How to Make Wealth

By 2019-01-27January 14th, 2020No Comments

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. 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. 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. 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.

Source: How to Make Wealth

This is the part that hooked me into reading this essay. The rest is equally pertinent and interesting.

Some notes…

1. PG’s writing is simple and elegant, which is essential for transferring complex ideas between minds.

2. That simplicity includes avoiding nouns. And instead, describing the concept from first principles to highlight how profound it is…

“In industrialized countries, people belong to one institution or another at least until their twenties. After all those years you get used to the idea of belonging to a group of people who all get up in the morning, go to some set of buildings, and do things that they do not, ordinarily, enjoy doing. Belonging to such a group becomes part of your identity: name, age, role, institution. If you have to introduce yourself, or someone else describes you, it will be as something like, John Smith, age 10, a student at such and such elementary school, or John Smith, age 20, a student at such and such college.”

This jolts you out of everyday thinking (loaded with connotation and presupposition) and into Steve Jobs thinking.

3. Compounding the multipliers to get from 80K to 3m is a form of compounding (of course) and dead-reckoning – a way to think quickly. Here accuracy isn’t essential, you just need to be directionally right.

It’s the same way Elon Musk talked about speeding up a boring machine.

Incidentally, this multiplier to get from company to indie is why hackerpreneurs like Pieter Levels can rival Google at al on a revenue per employee basis.