> still one of the most reliable ways of [...] becoming financially independent (if not outright wealthy)
There's just no way this is true. For people with the skills needed by SV startups, working at one of the startups is almost certainly financially worse than using those skills at a large company.
I was specifically talking about founders (but even early stage engineers can do extremely well if the startup takes off). The upside is much higher doing your own thing rather than working at BigCorp (the two aren't even remotely comparable, but neither is the risk). Not to mention the end goals/QOL of working on what you want, commanding your own ship, being financially independent, etc.
Virtually all self-made millionaires+ started companies[1]. There's really no other way to get there.
Looking at the potential upside is disastrous without looking at the downside. That's what the '00 tech bubble was -- we're prone to HUGE biases and it is important to have constant reminders to bring us back to reality.
The founders who have succeeded are known to be _irrationally_ optimistic, literally irrational. This means, statistically, it's a poor choice to do what they did. It means, in some sense of the word, they got lucky. Many founders publicly acknowledge this -- luck was a huge factor.
If you want money, being a founder _might_ get you there, but odds are, it won't.
Being a founder makes the most sense when you're obsessed with solving a problem and the money is a perk, not a motivator.
You're making a giant logic error. It may well be true that most self-made millionaires started a company. It is certainly not true that most people who start companies become self-made millionaires, which was the premise of your original post.
I think the more salient question is whether starting a company is the most reliable way to become a self-made millionaire (one of the things they're actually claiming), which could be true even if the chances were low. The parent comment's error (or perhaps an intentional omission if for example they thought it to be self-evident) is in not taking into account the volume of people starting companies vs the volume of people doing other things which could turn them into millionaires.
On that note, I do think there's a flaw in the logic or premises (or unstated assumptions -- maybe "millionaire" is code for some larger quantity of wealth) somewhere. A decade in FAANG with conservative spending habits will easily create a millionaire with a near 100% success rate, and it would be surprising if starting a company would have better odds than that.
> ...most people who start companies become self-made millionaires, which was the premise of your original post.
This is a complete fabrication. I never said that, directly or indirectly. In fact, I've said multiple times in this thread that 9/10 startups fail and that startup life is a "lottery" but people still choose to do it for reasons X, Y, or Z.
> Virtually all self-made millionaires+ started companies[1]
The article you linked makes no sense related to your claim. Unless you're saying that millionaires+ (whatever the + means) don't exist outside of Forbes.
> There's really no other way to get there
Joining a startup as an early member? Working in finance or computer science or medicine with ridiculous salaries?
Here's a link[1] with thousands of jobs with an average income higher than $100k. If you have that kind of income, you can become a millionaire.
> QOL of working on what you want, commanding your own ship, being financially independent, etc.
How about the QOL of not knowing for a long time whether you'll succeed or fail? Or having to deal with investors, marketing, managing people, aka everything that you probably don't want to be working with? Not commanding your own ship because most of it is built with other people's money?
If you're talking QOL, I don't see how playing the lottery with your future (in your own words) is better than having a high-income job, then FIRE in your 30ies.
> How about the QOL of not knowing for a long time whether you'll succeed or fail? Or having to deal with investors, marketing, managing people, aka everything that you probably don't want to be working with?
This is kind of silly to bring up. Obviously people starting a company are okay with managing people and dealing with investors (or if not, being bootstrapped). You're saying "being an elite athlete sucks because you have to deal with working out and eating healthy" like.. yeah, you kind of signed up for that. You can't be an NFL player and eat donuts all day.
> FIRE in your 30ies.
This is ironically very similar to doing a startup (but with less risk, and a lower upside). Are you forgetting that investing didn't go so well for people in 2008? I actually like the FIRE movement.
> Obviously people starting a company are okay with managing people and dealing with investors
I must have dreamed all the posts and comments about people learning that they were actually not made for being a founder, that marketing is more important than what they like doing (programming), and that the stress of creating a company is higher than they thought.
It's nice that you found your path in life, and I have nothing against that path being creating a company. I just don't see what's your goal by repeating that everyone who doesn't agree with you is a "survivorship bias naysayer". Self-reassurance you made the right choice?
Again, the upside is significantly higher if you start a company (financial independence is just one piece). It can be risky (see OP), but it's pretty rational to be a founder, especially if you can weather the adversity. I'm not even sure how my claims are controversial (especially here on HN, of all places).
Looking at upsides on their own is meaningless. The mega millions jackpot is currently at $550 Million dollars in cash. That doesn’t mean it’s a good idea to spend 2$ on a ticket.
So sure, it’s possible to become a billionaire by writing books just look at J.K. Rawling. Hell someone got 10,000 bitcoins for the price of 2 pizza, which in theory are worth 366,790,000$ today. In the end the upside of being the founder isn’t worth much on day one. It might be worth something down the line, but it’s critical to have a fallback option.
Which is why I've been mentioning "risks" in just about every post I've made. Which is why a big part of OP is how taxing and difficult it's been. Why is why we keep talking about how 9/10 businesses fail. There's no free lunch.
But my original point was that we already know this. So it's not particularly insightful to point it out on a forum almost exclusively dedicated to people working on startups.
I think the problem is you called it a "reliable" route to financial independence, when the variance is actually pretty high. Anyone who can get a job at a large tech company in SF/Seattle/NY has a much more reliable route to financial independence.
> I think the problem is you called it a "reliable" route to financial independence, when the variance is actually pretty high. Anyone who can get a job at a large tech company in SF/Seattle/NY has a much more reliable route to financial independence.
I feel like I argue this ad nauseum here on HN. No, being engineer #3489 won't ever make you financially "independent" (and by that, I mean having FU money). Financial comfort is something else entirely. Making 100-200k (even including stock bonuses) somewhere like SF/NY where rent for a 1 bed 1 bath is like 3k (and houses/condos start at $1 million) will never have the same upside as starting your own company. Let's ignore for now the very real chance of getting laid off, or otherwise fired in favor of a younger engineer that gets paid less than you do (when you hit your 40s).
But again, financial independence is just one aspect of "winning" at a startup. Everyone conveniently ignores doing your own thing, freedom, self-reliance, self-determination, etc. -- these are non-existent at BigCorp (where you're treated, at best, like a cog). I personally value freedom much more than I do money -- which is why I accept the risks of every few years throwing my hat in the ring and seeing what comes of idea X or Y.
Plenty of engineers working at FAANG and investing in index funds have enough money to retire comfortably in their 30s. That’s what the GP means by financial independence, I believe.
Also “senior” engineers (>5 years of experience) at these companies make a lot more than 200k a year.
> Also “senior” engineers (>5 years of experience) at these companies make a lot more than 200k a year.
No they don't, look up the numbers. Average salary on most websites is around 180k. Principal engineers start making north of 300k (at FAANG, which is already a subset of a subset) but it's very difficult to snag one of those.
I like the FIRE movement, but ironically, I think it's pretty analogous to doing your own startup. Obviously, it's less risk (but also less upside).
1) Average comp for a senior (not principal) engineer at FAANG is 350-400k, not 200k.
2) It's much easier to get a job at FAANG and get promoted to senior (or get a job elsewhere and hop to FAANG later) than it is to start a comparably successful startup. Google alone employs 30k+ engineers, most of them in the US, which means they employee ~1% of the software engineers in the country. It wouldn't be unreasonable to say that 8-10% of all SWEs in the US work for a company where standard career progression will get them to that level of comp in 10 years or less.
3) Starting and growing a startup to the point where it can provide an exit event that translates to financial independence (in a comparable time frame) is much harder than getting a job at one of those tech companies, and much less likely to succeed.
4) You don't need to earn 350k/yr to become financially independent much earlier than the typical retirement age, even if you live in the Bay and suffer with the rent. You need to save 25x your future annual outlay. This is trivially achievable by age 50 with most work/life/family configurations that include at least one software engineer (single earners, 2-income couples, 1-income couples w/1-stay-at-home, etc) earning half that (i.e. your 180k), if you don't insist on retiring as a property owner in the single most expensive city in the US. If you are in FAANG/comparable, getting there by 40 is a no-brainer if you aren't really awful at managing your money. A couple working at FAANG can easily manage by 35. This isn't "eat rice and beans, then retire in a tiny shack in the middle of nowhere" independence, either, this is "hit 5m+ net worth". 5m is "fuck you" money by any reasonable metric.
> No they don't, look up the numbers. Average salary on most websites is around 180k. Principal engineers start making north of 300k (at FAANG, which is already a subset of a subset) but it's very difficult to snag one of those.
I think you're out of touch with modern TC. There are many engineers at FAANG pulling past 300k/yr - many going past 400k/yr. One management track + one senior engineer can clear $1mil/yr. I know plenty of people in the valley who do this reliably... https://www.levels.fyi/2020/ - just check out what a senior engineer can make...
> “can be risky (see OP)” is vastly downplaying 1 in 10 odds of nominal success. Simply not failing doesn’t mean the bet paid off.
We know this, yadda yadda "survivorship bias." It's just boring to have the same people making the same points about every startup that made it. It's like the old "correlation does not equal causation" trope you see repeated over and over again when someone links any dataset. We get it.
Again, my point is that this is not insightful -- and you've yet to demonstrate otherwise.
I am not suggesting it’s insightful, just the counter argument you’re posts are largely ignoring. If your looking for everyone that made more than 10+ million in the last 40 being a founder isn’t a great route. Even if your benchmark is 100 million it’s not good overall odds.
It’s only when your benchmark is becoming a billionaire that it starts to look like the best option.
If you live in a state where you can play jackpot only, which is 2 picks for $3 and no eligibility for partial matches, there's a positive EV anytime the cash payout is more than $453,863,025.00
Accounting for taxes ruins it a bit, but once the jackpot gets high enough it's dumb not to buy a ticket.
That also assumes single winners, more interestingly it ignores the diminishing marginal utility of money.
Consider your personal utility function, at 70 what odds would you need to play double or nothing with your entire life’s savings. If it takes more than 50.1:49.9 odds then you like most people don’t have a linear view of money.
The expected utility of buying that ticket is quite poor though which is the thing that really matters for most people. You get a sense of this when you consider that the vast majority of the time you lose your initial investment. If you have any other options to get returns on your money you are going to have the opportunity cost of that to deal with too and that's what makes the lottery ticket unappealing from a utility point of view.
Oh sure the upside is higher because you might start the next Uber or Facebook or Dropbox. However the utility of money diminishes IMO for most people past the point you no longer need to work. It depends on what you goals are and the probability distribution you are after. Also many founders end up burned and in poor physical health so there is that risk too.
The only problem with that is that I think a lot of people are okay with any really good upside above XXX dollars (i.e. comfortable financial independence). Given this, even though the potential dollar amount of the upside is much larger, the odds of an "acceptable" upside are significantly lower, and as a result it is a bad choice for people who aren't extremely ambitious.
The comment said "one of the most reliable ways", not the only reliable way. Furthermore the two are not mutually exclusive. I worked at Microsoft and Google before starting my own company, mostly as a way to pay off student debt. A few of my co-workers at Google also left to start their own companies as well. There's no reason why you can't put in a couple of years at a large company to make some early cash, then leave to start your own company.
If it fails you can almost certainly go back to working at a big company and heck even try again later on in life.
But it's not reliable at all. Particularly when you consider the longer and longer time to exit, the greater dilution due to those huge late rounds, the fact that you get hit with the tax burden when you exercise (which can easily be a decade before that stock is liquid), the fact that the late rounds have significantly raised the bar on what a 'successful exit' is.
Now that startups tend to stay private so long, the value of employee equity has absolutely tanked.
There's just no way this is true. For people with the skills needed by SV startups, working at one of the startups is almost certainly financially worse than using those skills at a large company.