I liked these essays when I was young, because these were so encouraging. It treated us programmers as special snow flakes, and advertised us the romantic super exciting world of startups.
Now as I got older and more experienced I find these essays trivial, boring or simply not true.
I realized I no longer gain anything 'usable' for my life from such essays.
(I find less and less interesting most essays from Joel and others also. I am more and more interested in actual business opportunities and connections, and less and less interested in general essays about enterpreneurship and programming.)
Creating wealth is relatively easy, but I don't care about it anymore (except as a hobby), I care about creating money, which is much harder.
All the stuff about programmer productivity in this essay is first not true but more importantly not really important anymore in my opinion.
At most startups and big companies programming is a commodity. By 2011 we programers are good enough, programming became matrue enough that it is really a commodity now. Not a cheap commodity, but a commodity: a $100.000 per year commodity. I argue that in 2011 (maybe not in 2004) you can find really good people for $100.000 per year if you know how to find these people. You can find much cheaper in Eastern Europe (where I live) if you are not so snob that you think programmers in the West are so special. So unless you work on something very deeply technical or technicall revolutionary (so you are not John Carmack working on the fastest rendering engine on the planet or you are not the engineer behind Gogle's superfast javascript engine) your value as a programmer is someting like $100.000 or something. There is no '36x multiplier because of programmer productivity.' I think if the market is quasy efficient that means if your startup would be about programming then the expected value of your earnings would be sometinng like this value ($100.000) in your startup.
What kind of multipliers there really are:
- There can be a multiplier because of your idea, your product, your marketing, and your connections. But not programming (in case of not technically deep startups. Technically deep startups are quite rare.)
- There is a factor which is related to how popular it is to create a startup. If it is super popular because of marketing essays like this, then it is possible that there are too much startups of constant sized markets, so that your expected value of earning could be even less than $100.000. At the time of this essay, when starting-up was not that popular we could not really speak of saturated markets, so that your expected value of earning was probably more than $100.000. The more people start-up the less attractive it will be to start-up. So the more successful PG's essays will be the less true they will be.
I think the nugget of wisdom here is your point about technically deep startups being quite rare. I can't remember who said it - Steve Blank? - but the startup world is currently dominated by companies who have marketing challenges, not technical challenges. If you go to a startup event, the people who need to figure out how to build what they want to build are vastly outnumbered by those who need to figure out how to get people to pay them for what they want to build. It seems like most companies are essentially building niche CRUD websites, with varying levels of sophistication.
But to defend the nature of this piece a bit; it is excerpted from Hackers & Painters, a book as much about culture and inspiration in technology as anything else. Once you find your groove - and you're not 21 anymore - I don't think anyone can blame you for moving on.
"If a fairly good hacker is worth $80,000 a year at a big company, then a smart hacker working very hard without any corporate bullshit to slow him down should be able to do work worth about $3 million a year."
I am not sure though that it is false. It is just not very well defined. (I don't know what it means. What actionable advice can be concluded from it.) You say wealth is different than money. This implies that wealth cannot be measured with the money you can gain from it. But you somehow measure wealth with money. You somehow convert between the two using the ratio used at big companies.
What can be said in my opinion is this:
At a big company you are paid 100.000 per year to improve someone else's huge shitty code. You are paid to fight with buerocracy. You are paid well for it.
In a small company you are paid to create new programs fast. Much faster than in big companies. But this small company either has huge risks or have much smaller income than the big company. You programming does not worth more just because you can create more lines of code or nicer code. Your programming here also worth only $100.000
Maybe I misunderstood you, but I read you as you stated that the expected value of the earning of a programmer founded startup is 36x$80.000
I think it is more close to 2x$80.000
The 2 multiplier comes from you work 2x more time in a week.
In a small company you are paid to create new programs fast. Much faster than in big companies. But this small company either has huge risks or have much smaller income than the big company.
It sounds like what you're saying is that although you may be able to get code written (and thus wealth created) faster in a small company, you don't automatically get paid in proportion.
If that's what you're saying, I agree, and in fact I said so later in the same essay:
"The other catch is that the payoff is only on average proportionate to your productivity. There is, as I said before, a large random multiplier in the success of any company. So in practice the deal is not that you're 30 times as productive and get paid 30 times as much. It is that you're 30 times as productive, and get paid between zero and a thousand times as much. If the mean is 30x, the median is probably zero."
One doesn't need to look very far. The first paragraph:
> If you wanted to get rich, how would you do it? I think your best bet would be to start or join a startup. That's been a reliable way to get rich for hundreds of years.
Startups are not a reliable way to get rich. Or what failure rate would you still consider reliable?
That said, I do agree that working at a startup can mean that you can contribute more. That is not always the case however. Just like smart technology is leverage, a big company is leverage too. Even assuming that you'll be 36x less productive at a big company, you'll probably reach 36x more users simply because you're working on a product by a big company.
You seem to share a common statistical misconception about success rates. If 10% of startups succeed, that doesn't mean that if you start a startup, your chances of succeeding are 10%. They are either much higher or much lower.
This is clearer if you consider a statement like "10% of men are over 6 feet tall." There's no one who has actually has a 10% chance of being over 6 feet tall. 10% of people have a 100% chance, and the remaining 90% have a 0% chance.
For the sort of person who has sufficient drive to get rich at all, starting a startup is a much more reliable way to do it than the overall success rate implies.
The frequentist way you're doing probability in that comment is not valid since the success or failure of one particular startup is not a repeatable experiment. The only valid interpretations are (1) the frequentist probability across a group of startups and (2) the degree of belief, or bayesian probability of a single startup's success. In this framework it is entirely reasonable to assign a 10% probability of success to one particular startup. I agree that if you knew beforehand that you're in the small group of people whose success rate exceeds your standard for reliability, then for that person a startup would be a reliable way to get rich. The problem is, of course: how do you know which group you're in?
I didn't mean to imply that for the right sort of person the odds are 100%. But they're pretty good. Probably over 30% and maybe as high as 50%. And since failing is usually pretty quick you could easily try 3 startups in 5 years.
As it turns out there is an easy way to know which group you're in: ask us. Like all venture investors, it's our job to answer that question, and we work very hard to try to do it well.
I would have to agree. For all the belly-aching about Wall Street in NYC's tech community, you're guaranteed a significant income for a number of years.
For this equality to hold:
E(Wall Street hacker's earnings) == E(startup founder's earnings)
you need an extremely high payoff, since
E(startup founder's earnings) == P(startup success) * payoff of startup.
and we know the probability of success at a startup is low.
Everyone on HN needs to be honest with themselves: this kind of high payoff almost never happens, in aggregate. And I haven't even included a risk premium, which would make the required payoff higher!
If wealth capture is a main concern, you're better off building a nest egg at a hedge fund or large corporation for 10 years. If you want to start a startup, do it for the culture and technological freedom. From a statistical view, however, a startup is not the optimal way to become rich.
EDIT: mynegation reminded me of risk-adjusted returns. Thanks!
The risk adjusted returns of a venture-capital funded startup for a a founder with assets < 100k and non-entrepreneurial opportunities of > 100k is about negative 100-200k. In other words, you'd pay money to not be a venture-capital funded startup founder in that scenario.
I believe pg meant there's a much larger percentage of rich people who were once part of a startup vs rich people that worked like everyone else. I'd say that's a fact right there.
P(becoming rich | working at a startup) != P(worked at a startup | is rich)
I don't want to parse statements here, but it's pretty clear PG suggests that starting up or working at a startup is the best way to become rich. I'd wager that, in practice, people become rich for a variety of reasons, with none being more effective than any other.
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EDIT: Above, I'm trying to point out how the fraction of rich entrepreneurs vs. rich employees provides us with no information by itself.
However, we can develop a distribution of probabilities for becoming rich based on the career you chose, using the careers of those who are already rich. I'd suppose this is PG's real point, and while I can't verify it right now I'd bet entrepreneurs become rich at a higher frequency than non-entrepreneurs.
Can't say we are saying anything much different but let's focus on what seems important. So there's a variety of ways to get rich and we want to know which one is easier: work for someone else vs start your own company. My point is that 99.9% of the world population work for someone else while only a really small percentage started a company. And only a really small percentage of the world population is rich. Even if only of 1% of the rich people started their own company, there's still truth to what the article said. So, I was saying it's a fact that your chances to get rich are much higher having your own company than working for someone else. Which I also believe is the point in the article.
You're right, we're agreeing violently. Above, you said that more rich people started a company than worked for others; here you're applying Bayes. That first assertion is not verifiable, but you're definitely right that starting a company increases your likelihood of becoming rich.
That depends entirely on your definition of rich. While P(earnings > $1M/year) is probably going to increase, P(earnings > $100k/year) is probably going to decrease. It's also unclear whether your expected earnings are going to increase, and note that most people's loss function is not even linear (e.g. you're not going to be 10x as happy earning $1M than earning $100k -- and you're going to be much less happy when you're broke).
It's ok, I could have been much clearer (but then I would also repeat what's in the article). I have the feeling people commenting here did not read the whole article or are just nitpicking, it's one of the best articles about the history of work and its current status I have ever read, everyone should read this.
"When those far removed from the creation of wealth-- undergraduates, reporters, politicians-- hear that the richest 5% of the people have half the total wealth, they tend to think injustice!"
Your comments preceding and following this sentence suggest that injustice doesn't enter into the equation.
But on the contrary, anyone who's paid attention the past 30 years is well aware that inequality has increased greatly, and that the main reasons are various forms of carefully calculated injustice, such as:
1. Regressive tax policies shifting the tax burden from the wealthy and the corporations to the middle class.
2. Mass wealth transfer scams such as the housing bubble and the S&L scams of the 1980s.
3. Massive spending on foreign wars which benefits a very narrow slice of weapons companies and related businesses - that money could have gone to build up the wealth of the nation, in the form of infrastructure, education, etc.
4. Massive deregulation of the financial industry, which allowed many Wall St. scams to proceed without hindrance.
The glib thinking exemplified by the quoted sentence is typical of "libertarian" ideology that doesn't expend much energy on thinking about the problems cited above.
You didn't refute what I wrote. You just quoted me and used it as a jumping off point for a rant of your own.
This is why I ask people who think they disagree with something I've written to find something I actually wrote and refute it. Otherwise more often than not they are (as you are here) arguing against something they mistakenly believe I said rather than something I actually did say.
What I said in the sentence you quote is that a lot of people automatically assume that economic inequality is due to injustice. I never claimed it never is, and in fact it's pretty clear from e.g. this passage I think it often is:
"There are a lot of ways to get rich, and this essay is about only one of them. This essay is about how to make money by creating wealth and getting paid for it. There are plenty of other ways to get money, including chance, speculation, marriage, inheritance, theft, extortion, fraud, monopoly, graft, lobbying, counterfeiting, and prospecting. Most of the greatest fortunes have probably involved several of these."
pg's multiple comes first from how the programmer is deployed, and only then from the talent edge. His example of a programmer deployed in a lacklustre way is maintaining and tweaking a piece of software.
Look at it this way. Before Google, there were plenty of very smart people working on improving search. Page & Brin might have had a valuable talent edge, but what made them able to jump ahead of the other, far better resourced, search companies is that they were applying their skills to the right problem, namely, how can we best analyse the whole corpus of data, rather than how can we tweak HTML content extraction to support indexing. There's luck in Google's success, but it is clear that there is a big difference in deployment.
sorry to burst your bubble but Page and Brin are computer scientist and much less "programmers".
The reason Google succeeded was because they had a great idea, and not because they had the best programmers.
Being programmer alone is of little use, one must be an innovator to create wealth.
I think it depends on how you define "idea". If the idea was to automate indexing and improve search, they were hardly the first and it was not a good idea that propelled them anywhere, but rather brilliant execution.
If by idea you mean something like "the bulk of the pagerank algorithm" then yes, that counted for a lot, but I think fleshing out that algorithm from the concept of "automating indexing" is part of what most people would call execution and even part of what a lot of people would call programming (developping the algorithm is often a key step of writing the program), and even then they executed the details like their page design and UI choices well.
They succeeded largely because they were hardworking people who executed well on a hard problem, though as PG says in the essay there was also a luck factor in play as there is in most of life.
Are you saying Page & Brin didn't program? They worked on Backrub for 2 years before they hired their first programmer.
You possibly did not read my comment properly: I was arguing that pg invested less into the super-productive programmer idea than your description. He's elsewhere argued that programmers (even if they are called Computer Scientists or Solid-State Physicists) are better placed to turn great ideas into successful start-ups than MBAs.
I do not think it is black and white. I myself sometimes have taken risks in my life, but I do not take huge risks all the time. I had to decide on this when I had my family and children. I am creating wealth by creating my Html5 Canvas based UI system on the side, but currently my family eats because of the money I get from a 'corporate job'.
And mine has always eaten because of the startup, or the consulting, or the speculative app development.
Starving is not really an option for software types. The real dichotomy is between living well and tightening the belt. The mental division is, Is taking a job risk worth sacrificing Anything At All?
The corporate job is lucrative, easy to get and keep, and if there is any stress you can blame it on the boss etc. Some folks crave a combination of those things. Others don't give a flying flip about them.
I think it is pretty black-and-white actually. I tell this story: Some folks are playing in the surf, paddling around, rowing small boats, diving for pearls. A tanker passes by, and folks are seen hanging over the rail yelling "Get out of the water! The tide is coming in! The waves are frightening! You're getting all wet!"
"It's ok!" we say. "I don't mind getting wet! If it storms, I'll capsize but I can swim."
All this is taken as hubris, arrogance, foolishness by those aboard the tanker. They leave the rail, shaking their heads and blogging about how their life is surely the best.
Creating wealth is relatively easy, but I don't care about it anymore (except as a hobby), I care about creating money, which is much harder. All the stuff about programmer productivity in this essay is first not true but more importantly not really important anymore in my opinion. At most startups and big companies programming is a commodity. By 2011 we programers are good enough, programming became matrue enough that it is really a commodity now. Not a cheap commodity, but a commodity: a $100.000 per year commodity. I argue that in 2011 (maybe not in 2004) you can find really good people for $100.000 per year if you know how to find these people. You can find much cheaper in Eastern Europe (where I live) if you are not so snob that you think programmers in the West are so special. So unless you work on something very deeply technical or technicall revolutionary (so you are not John Carmack working on the fastest rendering engine on the planet or you are not the engineer behind Gogle's superfast javascript engine) your value as a programmer is someting like $100.000 or something. There is no '36x multiplier because of programmer productivity.' I think if the market is quasy efficient that means if your startup would be about programming then the expected value of your earnings would be sometinng like this value ($100.000) in your startup. What kind of multipliers there really are:
- There can be a multiplier because of your idea, your product, your marketing, and your connections. But not programming (in case of not technically deep startups. Technically deep startups are quite rare.) - There is a factor which is related to how popular it is to create a startup. If it is super popular because of marketing essays like this, then it is possible that there are too much startups of constant sized markets, so that your expected value of earning could be even less than $100.000. At the time of this essay, when starting-up was not that popular we could not really speak of saturated markets, so that your expected value of earning was probably more than $100.000. The more people start-up the less attractive it will be to start-up. So the more successful PG's essays will be the less true they will be.