pg should just get every founder to trade wallstreetbets style for a few days. they'll be doing this calculator exercise intuitively

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.

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.

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!

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.

Does that work always without fail with anyone anywhere anytime?

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.

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.

>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.

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.

An obvious calculation. The real world cannot be calculated so easily, It is changing unexpectedly and quickly.

"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.

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.

Woof. This article is pretty impressively tone deaf and seemingly missing the point (on purpose?)

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.

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.

"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.

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.

Ew

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.

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.

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.

(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

  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.

>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.

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.

It’s like fertilizer, for jealousy.

There is nothing more evil in this world than the pursuit of power and wealth.

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.

> 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...

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 answer is easy, steal the value created by thousands of your employees.

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".

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...

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?”

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.

> 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.

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.

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.

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?

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.

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.

> 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.

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.

its even easier with a 9999% month over month growth

> 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.

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-component model of reality?

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.

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)

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.

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.