The Proposition

L

light.House

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Nov 17, 2007
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Was reading another thread about how stressful it can be working in this field. I was reminded of a piece of an essay from Paul Graham-- he founded YCombinator and writes really good essays. This passage comes from "How to Make Wealth"
The Proposition

Economically, you can 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, where you earn a premium for working fast.

Here is a brief sketch of the economic proposition. If you're a good hacker in your mid twenties, you can get a job paying about $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 just to break 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 another 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 there is one more multiple: how much smarter are you than your job description expects you to be? Suppose another multiple of three. Combine all these multipliers, and I'm claiming you could be 36 times more productive than you're 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 without any corporate bullshit to slow him down should be able to do work worth about $3 million a year.

Like all back-of-the-envelope calculations, this one has a lot of wiggle room. I wouldn't try to defend the actual numbers. But I stand by the structure of the calculation. I'm not claiming the multiplier is precisely 36, but it is certainly more than 10, and probably rarely as high as 100.

If $3 million a year seems high, remember that we're talking about the limit case: the case where you not only have zero leisure time but indeed work so hard that you endanger your health.

Startups are not magic. They don't 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 want to make a million dollars, you have to endure a million dollars' worth of pain. For example, one way to make a million dollars would be to work for the Post Office your whole life, and save every penny of your salary. Imagine the stress of working for the Post Office for fifty 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 can't evade the fundamental conservation law. If starting a startup were easy, everyone would do it.
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Good stuff. There are a lot of folks who don't understand value as it relates to money and some of them are really waiting for their life to be handed to them somehow.

There is a conservation law at work here: if you want to make a million dollars, you have to endure a million dollars' worth of pain.
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On Monday I heard a delivery guy say to a security guard as he entered a building, "They're making you work the holiday too, huh?" Yeah they're making him and then they probably force him to take his paycheck too..... Keep waiting for someone to hand you your life and then bitch about it to.. *rolleyes* Ok anyways :)
 
Just get the "shoe system" and problem solved. I made $2.9 million using it in just 4 months!
 
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