Wealth and Money

If you cherished to live on rich, how would you do it? I think your best bet would be to start or articulation a startup. Thats been a reliable expressive style to drop dead rich for hundreds of categorys. The word startup dates from the 1960s, entirely what happens in matchless is very similar to the venture-backed trading voyages of the Middle Ages. Startups usually involve technology, so lots so that the phrase high-tech startup is almost redundant. A startup is a small company that takes on a hard technical problem. Lots of tidy sum get rich knowing nothing much than that.You dont wealthy person to know physics to be a better pitcher. But I think it could revert you an edge to under al-Qaida the underlying principles. Why do startups concur to be small? Will a startup inevitably stop being a startup as it grows larger? And why do they so often work on developing new technology? Why be thither so many startups selling new drugs or computer softw ar, and n one sel ling corn petroleum or laundry detergent? The Proposition Economically, you bath think of a startup as a way to compress your whole working life into a few years.Instead of working at a low intensity for forty years, you work as hard as you possibly can for four. This pays especially well in technology, whither you earn a premium for working fast. Here is a brief cogitation of the economic proposition. If youre a good hacker in your mid twenties, you can get a occupation paying slightly $80,000 per year. So on average such a hacker must be able to do at least $80,000 worth of work per year for the company scantily to swing even. You could probably work twice as many hours as a corporate employee, and if you focus you can probably get three times as much done in an hour. 1 You should get some opposite multiple of two, at least, by eliminating the drag of the pointy-haired middle manager who would be your boss in a big company. Then at that place is one more multiple how much adroiter are you than your job description expects you to be? Suppose another multiple of three. Combine all these multipliers, and Im claiming you could be 36 times more productive than youre expected to be in a random corporate job. 2 If a fairly good hacker is worth $80,000 a year at a big company, then a smart hacker working very hard with egress any corporate bullshit to slow him down should be able to do work worth close to $3 one thousand million a year.Like all back-of-the-envelope calculations, this one has a lot of wiggle room. I wouldnt try to defend the actual numbers. But I stand by the structure of the calculation. Im not claiming the multiplier is precisely 36, only when it is certainly more than 10, and probably rarely as high as 100. If $3 million a year have the appearance _or_ semblances high, remember that were talking about the limit case the case where you not only have zero leisure time only when indeed work so hard that you endanger your health. Star tups are not magic. They dont change the laws of wealth creation. They just represent a point at the far end of the curve.There is a conservation law at work here if you motive to specify a million dollars, you have to endure a million dollars worth of pain. For example, one way to pull out a million dollars would be to work for the Post responsibility your whole life, and save every penny of your salary. Imagine the stress of working for the Post Office for fifty dollar bill years. In a startup you compress all this stress into three or four years. You do tend to get a certain bulk discount if you buy the economy-size pain, but you cant evade the vestigial conservation law. If starting a startup were easy, everyone would do it.Millions, not Billions If $3 million a year seems high to some people, it will seem low to others. Three million? How do I get to be a billionaire, like Bill provide? So lets get Bill render out of the way right now. Its not a good idea to use famous rich people as examples, because the press only write about the very richest, and these tend to be outliers. Bill Gates is a smart, determined, and hardworking man, but you need more than that to make as much money as he has. You also need to be very lucky. There is a large random factor out in the success of any company.So the guys you end up reading about in the papers are the ones who are very smart, totally dedicated, and win the lottery. Certainly Bill is smart and dedicated, but Microsoft also happens to have been the beneficiary of one of the most spectacular blunders in the history of business the licensing deal for DOS. No surmise Bill did everything he could to steer IBM into making that blunder, and he has done an excellent job of exploiting it, but if there had been one person with a brain on IBMs side, Microsofts future would have been very different.Microsoft at that submit had little leverage over IBM. They were effectively a component supplier. If IBM had require d an exclusive license, as they should have, Microsoft would slake have signed the deal. It would still have meant a lot of money for them, and IBM could easily have gotten an in operation(p) system elsewhere. Instead IBM ended up using all its power in the market to lend Microsoft control of the PC standard. From that point, all Microsoft had to do was execute. They never had to bet the company on a forward decision.All they had to do was play hardball with licensees and copy more innovative products reasonably promptly. If IBM hadnt made this mistake, Microsoft would still have been a successful company, but it could not have grown so big so fast. Bill Gates would be rich, but hed be somewhere near the bottom of the Forbes 400 with the other guys his age. 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, s peculation, marriage, inheritance, theft, extortion, fraud, monopoly, graft, lobbying, counterfeiting, and prospecting. Most of the greatest fortunes have probably involved several of these. The advantage of creating wealth, as a way to get rich, is not just that its more legitimate (many of the other methods are now illegal) but that its more straightforward. You just have to do something people want. Money Is Not Wealth If you want to spend a penny wealth, it will help to study what it is.Wealth is not the same thing as money. 3 Wealth is as obsolete as human history. Far oldisher, in fact ants have wealth. Money is a comparatively upstart invention. Wealth is the fundamental thing. Wealth is stuff we want food, clothes, houses, motorcars, gadgets, travel to interesting places, and so on. You can have wealth without having money. If you had a magic machine that could on command make you a car or cook you dinner or do your laundry, or do anything else you wanted, you wouldnt need money.Whereas if you were in the middle of Antarctica, where there is nothing to buy, it wouldnt matter how much money you had. Wealth is what you want, not money. But if wealth is the important thing, why does everyone talk about making money? It is a kind of shorthand money is a way of moving wealth, and in practice they are usually interchangeable. But they are not the same thing, and unless you cast to get rich by counterfeiting, talking about making money can make it harder to understand how to make money. Money is a side effect of specialization.In a specialized society, most of the things you need, you cant make for yourself. If you want a potato or a pencil or a place to live, you have to get it from someone else. How do you get the person who grows the potatoes to give you some? By giving him something he wants in return. But you cant get very far by trading things directly with the people who need them. If you make violins, and none of the local farmers wants one, ho w will you eat? The solution societies find, as they get more specialized, is to make the dole out into a two-step process.Instead of trading violins directly for potatoes, you trade violins for, say, silver, which you can then trade again for anything else you need. The median(a) stuff the medium of exchange can be anything thats rare and portable. Historically metals have been the most common, but recently weve been using a medium of exchange, called the dollar, that doesnt physically exist. It works as a medium of exchange, however, because its remainder is guaranteed by the U. S. Government. The advantage of a medium of exchange is that it makes trade work.The disadvantage is that it tends to obscure what trade real means. People think that what a business does is make money. But money is just the intermediate show just a shorthand for whatever people want. What most businesses really do is make wealth. They do something people want. 4 The Pie Fallacy A surprising number of people retain from childhood the idea that there is a stiff touchstone of wealth in the world. There is, in any normal family, a fixed amount of money at any moment. But thats not the same thing.When wealth is talked about in this context, it is often described as a pie. You cant make the pie larger, say politicians. When youre talking about the amount of money in one familys bank account, or the amount available to a government from one years tax revenue, this is true. If one person gets more, someone else has to get less. I can remember believing, as a child, that if a few rich people had all the money, it left less for everyone else. Many people seem to continue to believe something like this well into adulthood.This fallacy is usually there in the background when you ensure someone talking about how x percent of the population have y percent of the wealth. If you programme to start a startup, then whether you realize it or not, youre planning to disprove the Pie Fallacy. Wh at leads people astray here is the abstraction of money. Money is not wealth. Its just something we use to move wealth around. So although there whitethorn be, in certain specific moments (like your family, this month) a fixed amount of money available to trade with other people for things you want, there is not a fixed amount of wealth in the world.You can make more wealth. Wealth has been getting realised and destroyed (but on balance, created) for all of human history. Suppose you own a beat-up old car. Instead of sitting on your butt next summer, you could spend the time restoring your car to pristine condition. In doing so you create wealth. The world is and you specifically are one pristine old car the richer. And not just in some metaphorical way. If you sell your car, youll get more for it. In restoring your old car you have made yourself richer. You havent made anyone else poorer.So there is obviously not a fixed pie. And in fact, when you look at it this way, you wonder w hy anyone would think there was. 5 Kids know, without knowing they know, that they can create wealth. If you need to give someone a present and dont have any money, you make one. But kids are so bad at making things that they consider home-made presents to be a distinct, inferior, sort of thing to boughten ones a mere expression of the proverbial thought that counts. And indeed, the lumpy ashtrays we made for our parents did not have much of a resale market.