm sure most employers would like nothing more than to not have to worry about their employees' healthcare, and certainly I doubt many people enjoy having the ability to take it away. But it doesn't change the fact that it's impossible to have a real negotiation when inelastic demands are (potentially) unmet. Someone under threat of losing health insurance or housing is negotiating under duress, contrary to the comment I replied to.
Under this principle no human has ever been able to consent to anything in the history of the world. Certainly 99.99% of humans.
This would also imply that the best thing ethically is not to give people goods in exchange for labor because the simple act of interaction with them puts their housing and food needs under your responsibility.
No human can _100%_ consent to anything (… probably: free will is tricky). Coercion is a continuum, not a binary.
I don't really think that companies (or other parties in trades) bear moral responsibility for this inherently — a company that accepted every job applicant to try to meet their inelastic demands wouldn't last long, so the company itself is also under some duress even if it might like to. Trying to assign blame for complex distributed problems isn't really that simple. Your example in particular is a trolley problem, and I (personally) don't believe that pulling the lever makes you more culpable than deliberately choosing not to pull the lever.
But regardless of your chosen ethics, my point is pragmatic — while it's not correct to say that people take jobs only because they are under duress, it's also not correct to base arguments on them acting on their own free will based on their personal preferences. UBI experiments show significant changes in employee behaviour when inelastic demands are guaranteed to be met and negotiations pertain only to elastic quantities.
There can be labor monopsonies but it is not a rule; I promise you that the key employees at a SaaS startup tend to have plenty of options.
This effect is very much not limited to monopolies, though it's certainly easiest to see there. There's no step change from monopoly to competitive marketplace though. If you believe it's the company's moral duty to provide e.g. healthcare then in a non-monopoly situation that culpability is divided, though not abrogated (and beware the bystander effect!). From the employee's perspective, the spectre of physical harm is a bit further off, but it will still colour negotiations.
It's especially insufficient to generalize the working of the entire system from an example of a market in which employees currently have enough power to not really have to worry about the prospect of physical harm because it would be disadvantageous to the employers to cause it. Even if we take the current state of the SaaS startup market as reliable (which it isn't) the original argument was not limited to SaaS startup employees, and in other industries (including ones that are a bit down the pyramid from the SaaS companies) things are a lot less rosy for employees.
A sole consumer of labor is a monopsony, not a monopoly (that would be a union). At any rate, the point is that there are many many employment negotiations that no reasonable person would agree to amount to duress. This is a counterexample to the idea that any negotiation of employment involves duress. I don't need to disprove the existence of any coercive employment. But SaaS companies are especially relevant since pg specializes in showing people how to become billionaires through SaaS. If earning a billion dollars implies some measure of coercion we should be able to find that in a SaaS startup.
I am making a meta-argument, and I do think that it’s inarguable.
My argument is this: the core disagreement here is about the allocation of resources between labor and capital.
I’m right. It is.
That doesn’t mean I have settled the argument about what those allocations should be which nobody has, it’s a core organizational element of politics.
But I think his argument is bullshit. It’s a purposeful misdirection because it refuses to recognize the terms of the discussion at all.
I don't think pg would disagree that the politicians that discuss this want to allocate more resources to labor. But what he takes exception with specifically is the rhetoric used to justify this "reallocation." AOC's claim:
> “There’s a certain level of wealth and accumulation that is unearned,” she said. “You can’t earn a billion dollars. You just can’t earn that. You can get market power, you can break rules, you can abuse labor laws, you can pay people less than what they’re worth, but you can’t earn that.”
You can produce a motte-and-bailey-type argument where the "get market power" and "pay people less than their worth" are doing all the heavy lifting in that statement. But I think we can agree that she is very much tying the accrual of wealth to various kinds of villainy. That is what pg is taking on. And that matters because the common person would agree with the statement that you should be rewarded for what you create - if wealth accrual is all theft, that perception would make a much stronger argument for the reallocation of resources.
One can agree that they would rather see wealth more equitably distributed while also admitting that the current system of private property and capitalism is the most effective at broadly generating wealth.
> The actual opposing argument is that it's impossible to create a billion dollar enterprise without a group effort
The other thing that we're often ignoring is that it's impossible to create a billion dollar enterprise without luck. You have to be at the right place at the right time.
For the most part only capital gets to roll the dice, but even before that it's a sign of the times that we take it seriously at all when people talk about "earning" a billion dollars. We could all do with a bit more humility.
>Period. That's it, and it's inarguable.
No it's not, it's actually extremely easy to prove wrong: J.K. Rowling.
She ran the printing press and picked the camera lenses and stacked the books by the cash register and booked her own press interviews? Also who taught all the kids to read?
Why does she have to control the entire vertical process to earn a billion dollars? She sold her work and got paid a billion dollars for it. Who did she exploit? In what way were her earnings unearned?
That’s just back to my original point. Which was that every billion dollar enterprise is a collective or team effort and the only argument is about how the results get allocated.
Which is, as I pointed out, inarguable. No one is spawned alone in the woods to start their adventure independently of the society they are in.
amusing that the most rational take on HN is immediately down-voted.
what kind of content he's consuming?
like other "entrepreneurs" its most likely self-affirming bullshit, cranked up to religious levels (cue any modern ayn rand equivalent)
Agreed, what a disappointment of an essay, encouraging a growth at all costs mindset and pretending that this growth doesn't involve/encourage bad side effects.
And a lot of these structures either involves a percentage cut or a security of some kind. And it's not new, it's copied.
He also glosses over the fact that the founder started with $2 million.
I understood the phrase as emphasizing the "deserving" implication of the word earn. As in, it is not possible for a human to take actions such that the fair reward is a billion. Or in other words, if you got a billion you got more than it's fair. To emphasize: this does not necessarily mean that the way one became a billionaire is nefarious or evil. It just implies unfairness.
I'm not defending that interpretation, mind you, just saying it's a possible read of the phrase.
Well put!
Yes, I agree. You need to create a brand or to be a brand.
She said you can’t earn it.
Everyday, people grind their own flour.
Then I build a mill, and allow them to use it in exchange for a part of their flour.
Is my wealth not earned?
You would not get a billion dollars from that. Someone else would see your mill and make their own mill. A thousand other people, in fact, if there was a billion to be made, so each would get a million, or less. The intense price competition would also bring your profits to near zero.
That’s a charitable read. Remember she also thought that New York would “lose millions” if Amazon put their hq2 there. Just because she’s in congress you can’t assume she understands how building a business works.
Taking your interpretation at face value I would add that yes we call it “capitalism” not “laborism”.
> so blunt and misrepresentative
You should read that as a self-preservation technique. The eager use of a strawman tells us PG heard AOC's words as an attack against him personally, his business, and his friends.
So the essay is not a reasoned retort but more an emotional self-defense to soothe a bruised ego. It's to assure himself that no -- in fact he did earn his wealth fair and square, and to imply otherwise shows a lack of understanding of how this all works. But I do love this essay because it does show just how emotional and irrational billionaires can be when their wealth and egos are threatened.
Plenty of us non-billionaires are glad PG wrote this article, because a lot a success-striving people are pretty grossed out by the lie that the only way to be a self made billionaire is to do something 'bad'.
That's a misunderstanding of the original argument. It's not about billionairs "doing something bad". The claim is that the only way to become a billionaire is to benefit from an unfair economic system.
A lot of success-striving people are pretty grossed out by absurd levels of wealth inequality as well.
Sure, some folks are going to be fantastically wealthy, that's OK to a large extent.
But, we're on the precipice of trillionaire's existing in a country where literally half of the population is functionally illiterate (yes, that's the USA), where the middle class is dissolving, and where we are approaching a feudal level wealth inequality-- and all this stuff is accelerating.
I mean, I guess it's not that bad. We still have a democracy. It's not like we have billionaires re-arranging political power and public resources for their pleasure and benefit. Oh wait, we do!
So then if you're glad for it, what do you have to say about the straw man he presents? The sibling reply spells it out, but as a non-billionaire why are you willing to accept that argument?
> So the essay is not a reasoned retort but more an emotional self-defense to soothe a bruised ego.
No. It was to persuade future politicians not to redistribute his and his friends wealth.
Yes, this is exactly it. One of the things I've found sort of interesting and unique about the current generation of asshole industrialist sociopathic technologists is that they're not satisfied with all their money and power. They somehow have decided that people have to like them for what they've done and treat them like the best most awesome little boys.
I wasn't there at the time, so I could be wrong. But I feel like their robber baron counterparts 100 years ago knew that they were hated and had some idea of why. And that's why they spent so much money on parks and buildings and colleges and everything else. They could see option B was the masses coming across their lawn with sharp implements.
> She meant impossible in that one doesn't earn a billion dollars through work alone. The only way to get there is to set up a structure that extracts a billion dollars from a market
Is "building structures" not work?
From the article:
> She wasn't saying, of course, that it's impossible to become a billionaire. Obviously that's possible. Nor was she talking about the distinction between income and capital gains. She wasn't making a point about accounting. What she meant was that it's impossible to get that rich without doing something bad — without cheating in some way.
IMO, that's a pretty fair interpretation, given Warren's rhetorical history.
> ...one doesn't earn a billion dollars through work alone > set up a structure that extracts a billion dollars from a market
If we accept that interpretation (which I don't), in what way is the latter not "work"?
Why does it usually imply extraction and externalities? What are those for Taylor Swift and Michael Jordan? The actual "usual" things in common between these and e.g. Amazon are massive value creation for consumers, economies of scale.
Focusing on completely optional and often imagined "externalities" just reveals a certain mindset (one could find some for cases like Amazon, but bezos became a billionaire in 1998 so whatever Amazon does after that doesn't directly apply, unless the goalposts are moved).
An example I love is hollowing out of this or that. The fact that people wanted to shop at Amazon (especially in 1998) and not a local bookstore, like the fact that people want to go to a Taylor Swift concert and not your indie band's is not an externality, it's a skill issue.
If I vibe code an app, and make $1m, and people willingly paid me for it, who am I exploiting? How did I "extract" $1m from a market. Who did I take that away from?
I didn't even exploit my workers and make a margin on their labor. Please can someone who believes billionaires are evil explain this to me.
> pg's reading of it is so blunt and misrepresentative that I'm nervous about what kind of content he's consuming.
Guy wrote an essay criticizing “woke” on the eve of Trump’s inauguration and is now running interference for billionaires causing an affordability crisis.
If someone is out of tune enough they are probably just playing a different song.
So what does you practical utopia look like in real terms. What's the master plan beyond I don't like people making money from what people want? What does that utopia look like in practice.
> So what does you practical utopia look like in real terms.
When you hit a hundred billion in net worth, you get a nice solid gold plaque that says "I won capitalism", you get an attaboy from the UN, and we start taxing the shit out of wealth over that cap.
Adjust periodically for inflation. (Do that for minimum wage while we're at it.)
But these ultra rich people don't have a hundred billion dollars in a bank account, they just own a percent of a company. So what you're really saying is a person isn't allowed to own a certain fraction of a company once it reaches a certain valuation.
Yes, you got it!
It's because while for some people there may be jealousy involved, many more have realized or are now realizing how much power the ultra rich have, and how bad that is for our societies.
Once a company becomes large enough, it becomes so influential in society that control of it must be made more democratic.
I don't think anywhere has figured out quite the right way to go about it yet, but it's clearly the right goal. Some countries require employee representation on the boards of large companies.
And this would solve the problem how? Bill Gates owns less than 1% of his company, but now Microsoft under Private Equity is several times more evil, not less.
Why do you think that democratic control means private equity?
Sounds great to me.
I find these special founder-class shares that completely insulate folks like Musk and Zuck from their actual investors to be deeply problematic.
Impressed at the commentary here, which correctly points out Paul dodges the entire issue at hand.
Three things can be true: 1. Growing at a rapid rate over long periods of time is hard, doable and rewarding 2. Incentivizing the discovery of these things is good for society. 3. Nonethless there is and should be a limit to wealth acquisition, given moral hazard.
To make a similarly glib counterargument to Paul G:
If it's the founders who earned the same monetary value of the companies they created ("because they're responsible for it"), they should bear the same moral and legal responsibility for the externalities.
So far, only SBF is in jail. Lots more of these companies have broken the law.
Let's throw the founders in jail too - they can keep their money!
> 3. Nonethless there is and should be a limit to wealth acquisition, given moral hazard.
How do we determine that limit ?
Most Americans ( middle class and above ) are richer than most people in the world.
Way richer than most people in Africa or poorer parts of Asia can ever aspire to be.
Consider that when competing for resources these poor people are competing with wealthy middle class Americans.
Add to that the USD being world's reserve currency makes life easy for a small part of global population earning in the USA and makes it harder for people in every other country whose currency might not be competitive compared to the USD.
>1. Growing at a rapid rate over long periods of time is hard, doable and rewarding
and depends on factors outside your control.
This last is a critical caveat, and really the crux of the argument. It's not about cheating, but the limits of predictability in complex dynamic systems.
I very much agree with your 3 points.
Rewarding entrepreneurship for example a good thing, but I'm also very much of the opinion that a single person controlling a billion dollars is extremely bad for the society while spreading some of that wealth out would do a lot of good.
The big problem we as a society face right now (in my opinion) is that a lot of political energy (votes and discourse) is spent on things that don't fix the economic imbalance right now. Poor poeple vote for politicians making the poor poorer and rich richer.
SBF is only in jail because the people he targeted for scamming were the rich.
Nobody who illegally make the rich richer goes to jail, they get a promotion usually
Correct.
There's a huge social element. No one wants to throw their buddies in jail.
It looks bad on the golf course (or at Burning Man / Sun Valley if you're in tech)
> Impressed at the commentary here,
Me too, honestly. I'm also kind of shocked. I want to expand on your last point.
Uber became a billion dollar business by running an illegal taxi service. Now I like the ability to book a taxi from my phone with seamless payment. I also dealt with the yellow cabs in NYC in years gone by and it sucked. Shift changes, annoying looping ads you couldn't turn off, card skimming, the process of hailing a cab sucked and the cabs themselves tended to be bad. All that is true but it was still illegal.
AirBNB became a billion dollar company by allowing people to run illegal hotels in residential neighborhoods. This was value extraction from all the neighbors who had to live with the externalities created but gained nothing from it. That value was extracted by people who usually didn't live there. Agree with it or not, it was generally illegal, particularly in their large profit centers like NYC.
There is a lot of this that goes on and, honestly, is the entire basis for private equity. Private equity looks for companies that have what they call "pricing power", which is a form of "inelastic demand". Housing, for example, has inelastic demand. But it also includes creating regional monopolies like buying up all the vets or medical practices in an area and then jacking up the price of all of them. You're not going to drive 5 hours for most medical treatment.
This can sometimes go wrong. KKR bought Envision Healthcare, an amergency medicine contracting company, and unlocked "pricing power" by intentinoally using out-of-network services wherever possible to charge a lot more. Lots of medical practices do this actually. Anyway, their business was effectively killed when the No Surprises Act [1], which interestingly was signed into law by Donald Trump in his lame duck period after losing the 2020 election to Joe Biden.
[1]: https://www.brookings.edu/articles/understanding-the-no-surp...
The thing about billionaires is that it's almost entirely paper wealth.
The real thing they have is a collective agreement that allows them to have the power to direct a bunch of capital toward production. If they ever just decided to cash in their chips and buy a dragon hoard of gold instead, the paper wealth would vaporize really quickly.
The problem that really exists here is that this small group of individuals has too much power. The feudal system existed for a long time, there's arguably a tendency to return to it, and this is the thing that truly makes people uneasy about the concentration of power outside democratic processes. How do we get rid of the despots? At least with democratic process there's a way to vote them out, their terms expire, etc. With hoarded wealth, and especially (as we see with cases like the Waltons and now the Ellisons) generational mega-wealth, we have zombie feudalism clawing its way out of the grave.
But the accounting difference is real. It is virtually impossible to earn a billion dollars. What is possible but still difficult is to create something worth a billion dollars which you can then sell if you choose so.
And to the people criticizing, this is cheating. To them, a billion dollars enterprise is not possible without the exploitation of employees, customers, or at least the environment.
Also, the most important thing to understand about a society is how people gain status, not just money/wealth. If you focus on money, you won't have an explanation for political movements or artistic endeavors.
Having to pay a fat wedge of tax every year on what you "earn" sucks a lot of the life out of the compounding effect.
We pay those taxes because not having the services and societal stability those taxes pay for also sucks a lot of life out.
In a healthy society that's the case. In an unhealthy one, who knows.
To add to that: There are also "compounding effects" from investments made by tax money, just as for any other investments, the difference is that the compounding gains are collectively owned and not controlled by an individual.
I think that’s their justification in the abstract, not the justification for most individual tax items.
I don't have to inspect every grain of rice with a magnifying glass to enjoy the overall dish.
Are you arguing that we should have bad taxes because some taxes are good?
Yes, absolutely.
There's a cost to perfection. In our computing world, every extra nine of reliability is more expensive than the last, often with diminishing returns.
See also: Florida drug testing welfare recipients cost more than it saved. https://www.aclu.org/news/smart-justice/just-we-suspected-fl...
You’re arguing that the cost to find bad taxes is not worth the savings. That’s not the same thing.
If I’ve already found with a poor justification or better yet, someone is proposing a new one. Shouldn’t we remove it?
I mean, I'd also argue that the definition of a "bad tax" is notoriously difficult to agree on.
For example:
https://x.com/NEWSMAX/status/1937470443168182386
> A government agency spending $300 million in taxpayer dollars to produce sterilized flies sounds like a dream scenario for a DOGE team looking to cut waste, fraud, and abuse.
A year later:
https://www.cnn.com/2026/06/09/business/what-consumers-shoul...
> Grocery shoppers could get hit with higher prices if the screwworm cases turn into a full-blown outbreak. That could cost $3 billion across the Southwest, according to a report by the Federal Reserve Bank of Dallas.
Good tax, or bad tax?
Returning to your question, though: Yes, I assert the cost of troubleshooting a "bad tax" may exceed the benefits of having addressed it.
But the amount of tax we pay is because of inefficient, corrupt and incompetent government.
We have the current inefficient, corrupt, and incompetent government in the US because the anti-tax wealthy class threw an all-out tantrum over even the idea of paying a tiny bit more tax.
I live in Germany and I pay almost 50% of my income in income tax and social tax. There is always "just that tiny bit more tax" that will magically fix the system (it won't).
Turns out paying more money to an already corrupt government doesn't turn it less corrupt. Go figure, hm?
We have an inefficient, corrupt and incompetent government in the US because we voted for it. And we keep voting for it. That's our revealed preference. We obviously like inefficient, corrupt, incompetent governments.
And that government was corrupted by…wealthy business owners via regulatory capture!
You can still collect taxes without taxing people who have already been taxed in the form of needing to exchange a large fraction of their life for the wage.
I'm entirely onboard with reducing tax on low/mid income folks currently "exchanging a large fraction of their life for the small wage" in favor of increased taxes on the billionaire class, yes.
When capital gains tax is so much lower than income tax, this holds even more true for people who work at the companies being sold for lots of money and make income in wages than the people who own the companies, and that just reinforces the original point
Those taxes are the necessary condition in silly essays like this one from pg. Or why do you think those billionaires miraculously mostly end up in the US and not in countries like Sudan or Peru? I mean if those billionaires would actually be the wealth creators, not depending on society at large, they could become billionaires everywhere, right?
Only up to a certain threshold – after which you can afford "creative" accounting which reduces the tax burden and restores the compounding effect ;-)
People who earn money pay taxes
While at Amazon Jeff Bezos considers his worth to be 80k a year hence he was paid that much, and paid taxes in that salary.
If someone becomes a billionaire by being paid 50m a year for 40 years and paying taxes on that income then congrats.
In creative destruction, you can do an accounting sleight of hand by attributing credit for creation while ignoring blame for destruction even though the two are linked.
This is a technology + investing forum and all of us agree that in general creative destruction processes are enormously net positive, but they frequently do kick off a toxic byproduct in the form of said destruction (e.g. Uber and displaced taxi drivers), so there is moral entanglement between creation and destruction. Morally speaking, figuring out how to mitigate this toxic byproduct is part of our remit just as it was part of the remit of earlier industrialists to figure out how not to discharge so much flammable goo into the river that it lit on fire. We neglect this at our peril, because society merely pinches its nose if the toxic byproducts are small, but they are increasingly not small.
When AI melts away these rent seeking marketplaces like Uber, Doordash, Amazon, etc, they won’t go as quietly as the people they displaced.
These are actually the most durable businesses because they have network effects: restaurants alright signed up, sellers onboarded, etc.
Easier for them to adopt AI than AI companies to rebuild the networks
One way to take over a network is to start with an alternative front end. We'll see if this works out for AI companies. First you have the AI consult booking.com whenever someone asks it to book a hotel, then you get more and more hotels to directly communicate with the AI company, then you drop booking.com once you have enough.
It’s exactly what I’m building. First I’m building open-source SaaS for every vertical and then leverage that to build a decentralized, interoperable marketplace.
It won't work. The future gatekeeper just has to threaten to send traffic to your competitor if you (a hotel) don't sign an exclusive agreement with them.
So marketplaces will not allow users to have their own storefronts and websites? Most restaurants on DoorDash have a website where prices are cheaper. AI will allow your computer go to that website and place the order. How could Doordash stop that? How many restaurants would be willing to take down their website to appease a marketplace?
Have you encountered any "virtual kitchens" on food delivery apps yet?
what makes you think AI won't be the ultimate rent-seeker
There's no resource destruction involved in displacing taxi drivers. Taxi medallions are a rent-seeking scheme, there's no real scarcity involved. Most other instances of "creative destruction" are like that, the capital simply gets repurposed at negligible social cost and only excess profits disappear.
Please look up Uber's business practices: https://en.wikipedia.org/wiki/Controversies_surrounding_Uber
I will say before Uber was a thing, if I tried to call and schedule a taxi pickup in the city I lived in at the time, if they showed up at all they were at east a half hour late. Missed a flight because of it once. I don’t even like uber, but it is objectively a better service most of the time.
Yeah, anyone who uses taxi drivers as an example of destruction either don't know what they're talking about (because they never experienced it) or they're crying crocodile tears.
I had cab drivers nearly drive off with me hanging off the car in San Francisco, because they were far more concerned with screening my destination than, say, not killing me. If Uber destroyed that industry, it was only a net benefit to society. They created immense value, and the "destruction" was only to eliminate a layer of corrupt parasites who made money by preventing a free market (in this case, the medallion owners, but the entire industry was corrupt from top to bottom).
Not all places have corrupt taxi industries. I think they were always more expensive than Uber (but there's a reason for that, Uber's pricing is not sustainable) but in most places a taxi is just a taxi.
Don't entirely agree that a local Taxi service is necessarily costlier than Uber. In my indian city, Uber and Ola cannot compete (and have been nearly wiped out) because a local Taxi service (that now dominates the market) is very competitively priced and professionally run. They charge their drivers a fixed percentage (unlike Uber or Ola, and lower fees than them) and release their payments timely in a transparent manner. The price per km, and all extra charges (late night fees, overtime driver charges etc., permit fees in case of long distance travel, toll fees etc.) are transparently conveyed to the customer too. And there is no bullshit practice of price gauging through "surge pricing" or "convenience fees" or "platform fees" etc.
So basically, you’re saying that “most places” had uncorrupt, put-upon taxi industries who simply cannot survive against Uber because Uber is anti-competitive, and it has nothing at all to do with delivering a better product?
Yeah, I don’t believe you. It sounds like you’re making a just-so rationalization for why taxis are good and Uber is bad.
In pretty much any mature taxi market Uber is as expensive (if not more expensive!) than the conventional alternative. And yet Uber survives.
Have you ever met an Uber driver who makes decent money? Honest jobs should be compensated with honest money, not starvation wages.
Black drivers used to make pretty good money many years ago, but Uber + market externalities redesigned their systems to "fix" that (mostly through decreasing payouts and high car rental costs)
Most of the drivers providing that service split their time between Uber, Lyft and traditional corporate black car service.
Lots of posts on this topic in the UberDrivers subreddit.
You see that whenever there is value, above starvation wages, flowing to laborers, capitalists see that as a problem and reduce it. Does this seem sustainable?
I don’t know a single place in Europe where taxis aren’t scamming tourists.
Yes, Uber did something enormously creative. But it also did something destructive and we're guilty of an accounting sleight of hand if we focus on one while pretending the other doesn't exist.
We still want to encourage creative destruction to move forward, but paying taxes to clean up the destruction is the very least that the victorious parties can do because the entanglement exists in moral accounting even if it doesn't exist in financial accounting.
Destroying inefficient monopoly rents? By all means, let us not pretend that doesn't exist.
You're forgetting the workers, who were the important part of this analysis.
Why are the taxi workers more important than, say, the taxi customers? If the companies are providing garbage service, why do I have to care about protecting their workers?
When you lose your job to AI, you will understand.
Technology has always displaced workers. And then the society adjusts. Plenty of people will lose their jobs to AI, but most workers will be redeployed elsewhere.
The agricultural revolution displaced farm workers with machines. There was unrest and migration to cities, and eventually that fed the Industrial Revolution and created a working class.
Change is tough, but we will all be fine.
Yeah and it took about 150 years until industrial revolution started to actually benefit the common people and the workers started to have their working conditions improved.
What it took was social democracy and unions and other social movements.
Saying that "it's happened before, it'll be alright" is a bit naive and short-sighted.
It took a literal civil war, which you don't read about in history books so much because it's not beneficial for the owners of those publishing houses to have more people hear about it. Lots of people died on both sides.
Last time inequality cooked up it took a lifetime to go back down. It did so very painfully through capital incineration on a monumental scale: a great depression, where the incineration was metaphorical, and two world wars, where it was very literal. In both cases it was economical and in both cases it fixed the problem but at enormous cost. We should aim to do better.
Plus all the union violence. The ones where owners used guns to break strikes so striking workers also started bringing guns and using them. I don't think we want that, do you?
Easy to say it all worked out fine when you aren't one of the people who was displaced. They might feel differently.
It may have worked out fine for humanity as a whole, but it ignores the suffering of a lot of people.
That doesn't answer the question.
In a world where AI has not yet taken all the jobs, when a company provides lousy service, why do its employees deserve to keep their jobs more than the customers deserve good service?
Counterpoint: I scheduled an Uber once to take me to the airport. They arrived earlier than the requested time and left when I met them at the time I requested because they waited too long. This was on Uber Black, their professional driver level service.
Counterpoint: It is increasingly impossible to get to a human at Uber when you need support, as most of their support channels are gated by LLMs and self-service support workflows.
Uber also forced taxi services to have apps and always accept CCs.
Competition is good. Which is why having only two taxi apps is bad.
What's the byproduct of human-level AI and robotics?
Displaced workers.
I mean, maaaaaybe a Jevon's Paradox kicks into play with human labor and replacing people with robots somehow creates even more jobs, but whenever someone says this your immediate response should be: "ok, now put your money where your mouth is and bet on it by strengthening the social safety net."
I generally do believe that workers get redeployed elsewhere after technological disruption.
(Eg agricultural revolution in the US)
I do believe in good safety nets as well and I think that shows in my voting record, so I’m not sure what else you would expect from me, if anything.
This assumes sufficient jobs. We have been below replacement jobs for a long time but we made up the difference with Bullshit Jobs. Now we might even be running out of those.
> Bullshit Jobs
I’ve only read the article, not the full book, but I’m not sure I buy the premise.
Maybe we can’t see what the new post-AI society looks like yet, but I tend to believe society progresses as it evolves.
It doesn’t mean it won’t be rocky for many people, and good social safety nets will make this easier, but I generally don’t think there will be some kind of dystopian future where society runs out of work to do for humans.
A lot of current bullshit jobs involve generating text that nobody reads or cares about. LLMs replace these.
We'll have a better idea if it arrives.
Weird to see Graham take AOC's quote out of context:
Graham: So you can imagine how astonished I was last month when an American politician said that it was impossible to earn a billion dollars. I felt like a skating coach hearing someone say that it's impossible to do a triple axel. Of course it's possible. It's hard, but it's possible.
Per his link in the article:
AOC: there is a certain level of wealth and accumulation that is unearned. You can’t earn a billion dollars. You just can’t earn that. You can get market power, you can break rules, you can abuse labor laws, you can pay people less than what they’re worth, but you can’t earn
The pursuit of everlasting growth that pg describes inevitably results in cheating. At a certain point the market reaches a saturation point and if you're capitalising on every possible opportunity to retain your high growth rate, that will include hoarding resources and circumventing consumer protections.
As they say, every 10x growth requires doing things differently. Eventually those things become immoral.
The hoarding resources and circumventing consumer protections is just the start of it.
Eventually it becomes rational to start buying politicians, and subsequently laws. The next obvious avenue is to then control entire government agencies like the FAA or the FCC and just write favorable laws and regulations they don't even have to circumvent.
But even that isn't the end because they're growing too fast, they actually outgrow the law, so breaking it becomes a rational, profit-driven choice. Huge fines? Regulators breathing down your neck? No worries! Just spend more money then has ever been spent in an election to their favored presidential candidate, and then they get to just shut down investigations into themselves!
But even that isn't enough -- soon it becomes a rational business-forward goal to take over the entire government; or even better become the government. First a city, then a state, then a nation. Guess what folks EVEN THAT won't be enough. Not even everything on this entire planet Earth is enough for them; they also want the Moon and Mars and the entire solar system. They will have to become God at some point for this growth to keep up, and that will still be too little for their egos to bear. Something has to give.
First question: why? Why should I (or anyone) earn a billion dollars? PG made it seem like that's the ultimate goal somehow. Also, why only a billion dollars, PG? You see your infinite cancerous growth machine doesn't stop?
This article did not sit well with me. I have found myself rereading Beyond Smart, How to Write Usefully, The Need to Read, Life is Short. But this one is harmful; nobody needs a billion dollars.
Certainly, $1B is a lot of money...
But you probably need >$10M to not HAVE to work and live a low-risk comfortable life in even modestly expensive parts of the US.
The funny thing about money is, it's really hard to save $1M and $10M, but once you get there, it's pretty easy to grow that substantially.
The fundamental problem in the West, IMO, is that we make it so hard to save even small amounts of money, and so easy to compound huge amounts of money (and no the EU is not much better on this front than the US).
It should be the opposite.
$10M is also perhaps asking for too much to live a modest life even without working, but I hear you with rising costs and healthcare. In any case, $10M is 100x smaller than $1B.
Why do many Americans feel like they need SUVs? Or huge 3000+ sq. ft. houses? Or five-star luxury vacations to impoverished countries where they barely have to lift a finger?
My take: they don't; nobody does. But when you aren't successful and don't have a lot, and when "success" is marketed to you as "big SUV; fancy big ass house; private jet; fancy vacations", you get trained into think you need much more than you actually do to be happy.
We can't romanticize making money, it's a ruthless field where mostly politicians, the military complex, and drug traffickers thrive, and a few startups that cater to the global economy, which are very very rare, so rare than only 30 out of more than 6000 have succeded in Paul's own words.
Amazon was first, then Uber went world wide, so did Airbnb, and now OpenClaw, so yes, the AI gold rush opened the gates for new opportunities but only a few will make it. We all can run the race for sure but most of us will only get tired at the end while the lucky few will take all the prizes and our corpses will be their podium, as it's supposed to be.
Still, we have to run because there is a chance, a very slim chance which is more than zero hope.
This aren’t great example are they?
Amazon is famous for being a terrible company to work for, on the logistics side.
Airbnb has caused all sorts of social problems.
Uber results in people working for peanuts and has circumvented labour laws.
I think there are some startups that have created large scale value without doing something malevolent, but not those ones.
Things like Linear. Good tool for software dev, no one harmed.
We're talking about how to get (not earn) a billion dollars so yes, they're good examples of that. It seems like if you break the law and make life worse for everyone, you can get a billion dollars.
> only 30 out of more than 6000 have succeded
At becoming billionaires. Many more than that succeeded at making a good chunk of money that was life-changing for them, their families, their early employees, etc.
So I think your reading of the chance of "hope" are overly cynical. Of course it's not easy to make millions, but it's not so bleak and the market isn't so ruthless that it can't be done for those who try intelligently and persistently.
And of course, even below that level of wealth, there are tens of millions of people who work regular jobs and are able to afford pretty high standards of comfort and living by any yard stick that's ever been used to measure.
"Drug traffickers" is a great term to use here, because arguably many of the startup stalwarts that went on to make billions are those that did so by selling addictive convenience (Amazon, AI-anything, etc.) or brainrot (all social media), all of which function as harmful drugs that emasculate people.
Playing devils advocate here:
Maybe the politicians position is that the whole system is based on cheating and everyone who partakes is acting immorally?
Is it fair that the founder got education and some money to start his company while other people are living on the street or have to care for relatives? If they come from a relatively privileged position and manage to build a company that ends up being successful, did they earn that money?
I don’t think the cheating people criticize is necessarily criminal fraud.
Edit: and the second thing people seem to criticize is that just keeping your company growing often seems to involve some unethical things. Basically every company that’s manufacturing hardware is doing that in Asia under inhumane conditions, so they probably can’t really claim they earned their money and it’s just maths.
If the only viable alternative is that nobody gets to start their business rather than some idealized best case of everyone getting a chance of it, then yes, it's probably fair.
I don’t think the only options are the current way or that nobody is allowed to start companies.
Im not from the US so I’m probably not doing a good job at the devils advocate thing but I could imagine that you just tax the people that start the business so they still get some healthy personal wealth by redistributing the truly extreme wealth back to the workers/society.
There’s probably some motivation problem to grow the company further at some point but maybe you could limit the percentage any individual can earn by holding the company or something like that?
There are models of business which don't assume a handful of people - some of whom don't even do the work - get to keep the profits, and the rest are disposable.
Businesses are started without VC capital all the time, especially outside of the US and SV circles.
> She was getting richer at a stupendously rapid rate. And yet she hadn't been doing anything bad. The reason her startup was growing so fast was simply that users loved what she'd built. So she could feel from her own experience how wrong that politician was. She wasn't exploiting anyone.
I presume it's a company that just has co-founders then? Or everyone is getting an equal % of the share? In which case SHE's not getting 93% richer just cause her start up is.
No it’s a magical startup where it’s just going to be her in a basement doing 100% of the work required for 10 months straight while demand doubles every month.
Let's say she has ten employees. They all voluntarily agree to work for her: slavery is illegal, so people work for others on a consensual basis. Both the employer and employee negotiated and consented to a salary or wage schedule for that employee. The employer pays the agreed-upon compensation, and the employee receives it.
If the company makes an unexpectedly large profit, the employer is not obligated to redistribute that to her employees in addition to the already agreed-upon and paid compensation. If the employees think that what they agreed to work for is no longer sufficient, they are welcome to renegotiate their compensation or, if they feel they have been wronged and are being paid less than they are worth, to take their talent to a different employer. After all, everything so far has been consensual. The only thing that would be non-consensual would be obligating the employer to redistribute her profit over and above what had already been negotiated.
This completely negates the fact that due to how the labor market is structured, most people who sell their labour to survive are in a disadvantageous position for the negotiation you are talking about. What you are talking about works well in a basic economics text book but does not translate to the real world.
The cleaning lady at SpaceX doesn't do a better job than that at Walmart. So why should she be paid more?
You think she's doing the heavy lifting there? Creating the billions? While the underperformer at VideoBuster / Radio Shack is responsible for tanking the business? That's just not true.
> slavery is illegal, so people work for others on a consensual basis
Well there you have it folks case closed.
Slavery is illegal therefore there is no slavery. Geniuses at work indeed
PG thinks racism was solved in the 60s
Yeah math is wrong. She has to wait one more month to be a billionaire since she has a co-founder. So 10 months.
The good news is she can be a trillionaire in another 10 months.
Let’s not be silly. If there are 10 people each with 10% and the company grows by 93%, then everybody’s shares, including the founder’s, grows by 93%.
Not giving everyone equal % is exploitation?
Interesting, by that logic every participant in the economy should also be required to bail out any startup that fails otherwise we’re exploiting the founders! They’re taking all the risk and we’re getting all the benefit of the services and goods they create!
Well yeah? We should have really wide safety nets actually, so people can try startups and feel comfortable that they might fail. What kind of losses are you envisioning - is it just salaries?
The people who create real value rarely make any money.
Linus Torvalds created Linux which allowed companies to use commodity hardware. Before Linux, every company had to pay massive taxes to Sun (Solaris) or IBM (AIX) to run a server. With Linux, commoditty hardware ecosystem blossomed, and the first companies like Google built massive datacenter. This wouldn't have been possible if they had to buy Solaris servers to run their datacenters.
The value created by Linus is probably tens of trillions of dollars. I don't think he is a billionaire. There is a guy who is a trillionaire today. It is hard to make an argument that Musk created more value than Linus. Tesla is a trillion dollar company with negative YoY growth.
Linus Torvalds is not a visionary: https://www.youtube.com/watch?v=I-YL0BeWZyU
The people who become billionaires are experts at becoming billionaires, creating value probably has nothing to do with it. They have either inherited wealth or in the right networks. The example PG gives of starting with 2 million USD is someone who is already incredibly wealthy and in the top 1% (1% globally, not just US). As always, there may be some rare exceptions where the founders actually created value and became billionaires.
> The people who become billionaires are experts at becoming billionaires, creating value probably has nothing to do with it
Give me a break. Elon has created a huge amount of value. Every third car I see on the road is a Telsa and the US was relying on Russia to reach the ISS before SpaceX.
>an American politician said that it was impossible to earn a billion dollars… What she meant was that it's impossible to get that rich without doing something bad — without cheating in some way.
This assumption is depressing. That the only alternative to "earn" is "cheat".
A system of diminishing work (i.e. where money makes money), especially combined with inheritance, means every dollar is arguably less earned than the last. That system is fine and actually very useful, but that diminishment becomes a big problem at large enough scales. We've been operating at that scale for many decades.
Precisely, I like the term "diminishing work". I think a lot of disagreement comes from differing definitions of "earning", or "ethically earned", but working 12hr days hard labour to earn $1000 and putting $10k into a stock that goes up 10% intuitively seem different.
I've been able to calculate logarithms for well over 20 years.
That's not the problem.
The problem is even simpler mathematics. Proportions. How much do we give to first employees? How realistic is that John Smith, first salesman of the company is getting 2% and should consider himself lucky, while I, Peter Boss retain most of the company?
We always talk about the dilation of the founders' shares and its relation to the VC portion.
What is the usual proportion of the shares held by the founders and the first 10 or 100 employees?
Is that proportion usually realistic with regards to the effort put in and the risk assumed?
Is that risk usually really that heroic or most of us in the "can found a startup" caste can usually go back to jobs that already pay well over average?
I am the founder of a company. I want it to succeed. I don't want to become a billionaire, but I want the people that help me build it to have similar successes to mine.
If we succeed, I don't want my car or house to be 10x more expensive than of those people who joined me first.
There's something seriously rotten about telling university students about billions. The issue isn't whether anyone can earn a billion dollars. Nobody actually needs a billion dollars.
The question they should be pondering is given the excess of talent and opportunity they have, how can they help the people around them and give something back to society.
Simply, neoliberal capitalism is sociopathy with quarterly returns.
The assumptions are:
1. A uniquely special class of people do all the work that matters. They're astoundingly gifted, talented, and insightful, and have a rare ability to make profits happen by having very special ideas, owning Important Things, and telling everyone else what to do. These prodigies deserve everything. They are not to be criticised or judged by their inferiors. Ridicule only proves their superiority.
2. The work everyone else does is far less important. Most of the people doing it are interchangeable and literally disposable. Sometimes they deserve nice things, in a limited sense, if it's hard to make things happen without them. But mostly no.
3. Negative externalities - pollution, ecosystem collapse, spiralling asset prices, financial and political instability - aren't real. If they are real they don't matter. If they do matter they're someone else's fault.
4. It's absolutely fine to treat other humans with aggressive indifference and outright contempt as long as Number Goes Up. In fact it's expected.
Technically if you look at AOC's statement he mentions
>AOC: “There’s a certain level of wealth and accumulation that is unearned. You can’t earn a billion dollars. You just can’t earn that. You can get market power, you can break rules, you can abuse labor laws, you can pay people less than what they’re worth, but you can’t earn that”
there's some truth there in that PG is talking about capital gains as the owner of a company and AOC is talking about earnings as payment for labour which are different things both in reality and in tax policy and law.
The capital gains can be unfair in that most of them go to founders and VCs and not much to other employees and stakeholders who have contributed as well.
Putting the scale of dollars and the startup world aside, AOC’s comments read that way would suggest a farmer who gets a series of loans from the bank to help him expand his family farm from a $200K sole proprietorship to a $10M sole proprietorship didn’t “earn” it either.
I don’t think a definition of “earn” that excludes cases like that captures the generally understood meaning.
Didn't AOC's comment specifically say a billion? Why would it imply someone increasing from $200k to $10m didn't earn it?
I don't think putting the scale of dollars aside is reasonable when the entire point is contingent on the scale being at least two orders of magnitude higher and sole proprietorships usually don't scale to the point where fines from ignoring regulations is just the cost of doing business.
The farmer doesn’t own that mega farm until he pays off the loans.
How does he get the money to do that?
By paying farm worker less than they deserve, farm equipment manufacturers more than they deserve, and using farming practices that destroy the ecology and depend on continued fossil fuel extraction.
(And in California where the most profitable crops are perennial fruits and nuts, probably outright stealing water from the aquifer or state irrigation system.)
> What counts as 'doing something bad' and 'cheating' clearly is subjective. I suspect Graham's opinion on the behavior of a Zuckerberg or a Musk would be a little more flattering than mine.
Graham's admiration of scammer Austen Allred is evidence for this.[1]
[1] https://xcancel.com/paulg/status/2019770359830949961
Well there are plenty of massively successful companies that Paul famously said no to investing in, for stylistic and opinionated and not greedy reasons, like Palantir. I'm sure in Paul's opinion they are doing something bad. Maybe not in Gary Tan's opinion. That is to say, not only is this stuff subjective, but it's complicated. Palantir and Flock, their main customer is the government, which complicates the story even further.
Conversely, I suspect the politician is defining that "all things that earn a billion dollars" are in the "bad" category.
LeBron James has, between playing basketball and endorsing things, earned a billion dollars. What bad thing did he do, other than losing the finals a few times?
If she meant "impossible" as hyperbole (as one might use "nobody wants a stylus!" to mean "very few people want a stylus!") then I agree with her.
If she meant "impossible" completely literally, then she is wrong.
This then that makes the argument very hard to respond to.
"No I didn't mean this [virtuous example]. I meant the vast majority of [unnamed nefarious actors] which I don't need to elaborate about as their existence is obvious."
Once you say it's just hyperbole and you don't mean it literally, then the only way to prove it is a statistical argument.
"The overwhelmingly share of company founders and companies are bad and don't earn their money." is a big claim that requires more than vibes.
Would anyone take literally the claim that it is impossible to attain a billion dollars without 'doing something bad' or 'cheating'? Someone with $100 billion, who wanted to disprove it, could do so in five minutes, by cutting a $1 billion bonus check to his nanny.
A classic Motte-and-bailey argument
It Alice tells Bob "I'm so hungry I could eat a horse", Bob challenges her actually to eat one, and Alice says she wasn't being literal, a reasonable person would not consider Alice to have made a motte-and-bailey argument.
Whether my comments constitute a motte-and-bailey depends on whether a reasonable person would assume the "impossible to earn a billion dollars" statement to be hyperbole.
He probably signed advertising contracts.
A tremendous amount of advertising towards kids which very explicitly uses tactics to exploit their insecurities and get them to pressure their parents (many whom can’t really afford it) to buy them gratuitously overpriced shoes or other products which the kids don’t actually need at all.
It’s an industry of low-grade exploitation, generating products that people mostly don’t need. It’s bizarre. It fits squarely into the category AOC is trying to define here.
Aren't shoe companies notoriously scummy in regards to human rights? Nike has quite a lengthy controversies section on Wikipedia, and they're where a lot of his money came from.
Yeah, you can choose between two worlds: in the current one, Nike is producing shoes in you don't want to really know circumstances and is paying LeBron ~$40M a year.
In another world, LeBron is still a millionaire, getting a nice $1M a year. The rest, a mere $39M, which in Paul Graham terms is just a couple months from turning into a billion, goes to the hopeless kids actually churning out the god damn shoes.
LeBron did nothing wrong. The system is this corrupt.
If you wish to live in a world of mediocrity then reward no one for merit. Look no further than to history to see the results of a merit less society.
Look around you. The stuff you wear, some of the stuff that surround you. The display you're reading this on.
It was made by someone who cannot afford healthy food.
Meritocracy my hairy ass.
Nike has some of the best labor policies of all the shoe companies now. Their controversies were in the 90s.
It's true. After all, what's wrong with endorsing a company that uses slave labor to make shoes ?
To me, earning something means deserving something.
I don't think that the current system rewards those deserving the largest cuts of the pie.
If you want to argue how to get a billion dollars, sure. But to me that is different than earning it.
Yes I'm sure that's what AOC meant too but it's not much of an explanation. Who are you to decide what people deserve or earn? And if you're going to decide that perhaps you'd like to provide a better justification, one that doesn't just boil down to "a billion is really really a lot of money".
I’m no fan of AOC but yes I think this is what she means. PG should be more generous and steel man the argument.
Why would you say that people don't deserve money that others willing gave to them in return for something they wanted and found to be worth it?
First, I'm assuming that you are not a free market maximalist, and that you believe that a market without any regulation will result in mega monopolies where it no longer matters if you find the price of the product to be fair.
The distribution of the wealth created by the massive increase in productivity has been trending towards the organisational top for many decades now.
I don't think that the management has gotten exponentially more efficient and better at their job to justify their increasingly bigger share of the profits.
Good question. When the robber pointed his gun at my head, I thought: since I am willingly giving this man my wallet in return for my life, he must have earned it.
All of your analogies fail because you ignore the fact that (a) most people are happy shoppers who genuinely enjoy buying much of what they buy, and who anticipate newer and better releases of games, movies, restaurants, and other products; and (b) most people could simply opt out, own nothing, and go live in the woods if they wanted to, but would strongly prefer not to.
You yourself are using an expensive phone or computer to type Hacker News comments, presumably not at gunpoint because you choose to do so. Which means you think it's better than the alternative that you're apparently glorifying.
Is this the same Paul Graham who says that founders need to be the kind of people who are prepared to break the rules? That is, cheat.
His essays are, themselves, "cheating" (in the sense of a life hack). Say what people want to hear today, even if it contradicts what you said yesterday.
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 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.
The thing about "compound growth", even in the most general sense, is that it ALWAYS ends, and that end is typically a crash of some sort.
In biology there's the notion of a growth curve. It starts out with the familiar "compound interest" exponential growth, but unlike Econ-101 textbooks, that curve then proceeds to resource depletion (overshoot), followed by "die-off", followed by extinction, where (N -> 0, where N is usually something like yeast-cell count, but if you're applying this model to something else, it could be stuff like well-being or money).
There's a kind of Efficient Market Hypothesis of career advice that I wish PG took better notice of.
If a career path (e.g. startup founder) outperforms at time T1, then this fact will diffuse quickly throughout society, causing the path to become overcrowded, which pushes down the average performance. So at time T2 the path will no longer outperform. This is analogous to a stock becoming overpriced due to hype. I consider the founder path to be enormously overcrowded at this point.
The key to finding a good career is to play a kind of Money Ball - find paths that, for whatever reason, are mispriced and thus undercrowded.
True, but only when you consider value as a combination of risk, reward, status, etc which is weighted by an individual’s preferences.
One reason why doctor is more popular is the process for becoming one is high effort but low risk. So if you have any risk tolerance you’re probably better off using that effort elsewhere.
>One reason why doctor is more popular is the process for becoming one is high effort but low risk.
Disagree completely that becoming a doctor is low risk. The amount of residency spots is capped and is smaller than the number of people graduating from medical school. Every year thousands of MDs are prevented from going to residency and thus prevented from practicing medicine, even though they graduated from medical school.
https://dailyorange.com/2026/03/opinion-amid-u-s-doctor-shor...
>In 2025, 9,541 applicants went unmatched, including 2,409 soon-to-be graduates of United States schools awarding Doctor of Medicine and Doctor of Osteopathic Medicine degrees.
You can aquire a billion dollars. Nobody has ever earned a billion dollars.
“Billionaires v. the underclass” is such an unsophisticated discussion. Markets have all kinds of externalities, equilibrium traps, information asymmetry flywheels, and hundreds of other phenomena that interplay to trip people’s sense of fairness in all kinds of ways.
To pick just one example, infinite scrolling can be seen as a modern equivalent of cigarettes— a product that made people billionaires, and that consumers obviously want but are not free to stop using because of hyper-sophisticated dark patterns.
Is Elon a trillionaire because he created a trillion dollars of value from thin air, or is it because he created an information asymmetry flywheel that lets him allocate capital more efficiently than other actors?
It’s genuinely unclear to me whether the universe in which we incentivize this kind of scale is better than the universe in which we do not (because the counterfactual universe has massive externalities too). But this is obviously not just a matter of compounding value creation and becoming a billionaire fair and square in ten years.
Why would you even WANT to become a billionaire?
Wealthy, sure, but becoming a billionaire effectively destroys your place in any of your social circles. It obliterates any dynamics of trust and interdependence you may have and replaces them with a gnawing unease about if they’re still hanging out with you, or if they’re hanging out with the money.
Not to mention, Graham entirely fails to differentiate between EARNING a billion dollars and HAVING a billion dollars. You can be part of a structure that earns a billions dollars without “cheating”, there are all kinds of companies that do that. But if you let that wealth accumulate in yourself? There’s something wrong there. You are almost guaranteed to be under-valuing the contributions of others, or the externalities of the systems in which you operate or SOMETHING.
And even if you’re not? That’s a dragon’s hoard of money. You’d have a very difficult time spending that much money on yourself and your lifestyle, and I find it hard to justify sitting on the rest, just to have it. It is literally a hoarding problem at that point. You do not need that money, it is actively making your life worse (look up the Billionaire’s Social Calendar: it’s the list of ultra-wealthy-only events that billionaires must attend if they want even a chance of interacting with people as peers instead of dependents), just let it go.
There’s a fundamental misunderstanding of the mechanics & incentive structure here:
Take Mr. World’s First Trillionaire, Elon Musk. He doesn’t have a dragon’s horde, his money is almost entirely invested in SpaceX and Tesla, building things he wants to build. SpaceX didn’t IPO so he could have bragging rights with his Forbes list peers, it IPO’d because it was the most efficient way to get more capital to grow and achieve its various strategic aims—largely set by Elon and its other preexisting owners.
You can take that away either proactively by making such ownership structures impossible or retroactively through taxation forcing current ownership to sell, but the end result is the same: No incentive for folks like Musk or Bezos to use their skills on big, ambitious, capital-intensive enterprises. Control is what matters, not $.
It's possible to have more than one reason for getting $75 billion from public markets. Paying off $20 billion of loans from people you don't want to owe money to (who, as far as I could tell, SpaceX borrowed money from to pay off people you really don't want to owe money to) and getting a really big number associated with your name are not mutually exclusive, and from Musk's previous actions (getting large compensation packages approved by conflicted boards) he obviously does want that number.
Even if only 5% of his NW is in cash, that'd be $50billion dollars in actual liquid cash. Even if it's 1% or less, he almost certainly has over $1bn in cash or practically liquid cash. That's already a dragon's hoard.
You don't have to advertise that you're a billionaire. You can live quite normally while quietly changing the world as a "side job".
Do you have an example of someone doing that? I suppose the argument would be we wouldn't know - but personally I don't buy it. It's possible to not be "famous" as a billionaire, but it's not possible for people in your life not to know.
I enjoyed this, but the thesis is misleading. Paul’s own examples here were Facebook, apple etc. I imagine that the politicians point was that beyond a certain point, you do have to be unethical to continue that growth rate. Facebook is notorious for doing plenty of this. Apple too is known for exploiting developers.
If we extrapolate to trillionaires, we know for a fact that you need to be an all-around dousche that manipulates politics and literally cuts government funding to the poorest and most vulnerable groups to get there.
And since this post has a numbers focus, zuck is worth 195 billion. Would Facebook’s negative influence be noticeably less if they spent 194.9 billion on reducing the harms of Facebook, and zuck remained a millionaire? I believe so.
Yup. Billionaire - doable without too much ethical compromise (e.g early Google). The thing is that a billion isn't much per "first world" citizen if that is roughly your market. Many-many-billionaire - would need some good example, I can only think of bad ones. The SAP guys maybe? But they aren't exactly the richest. The only bad things I've heard about SAP are "making clunky software" and "charging too much money".
Early Google got that money because of the eventual market capture and implied evil they would definitely do because they are an american advertising company.
The first billionaire I followed was gates. He did pretty horrible rent extraction to businesses all over the world. See monopoly trials and other similar things that didn’t go to trial.
One billion is huge for a citizen, are you sure you don't mean one million?
I mean how much you need to "take" / earn from each other citizen to accumulate the billion.
Is that the incentive structure?
> What she meant was that it's impossible to get that rich without doing something bad — without cheating in some way.
She certainly frames it in a way that you have to personally cheat, or personally create the myth that you've earned it, or at least it can be interpreted that way. But I think it is the system itself that causes unearned[1] money to accumulate. Money begets power begets money, with or without any intention of the actors to exploit this is any bad way.
I don't think we know a better system, but I do think we can point to the level of wealth accumulation and say this is a bad property of this overall very good system, and we should try to do something about it.
[1] Or rather: Money to accumulate disproportionate to the earning. We can say that many billionaires have earned something very significant and ALSO say the accumulation is disproportionate to that, and that there is an opportunity here for improvement.
There is an argument to be made that societal structure enables much of that wealth to be made. J K Rowling can make a billion dollars not just because people want her stuff and give her money for it but because we have a system of intellectual property and a bunch of guys who enforce it. We all pay for that and Rowling benefits. It’s true that this happens, but our system of taxation takes care of this pretty well.
There are exploitable gaps in the logic where loaning against owned collateral is not considered a realizable taxable event and it’s reasonable to attempt to close these.
But like most things I find that things fall down when actual policy needs to be written. The only example is the SEIU proposition in California which is backdated and requires many people to give up half their ownership in a company.
I can’t be brought around to supporting those outcomes.
I've read (and re-read) all of PG's essays over the years. Often they're wonderful fonts of wisdom. Sometimes they're myopic and poorly supported, but never just plain wrong.
This is, sadly, a first for him.
AOC (the politician referenced) did not mean that earning a billion is "impossible". She, very clearly, stated within the context of that interview that Billionaires must be an extractive class at the cost of normal market efficiencies due to the rent-seeking behaviors of the monopolies that must exist to attain that level of wealth.
"It's impossible to earn a billion" means it's impossible to work hard enough to deserve to have a billion dollars in a world where so many people died for lack of money, not that it's impossible to get it without cheating.
Another solid interpretation is that nobody gets a billion in wages. You have to own something that appreciates, and it appreciates because of the people who work for you, and you take disproportionately much of the benefit.
How does it work with theoretical distant poor aliens and any amount of money?
lots of moving parts on this discussion but I'll boil it down to:
the ratio of the average individual's wealth to 'illionaire's wealth feels "wrongly asymmetric" for a lot of people (CEOs making ~300x that of average worker)
the question is basically about how that startup scaling at 94% translates to scaling up the individual's life (who faces alleged "stagnant wages")
or in other words, how can entrepreneurs create an approach for society that facilitates individuals scaling up their wealth?
There is for example a perception that a person working all waking hours on a low amount of pay - like minimum wage, and without investments - could never become a 'illionaire through their "honest hard work"; ergo becoming a 'illionaire requires something beyond this "honest hard work" (implying illegal and or unethical means)
> Since we started it in 2005 we've funded about 6500 companies.
> Starting a successful startup is the most common way to become a billionaire, so in effect I've spent the last 21 years training people to become billionaires. So far about 30 of them have, but there are many more in the pipeline.
Seems to me that right off the bat he completely undermines his own point - less than .5% of the founders being funded at basically the best connected best financed incubator become billionaires. Easy, right?
I won't even go into the embarrassing math that follows... pyramid scheme salesman levels...
Moreover, he conveniently forgets the millions of aspiring founders who did not even get into his puppy mill to get a chance to play the 5% odds. In many cases their only obstacle was not being born in the United States and living in California.
Paul if you are so rich why aren't you smart? Or is this the age old problem of getting a man to understand something when his paycheck depends on him not understanding it?
>Easy, right?
He specifically says it isn't.
> So how do you find startup ideas without looking for them? By working on projects with your friends. That's where the very best startups come from. Initially they're not even meant to be companies. They're just something people built because they thought it would be cool. That's how Apple and Google and Facebook all started. None of them were meant to be companies at first.
That’s cool and it’s a cool post, sure, but it sounds ridiculous when you look at how many dumb GPT wrappers there are in YC batches nowadays.
It's incredibly naïve at face value.
What occurred to me reading this was the wage. Initially, and famously, the hours put into building a startup result in sub-par wages. But the amount of work by an individual never increases as it is limited by human capacity. In a successful startup with continuous growth the wage is ever increasing, to the point of absurdity.
That’s weird. I grew up around farming and farmers. A group also very proud of the work they do, in a profession where the wage is also indirect — sometimes negative, sometimes a fortune, always based directly on the work they’ve done. Year after year, the work.
That’s different.
I’ve always identified two sets in the realm of entrepreneurs: those that want to “be rich”, and; those that want to “become rich”. The latter group is perhaps more admirable as they acknowledge the process and the value creation whereas the former seek only the status. But neither are often interested in the work of it.
This article reads like a rather flippant dismissal of the original concern that "earning" a billion dollars cannot be done without some moral compromise.
Sure, if you start off with $2 million and double it 9 times, you end up with $1 billion. Exponential growth is a powerful thing, so it comes as no surprise that maintaining a large growth rate over time very quickly grows a starting sum into a much larger pool of money.
However, his only response for how you should achieve exponential growth is this hand-wavy "make something you yourself want". His only acknowledgement of the concern that maintaining exponential growth may require cheating is a casual dismissal, and his only acknowledgement of the concern that the growth rate will drop off over time is "you'll still get there eventually".
So, while the original concern was that you cannot earn a billion dollars without some wrongdoing, PG's response can be boiled down to "nuh uh".
Regarding "moral compromise," many in this thread are missing the forest for the trees. The trees are taxi drivers and airbnb noise complaints, the forest is a policy environment that is absurdly tilted towards capital:
- Ordinary income has sky-high taxes compared to capital gains, and you don't even have to pay the taxes on capital gains if you don't realize them!
- Inelastic labor supply mismanaged into increasingly soggy demand, mathematically tanking wages
- Attributing credit for job creation to capital without attributing blame for job destruction to capital
there are more, but these are all Political Economy decisions that didn't have to be this way. They are this way because people with money and power wanted them to be this way and were willing to morally compromise to get them this way.
I think it's necessary that capital gains are only taxed when realized - anything else would be an accounting nightmare full of loopholes. However we could define more things as forms of realization - using it as collateral should count as realising it, and maybe casting certain shareholder votes that affect you financially
If I can pay property taxes on the unrealized value of my house, a notoriously illiquid asset with a notoriously subjective and noisy valuation, then billionaires can pay property taxes on their galactic piles of unrealized gains, which are more liquid than a firehose and easier to value than a $2 bill. This could crash the economy if done too aggressively, but the same can be said of every important economic decision ever made.
We've been pushing all the money into the capital economy and all the taxes into the labor economy and this can't go on forever.
Property taxes are a completely separate kettle of ill-considered fish.
> PG's response can be boiled down to "nuh uh"
Worse, it's just a long post trying to show that doing math with a calculator somehow disproves real-life ethics.
> that "earning" a billion dollars cannot be done without some moral compromise.
What did George Lucas do?
LeBron has to be worth a few hundred million. What did he do?
I came to read well constructed rebuttals like this.
> Sure, if you start off with $2 million and double it 9 times, you end up with $1 billion. Exponential growth is a powerful thing, so it comes as no surprise that maintaining a large growth rate over time very quickly grows a starting sum into a much larger pool of money.
Reminds me of this post I’ve seen making the rounds recently about a welder at SpaceX who was making $28/hr becoming a millionaire.
They keep emphasizing he’s a welder, the system works, and at the verrrry end mention he was issued 10k in stock a decade ago at SpaceX and held until it IPO’d the other day. The only “lesson” here is “if you own stock and stock go up you get lots of dollar bucks.”
They keep emphasizing “he’s a hardworking welder.” My response is “great! Let businesses take a lesson here: give all your employees a chunk of the company. Let’s all share in the success!”
But that’s obviously not their point.
I don't think they hid the point that he was issued stock? I thought it was pretty obvious? Which is why they're talking about it now, because the value of those stocks shot up because they went public
Yet they keep talking about an emphasizing how he was a hardworking welder first when, frankly, it’s borderline irrelevant to his being a millionaire.
The thumbnails often just tell the welder story, for instance. It’s very clever (misleading).
Yes! What's wild is that the story is a microcosm of what's wrong with the economy as a whole, where his work was worthless in comparison to his winning lottery ticket, which itself was (charitably) 10% due to SpaceX achieving its original mission and 90% due to investor optimism about AI datacenters in space.
> My response is “great! Let businesses take a lesson here: give all your employees a chunk of the company. Let’s all share in the success!”
Don't >95% of tech companies offer stock options or equity, from startups to FAANG?
A cursory search says 74-90% (in the US), but also that’s just tech companies and usually you need to be early. It’s also often in the form of options that take years to exercise and companies have gotten very creative lately in how they screw people out of them.
Looooots of caveats here.
>There are two numbers that determine how big a startup gets, and thus how rich its founders become: the growth rate and how long it continues. You get the first by making something users like so much they tell their friends. You get the second by being in a big market. If you grow exponentially into a big market, your startup will become valuable, and you, as a shareholder, will become rich. You not only don't have to cheat to make this happen, it will happen automatically if you just keep making customers happy.
The real problem is his example, "you start off with 2 million dollars and 95% growth rate".
Fine, show me the average person who can come up with 2 million dollars. I sure as hell can not. I even went to banks and founders with my ideas, cash flow sheets and customer list looking for a loan.
No, I am convinced, the rich already have 2 million dollars, and make themselves a billionaire. The system is rigged against "normal" people.
He was talking about an equity stake in a start-up. Although on paper it is worth $2M, it is (probably) not liquid (i.e, the shares can't be traded easily, maybe at all.) The vast majority of founders don't literally spend $2M from their checking account to purchase their position in a start-up - they get some ownership as part of taking the start-up risk.
Is there some standard he/people use to come up with the initial company paper-stock worth? A 2m company I would imagine needs to have some tangible traction already.
Of course - at founding, if $20M goes into the company at $1 per share, and the CEO gets a 10% equity stake (usually subject to restrictions), then the CEO has $2M on paper (or will have after possible vesting.) Real money in this case came from the original investors that flowed into the company in exchange for ownership, but the CEO can't really do anything with his shares yet. At this point the original investors are taking a huge risk with their money - chances are, they just lost $20M dollars, and probably even more, as it can often take a long time of putting good money after bad.
Once a company starts operating, but before revenue (and hopefully eventual profitability), the valuation is trickier. The share price _should_ be the number of shares divided by the sum of all future profit (minus current debt.) Which is hilarious of course, because no one actually knows the denominator.
That original $2M equity stake can grow to billions if the company ends up making something that a lot of people want or need, so the sum of all future profit is large. Or, much more likely, it will be worth nothing, or a modest amount.
Graham's essay kind of avoids the point of whether ownership of a vastly appreciating asset is "fair", if a bunch of other people help that asset to appreciate.
But these are still numbers plucked from the air (or as you put it, from the 'future'). I want *tangible, material bases* to start from if any.
Another far more sensible model I've found is slicing pie. Each founder's input % of the pie pre-'bake' is their % of the rewards. And what makes up for one's slice of the pie? The dollar-value you would've earned if you worked somewhere else, times the period of baking. These can be tweaked accordingly to the type of investment put in. IMO, it seems far more grounded compared to say a flat 10%.
Of course people who have more access to money and parents who understand money would be better at earning it.
Why are you presupposing the world is just when EVERY skill and opportunity is distributed non-linearly?
I, too, would win the marathon if you put me at the last mile marker while everyone else starts at the beginning.
Is that skill?
If your life analogy is a closed system competition you’re going to be disappointed.
Most people with millions do not become billionaires. So yes, there is an exclusive pool of players who can play the game. But within that pool there is incredibly different outcomes.
A better analogy is being born as a child of D1 basketball athletes and then making 100 million in the NBA. Being born into a family with no interest in athletics makes it almost impossible to be a professional athlete. Life isn’t fair. It’s still impressive to become one.
"Life isn't fair" as if we are physically prohibited from making it less unfair...
One in 500 of them makes themselves a billionaire, the rest have thrown two million dollars down the toilet. It's just a fair bet, there's nothing "rigged" about it.
Just because only 1 in 500 makes it to a billion, does not mean the other 499 are failures. Plenty of startup founders turn a few million into much more.
If someone has an idea that 'only' makes them 20 million, I would call that a great success; even if it takes dozens of years to get there.
yes but again, who has $2M to bet, even at 1/500 odds? You have to be a billionaire to make 500 bets hoping one hits, then you’re back to just being a billionaire again.
Well the average person, when you exclude real estate, is neither worth nor has a million dollars, that is true.
But this kind of person isn't rare either, even in Italy or Poland where I live I know many multi millionaires.
Some are farmers, some have restaurants/hotels, some work remotely for US tech companies, some were early engineers in startups.
I think Paul left out the fact that in order to grow that fast, you often need to commit crime.
Airbnb/Bed Boat, Neighbor, Swimply, Uber/Lyft, Bird/Lime, BlackJet, Waymo/Cruise, Splacer/Peerspace, Zenefits, Tilt, Loomis/Stablecoins, Coinbase, Worldcoin, Stripe, AngelList/Sydecar, Polymarket, Uniswap Labs, Doordash/Instacart/Postmates, CloudKitchens, Shef, Done Health, Forward Health, Cerebral, Pacaso, Sonder, 23andMe, Ro/Hims/Hers, Viome, Juul Labs, Oura Ring, Particle Health/Moxe Health, Roblox, YouTube, Popcorn Time, Kickstarter/Indiegogo, Republic/Wefunder, Deel/Remote, Lambda School, Make School, Mission Bit, WeWork, Oyster/Papaya Global, HiQ Labs, FlexPort, Katerra, Zipline, Starship Technologies/Serve Robotics, 3D Robotics, Anduril Industries, DraftKings/FanDuel, Cydia, Eaze, MindMed, Odin, Swarm Technologies, Starlink, Convoy/Uber Freight, Carvana, Tesla, VoltShare.... oh yeah, and OpenAI.
What do all of these companies have in common? They all manipulated markets, bent and broke laws in order to get that "exponential growth". They didn't want to wait around and find out if their businesses would be legally allowed to grow. So they just broke or worked around the law, with the intention of becoming billionaires. But that's okay, because growth rate! We're not doing anything bad, people want these things! Who cares if it might be illegal or the spirit of the law frowns on what we do? Money!!!
This is just one of the reasons why becoming a billionaire requires you to cheat. There's also the tax loopholes, the inducement to harm (both of the customer and by the customer), anti-competition, etc. In order to get these gains, you need to cheat, because if it were easy to do legally, ethically, and quickly, somebody already would have. It's corporate doping.
> Who cares if it might be illegal or the spirit of the law frowns on what we do?
Surely these things are on a moral and ethical continuum and we need to look at them individually? Pretty much every person has broken some law at least once in their lives. I don’t disagree that moral ambivalence is often necessary to make billions, but I also don’t consider all laws sacrosanct, or that breaking the law is the primary measure of a company’s moral standing.
You can tell that he doesn’t really think too deeply about any of this, because the way he wants to illustrate the point is by typing the numbers into a calculator.
It’s as if the money comes right up out of thin air, isn’t it?
He inadvertently gets close when he talks about Facebook being about people doing stalking. PG, is stalking a good thing or a bad thing, hmmm?
There’s no conservation rule for an asset’s value. Market cap comes mostly out of thin air because people believe a company is valuable. If they change their minds, it disappears.
(Market cap is estimated based on transactions that are a small percentage of market cap.)
No, market cap does not come out of thin air. Money flows in one direction and human activity and real changes in the physical world flow in the other direction.
Nobody is mad about the billionaires having a lot of money - they are mad that people are pissing in water bottles to make their route, or having the city’s public infrastructure privatized, or the many other fantastic real world changes that are on the other side of these fantastical market caps.
Market cap is based on people making estimates of future cash flow. (Especially for growth companies.) Predictions aren’t physical and can be wrong.
It’s also true that these companies raise and spend money and that results in physical changes in the world, but angry people on the Internet aren’t necessarily well-informed about what those changes are. There are lots of myths.
Traditionally, the value of a security is a prediction of its future cashflow to perpetuity discounted by a capitalisation rate. While it is true that some securities these days are sold as something not dependent on future cash flows, and insiders are paid off by selling something misleading to retail investors, that is known as a Ponzi scheme and is traditionally prohibited by securities regulations.
Predictions aren’t physical and can be wrong.
There is nothing physical about any financial transaction (except some electrons moving I guess), that doesn't mean that they aren't supposed to approximate something that happens in physical reality. A billion dollars is control.
Yes, the transactions are real, but trades are based on speculation and market cap is an extrapolation of much smaller trades.
The transactions are just as real for Bitcoin or a meme stock.
The arguments for or against it being possible to earn a billion units of currency seem to hinge on differences in understanding of the term "earn".
The pg view seems to assume that if there is a causal relationship between your actions and a billion dollars appearing in your bank account, then it counts as having earned that money.
The countering viewpoint seems to consider the words "earn" and "build" as having a similar relationships to money and buildings respectively. If I tell you I built the shed in my garden, then you'll probably take my word for it. If I tell you I built a skyscraper, you'll either call me a liar or understand me to mean that a large number of individuals built it at my request.
I think the second version is more useful and more accurate.
The problem is in accounting. A stake in a speculative asset that's valued at an absurd multiple of ARR isn't exactly the same kind of thing as owning all the property of a slum and extracting rent. I am for a wealth tax so long as it discriminates on the type of wealth, but we aren't ready for that conversation.
Holy smokes, one could call this condescending but assuming both politicians and an average reader don’t understand how exponents work feels a step above. And that’s before you get to the part where it’s all about a great idea and hard work and definitely zero exploitation while mentioning examples like Apple, Facebook or Airbnb.
>PaulGraham: And how could you possibly cheat to increase the market size?
I can literally think of a million ways.
1) lie to your customers about what your product actually does; this seems inevitable, once (if not before) private equity gets involved.
Using AirBnB as example: all the excess fees which have slowly crept into the final purchase price, while still requiring guests to clean &c
Have you ever listened to a congressional hearing? Or spoken to an "average reader"?
Most absolutely glaze over at the idea of calculating the "log base" of anything. If they ever got that far in math class, they certainly have not used the concept since then and cannot remember what it means or how it works. They might remember exponents, but the compounding of them is absolutely lost on the overwhelming majority of people.
I don't think this essay by PG is sufficient to teach them log bases or compounding, and is manipulative to assume now that someone knows 2 million doubling 9 times is a billion, they should be accepting of how one can earn a billion dollars fairly.
Unfortunately, there was plenty of not understanding exponentials on display during Covid, including from politicians, journalists and other public figures.
It’s appalling that it is at the top of the front page.
(Edit: At the top of https://news.ycombinator.com/classic, at present.)
What's the difference between HN normal and classic?
Classic is based on votes from older accounts: https://news.ycombinator.com/lists
It tends to filter out trite topics and lower-quality submissions, though I have the feeling that it has become less effective for that in recent times.
The most offensive part to me is that it tries to excuse obscene wealth as simply (shrug) a pesky, I mean "magic", byproduct of math.
Regardless, can we talk about the danger to society of having these resulting billionaires and how we ought to address that? I think that is in fact what "the politician" mentioned in the article was trying to address.
(The new American Dream appears to be: be one of the 30 people every 21 years that finds themselves the head of a startup that succeeds.)
Let's put this math in a mirror and do the leftie version of the exponentials:
"The purpose of capitalism is to pay rich people for being rich in proportion to how rich they are, thereby establishing, reinforcing, and perpetuating a class hierarchy where the people on the bottom must constantly pay to exist while the people on top constantly get paid to exist."
Dear reader, if you bristled at how casually this statement ignored that compounding returns are a feature of the real world that we want our economy to model and encourage, now you understand how a normal person feels when a megacorp or megacorp cheerleader casually fails to account for everyone they displaced and stepped on in order to capture the value that they did. "Negligent accounting" is a strategy that points both ways.
> Let's put this math in a mirror and do the leftie version of the exponentials
The plot twist is that the 'rightie' and the 'leftie' are both entirely correct. Which is why most developed economies try to remove sources of wasteful, unearned rent and also include significant amounts of redistribution/social insurance rather than relying on pure market outcomes. This doesn't erase the compounding dynamics altogether, but it hopefully ensures that folks at the lowest end of the distribution can keep a tolerable standard of living that doesn't have them 'paying' too much.
Yep! The equation even has a "left" and "right" term that correspond to political left and right:
Left term: rich people get paid for being rich in proportion to how rich they are. This is an exponential and it creates, reinforces, and perpetuates a class hierarchy where poor people must pay to exist and rich people get paid to exist. Capitalism is a Softmax function.Right term: capital allocation decisions are made with skin in the game. Every chunk of the economy has a responsible owner who is rewarded/punished and promoted/demoted for good/bad decisions. Capitalism is a Q-learning algorithm.
We also want a compounding (progressive) tax rate to address compounding wealth (and perhaps we need a wealth tax?).
Yes, although I tend to think this produces better incentives and is easier to administer if we formulate it as progressive corporate taxation. This structurally discourages mega conglomeration and encourages spin-offs to enhance competition. Also, taxing at the source of profits obviates the need to track down the destinations of profit, who are far more numerous and easy to hide.
The non-explosive way to do this is simply to set the heel above the megacorps today and let inflation push them into it. They will be able to avoid the heel by splitting at their leisure, slowly remediating the consolidation we have seen and restoring competition.
If you start with a mere two million and get really lucky, you, too, can be a billionaire!
Now, if that isn't inspiring, I don't know what is! Some of my rich buddies got to be super rich following my advice!
I really don't know why the average person hates the rich. Those poors are so out of touch!
$2m is the standard seed round nowadays which is what he was as referencing. Anybody who has a good idea and can convince investors can raise this, hence how the new AI founders became billionaires without having $2m of their own.
Come on. Exponentials are deeply counterintuitive, but simultaneously pretty much where all the returns come from in startup investing. I think it’s extremely illustrative, especially to a group that’s probably heard a lot of degrowth propaganda.
"You not only don't have to cheat to make this happen, it will happen automatically if you just keep making customers happy."
Call me cynical but ...
Paul has to update to trillion dollars now
That's easy. It just takes another 9 months.
Growth for the sake of growth is the ideology of the cancer cell.
Not all companies are growing because they are making their customers happy. Some are fully exploiting their customer, users, environment, etc.
This mindset is what makes capitalism very ugly, and im not sure how one backs off the throttle a bit to grow responsibly?
AOC’s point is simply that when growing exponentially from 250M to 500M to 1B usually whether using exploitive rails one is conscious of or not - someone is bearing an unfair burden. That in 60 out of 60 examples of YC billionaires and all billionaires with maybe a few exceptions - people do not go out of their way to ensure nobody is getting hurt and everyone participates fairly. People are too excited about the exponential growth and their goals. I don’t even think it’s AOC’s main point that these people are at fault. Just that the system is at fault for not ensuring exploitation is minimized further for the rest of the 99%.
(Great essay on how to be a billionaire though. Could billionaires give back more? Yes. But creating market value like that is both worth celebrating and evolving.)
So who was the woman he mentioned growing her company at 93% a month?
Certainly not fictional. You just haven't heard of the company that doubled every month for a year, which obviously they did because why wouldn't you?
Personally I always choose to put the growth lever at 100% - it just makes sense.
pg should just get every founder to trade wallstreetbets style for a few days. they'll be doing this calculator exercise intuitively
Not quite on topic. But I feel there is an issue in politics where many non-wealthy people vote as if they are "temporarily inconvenienced billionaires." That is they endorse policies that favor billionaires, as they have some hope of being one someday.
The lack of genuine desire to understand each other is what is astonishing.
I don’t know where “the politician” went with that comment, but for me the more pressing conversation is whether we want a society where many are struggling and some make a billion dollars.
You benefited from society, clearly, which is not to say you didn’t work hard. But it seems entirely reasonable to me to ask you at that point to give back. We can knock plenty of people back to mere “hundred millionaire” status, they’ll be fine, and we can do a whole lot with that money.
How to make a billion:
Step 1: Have millions
Step 2: Double it 10 times. Now you have billions. Enjoy.
Sadly this is the actual advice in the post.
> So you can imagine how astonished I was last month when an American politician said that it was impossible to earn a billion dollars. I felt like a skating coach hearing someone say that it's impossible to do a triple axel. Of course it's possible. It's hard, but it's possible.
"Earning a billion", to the skating coach, is like pulling off a dodeca-axel.
It's not gonna happen through mere pluck, and it's probably gonna involve a lot of other folks' work if it ever happens, who probably aren't gonna get that much of the glory.
Paul Graham is the skating coach himself, as from 6000 startups financed by y combinator quite a few were unicorns. it is olympian level, but it there is a system to it.
I'm well aware of who pg is.
I'm suggesting - and I think the politician was also clearly suggesting - that a certain point of scale it ceases to really be "earning" anymore.
You’re suggesting that selling others’ talent isn’t legitimate “earning”? Why?
I'm saying there's a difference between earning and benefiting from.
You can earn by deploying your own labor to facilitate transactions between other laborers, such as by running a job fair, that's completely legitimate, good, and creates value. You can't just take 90% of someone's wages, or rather, you can, and many people do, but it's theft.
Because it's not your labor to sell and if you take part of the proceeds for yourself, that's theft.
Because they believe in the Marxist labor theory of value, where apparently it's theft if someone else uses your labor to make something more than you could make yourself, not understanding the fact that that's not how labor markets and total human collaboration works to make something more than the sum of individuals.
Selling others labor isn't legitimate earning when you get a higher share of the labors value than the laborer themselves.
"“Destruction becomes the principal commodity produced by capital. Militarism will lead accumulation, which will theoretically demolish any limit to capital.”
The Accumulation of Waste, Kadri, https://brill.com/display/book/9789004548022/front-7.xml
Monopoly Capitalism, Baran and Sweezy
https://archive.org/details/monopolycapitale00bara
Labor and Monopoly Capital, Harry Braverman https://ia801604.us.archive.org/12/items/023978561/Braverman...
This is slightly disappointing, but it's probably necessary cope. If you want to build startups which move fast and break things, you have to ignore many problems and many people of this state, country, and world.
You start by ignoring what a "billion dollars" means, and most people don't think it's stock. Then you have to ignore what "earn" means, which most people don't think is getting stock on the assumption that the company you own a portion in will turn a profit one day, possibly many years ahead.
Getting investment without having profitability, getting to keep a portion of this investment, even if the banks that are insured with taxpayer money lose that money, is not what the constituency of AOC think is earning money.
There is a huge amount of technological advancement and personal fortune that I enjoy from this system, but I'm not trying to bullshit anyone that the system is fair.
In conclusion, I do think this attitude is cope that allows a high performing individual to focus on this game and be successful, and Paul Graham seems to be successful, so it's natural.
Even if we agree that Billionaires are better capital allocators and power yielders than elected govs, let's see what happens after they die.
Their money goes to heirs who did not earn billions and do not know how to allocate it, or to questionable non-profits. So it ends up being a huge drag for the society.
Thank you for publishing this. I've been following Paul Graham and his works for a long time. It's refreshing to see everything written down in a document like this. This is the bible for startups. Honestly, it's beautifully simple but not easy.
I don't personally subscribe to this belief but the people saying it's impossible to earn a billion dollars without doing something bad would say that your founders are doing something bad by exploiting the employees by not returning to the value creators a fair share of the value generated and instead hoarding it for themselves. pg is arguing a strawman to the actual argument when there are far better arguments around rewarding risk though I feel like most people shouting that don't value risk either so maybe that's not a better argument?
Andrew Wilkinson has a whole part in his book about what it's like to be on the billionaire side of this speaking to former employees who feel that you took more of the value than you deserved it was an interesting read.
Who decides what's "fair"? Shouldn't the market decide? Otherwise, of course people will always be incentivized to argue that their subjective opinion is what's fair, and that's almost always going to be, "I should have been given more."
This post hand waves away the inflection point(s) of maintaining high growth rates as you grow. He hints at it saying year 4 growth is harder, but it is _vastly_ harder.
Companies focus of the Rule of 40 and struggle to keep above it. And this struggle is where many in management lose their way.
Enshitification begins. The margins get harder. More corners cut. Employees get treated less well, customers get treated less well.
Instead of telling us "it is just exponential growth bro," do case studies on billionaires and their dealings. In the US, you have billionaire business leaders who have full time employees who require government assistance every month.
The couple of billionaires and near-billionaires I have worked with (and helped build their companies) have not been bad people. But working at their companies pre and post IPO is way different. Less perks, more pressure. If the company culture isn't solid, it becomes bad fast.
> A couple days later I was talking to the founder of a startup I'd funded. I began by asking, as I usually do when I meet a founder, what her growth rate was. 93% last month, she said. I pointed out that this meant her net worth was also growing at 93% a month. She was getting richer at a stupendously rapid rate.
This is such a weird statement to see. The idea that a startup founder whose company is growing at 93% month-over-month has a net worth growing at the same rate is just so logically wrong that it's bizarre to see someone stating this.
Even putting aside the fact that "growth" can be tracked by various metrics (revenue, customers, registered users, etc.), the idea that any given "growth" rate tracks 1:1 to the paper valuation of illiquid equity in an early-stage private company is so naive to be silly.
> And yet she hadn't been doing anything bad. The reason her startup was growing so fast was simply that users loved what she'd built. So she could feel from her own experience how wrong that politician was. She wasn't exploiting anyone. Exactly the opposite in fact. The reason her startup was growing so fast was that she and her cofounder had been working their asses off to make their users happy, and as a result the users had been telling their friends. And that gets you exponential growth.
Delve, anyone? Startups can lie, cheat and steal, and their customers "love" them until they find out they've been duped. And let's not forget that more than a few have been accused of lying about how much "love" they really have (by misrepresenting their traction). Fake it until you raise it.
Also, this reasoning is very narrow. A company's customers might love it because it allows them to benefit from something that has external costs that disadvantage other groups, if not society at large. Cheap outsourced labor, regulatory capture, network/monopoly rents, tax shenanigans, etc.
A lot of companies also try to hack referrals, which sometimes involves using dubious tactics to get users/customers to sign up for something under questionable pretenses. In other words, people recommend products and services to their friends not solely because they love them but because they're given a personal incentive to. These can be really effective even when it's pretty obvious people are doing something that won't benefit their friends.
> There are two numbers that determine how big a startup gets, and thus how rich its founders become: the growth rate and how long it continues
> The reason her startup was growing so fast was simply that users loved what she'd built.
> In the real world, growth rates tend to slow down a bit. A very successful startup will probably be growing faster than 15% a month in year 1 and slower than 15% a month in year 4.
It turns out that the people who will invest in your startup when 93% MoM gains are possible want you to do pretty much anything to keep growth as high as possible--also your career, net worth, and employment are tied to this so you're similarly motivated--including squeezing and manipulating those users who loved you so much. But hey, as long as you personally get rich it's fine I guess.
> How people become rich in your society is one of the most important things to understand about it. You can't let your beliefs about this be determined by ideology, or movies, or historical examples that are centuries old.
The idea of becoming rich is as old as society itself but it has not been a static concept. It is an idea shaped entirely by the things mentioned - ideology, culture and history. There is no wealth accumulation without ideology of one sort or another.
It's fair to resist a view of wealth that may seem flawed but it's disingenuous to assume this can be done from a neutral position.
But "earning" does not mean "obtain without cheating"! Nobody (that I have spoken to) speaks of earning their lottery winnings. The claim is that owning a company worth a billion dollars is more like winning the lottery than it is like earning money. And it is!
The whole discussion about exponential growth is idiotic and not worth responding to. But if you think of what he actually means - having a total addressable market of at least a billion dollars and being able to effectively capture it - it is obviously primarily due to factors outside of your control. The sort of company PG is talking about typically revolves around a good technology that has a network effect somewhere that leads to market concentration. People do not get good ideas by working hard, and markets are not made easily monopolizable by hard work. Execution of an idea requires hard work, but companies that are only good at execution do not win.
Obviously you can engage in hard work to improve your odds. But the returns are out of scale with the hard work. This is all people mean when they talk about "earning" money - if it's in proportion with your work, you earned it; if it isn't, you didn't.
I exclusively build stuff that I think is cool for me and my friends but I have little drive to market these things and plus they are designed to be completely free forever so I don't think I'll ever be a billionaire.
That is wonderful. What makes billionaires valuable to society is that the act of trying to make a business worth a billion dollars that people want is really, really hard. It essentially punches you in the face constantly. You have to power through a bunch of really tough situations. There has to be a really strong reward at the end to make it worth it. Otherwise everyone would just toy around with free projects.
Hopefully the billionaires are happy with the reward at the end of the tunnel.
I suspect they may envy the laymens position in life eventually. You loose alot becoming wealthy in the monitary sense. There are many ways to define richness and wealth beyond what society defines it as.
As they say, more money more problems.
How many businesses are there that are worth at least $1 billion and employ no-one but the founders?
When people say that it's not possible to earn a billion dollars, they're talking about the discrepancy between the wealth gained by those employed by the company versus the shareholders of the company. For example, when WhatsApp was sold to Meta for $19 billion, how many of WhatsApp's 55 employees walked away with hundreds of millions of dollars?
The fundamental problem is that it's possible for an employee to generate a hundreds of millions of value for a business, and yet be compensated for a vanishingly small fraction of that. Even if the employees agreed to a particular salary, is it ethical to pay them so little in comparison to the worth they generate, or is it exploitative?
Most, if not all billionaires, reach that status by paying people far less than the value they generate. If you want to become a billionaire, you need to find people who are willing to be paid thousands or tens of thousands of times less than they're worth. You need employees who will generate you $100 million in exchange for being given $100 thousand.
Your post implies that every employee of a successful company is entitled to a share of whatever wealth that company generates.
As a career programmer, I worked for several companies. Each time I took a job, I negotiated what I thought was a fair salary for my wages. Some companies also gave me stock options and one gave me founder's stock. When a company had a good year, they often gave generous bonuses.
Only when I took great personal risk, did I expect to share the rewards that come with a successful company. I was always grateful when I got more than I agreed to work for, but I never felt entitled to it.
A janitor working for a 10x company should not feel entitled to 10x of the salary as another janitor working down the street for another company that is struggling.
That's one viewpoint. No moral nor ethical foundation; just a personal view.
That's not quite what I'm saying. You may very well have been paid fairly for each job you've taken, assuming that the value you generated for the business was not substantially higher than your salary.
But hiring people who are compensated fairly does not make someone a billionaire. If you generate $300,000 of value per year and I pay you $200,000, then I'm only making $100,000 profit off your work. I could hire more employees, but value does not scale linearly indefinitely. Doubling my number of employees does not guarantee I double my profits.
No, if I want to become a billionaire within my lifetime, I need an asset that generates far more money than it costs to buy and maintain it. In other words, I need employees who will generate millions for every thousand I pay them.
Now you might well argue that I'm taking a risk. How do I know if an asset or an employee or a team of employees is undervalued? Not every bet is going to pay dividends. However, while this is true, I don't think this makes it ethical. If I'm a venture capitalist looking to make it rich (or richer), the fact that I'm taking a risk doesn't change the fact that ultimately I'm looking for people who I can pay far less than they're worth.
Why is it unethical? I'm both a freelance engineer and a business owner that sells software, and I've both sold my labour for equity/revenue share, and for a flat hourly rate.
If I charge a client $50k for some software and they made $1 million profit from it, good for them? As long as they pay our mutually agreed upon rate on time and there was no hostile negotiation, why should I feel suddenly entitled to more money if that wasn't in our contract? How do I know how much of the value is from my work and not their marketing or idea?
What you're saying seems as crazy as me saying that someone who bought my software for $99 and used it on a multi-million dollar project is being unethical unless they give me more money. How on Earth does that make sense? Should I be forced to switch to a royalty model? What if I make more selling copies at a flat rate, what if I don't want to have to investigate the finances of thousands of customers and have to deal with that whole trouble?
For me it's the same thing regardless of whether I'm selling my labour or a product. I can choose whether to accept a flat hourly rate, equity, or a mix of both, and usually the better deal is the hourly rate.
If I find a way to hire a software engineer for market rates (say, $200k/year in the US) and get $2M revenue from their work, good? They can ask for a raise or a bonus, we can renegotiate, they can leave if they're unhappy, but I'm not obligated to give them more money than was in our agreement anymore than they're obligated to give me their salary back in the project fails.
This wouldn't happen if employees rejected cash-based compensation and decided to be founders themselves. Most employees trade risk for higher cash comp, and end up with less upside. This issue is mostly settled by the employment market
Not everyone can afford to take the financial risk of being a founder, and not every business type can be started with low initial capital.
> So you can imagine how astonished I was last month when an American politician said that it was impossible to earn a billion dollars.
> She wasn't saying, of course, that it's impossible to become a billionaire.... What she meant was that it's impossible to get that rich without doing something bad — without cheating in some way.
> But now you at least understand, from having done the math yourselves, that you don't have to cheat to become a billionaire. You've seen for yourselves that there are only two numbers in the calculation, the growth rate and how long it continues. If it's impossible to make a billion dollars without cheating, which of those two numbers is impossible?
AoC quote:
> There’s a certain level of wealth and accumulation that is unearned. You can’t earn a billion dollars. You just can’t earn that. You can get market power, you can break rules, you can abuse labor laws, you can pay people less than what they’re worth, but you can’t earn that.
Come now @pg.
$2 million * 9.45 months * 93% growth rate = earning a billion dollars, ok. Does that really address what AoC was saying? She wasn't saying that the math doesn't math.
He's saying that the math as he defines it means that YC founders who make less than even millions can anticipate making billions without anticipating doing something unsavory along the way. That's a fine, and possibly true premise.
But, in the real world, as the 'exponential earnings' stack up, the incentives to do unsavory things to keep the rate of growth scales right along with the earnings; and the odds of anyone actually 'earning' a billion dollars while sharing the proceeds and absorbing the risks and societal costs of that growth fairly, ethically, legally and honestly has a growing potential to become vanishingly small.
AOC was speaking to this reality, the author was speaking about the math functions of how some steady rate of growth crosses from a small number to a very big number due to the law of compounding growth, and speaking to the actions and motives of a cohort who had not yet done what it took to realize that rate and duration of growth.
They actually are both right.
AOC was not addressing the math at all, nor did she claim that it was mathematically difficult to become a billionaire; just that it was unrealistic to expect that the process of doing so did not select for people with an intrinsic ability to externalize risk and maximize profit in a manner which many other people find distasteful, bordering on criminal if known to the full extent.
And the original post posits that his representative cohort was free from these types of behaviors and thus would remain so.
I find one of those arguments more realistic and actionable than the other even though they both may be true. I'll leave which for another day.
Of course he's not addressing what AoC said. That wasn't the purpose of his propaganda. Just as so many billionaires are panicking about potential wealth taxes etc, so too is PG.
This is no different than any of the Thiel/Musk/Bezos propaganda that's been swirling around as they realize that the natives are getting a bit restless and mentions of guillotines become more common on social media. And they look at the UHC CEO's murder and wonder just how safe they really are.
I doubt he listened to what she said - just a soundbite on Fox News or worse Facebook.
Did you read his post at all? He knew what she was saying and addressed it clearly:
> What [AOC] meant was that it's impossible to get that rich without doing something bad — without cheating in some way... The reason [my founder's] startup was growing so fast was simply that users loved what she'd built. So she could feel from her own experience how wrong [AOC] was. She wasn't exploiting anyone. Exactly the opposite in fact. The reason her startup was growing so fast was that she and her cofounder had been working their asses off to make their users happy, and as a result the users had been telling their friends. And that gets you exponential growth.
In other words, this founder being on a trajectory toward billionaire status, through doing little but working to provide something of value to those willing to pay for it, belies the claim that you must be doing something unethical and cannot earn one's way to a billion dollars.
Off topic but how's IH going? I haven't seen any new podcast episodes, have you guys stopped doing them for now?
Paul Graham seems pretty self-centered...
Does that work always without fail with anyone anywhere anytime?
For those that pg has sponsored it has happened a few times out of ~5,000. Better odds than the lottery, for sure.
Because he sponsored those who already have something really valuable, and not just anyone.
I would not compare to lottery because a lottery ticket is bought at pure chance whereas these startup are taken onboard after very thorough audit.
He says ~30 out of 6500 companies which if you estimate two founder per company comes out at 1/433.
Most likely that this works in a small number of all cases.
(underscores to visually identify mag)
--
// 8bn world population / 3,500 billionaires:
0.000000_44
--
// 300mm US population / 1,000 billionaires
0.00000_333
--
// Odds of winning billion dollar powerball
0.00000000_3422298 (play once)
0.0000000_68446 (play twenty times)
0.000000_34223 (play 100 times)
--
// Global net worth vs billionaires
0.03636364
--
// US net worth vs billionaires
0.0942029
Yes, growing at average 15% a month will make you a billionaire in so many months. But somewhere along that trajectory you've tipped the balance from "eveyone is benefitting" to "in order to grow larger we need to exploit and extract."
Clearly nothing is universally the case, but this pattern repeats in enough freqeuncy that it's effectively the case.
I read pg's collection of essays (Hackers and Painters) in my 20s, and it single-handedly prevented me from being radicalized by leftist ideologies. The one insight from the book that I will always remember from the book is this: if you want to be rich, make something people want. Money is fiat to the value you've generated in growing the economic pie. It is in fact possible gain wealth ethically.
However, there are several addendum to this argument:
1. Most billionaires are hedge fund or private equity managers whose name no one has ever heard of. They provide liquidity or allocate capital or something. It's actually a major PR failure that people think Jeff Bezos or Elon Musk when they think of billionaires; If we can ignore their character for a second, these guys are actually hyper-productive and they've created immense wealth for society and are compensated in a power law sort of way.
2. Rich people make money with money - in the form of dividends, interest, rent, etc. Poor people trading labor for money. Salary only scales linearly; therefore, generating value for society is only half of the equation, you must also have ownership, or slowly invest your earned capital to eventually make money with money (i.e. retirement).
3. There must be a growing economy, otherwise it's a zero-sum game; a fixed-sized pie. In a stagnant economy, the customers you gained are customers another company lost. The wealth just shuffle hands from laid off workers to your employees. I think this is why Jeff Bezos once remarked that a stagnant economy is incompatible with free democratic society.
4. There must be a new frontier, otherwise the chance of success is pretty much zero. Software is this generation's new frontier. There are no bars to entry. You just need a laptop and the skill to arrange symbols on a screen in the right order. It's literally alchemy. On the other hand, non-software startups can't just do things. In many cultures, maybe due to their lack of growth, "entrepreneur" is actually very low status. It's synonymous with ne'er-do-well who can't find proper work. In the case of USSR before its collapse, it's synonymous with literal thieves and black market thugs.
An obvious calculation. The real world cannot be calculated so easily, It is changing unexpectedly and quickly.
Phew this guy hasn't had a new idea in a long time.
What AOC is trying to do here is shift the debate from extracting retribution on people who have violated specific laws (a fair and an honest way to enforce justice in a civil society) to extracting retribution on people who she insinuates "must have done something immoral" based on their net worth (a selfish, dishonest, envious and greedy way to run a society). It's a clever play, and unfortunately for the people of the world who value freedom and a high standard of living, it's going to work. There is enough of the population filled with envy and greed that they'll lap up whatever a politician tells them bogie man of the day is. Historically it's been the aristocracy, Jews, immigrants, but those don't work any more, so now it's generally "the rich". Billionaires are the thin end of the wedge. After them it will be business owners of all kinds, people with second homes, people who send their children to private schools, and generally anyone who has anything else that someone might envy. It's clear that the way society is going people are going to keep lapping this stuff up.
HN used to be open minded about people creating wealth. The change is shocking to me, actually.
>There is enough of the population filled with envy and greed that they'll lap up whatever a politician tells them bogie man of the day is. Historically it's been the aristocracy, Jews, immigrants, but those don't work any more, so now it's generally "the rich".
I love how the billionaires hoarding resources to entrench their own power are not the greedy ones in your telling.
Ew
I don’t know if this take is just naive or dishonest…
building something people love can make you a billionaire, but most billionaires did not build something people love, and most people who’ve built something people love are not billionaires.
> starting from 2 million && 93% growth > 9.45 months to become a billionaire (500x growth)
There is a much simpler way to become a billionaire. No Revenue (Silicon Valley): https://www.youtube.com/watch?v=BzAdXyPYKQo
Generally a PG defender (at least nowadays), but he is deliberately misrepresenting what she meant, and/but I think a good % of the students/attendees know that.
"So you can imagine how astonished I was last month when an American politician said that it was impossible to earn a billion dollars… What she meant was that it's impossible to get that rich without doing something bad — without cheating in some way."
Not exactly the way I interpreted it (emphasis on earn). Right or wrong, I think the vast majority of us think that "deserved money" is money earned from "work".
A simple example would be the billionaire Walton children: their fortunes inherited. Most people would argue that they did not really earn those billions of dollars.
On an admittedly slippery slope, for many, investing and other means where the money makes money is also not regarded as work (and therefore is not earned money).
To wave around the idea of "the American Dream", I suspect that many American's disapprove of any means of obtaining wealth that the average Joe or Jane are not privy to. This idea that you have to be born into money or have money to make money—we are (perhaps naturally) repugnant to.
I've always respect PG's articles (obviously), but him pointing to a sole founder at a high growth rate (which founder btw, what is the product) as 'proof' that no bad has been done to reach that level of growth is so incredibly naive!
His founder is not at the level we are talking about. They obviously would not represent the 'bad' that AOC was trying to make a point about. Why don't you pick your actual billionaires?
Airbnb - Ignored and exploited local housing regulations, over time the blowback has been HUGELY negative. Here the 'bad' is the commoditization of housing in peoples' homes, causing housing problems.
Coinbase - For years, they built their business on bitcoin being used on dark nets for illegal purposes. There's the bad. If they were truly good they would have done KYC from day 1. Why would they? Billionaires gotta break rules.
DoorDash/Instacart - Exploitation of cheap labor, they _consistently_ underpay workers, hire undocumented laborers for that purpose, and pit laborers and consumers against each other rather than improving the system.
These, Paul, are the actual billionaires AOC was talking about. Not your young founder making the 200th to-do app.
Really unimpressed and disappointed by the shallowness of his thinking here.
- So I would like you all to do me a favor please. I would like you to take out your phones and calculate a number. I know this may seem contrived, but I promise it will be useful for you.
I’m thinking of vibe coding a calculator app How Many Babies Died For This where you input your startup idea, life(style) goals and AI token usage and the machine spits out the Net Babies Dead for you to achieve your dreams
Or as someone more elegantly phrased: https://x.com/tobytarrant/status/2065946761332486231
How many would it be?
I mean i’d need to vibe code the damn thing but as a rule of thumb you can save one baby’s life for around $4k
Why haven't you saved a baby's life?
Well let’s say the real (non subsidized) token cost to create the app is $40 that’s 1/100 of a baby i’m saving just by not creating it!
Ah i see you edited your comment, i’ll leave mine as is though.
Yeah I was more interested in why you haven't saved a baby's life for $4000. Maybe I'm being presumptuous, but even if you don't have $4000 in savings and liquid investments you could probably get a loan for $4000, or extend your mortgage. A baby is going to die if you don't.
Please do it
Why would you want to earn a billion dollars? You must have the maturity to handle the money. Hopefully you’ll mature sufficiently through the process of making that money but if the money’s fast, that might not happen. I’ve seen people get 9-figure rich overnight. Didn’t change them at all, they are still the wonderful folks they were. But I’ve also seen people drink themselves to death as it turns out a few mill in the bank does not answer the question “wtf do I do when I don’t have to do anything?”
I don't think this article properly engaged with the criticism from the politician. That's fine, I wasn't expecting it to, but this isn't valuable commentary on the politician's point. I suppose it does serve to demonstrate that Graham and people in Graham's orbit are unable to see a distinction between "have a billion dollars" and "earn a billion dollars".
It's a very sf-bubble type article.
It's depressing really - lost alot of respect for pg over time. Based on his writings it honestly appears that he isn't engaged with any critical writing in any of the social or political (or economic) domains.
The problem with any Sycophancy is that eventually [even the most-egalitarian] leaders lose both perspective as well as control (of their entire organization... world).
Even if the leader wants to hear honest criticism – to receive capital `t` Truth, IMHO: rare – his echelons will sequester any challenge(s) to their status quo, often by excluding dissent(er)s.
----
Thou art mortal, Caesar.
I don't disagree with the essay, but is there any benefit to being a billionaire? Almost anything I could possibly want could be satisfied by being a humble multi-millionaire.
Many of these billionaires they're referring to are paper stock billionaires. It gives you access to maintain control/takeover other companies. For example, Elon made an argument that his package payout (if fulfilled) was so large because it served him to be able to retain control of his company.
Another example would be taking over media companies like what Bezos did, the side effect would be being able to waylay/hide any dirty laundry.
Do you have a want to please millions of people whose lives are improved by exactly the product that your company sells? I could certainly do without that, but it does sound nice.
I'm not sure there is but if you create a company that successfully serves the world's 8 billion population it often ends up worth more than 12.5 cents per head. Or else it maybe isn't providing that significant a service.
With nearly all the billionaire PG mentions the money is the company valuation rather than cash in the bank.
"So you can imagine how astonished I was last month when an American politician said that it was impossible to earn a billion dollars..."
Paul, playing dumb doesn't suit you.
The first definition of "earn" on merriam-webster.com is "to receive as return for effort and especially for work done or services rendered".
Your chose a straw man, "doing something bad", to argue against because it's so easy to beat.
Much harder to justify that anyone's doing $1B of effort. Being a billionaire doesn't mean you're bad. In fact, it doesn't even matter if they are all bad -- there are always going to be bad people. It means a system that allows, encourages, and protects billionaires might be a problem that needs to be fixed.
Scary idea, I know. But we all only get to go around this world once. Might as well spend our time trying to make it better rather than rationalizing why it's OK to spend all your time trying to make it worse.
So nice of pg to mention AirBnB as one of his examples of what a successful startup who "doesn't cheat" means. They just were great people with a great idea who found a market for something people wanted that no one had thought about before, and poof, exponential math billionaires who earned it!
Of course, we'll ignore the huge issues that Airbnb created for cities, customers, and providers. We'll ignore the way they knowingly helped ignore any regulations on tourism as much as they could. We'll ignore the business model of simply being the biggest middlemen around. We'll ignore the fact that their business is slowly being outlawed in major cities, at least in Europe, because of all of the above.
And, surprisingly, if we ignore all of the things these founders do to ignore the law and cheat the market or their competition, we can say that they earned their billions without cheating!
We'll also ignore the fact that the brilliant magic math that us lay people and politicians just don't understand also predicts that the founder whose business is growing 93% per month will not only be a billionaire in 9 months, but a trillionaire 9 more months after that, and surely the world's first quadrillionaire within 5 years. You might think this is implausible, but that's just because you don't understand how exponential growth works!
No, that problem was not generated by Airbnb. There’s growing demand and, because of regulation, not enough is built every year. For example, according to INE, 250k new families are formed in Spain (more than 500k people) and only 100k new houses/flats are built and the yearly deficit has been accumulating for 12 years. That is the real issue and blaming corporations is just the politicians’ easy path to deflect blame, which unfortunately too many citizens eagerly buy into.
Even if it were true that the problem of housing affordability was not affected by Airbnb (it's not, at best it only exacerbated an existing problem), that would not mean it didn't create other problems for cities. Having tourists concentrated in places that are not designed for it, where a hotel license would never have been issued; the problem of too many tourist accommodations, causing an overflow of tourism; problems for neighbors with parties and similar nuissances; problems with untaxed income from the smaller owners; and probably others I'm forgetting.
I know the Spanish case. The hotel lobby does not only push for airbnb restrictions but also for banning new hotels (so that they can push prices up). For example famously there are no new airbnb or hotel licenses since more than 10 years and obviously the problem has only worsened. Regardless, the problem is in general still a demand that grows roughly at 2.5x the supply growth rate.
Are the boulevards, museums, parks etc growing as well? If not, why should the number of hotels grow? A city generally has a limited capacity for tourism (one which is not primarily related to the number of hotel rooms) and once that is reached, it becomes detrimental to increase tourist accommodations. I don't know if this is the specific case in one specific city that you have in mind, but the principle is there - expanding tourist accommodations is not a good in and of itself. Supply is naturally constrained, regardless of demand, for many real goods, and this is one of them.
Additionally, you keep ignoring the fact that even if new housing supply would be very important, Airbnb is still a drain. If demand was outpacing supply 2.5x before Airbnb, and it's outpacing it 3x now, that is still Airbnb making a bad problem worse.
You can exacerbate a problem (which Airbnb is doing) without being its major cause. Doing that is still bad.
Externalize all the problems, but its "not cheating!" - its just making us all pay for your growth while you take advantage of the current structure of society and generally making things worse.
There was also the whole Craigslist spam stuff airbnb did to bootstrap growth
Paired right next to the “personals” ads they used to have.
There's an older tradition of thought on the matter with better intellectual pedigree and epistemological hygiene: "Behind every great fortune lies a great crime."
The easiest way to earn a million dollars is to start a business that makes sense and work your ass off running it well. Maybe that's even the easiest way to reliably earn ten million dollars, a million isn't what it used to be.
But at some scale that's far short of a billion the game becomes about asymmetry.
This asymmetry takes many forms. For Steve Cohen it was trading on inside information, for Jim Simons it was (as far as anyone can tell) novel mathematics.
For most of the technology companies in the 21st century it was about privatizing the commons and/or externalizing costs that a well-refereed market would place on your company.
The United States used robust public/private partnerships and a vibrant, thriving university system to build the greatest pile of latent wealth in the sum history of humanity during the 20th century. Everything from the transistor to the integrated circuit to the laser to Velcro to tang to the internet to the web was a product of this holy Trinity of innovation: defense and related public money, well-refereed private companies (even a notable natural monopoly or two under muscular regulation), and a paved path between the Academy and the other two. The gains accrued enough to individuals to keep everyone motivated but largely in the form of status, which confers a desirable station in life but does not compound directly into political power. Feynman and von Neumann and Einstein all seem to have led very enviable lives and are easily as smart and accomplished as anyone in the front row at the last Inauguration (and if we're honest, a lot more), but none of them had a billion dollars or untoward access to the levers of government. All of them paid far more into the ocean of latent wealth deeded to the body politic than they took out of it.
And at some point (my money is on the kneecapping of Brooksley Born, whose architect is now resigning in disgrace from everything for Epstein affiliation and whose most recent post was on the board of pg's protege) the flow reversed. The access caste started to be d away from the competence caste and the singular fortune deeded to the public started to accumulate as a dozen private fortunes that were substantially just the 20th century stuff with a named owner.
You get a billion dollars by stealing it, this is qualitatively different, a distinction of kind not of degree, from how you get a million or even a few tens of millions.
To get a trillion dollars as we have now seen, well first you steal a billion.
PG actually addresses this in other essays. That adage does have more history. But the world literally changed;
1. In pre-industrial society there is less technological leverage, so that it’s very difficult for an incidental or group to help very many people.
Perhaps the closest analog before then was land discovery or conquest (taking other people’s stuff).
2. Post-enlightenment society is one of the first which doesn’t predefine your social role by birth. So you can claim new roles and status from your own wealth.
America has a much stronger sense of 2 which is why European attitudes towards wealth differ.
My copy of Hackers and Painters is the first printing, I'm extremely versed in the last twenty years of pg's writing and public speech, and the glowing arc of that thought over that time.
Early pg wrote about Lisp and engineers should do their own testing and commodity FreeBSD on commodity Intel was better than Oracle on Sun for starting a company.
He wrote that makers and managers needed different schedules. He wrote that math has asymmetrical upsides. He wrote that you do things that don't scale while you're in the garage.
In his wheelhouse he was best in the genre, maybe not the Balzac he fancies himself as an essayist or the painter he fancies himself at all, but the best guy to listen to if you were doing a garage band startup that involved the Internet. He was surrounded by legitimate legends like Robert Tappan Morris and Trevor Blackwell, and he wrote about things he understood.
Late Soviet Paul Graham exists as the lobbyist for Garry Tan Y-Combinator, which isn't even really prestigious anymore. As far as the signalling value goes? I'd rather have a strategic from NVIDIA before YC. I would think about YC's money if literally no one else was interested. This is "ChatGPT Tha License Dawg", "die motherfuckers die motherfuckers die" tweets tagging elected officials Y-Combinator he's defending, and the vampire companies he cites as his clean wins are suitable filleted in the rest of the thread that mine would be redundant.
And the real mile marker of a guy whose audience has exceeded his depth is that he's lecturing a room full of people about how a single operation on the iPhone calculator app can teach you more about government and economics than is apparently understood by someone who has survived eight years in Congress designed to destroy people like her, who has an Economics degree cum laude from Boston University that she got while working as a bartender to support herself and her family after her father died, a situation with no parallel in pg's life or that of anyone adjacent to him in either it's highs or lows.
I got into this business substantially because pg's writing was so motivating to twenty year old me, and for that I'm still grateful. And just like I hope Kanye gets back on his Lexipro and starts making great music again, I hope that pg goes back to his roots and starts printing great technical and startup essays again instead of spewing solid waste.
But just like I can't follow Kanye down the "death con three to the jews in hollywood" road, I can't follow pg down the "think about the billionaires and don't listen to the honors economist multiple-term congresswoman" road.
One is dramatically more offensive in it's form, one is dramatically more toxic in it's substance, because there are people who take it seriously.
So do you have a counterpoint to his argument that 1 and 2 enabled new methods and scales of wealth creation?
I wrote a 542 token rebuttal to his argument that you originally replied to, but to zoom in on that particular nub of a much more complicated picture:
No serious person acting in good faith disputes that new methods of wealth creation have started appearing at a dramatically higher rate in the last two or three hundred years than any precedent before that. Everyone, including AOC (who I agree with in this instance but am not in general a huge fan of, just to be clear, I can respect a person's credentials without blindly endorsing them), would concede that point cleanly unless they were trolling.
The second point is so ill-formed as to verge on oxymoronic when examined against either of mechanism on the ground or Bayesian prior of history. New methods of wealth creation have triggered market failures admitting new methods of wealth centralization a number of times in recent history, the Gilded Age being perhaps the poster child for this failure mode, and the Great Depression being perhaps the poster child of the magnitude of that failure mode.
The sleight of hand here is recursive, the two points are one that is trivially true followed by the shellcode that looks like a test fixture, and the shellcode is a subtle rename, `s/time bash -c 'my-command'/sudo bash -c 'my-commmand/`. It's almost reasonable, except that it grants arbitrary privileges to something that definitely shouldn't have arbitrary privileges.
In both instances, pg is smart enough to know he's arguing in bad faith.
Both points support the same conclusion. You can create wealth now without taking it. Glad you agree.
> The second point is so ill-formed as to verge on oxymoronic
Sounds like name calling. I don’t see a rebuttal.
> am not in general a huge fan of, just to be clear, I can respect a person's credentials
Are the credentials here a Bachelors from BU? Is this an LLM?
If you're not aware, in addition to being generally frowned upon on HN because it's zero-signal snark, the no doubt satisfying BU diss is also such a meme about socially awkward teenagers that it's a bit in a hit movie: https://www.youtube.com/watch?v=HtMmhcNKn0o.
At "Glad you agree" we've left plausible benefit of the doubt that you're arguing in good faith and so I'll bow out with one procedural grade discharge, which is that the LLM accusation is quite trivially prohibited in the stare decis of dang's rulings over the years, but still sometimes rallies downvotes, so my credentials as a human are that no LLM I'm aware of (and I work in AI) has YouTube channels of code streams.
Chain of custody on that: https://news.ycombinator.com/item?id=48511333 -> https://www.youtube.com/@b7r6-c3t so no, I'm not an LLM. I have Opus read my comments after I post them so I don't persist in trivial errors of reasoning, but I credit LLMs for their output just as I expect mine credited.
Benefits of being a billionaire are vastly overstated. To live a happy life, you don't need to be a billionaire.
its even easier with a 9999% month over month growth
If you can grow 10000000000000% every millisecond you can start from one cent and become a billionaire in one millisecond!
Elon Musk easily earned the billions for SpaceX. It's providing space internet to Ukraine, an innocent democracy that's under attack. The technological feats of rocket reuse and the vision of Mars don't even matter, insofar as they're just tools to attract the capital. Any other method that supports Ukraine just as well would have also been worth a billion.
Patriot interceptors cost many millions, so 100-200 are already worth a billion! Is SpaceX internet worth 200 Patriot missiles? Easily.
I think politicians restrict "earning" to "wage income", which is kind of an arbitrary line in the sand, and would also be untrue. SpaceX/Tesla would also have paid Musk billions in cash if stock wasn't allowed.
We're just temporarily embarrassed billionaires.
This essay is unfortunate because he isn't addressing the true misunderstanding of politicians like AOC, he's not explaining the consumer surplus (why the world gained 50x more from Google than the founders), and he's not explaining that wealth is craeted not taken.
Politicians spend their lives in one of the purest zero-sum systems in existence. Of course they don't have a gut level understanding of the creation of wealth.
But consumer surplus matters most of all. Imagine the net benefit to consumers of Robotaxi and Optimus (ok, ok, assuming they work, for the doubters in the room). Entrepreneurs capture
What will become of this site once its userbase turns against its corrupt oligarch owners on the basis of it propagating evil things like Flock?
And yet, the vast majority of startups fail. This essay about exponential growth is clearly not the whole story.
How does your startup avoid failing? By skirting local laws? Exploiting employees? Destroying the environment? Replacing jobs in a way that makes the standard of living better for the few but worse for the many? Making weapons or systems that coordinate weapons? Submitting to and therefore tacitly supporting oppressive governments?
Sure, there are examples of startups that don’t do these things. But looking at billionaire-class startups (there’s not that many of those to analyze!), there are far more of them in the other category.
Well... but the billionaires, or billion dollar companies DO "break rules, abuse labor laws, pay people less than what they’re worth"... also manipulate markets, bribe politicians, evade taxes, sell user data etc. Even Trillionaire(s) and trillion dollar companies do that. Why do they do that then, if the only things they need are those two numbers and a product that people love ^_^?
Because there are more than 2 numbers even in pg's simplistic example. Third number: You make $10K monthly today. How? If your cost is $9.9K this doesn't mean anything right? Everyone can do that. So how you earn that $10K is more important than those other 2 numbers. You want more profit and less cost. That's when you start breaking the rules and doing bad things. You have to compete, and it's easier to win if you cheat. If there are cheaters in the game, they would win the competition, not you. And there are always cheaters in the game.
Silicon Valley's system is different than the rest of the world. They give the founders some sort of an infinite money glitch (for a limited time). They don't care about the third number. They care only about the Growth number. Because what they really care about is the Market Domination. They want to BURN money to BUY that market. In most cases, globally. That's why billions of people in the world are using Facebook's products daily. Not because Zuck had a great idea in his dorm room. Not because Poke feature was that viral. But because US needed to dominate the upcoming social media world. For profit, but more importantly for politics, for gathering information, for tracking people, for controlling (social) media and narrative, for security. So the system funded his startup, along with other similar startups in case any of them becomes the winner. And they didn't give just money, they give all the network, permission and privileges to win.
That's why Hans Zuckerberg from the Berlin startup scene hasn't become a billionaire but Mark did.
This is exactly the same playbook with the AI game today. My 70+ parents at the other side of the World use ChatGPT daily for FREE. They will never be the paying customers of OpenAI. OpenAI gives its expensive services for free, because they want absolute dominance in the global market. They can't lose that. Note that such a game plan is impossible for any company outside of Silicon Valley. Only state-controlled companies can play that game in the rest of the world. But for SV, it's not really clear who's controlling who.
Regarding the scale of what a billion dollars even means, I've recently been thinking of an example which I think might work (but I haven’t tried it on many people yet).
There are 86,400 seconds in a day (24 hours * 60 minutes * 60 seconds = 86400). Now let’s say you spend an average of 1$ every second. That’s every second, including when you’re sleeping or on the toilet. That’s 86,400$ per day, which I hope we can all agree is a lot of money.
If you had one million dollars, to spend it all it’d take you over 11 days (1,000,000 dollars / 86,400 seconds = 11.57).
If you had one billion dollars, to spend it all it’d take you over 31 years (1,000,000,000 dollars / 86,400 seconds / 365 days = 31.71). That is an obscene amount of money.
Mr. Graham is making 2 mistakes:
a) thinking that others don't understand exponential. Any reasonably college educated grad understands it well.
b) thinking that growing 93 percent every month means the founder has put in 93% more effort than the prior month.
Their argument relies upon the ideology that just because you thought and executed an idea profitably means you should continue to "earn" from it.
In the LLM age, more and more people are questioning this, and rather want to goto: effort == earnings.
Sadly, I don't believe that many college grads reasonably well educated in anything other than a scientific field understand exponentials.
Reading this, I realize that I don't have confidence in winning under capitalism, so I think it would be quicker to just try to break the game of capitalism altogether. But communism, in my opinion, seems like a concept that is unlikely to arrive, so please wait just a little while until I come up with a new ideology.
Woof. This article is pretty impressively tone deaf and seemingly missing the point (on purpose?)
> (on purpose?)
As Upton Sinclair put it, "It is difficult to get a man to understand something, when his salary depends on his not understanding it."
That quote is just the tip of the iceberg of Sinclair's work, though. He wrote about how when a person's livelihood, reputation, or financial well-being relies on a specific status quo, they often find it impossible to see the logic or ethics in changing it. It can be very difficult for them to confront such issues objectively.
He also wrote about the question of cynics vs. true believers in this situation. For the true believers, he pointed out that the only way for them to resolve their cognitive dissonance (while maintaining their lifestyle) is to block out the truth entirely. They stop trying to understand because actually understanding would be too painful.
The answer is easy, steal the value created by thousands of your employees.
It’s like fertilizer, for jealousy.
Yeah man its just all the people who are jealous that are mad and no other reason.
The billionares hands are clean, the climate is fine, the elections are great, there's nothing wrong, close your eyes, stuff your ears with wax, and keep on trucking :)
What people mean by "you can't earn a billion dollar" is that there's no work that's useful enough, alone, to be worth that much in reward. How can we live in a world where a moron can have a trillion to their name, while others work arduous physical labor all their lives and end up with nothing?
You might not believe you've done anything "bad" to become a billionaire, but the mere fact that you accumumated so much wealth necessarily means others, somewhere, had to work for it. The mere existence of billionaires is the mark of an unhealthy economy, that doesn't distribute wealth in an efficient or fair manner.
The issue with billionaires is that some of them got insanely rich while being net negative from a societal perspective.
The most famous ones ended-up in prison (Sam Bankman Fried, Elizabeth Holmes, Jeffrey Epstein, Bernie Madoff) but anyone with a basic grasp of statistics and criminal behavior know that many others will escape the justice system forever.
It does not mean that all billionaires are bad, the criminals are not the majority, but there are enough criminals to justify skepticism and scrutiny.
He makes it sound simple, and in some ways, it is. You have to not only build the thing, but also find the thing that people want. It’s the latter that’s as hard if not harder than the former.
In addition, the converse is not true. Just because you’ve found something that grows fast and in large market, doesn’t mean you’ll become a billionaire. With all humility, I’ve been lucky to have done that twice, but in a large company. I’m not complaining, I’m just saying that doesn’t necessarily make you a billionaire.
PG seems be becoming more and more disingenuous. People using the word "earn" almost always mean "you can't get this from wages." This doesn't mean that the effect of growth isn't real - almost any business that scales even moderately, but none the less scales, and is profitable, can make its owners millionaires or better. But this does not mean that those riches were "earned." Or that the person who started the business had more glorious suffering than some rando who works 80 hours a week of part time jobs to keep a roof over their kids' heads. Rather, it is inherent to finding a scalable business and not screwing it up.
Wow, Paul Graham REALLY missed the point.
How ironic. Extremely successful person tries to justify why he's better or smarter than you, and the way he does it proves that he doesn't even understand what the other person has said.
He kind of proved the point he intended to disprove.
It's not quite as bad as a lottery winner saying "anyone can earn the jackpot", but it's in that direction.
AOC wasn't even being easy to (deliberately) misunderstand, here, like Obama was when he said "you didn't build that".
Of course, like the tan suit critique, the "you didn't build that" pearl-clutchers were all arguing in bad faith.
I don't think Paul Graham is arguing in bad faith here. This post is just, for lack of a better word, "stupid".
> Since we started it in 2005 we've funded about 6500 companies.
> I've spent the last 21 years training people to become billionaires. So far about 30 of them have
Since it's a post about math, let's do it.
6500 companies with 2 founders each - 13000 founders.
30 of them became billionaires - 0.2% of them.
So being a tech founder at the most famous startup accelerator in the world give you about 0.2% chance of becoming a billionaire.
Or put another way, only 1 out of every 500 YC-combinator founded startup makes one of it's founders a billionaire.
As a committed market-socialist, the extent that the HN commentariat has turned into a reflexively nihilistic anti-free-enterprise is a fairly astonishing turn. It’s like my belief system turned into the maximally idiotic version of itself.
“Externality” is thrown about as a term almost completely disconnected from any economic grounding of the term. If you make externality mean “anything I find aesthetically displeasing”, then yeah, sure, billionaires create and benefit from externalities, if your aesthetic is egalitarian comity.
But if you mean “legitimate societal goals, legislated and agreed on by a representative body” are being violated left and right by billionaires, gimme a break.
Go ahead and tax capital gains way more. Ending the estate step up in basis sounds great. Break up the “borrow” part of buy-borrow-die, while you’re at it, and treat encumbrance on capital as a taxable event, we could probably make that work, too, although the middle class might foam at the mouth if that was applied broadly.
But, man. The cynicism, confiscatory and controlling instincts on display are enough to make me upgrade Ayn Rand from “hypocritical nut” to “maybe she was on to something when the general population gets tall poppy syndrome.”
Markets work. There are externalities, but we can, and should, legislate fixes for social goals that we actually agree on. But stiflingly heavy regulation is really bad for incentivizing creation of new knowledge and wealth. You can still believe in caring about people, and building (incentive aligned) social safety nets without destroying people’s incentive, and thus, because intellectual capital formation depends heavily on network effects, people’s ability, to create many kinds of value in the world.
Actual socialists recognize that capital is incredibly useful, and incredibly valuable. Leveraging capital is incredibly beneficial to the world. Pretending that the people leveraging that capital are somehow guilty of an original sin just by leveraging capital markets, which is really what these screeds against anyone holding controlling interests in companies they were instrumental in creating, seem to be about, leads down a terrible path.
Demonizing people creating things is petty and unbecoming for a political movement.
Man I am so tired of rich people. Can they all just go f each other on a little island and leave the rest of us alone to enjoy a normal life?
He's right. You don't have to cheat to become a billionaire. Stepping on everybody else's throats is a legit part of the capitalist playbook. No cheating involved.
What an out of touch buffoon. AOC is right, billionaires are a policy failure, and pg is making her point.
This is a strawman argument. It is of course mathematically possible to obtain a billion dollars (although notably much harder to do in a way that is liquid, but let's gloss over that). My somewhat more charitable reading of that claim (shared by other readers here, I see) is that ‘earn’ refers to moral desert. I'm not really a desert-oriented person but let me try to steelman it a bit:
In aristocracies we traditionally assume or imply that a person can deserve a certain wealth or power simply by being born into it. Capitalism, however, sells us the dream of the meritocracy: your (financial) success in life should depend not at all on factors of chance like birth or genetics but simply how much of yourself you choose to sell to the market.
At any point in time you have control of some tangible or intangible capital, including wealth, physical health, social connections, equipment, information, trained skills, et cetera. Some of these assets are gained by luck, e.g. accident of birth; some of them are gained by trading your time; and some of them are gained by spending another asset (whose origin reduces, recursively, to some combination of luck or time). At any point you can, assuming the market is appropriately liquid, spend some of these assets to get cash.
Some of these assets have force-multiplier effects on your future output in certain domains, from which exponentials naturally arise; but the time spent on them remains linear, and so, if we want to ignore inherited factors (the opportunity to spend the time on things without immediate feedback, say, or handed-down insight about which of these investments will produce the most value in the future, or access to the required tutors) the increase in earnings these things _merit_ has to remain linear as well. There is no way to compound your time and therefore, under an assumption of meritocracy, there is also no morally acceptable way to compound earnings, which I would assume is the point the politician is attempting to make. Under this worldview, any exponential compounding that occurs must, mathematically, be a result of systematically undervaluing the time of an exponential number of other people, since each person can only spend a linear amount of time.
In practice, of course, the assumption of meritocracy is simply wrong, and arguably the concept as a whole is internally incoherent (or at least I don't believe we've yet managed to articulate it coherently: we would have to settle the nature vs nurture debate and completely sever the value of a person's spent time from the accidents of their birth, if such a thing is even meaningful). But I think that's where the claim falls down, not in failing to understand the mathematics of exponentials.
Please don't bury the lede here of how the author completely and epically misses the point of the statement.
It's not about the math of the thing, it's about the arguably necessary exploitation that must occur to hit those kinds of numbers.
And in fact, IMHO, you don't even need to get to "exploitation" to criticize this mentality.
Any normal human would (and if not would, SHOULD) want to stop "earning" well before they hit those ridiculous numbers. Let's say -- at about 50 million, a normal person should realize, yes, that's enough. Time to pivot to something that doesn't cause so much accumulation. This does happen, we just don't hear about it enough.
There’s no exploitation involved because it is not a zero sum situation.
This is a ridiculously oversimplified application of first year economic theory. No, we do not live in the textbook fantasy of "everyone is always free to make favorable trades and therefore no one is exploited."
Yes but yours is more of an edge case than mine is.
Trades are almost always positive sum with some externalities.
Trades aren’t exploitative like you claim.
I feel like a primer on Labour Theory of Value is important in this thread. This a debunked theory that is still being used by populists to justify their anger on the System TM and in particular, the billionaires.
Folk LTV interpretation is that people's wages are supposed to be proportional to their hours worked. Obviously this is false -- everyone knows this but people still repeat it because it has populist memetic value.
That LTV is debunked and proved to be useless is very easy to demonstrate -- the single person (who was a Marxist) who took this theory seriously abandoned it. He's not the only one though.
I asked ChatGPT this: "who is the single one contemporary person who took labour theory of value seriously in an academic sense?"
ChatGPT: G.E Cohen.
(G.E Cohen is an Analytical Marxist BTW)
Here's what G.E Cohen has to say specifically on LTV:
1. "labour theory is, moreover, false" [1]
2. "The labour theory of value is not a suitable basis for the charge of exploitation laid against capitalism by Marxists, and the real foundation of that charge is something much simpler which, for reasons to be stated, is widely confused with the labour theory of value." [2]
[1] https://andrewmbailey.com/money/readings/cohen
[2] https://www.versobooks.com/blogs/news/3128-the-labour-theory...
So here you have the one guy who took this flawed concept seriously, * from the side of Marxism * and then has to conclude that it is false.
Money, property, limited companies, intellectual property laws, patents, contract law, etc. etc. are things on which all successful businesses depend. These are social constructs - societal "technologies" if you like. They work because as a society we agree that they should and enforce them through the rule of law.
The assertion that it should be "impossible" to be a billionaire (or trillionaire, gazillionaire, whatever) is really an assertion that a just and moral society would design all of these things to prevent that outcome.
And I think it's pretty reasonable to say that we ought to set society up such that as someone gets wealthier we take money away from them at faster rates, so that beyond some level of wealth it is very difficult to continue to get richer.
Unfortunately, a lot of people are captured by rather libertarian ideas about government, money, property, etc. that seem to prevent many people (at least in the US, UK, et al.) from behaving in anything but the most selfish, individualistic, and antisocial of ways.
I think maybe the fundamental issue is something that he said really late in the essay:
> There are other ways to get rich than by starting startups. Some of those do require you to exploit people. But startups are the most common way to become really rich, and if you want to start a successful startup, the key is not exploitation but empathy.
> How people become rich in your society is one of the most important things to understand about it. You can't let your beliefs about this be determined by ideology, or movies, or historical examples that are centuries old. You must look at the world around you and see how it's actually done.
The "it's impossible to do morally" people are looking at how it used to be done, and how it's sometimes still done. They are right to be opposed to that. But oppose the immoral aspects of it, not doing it at all.
And those who hard-core define a billion as immoral are I think signalling something else: They want the government to take that money, from every billionaire. (If we're talking immorality, we could discuss the morality of that.) But they don't understand that there will probably be second-order consequences of doing so...
You're right, higher taxes on the billionares would create all sorts of second order effects, like the ability to pay for the social safety net for the common folk, maybe educating the populace properly, all sorts of truly scary stuff!
I didn't say "higher taxes". I said "take it" - meaning take all of it. Confiscation. That's what I think many of these people are trying to say, without quite saying it.
Um, did i just get mansplained compound interest by Paul f*ing Graham? I feel like this has been the subject of condescending advice since the beginning of time.
"But now you at least understand, from having done the math yourselves, that you don't have to cheat to become a billionaire. You've seen for yourselves that there are only two numbers in the calculation, the growth rate and how long it continues."
What could possibly be false in a two-parameter model of reality?
He seems to be regressing, he said this in January:
> The rational fear of those who dislike economic inequality is that the rich will convert their economic power into political power: that they’ll tilt elections, or pay bribes for pardons, or buy up the news media to promote their views.
> I used to be able to claim that tech billionaires didn't actually do this — that they just wanted to refine their gadgets. But unfortunately in the current administration we've seen all three.
Now he's claiming he's trained all these billionaires and they are a blessing to the world, not avaricious sociopaths.
He writes for an audience and knows what he's doing.
This horrible mentality is what ails tech bro culture today and ruined the tech world for me - chasing billions
Greed mixed with analytical thinking on industrial scale - graham, thiel, musk, hoffman, bezos, zuck all symptoms of “smart” people who screwed this country ultimately - all for what?
Has the changed world that resulted been for the better?
> Though the most successful founders are usually good people, they tend to have a piratical gleam in their eye. They're not Goody Two-Shoes type good. Morally, they care about getting the big questions right, but not about observing proprieties. That's why I'd use the word naughty rather than evil. They delight in breaking rules, but not rules that matter. This quality may be redundant though; it may be implied by imagination.
> Sam Altman of Loopt is one of the most successful alumni, so we asked him what question we could put on the Y Combinator application that would help us discover more people like him. He said to ask about a time when they'd hacked something to their advantage—hacked in the sense of beating the system, not breaking into computers. It has become one of the questions we pay most attention to when judging applications.
- Paul Graham, "What We Look For in Founders"
I also want to add my own characterization.
It is my personal experience with YC founders that YC has coached them in business practices and philosophy that could be characterized less than charitably as "how to con people and get away with it."
I understand the PG doesn't believe this himself and every partner has different advice. But there is a consistent pattern of dishonesty and manipulation that is not innate to founders but taught to them directly by YC partners and it is impossible for me to square this essay with how those founders PG has coached over the last 20 years behave.
Maybe it's possible to become a billionaire without cheating. But all I know is YC won't teach you how.
---
Aside, it deeply bothers me how tone deaf pg is politically. There is a meta to AOC's messaging that he's not reading, which is that wealth is unattainable for the masses and there are oligarchs in our society manipulating our systems to empower and enrich themselves. You are making a rhetorical error by attempting to debate a single sound bite instead of addressing the systemic problems that AOC and progressive democrats are voicing.
If we assume that YC funded about 6,500 companies and produced about 30 billionaires...That is 0.46% using the most flattering denominator possible. And the best reason not to apply to YC.
If you count individual founders, the rate is even lower. So to insinuate this is some kind of training people to become billionaires, is like a lottery operator saying he teaches wealth creation because a few ticket buyers hit the jackpot.
PG is turning an extreme power law outcome into a moral argument. A tiny fraction of founders capture enormous upside, thousands do not, and PG presents the winners as proof that the system is fair. I could not think of more survivorship bias with a halo.
And thee political sneer is also absurd. Startups do not exist outside politics. They exist( or should exist) inside law, tax, infrastructure, courts, labor rules, housing rules, securities law, immigration policy, and government procurement. Uber S-1 warned that its business would be harmed if drivers were classified as employees rather than independent contractors...and described legal and regulatory obstacles as material business risks. In other words...regulatory arbitrage ( corruption? ) as a business model.
Airbnb is an even cleaner YC example. Its own filings describe short term rental law, host registration, tax collection, fines, city restrictions, and New York 2023 rules as materially affecting the business. Its a business that lives lives inside a fight over housing law and local regulation.
And if the claim is that politicians do not understand value creation, then SpaceX is a hilarious counterexample. SpaceX is a company completely entangled with the state and US tax payer. SpaceX has about $22B in government contracts, mostly NASA, and Reuters separately reported a $5.9B Space Force launch award in 2025.
And the biggest logic failure being used here is the so called exponential growth part. The world is not exponential. Population growth is not exponential forever. Demand is not exponential forever. Restaurants, supermarkets, apartments, drivers, cities, and disposable income are finite. Real markets saturate. Growth curves become S curves. Pretending that 15% monthly growth can simply continue for years is nothing more than spreadsheet intoxication.
So instead of the claim you can earn a billion by making users happy, what is reality is, that in a legal and financial system that massively rewards scalable equity ownership, a tiny number of founders can become billionaires if capital, timing, network effects, labor structure, regulation, and distribution all break their way. I don’t think its legal, and the best PG could do with this is a defense of the casino by pointing at the jackpot winners.
Just reflect on this: Of the 30 billionaires Paul Graham talks about, in an essay where, notably, he never once uses the word “entrepreneur” they come from these 14 companies:
Airbnb, Brex, Coinbase, Cruise, Deel, DoorDash, Dropbox, Flexport, Instacart, Loopt, Meesho, Reddit, Scale AI, Stripe.
Less than half of them are profitable as of 2026. None created a vaccine or cured a disease, discovered a new algorithm or mathematical theorem, developed the economies of poorer countries, created a new engine, or invented a renewable energy source. If all of them...disappeared tomorrow...you would probably just use some other payment system, maybe with higher or lower commissions, and argue on some other message board not called Reddit.
The impact on human lives would be zero... or maybe even slightly positive.
You do not EARN 1B$.
You mass exploit labor at scale to exfiltrate 1B$.
You commit wage theft to obtain 1B$ (the largest theft category).
You union bust and fire workers who try to fight for better working conditions and wages.
You engage in monopoly practices to obtain 1B$.
You engage in corruption via 'campaign donations' to lay down laws that benefit you and harm others.
Doctors earn. Engineers earn. Scientists earn. LABOR EARNS.
But billionaires never *earn* 1B$. They exfiltrate, steal, and corrupt.
In tears laughing that people still believe the labor theory of value. How is this possible. What's next, bringing back miasma theory and spontaneous generation?
Well, for starters, Elon Musk actively adheres to the Labor Theory of Value. He named it differently, with the "Idiot Index". Except, its an inverse LTV.
Both theories use the SAME formula.
Final Price = Raw Materials + Labor + Overhead + Profit
The difference is that Marx pushed that labor is what makes a thing have value. Wheres Musk pushes that humans have 0 value, and should be removed whereever possible.
Same thing, different conclusion.
And know what happens when we get "perfect idiot index" of 1.0? There are no workers, no money, and wealth is accmulated purely in the hands of the elite. Hell, even Ford saw this in tge early 1900's - who'd buy cars if nobody can afford them?
Hi, this is called “Labour Theory Of Value”. And this is imo a popular theory of value creation a lot of people believe in and it has populist memetic value.
But Labour Theory Of Value has been debunked and is mostly not used anymore.
"It is difficult to get a man to understand something when his salary depends upon his not understanding it"
- Upton Sinclair
And, well, you are right that there are 'debunkments' of Labor Theory of Value. Of course, they are put out by hard right-wing laissez faire capitalist enclaves, like Mises. I would never expect them to take a dispassionate view of capitalism, given their extremist position.
https://mises.org/mises-wire/three-arguments-debunking-marxs...
I asked ChatGPT this:
"who is the single one contemporary person who took labour theory of value seriously in an academic sense?"
ChatGPT: G.E Cohen.
(G.E Cohen is an Analytical Marxist BTW)
Here's what G.E Cohen has to say specifically on LTV:
1. "labour theory is, moreover, false" [1]
2. "The labour theory of value is not a suitable basis for the charge of exploitation laid against capitalism by Marxists, and the real foundation of that charge is something much simpler which, for reasons to be stated, is widely confused with the labour theory of value." [2]
[1] https://andrewmbailey.com/money/readings/cohen
[2] https://www.versobooks.com/blogs/news/3128-the-labour-theory...
So here you have the one guy who took this flawed concept seriously, * from the side of Marxism * and then has to conclude that it is false.
Wait a sec.
You want me to *trust* the output of a hypercapitalistic slop machine whose owner bulk pirated most of the western knowlege for money. And he wants to scan the eyeballs of everyone for his shitcoin (and kicked out of multiple countries for abuses).
And, you expect me to read that slop drivel? Fuck, no.
I had the decency to use my own words. You can too. And, "Don't post generated text or AI-edited text. HN is for conversation between humans." I do not care about your propaganda clanker.
A reminder that in a recent Paul Graham blog post, he vowed to help the 2nd Trump Admin crush woke youth, and asserted that racism isn't bad as the left thinks.
In the following weeks we saw Elon do two Nazi salutes in front of the presidential seal, and we saw the Trump admin hire tons of thugs to rip minority children out of their beds, and those same thugs have murdered a number of citizens, with Stephen Miller loudly shouting that they have absolute immunity.
I'm surprised Paul Graham and the signers of the blog post are not to embarrassed to continue posting their thoughts. At worst Paul should stop talking, better, he should apologize and admit he is a fool.
Some disrespect to PG, but the entire thing reads like:
"Oh, if we just operate in a vacuum, do not closely examine the systemic interactions of our accumulation of such vast sums of wealth, assume there's no moral or ethical quandary that would prevent us from utilizing every game theory strategy available to us, and have consistently high, compounding growth over time, then anyone can make a billion dollars if they follow my teachings, which in turn were formulated over thousands of students and with a success rate still in the single percentage points, at best."
Here's the thing none of these people will ever admit: not everyone can actually succeed at a goal, otherwise it wouldn't be a goal, but a baseline. This is the fundamental grievance I have with these sorts of "wealth whisperers" braying on (and on, and on, and on) about how with a good idea and hard work (and YC's guidance), you too can be a Larry Ellison or Elon Musk or Mark Zuckerberg type.
Which, no, you cannot. If you could, PG's success rate for billionaires would be 100%. It is not, so clearly hard work and a good idea (and a mentor) alone isn't enough. Yet enough leaders and populace have bought into this fairy tale that we've reoriented society around it wholesale. The presumption is that anyone lacking in obscene wealth has done so by choice, rather than examine systemic incentives and policy failures that make such an outcome the default, rather than a personal choice (or worse, some sort of personal failure).
I'm just so weary of having the same argument with the same people who refuse to bother learning anything that might remotely conflict with their world view anymore. If the response to "maybe we should improve society somewhat" is some banal wealth-building sales pitch relying on cherry-picked statistics and devoid of any wider context, then I think it's safe to presume you're either willfully arguing in bad faith or so colossally ignorant that you're beyond help.
EDIT: One thing I would add requires quoting PG.
> There are other ways to get rich than by starting startups. Some of those do require you to exploit people. But startups are the most common way to become really rich, and if you want to start a successful startup, the key is not exploitation but empathy. What do users really want? What could you do for them that would make their lives dramatically better? That kind of empathy is what we look for in founders, and what we cultivate in the ones we accept.
I will flatly reject that YC startups of late have any shred of empathy for their customer base, in general. If they had any shred of empathy for their customers, they all wouldn't collectively lean into the "permanent underclass" and "AI job replacement" narratives so often spouted by their predecessors. In fact, I would go so far as to argue the only groups with a shred of empathy for their customers might just be the non-YC startups or the FOSS groups cranking away in spite of all the headwinds.
Nobody - nobody - makes a billion dollars through empathy alone. At some point, one has to make a conscious decision to say "I demand more returns than reasonable relative to my costs, and I expect my customers and/or employees to bear that burden on my behalf." Otherwise we'd see a parade of companies demanding caps on margins to drive prices lower or wages for workers higher, thus creating more spending money among workers that in turn produces more economic activity. We do not see this outcome, therefore we cannot ascribe empathy as a source of wealth.
I know an easier 3 step hack if anyone's looking for one:
Step 1 ensure server connection is alive and you see pre-birth screen
Step 2 pick character starter pack of higher surface luck areas (e.g. father runs emerald mine in south africa)
Step 3 identify server grandmasters and rewrite unfavorable rules after birth
Unfortunately I skipped step 1 on this build so I'm looking to improve next time!
Absent circumstances of four digit inflation rates, one cannot earn a billion dollars… one can only accumulate a billion dollars.
If one ever does so, one has definitely done something morally indefensible.
What, exactly, is the morally indefensible thing that they have definitely done? If it's definitely there, you should be able to point out what it is.
Apple, for example, steals 30% of the money of anything you buy on your phone.
Charging someone money that they voluntarily pay in return for getting something of value themselves is not stealing.
For example, the highwayman, who who provides the valuable service of 'not getting murdered' to travelers, in return for the payment they voluntarily make.
Or perhaps you would prefer the example of the extortionist, who provides insurance against the risk of "something" happening to the nice business you have?
What's morally indefensible about that?
Once they define it as stealing, then it's morally indefensible, by definition.
The question is, is it actually stealing, or is that just their overheated rhetoric? From where I sit, it's hot air.
> Once they define it as stealing, then it's morally indefensible, by definition.
Right, similar to the equivocation around the meaning of earn in this thread. I've started to wonder whether it's possible to push by accepting that framing and then asking for a justification rather than quibbling about what "stealing" is.
I doubt it. "Stealing" functions as a thought-terminating cliche; I suspect that very few people will think past it.
As a first pass, you’ve accumulated all that money, thus you’ve actively or passively, knowingly or unknowingly, taken advantage of a perverse systemic bug that allows that sort of money to accumulate in any one person’s hands to begin with.
But point me at any given billionaire and I can provide more context-specific examples, sure.
There is nothing more evil in this world than the pursuit of power and wealth.
“For the love of money is the root of all evil: which while some coveted after, they have erred from the faith, and pierced themselves through with many sorrows. ”
— 1 Timothy 6:10 KJV (The King James Bible) <https://en.wikisource.org/wiki/Bible_(King_James)/1_Timothy#...>
Most people do that to some extent. There are worse things.
This is what weak people say to comfort themselves in a world with hierarchy and power differential.
Even AOC doesn't believe what she said. She's saying it because she has a startup of her own which sells ideas, and gets paid in votes. It may not be 93%, but she's had a pretty good growth rate, and when you get to about 50 million, you have a great shot at being President. Ideas which bash rich people have had a growing market for a while, and she's good at it, and people are telling their friends about her.