paul graham essay wealth

How to Get Rich: Paul Graham on Money vs. Wealth

By maria popova.

If you want to create wealth, it will help to understand what it is. Wealth is not the same thing as money. Wealth is as old as human history. Far older, in fact; ants have wealth. Money is a comparatively recent invention. Wealth is the fundamental thing. Wealth is stuff we want: food, clothes, houses, cars, 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 wouldn’t need money. Whereas if you were in the middle of Antarctica, where there is nothing to buy, it wouldn’t 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 plan 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 can’t make for yourself. If you want a potato or a pencil or a place to live, you have to get it from someone else.

Unlike Buckminster Fuller, who saw specialization as a social evil , Graham considers it the natural progression of an exponentially advancing society. It first gave rise to trade between specialized forms of wealth (e.g., my homegrown tomatoes for your carpentry ), then eventually sparked the creation of an intermediate stage — money ( my tomatoes for a shilling, a shilling for your carpentry ). Somewhere along the way, Graham argues, we lost sight of the fact that money is just an intermediary. He writes:

People think that what a business does is make money. But money is just the intermediate stage — just a shorthand — for whatever people want. What most businesses really do is make wealth. They do something people want.

From this, in turn, stems one of the most toxic fallacies we subscribe to — something legendary graphic designer Milton Glaser so eloquently debunked in considering the manifestable kindness of the universe . Graham writes of “the pie fallacy”:

A surprising number of people retain from childhood the idea that there is a fixed amount of wealth in the world. There is, in any normal family, a fixed amount of money at any moment. But that’s not the same thing. When wealth is talked about in this context, it is often described as a pie. “You can’t make the pie larger,” say politicians… What leads people astray here is the abstraction of money. Money is not wealth. It’s just something we use to move wealth around. So although there may 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 created and destroyed (but on balance, created) for all of human history.

What’s more, Graham points out, the relationship between wealth and money isn’t always a linearly transactional one:

Wealth can be created without being sold. Scientists, till recently at least, effectively donated the wealth they created. We are all richer for knowing about penicillin, because we’re less likely to die from infections. Wealth is whatever people want, and not dying is certainly something we want.

But this is where Graham loses me a bit: The way to make wealth, he argues, is “to start doing something people want.” And yet this falls closer to on-demand manufacturing than the kind of wealth-creation that happens when people are presented with something they didn’t yet know they wanted. Buzzfeed gives people what they want — most frequently, what their lowest selves want. Buzzfeed is making money. But is Buzzfeed creating cultural wealth? After seven years of Brain Pickings , I side even more wholeheartedly with E.B. White and believe what he once said of journalism — that the role of the writer is “to lift people up, not lower them down” — applies equally to every field of cultural endeavor. To create wealth is not to give people what they want, but to help them figure out what to want by making sense of what is worth having . There is a moral element to the marketable deliverable.

Graham takes this point in an even more worrisome direction in a footnote, where he writes:

There are many senses of the word “wealth,” not all of them material. I’m not trying to make a deep philosophical point here about which is the true kind. I’m writing about one specific, rather technical sense of the word “wealth.” What people will give you money for. This is an interesting sort of wealth to study, because it is the kind that prevents you from starving. And what people will give you money for depends on them, not you. When you’re starting a business, it’s easy to slide into thinking that customers want what you do. During the Internet Bubble I talked to a woman who, because she liked the outdoors, was starting an “outdoor portal.” You know what kind of business you should start if you like the outdoors? One to recover data from crashed hard disks. What’s the connection? None at all. Which is precisely my point. If you want to create wealth (in the narrow technical sense of not starving) then you should be especially skeptical about any plan that centers on things you like doing.

What a heartbreaking proposition. If we didn’t invest so much of ourselves in what we do — which includes what we ourselves believe, what we wish existed, and what direction we want to move the world in — then why bother doing it at all? As John Green put it, it’s about making gifts for people and putting them into the world, hoping those gifts might bring them joy and eventually bring us some form of “wealth,” but not putting them into the world because they will bring us wealth and with the primary aim that they do so.

And yet, though Graham himself might confuse money with wealth at times, he does offer excellent insight into the advantages of startups — of being “part of a small group working on a hard problem” — over traditional companies. He writes:

A big company is like a giant galley driven by a thousand rowers. Two things keep the speed of the galley down. One is that individual rowers don’t see any result from working harder. The other is that, in a group of a thousand people, the average rower is likely to be pretty average. If you took ten people at random out of the big galley and put them in a boat by themselves, they could probably go faster. They would have both carrot and stick to motivate them. An energetic rower would be encouraged by the thought that he could have a visible effect on the speed of the boat. And if someone was lazy, the others would be more likely to notice and complain. But the real advantage of the ten-man boat shows when you take the ten best rowers out of the big galley and put them in a boat together. They will have all the extra motivation that comes from being in a small group. But more importantly, by selecting that small a group you can get the best rowers. Each one will be in the top 1%. It’s a much better deal for them to average their work together with a small group of their peers than to average it with everyone.

(It’s worth pausing here to note that the carrots-and-sticks method isn’t really what motivates us — a trifecta sense of autonomy, mastery, and purpose is. Even in Graham’s boat analogy, this is likely the underlying force propelling the rowers.)

Graham continues:

That’s the real point of startups. Ideally, you are getting together with a group of other people who also want to work a lot harder, and get paid a lot more, than they would in a big company. And because startups tend to get founded by self-selecting groups of ambitious people who already know one another (at least by reputation), the level of measurement is more precise than you get from smallness alone. A startup is not merely ten people, but ten people like you.

He concludes with a piece of advice, both practical and philosophical, on how to choose the direction in which the energetic rowers steer the boat. In a sentiment that parallels Steven Pressfield’s assertion that “the more scared we are of a work or calling, the more sure we can be that we have to do it,” Graham urges:

Use difficulty as a guide not just in selecting the overall aim of your company, but also at decision points along the way… Suppose you are a little, nimble guy being chased by a big, fat, bully. You open a door and find yourself in a staircase. Do you go up or down? I say up. The bully can probably run downstairs as fast as you can. Going upstairs his bulk will be more of a disadvantage. Running upstairs is hard for you but even harder for him.

All the essays in Hackers & Painters: Big Ideas from the Computer Age make for a provocative read. Complement it with Anna Deavere Smith on discipline and how to stop letting others define us .

— Published July 2, 2014 — https://www.themarginalian.org/2014/07/02/how-to-make-wealth-paul-graham-hackers-painters/ —

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Paul Graham on Wealth Inequality and The Difference Between Wealth And Money

In his 2004. essay How to make wealth , Paul Graham touches upon the subtle difference between wealth and money:

If you want to create wealth, it will help to understand what it is. Wealth is not the same thing as money. Wealth is as old as human history. Far older, in fact; ants have wealth. Money is a comparatively recent invention. Wealth is the fundamental thing. Wealth is stuff we want: food, clothes, houses, cars, 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 wouldn’t need money. Whereas if you were in the middle of Antarctica, where there is nothing to buy, it wouldn’t 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 plan to get rich by counterfeiting, talking about making money can make it harder to understand how to make money.

The importance of this distinction comes later, as Paul explains that unlike money of which there is usually a fixed amount in the world, wealth is something that you can create by exerting effort and putting in your own time.

The people most likely to grasp that wealth can be created are the ones who are good at making things, the craftsmen. Their hand-made objects become store-bought ones. But with the rise of industrialization there are fewer and fewer craftsmen.

Further on, Paul makes a remark that creating wealth isn’t the only way of accumulating it:

Making wealth is not the only way to get rich. For most of human history it has not even been the most common. Until a few centuries ago, the main sources of wealth were mines, slaves and serfs, land, and cattle, and the only ways to acquire these rapidly were by inheritance, marriage, conquest, or confiscation. Naturally wealth had a bad reputation.

Now, where it all comes together nicely is in another one of Paul’s essays, Mind the gap , where he offers his opinion on why there exists a concern at all for wealth inequality today:

The second reason we tend to find great disparities of wealth alarming is that for most of human history the usual way to accumulate a fortune was to steal it: in pastoral societies by cattle raiding; in agricultural societies by appropriating others’ estates in times of war, and taxing them in times of peace. In conflicts, those on the winning side would receive the estates confiscated from the losers. In England in the 1060s, when William the Conqueror distributed the estates of the defeated Anglo-Saxon nobles to his followers, the conflict was military. By the 1530s, when Henry VIII distributed the estates of the monasteries to his followers, it was mostly political. [9] But the principle was the same. Indeed, the same principle is at work now in Zimbabwe. In more organized societies, like China, the ruler and his officials used taxation instead of confiscation. But here too we see the same principle: the way to get rich was not to create wealth, but to serve a ruler powerful enough to appropriate it. This started to change in Europe with the rise of the middle class. […] Once it became possible to get rich by creating wealth, society as a whole started to get richer very rapidly. Nearly everything we have was created by the middle class. […] But it was not till the Industrial Revolution that wealth creation definitively replaced corruption as the best way to get rich. In England, at least, corruption only became unfashionable (and in fact only started to be called “corruption”) when there started to be other, faster ways to get rich. Since for most of the world’s history the main route to wealth was to steal it, we tend to be suspicious of rich people. Idealistic undergraduates find their unconsciously preserved child’s model of wealth confirmed by eminent writers of the past. It is a case of the mistaken meeting the outdated.

For a complete collection of Paul Graham’s essays on technology and entrepreneurship see Paul Graham’s Essays and the 2004. collection published as Hackers & Painters – Big Ideas From The Computer Age .

Paul Graham 101

There’s probably no one who knows more about startups than Paul Graham. Having helped thousands of startups through Y Combinator, the startup accelerator he co-founded, there’s a thing or two to learn from his essays. And Graham’s wisdom isn’t limited to startups either; his essays, read by millions, touch on education, intelligence, writing, society, the human mind, and much more.

I’ve read all of Paul Graham’s published essays (200+), ending up with enough notes to fill a book. This post tries to summarize the parts I’ve found most insightful and provide an accessible starting point for someone new to Graham.

Whenever possible, I’ve included links to his essays so you can easily go to the source when something interesting catches your eye. (Indeed, I recommend it - use this post as a gateway to the good stuff rather than a complete account in itself).

If my description of Graham’s idea sounds interesting, expect his essay to be 100x better. Always go back to the essays, where the ideas are fleshed out in full. This post is a very shallow overview.

Nevertheless, I hope this post inspires you to read Graham’s essays. They’re worth your time.

Boring disclaimer stuff:

• I made a Google Docs version of this post, in case that's easier to navigate.
• I’ve included all essays that were published before November 2021 ( Beyond Smart is the latest essay included). You can find a list of all essays on Graham’s site .
• The info included is based on my interests at the time of reading the posts. Had I read an essay a year earlier or later, I’d likely have included something else. Plus, with over 200 essays, I’ve just downright overlooked and forgot important stuff. Again, I recommend you explore the essays yourself.
• This post does NOT cover Paul Graham’s thoughts or essays on programming / coding. I’m simply not interested in or knowledgeable about that stuff, so I didn't think it fair to talk about it. He’s written a lot about coding, so if that’s your interest, explore his essays yourself.
• Finally, if something seem off or missing, let me hear about it and I’ll fix it: [email protected] / Twitter

Okay, let’s jump in.

Paul Graham on Startups

Unsurprisingly, many of Graham’s essays are startup-related. Given his experience on the topic, there’s a lot to unwrap, including some classics like “Ramen Profitable”, “Do Things that Don’t Scale” and “Maker’s Schedule, Manager’s Schedule”. Let’s start with an overview.

Startups in 13 sentences :

• Pick good co-founders.
• Launch fast.
• Let your idea evolve.
• Understand your users.
• Better to make a few users love you than a lot ambivalent.
• Offer surprisingly good customer service.
• You make what you measure.
• Spend little.
• Get ramen profitable.
• Avoid distractions.
• Don't get demoralized.
• Don't give up.
• Deals fall through.

For a detailed account, try How to Start a Startup . 

This section presents some of Graham’s core ideas around startups, including the principles above.

Essays mentioned in this section:

Startups in 13 sentences

How to Start a Startup

Startup = Growth  

How to Make Wealth

After Credentials

The Lesson to Unlearn

The Power of the Marginal

News from the Front

A Student's Guide to Startups

What Startups Are Really Like

Before the Startup

Hiring is Obsolete

Why to Not Not Start a Startup

The Hardest Lessons for Startups to Learn

Organic Startup Ideas

Six Principles for Making New Things

Frighteningly Ambitious Startup Ideas

Black Swan Farming

Crazy New Ideas

Why There Aren't More Googles

Ideas for Startups

Jessica Livingston

Startup FAQ

Earnestness

Relentlessly Resourceful

A Word to the Resourceful

The Anatomy of Determination

Mean People Fail

Why It's Safe for Founders to Be Nice

Design and Research

A Version 1.0

What Microsoft Is this the Altair Basic of?

Beating the Averages

Do Things that Don't Scale

Ramen Profitable

Default Alive or Default Dead?

Maker's Schedule, Manager's Schedule

Holding a Program in One's Head

How Not to Die

Disconnecting Distraction

Good and Bad Procrastination

Don’t talk to Corp Dev

The Top Idea in Your Mind

The Fatal Pinch

Startups are fundamentally different

Startups aren’t ordinary businesses. “ A startup is a company designed to grow fast ”, it is fundamentally different from your standard restaurant or hair salon. All decisions reflect this need to grow. Indeed, Graham says : “If you want to understand startups, understand growth”.

“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.” (From How to Make Wealth )

Startups are also vastly different from your school experience. Your tests at school can be hacked, but success at startups is unhackable. At school, you learned that the way to get ahead is to perform well in a test, so you learned how to hack the tests . But in startups, you cannot really trick investors to give you money; the real hack is to be a good investment. You cannot really trick people to use your product; the real hack is to build something great. Valuable work is something you cannot hack.

So you don’t need to be a good student to be a good startup founder. In fact, if your opinions differ from those of your business teacher, that may even be a good thing (if your business teacher was excellent in business, they’d probably be a startup founder). In a startup, credentials don’t really matter - your users won’t care if you went to Stanford or got straight A’s. (Related: A Student's Guide to Startups ) . 

Starting a startup is fundamentally different from a normal job , too. In a startup, experience is overrated . The one thing that matters is to be an expert on your users and the problem; everything else can be figured out along the way. “The most productive young people will always be undervalued by large organizations, because the young have no performance to measure yet, and any error in guessing their ability will tend toward the mean.” (From Hiring is Obsolete ). By starting a startup, you can figure out your real market value.

So, startups are fundamentally different from other companies, school and “normal work”. But why don’t more people start them? Graham has listed common excuses (and rebuttals) in Why to Not Not Start a Startup .

Startups are wealth-creation machines

So, startups are fundamentally different. You cannot really understand them by looking at other things. But what are they then?

Startups are one of the most powerful legal ways to get rich. If you’re successful, you can, in a few years, get so rich you don’t know what to do with all the money. But perhaps even better than the money is all the time a successful founder saves:

“Economically, a startup is best seen not as a way to get rich, but as a way to work faster. You have to make a living, and a startup is a way to get that done quickly, instead of letting it drag on through your whole life.” (From The Hardest Lessons for Startups to Learn ) 

In How to Make Wealth , Graham shows why startups are optimized for wealth-creation. (And for clarity, wealth is different from money: wealth is what people want, while money is merely the medium of exchange to get it. So a startup doesn’t actually create money, it creates wealth; in other words, it creates something people want, and people give money for that. This distinction may seem small but it’s important: “making money” seems really complicated while “making something people want” is far easier.)

Why are startups optimized for wealth-creation?

Leverage: If a startup solves a complex problem, it only needs to solve it once, then scale it infinitely with technology. So a startup, once it cracks the code, can create a lot of wealth rapidly. 

Measurement: The performance of every employee in a startup is easier to measure than the performance of every employee in a big organization. So if you perform well and create wealth, you’re in a better position to get paid according to your value in a startup.

More detail in How to Make Wealth . 

Good startup ideas come from personal need and they don’t sound convincing

While there are many ways you could get startup ideas, Graham has observed that most successful startups were founded because of a personal need. Fix something for yourself, and don’t even think that you’re starting a company. Just keep on fixing the problem until you find that you’ve started a company. (From Organic Startup Ideas )

He’s also observed that good ideas tend to come from the margins - places you’d not expect. The idea is often very focused - like a book store online or a networking site for university students - so it isn’t obvious how it would change the world; we dismiss the idea until it becomes obvious.

So, good ideas don’t initially sound like billion-dollar ideas - what even is a billion-dollar idea? Certainly not something we could recognize in advance. Indeed, the initial idea is usually so crude and basic that you’ll ignore it if you’re looking for a billion-dollar idea. The really big ideas may even repel you - they are too ambitious. 

A good idea doesn’t sound convincing because, for no one to have already taken it, it must be a bit crazy or unconventional. “The most successful founders tend to work on ideas that few beside them realize are good. Which is not that far from a description of insanity, till you reach the point where you see results.” (From Black Swan Farming )

Indeed, when someone presents a crazy new idea to you, and if they are “both a domain expert and a reasonable person”, chances are that it’s a good idea (even if it sounds like a bad one). “If the person proposing the idea is reasonable, then they know how implausible it sounds. And yet they're proposing it anyway. That suggests they know something you don't. And if they have deep domain expertise, that's probably the source of it.”

Graham also emphasizes that it is not the idea that matters, but the people who have them. 

Oh, and "Don't worry about people stealing your ideas. If your ideas are any good, you'll have to ram them down people's throats." ( Graham quoting Howard Aiken )

Nevertheless, if you’re in need of inspiration, Graham has some good starting points for coming up with startup ideas.

Founders make the startup

“ The earlier you pick startups, the more you’re picking the founders. ” Throughout his essays, Graham emphasizes the importance of the founders. More than anything - target audience, trends, TAM… - a startup’s success is influenced by the founders. (Obviously, the other employees matter, too. But founders are special, they are the heart and soul of the startup.)

“Cofounders are for a startup what location is for real estate. You can change anything about a house except where it is. In a startup you can change your idea easily, but changing your cofounders is hard.” (from Startups in 13 Sentences ). 

Indeed, Graham notes that most successful startups tend to have multiple founders .

Earnestness and resourcefulness make a good founder

If the founders are the most important factor for a startup’s success, it is critical to understand what makes a good founder. Indeed, this is the topic of numerous essays.

According to Graham, a good founder is:

“The highest compliment we can pay to founders is to describe them as ‘earnest.’”

An earnest person does something for the right reasons and tries as hard as they can. The right reason usually isn’t to make a lot of money, but to solve a problem or satisfy an intellectual curiosity. This is why it’s important to figure out your intrinsic motivation or embrace your nerdiness (both of which we’ll discuss later).

“A couple days ago I finally got being a good startup founder down to two words: relentlessly resourceful.”

Relentless = make things go your way

Resourceful = adapt and try new things to make things go your way

Relentlessly resourceful people know what they want, and they will aggressively try things out and “hustle” until they get what they want. Consider the Airbnb founders and selling cereal .

Graham noticed a pattern around resourcefulness: when he talks to resourceful founders, he doesn’t need to say much. He can point them in the right direction, and they’ll take it from there. The un-resourceful founders felt harder to talk to. 

It is not the most intelligent who succeed, but the most determined . Smart people fail all the time while dumb people succeed just because they decide they must. 

"Make something people want" is the destination, but "Be relentlessly resourceful" is how you get there.

Oh, also: good founders aren’t mean. Mean People Fail and can’t get good people to work with them while startup founders who are nice tend to attract people to them .

Make something people want

If there’s one piece of startup advice to take from Graham, it’s this: “Make something people want”. (As you may know, this is also Y Combinator’s motto)

Yes, it is obvious. But it’s also pretty much the only thing that matters in a startup: if you just make something people want, you’ll attract users, employees, investors, money. “ You can envision the wealth created by a startup as a rectangle, where one side is the number of users and the other is how much you improve their lives .”

Indeed, many early-stage startups are “ indistinguishable from a nonprofit ”, because they focus so much on helping the users and less so on making money. Funnily, this approach makes them money in the long term.

“In nearly every failed startup, the real problem was that customers didn't want the product. For most, the cause of death is listed as ‘ran out of funding,’ but that's only the immediate cause. Why couldn't they get more funding? Probably because the product was a dog, or never seemed likely to be done, or both.” (From How to Start a Startup ) 

So how do you make something people want? Get close to users, launch fast, then iterate.

Get close to users

“The essential task in a startup is to create wealth; the dimension of wealth you have most control over is how much you improve users' lives; and the hardest part of that is knowing what to make for them. Once you know what to make, it's mere effort to make it, and most decent hackers are capable of that.” (From Startups in 13 Sentences ) 

“You have to design for the user, but you have to design what the user needs, not simply what he says he wants. It's much like being a doctor. You can't just treat a patient's symptoms. When a patient tells you his symptoms, you have to figure out what's actually wrong with him, and treat that.” (From Design and Research )

Since you may not precisely know who your users are and what exactly are their needs before you launch, it’s useful to yourself be a user of your product. If you use and like the product, other people like you may, too. This is why successful startups tend to arise from personal need.

Launch fast, then iterate

“The thing I probably repeat most is this recipe for a startup: get a version 1 out fast, then improve it based on users' reactions.”

The importance of iterations is highlighted in “ A Version 1.0 ”, “ What Microsoft Is this the Altair Basic of? ” and “ Early Work ”, among others. (If you understand the importance of iterations, then you understand that you must release a version 1 as soon as possible, so you can start iterating sooner.)

Some ideas from these essays:

• Don’t be discouraged by people’s ridicules of your early work. Just keep on iterating. (There will always be Trolls and Haters . Don’t mind them.)
• Don’t compare your early work with someone’s finished work. (If you wanted to compare your work to something, it’d optimally be a successful person’s early work. But people tend to hide their first drafts, precisely because they don’t want to be ridiculed.)
• When in doubt, ask: Could this really lame version 1 turn into an impressive masterpiece, given enough iterations?

Iterating and getting through the lame early work never gets easy. But Graham has listed some useful tips to trick your brain in “ Early Work ”.

Execution is a pathless land, but there is advice to be given

Mostly, a startup shouldn’t try to replicate what other startups do:

“If you do everything the way the average startup does it, you should expect average performance. The problem here is, average performance means that you'll go out of business. The survival rate for startups is way less than fifty percent. So if you're running a startup, you had better be doing something odd. If not, you're in trouble.”

Startup execution is a pathless land; there’s no formula to follow, even though many blog posts and thought leaders want you to believe otherwise. This is why it’s so important for the founders to be earnest and relentlessly resourceful: they need to figure it out themselves.

Even though there isn’t a connect-the-dots type of way to succeed in the startup world, Graham has observed hundreds (if not thousands) of startups from a very close distance, so he has identified general principles that help:

Do Things that Don’t Scale

“Think of startups not only as something you build and you scale, but something you build and force to scale.” 

“Startups take off because the founders make them take off. If you don’t take off, it’s not necessarily because the market doesn’t exist but because you haven’t exerted enough effort.”

At some point, your startup may grow on autopilot. But before you’re there, you need to do seemingly insignificant things, like cold emailing potential clients, speaking to people at conferences or offering “ surprisingly good customer service ”.

The “Do Things that Don’t Scale” advice helps us remember that building something great is only one part of the equation; we must also do laborious, unscalable work to get initial growth, no matter how great the product is.

Get Ramen Profitable

Ramen profitability = a startup makes just enough to pay the founders’ living expenses.

“Ramen profitability means the startup does not need to raise money to survive. The only major expenses are the founders’ living expenses, which are now covered (if they eat ramen).”

Significance: Ramen profitability means that the startup turns from default dead into default alive . The game changes from “don’t run out of money” into “don’t run out of energy”. While running a startup is never not stressful, reaching ramen profitability does take a weight off your shoulders.

To increase your startup’s chances of succeeding, increase your chances of survival; to increase your chances of survival, reach ramen profitability.

Maintain a Maker’s Schedule

To get into the making/building mindset, you need big chunks of time with no interruptions. You can’t build a great product in 1-hour units in-between meetings; “that’s barely enough time to get started”. If you think of the stereotypical coder, they prefer to work throughout the night, probably because no one can distract them at 3am.

“When you're operating on the maker's schedule, meetings are a disaster. A single meeting can blow a whole afternoon, by breaking it into two pieces each too small to do anything hard in.”

If you want to create great stuff, you need to be mindful that a manager and a maker operate on very different schedules. If you’re the manager, try to give big blocks of time for the maker; if you’re the maker, try to schedule all meetings on two days of the week so the rest is free for creating.

Holding a Program in One's Head expands on some of these ideas.

What not to do

Graham has also figured out something about the inverse: what not to do. Or, as he puts it, “ How Not to Die ”. 

• Keep morale up (don’t run out of energy)
• Don’t run out of money (for example, hire too fast)
• Don’t do other things. The startup needs your full attention. ( Procrastination is mostly distraction . Avoid distractions and you’ll avoid procrastination. Note, though, that you can procrastinate well .)
• Make failing unbelievably humiliating (to force you to give your everything)
• Simply don’t give up, especially when things get tough

To summarize this part on execution, here are Paul Graham’s Six Principles for Making New Things : 

• Simple solutions
• To overlooked problems
• That actually need to be solved
• Deliver these solutions as informally as possible
• Starting with a very crude version 1
• Then iterating rapidly

The more you focus on money, the less you focus on the product

Graham doesn’t often talk about money, and when he does, I get this weird feeling. It’s like “sure, we’re talking about money... but I’d rather we talk about the product instead.” Let me explain:

In Don’t talk to Corp Dev , Graham says all a startup needs to know about M&A is that you should never talk to corp dev unless you intend to sell right now. So it’s better to focus on the product until you absolutely must think about M&A.

In The Top Idea in Your Mind : “once you start raising money, raising money becomes the top idea in your mind”, instead of users and the product. So your product suffers.

When you get money, don’t spend it . “ The most common form of failure is running out of money ”, and you can avoid that by not spending money, not hiring too fast.

One instance when you should think about money is if your startup is default dead . “Assuming their expenses remain constant and their revenue growth is what it has been over the last several months, do they make it to profitability on the money they have left?” If you know you’re default dead, your focus quickly shifts to turning the ship around and reaching profitability; avoiding The Fatal Pinch .

In the long term, it’s obvious that the company that focuses more on the users and product beats the company that obsesses over investors and raising money.

Paul Graham on What to work on

What to work on is one of the most important questions in your life, along with where you live and who you’re with. While Graham’s treatment of this question definitely leans on the side of startups, you can also view his ideas from the perspective of side hustles, hobbies, projects (in or outside of a career) and so on.

What Doesn't Seem Like Work?

Why Nerds are Unpopular

Fashionable Problems

How to Do What You Love

You Weren't Meant to Have a Boss

A Project of One's Own

Great Hackers

Follow intrinsic motivation

If it’s something you’re intrinsically motivated about, that’s something where you have infinite curiosity, and that’s something you’ll eventually do well in. (Later, we’ll discuss how curiosity leads to genius.)

“ If something that seems like work to other people doesn't seem like work to you, that's something you're well suited for. ” Put another way: the stranger your tastes seem to other people, the more you should embrace those tastes. 

Because of the internet, you can make money by following your curiosity. This is a revolutionary shift : in the past, money was gained from a boring job, and you satisfied your curiosity during the weekends. But now, you can make real money just by following your curiosity, whether it’s from a startup or a YouTube or Gumroad account.

The two greatest powers in the world - money and curiosity - are getting more aligned each day. There has never been a greater time to follow your intrinsic motivation. Now, the important question is what to work on, not how to make money, because if you figure out an answer to the former, the latter question will answer itself. 

Turns out, nerds are far closer to figuring out the answer than non-nerds. (Nerds - or earnest people - do something for the sake of it, not to become popular or rich). Nerds in high school tend to be unpopular , not because they couldn’t figure out how popularity works and game the system, but perhaps because they don’t really want to be popular. That makes high school a tough time for them, but real life becomes much more fulfilling: while others are stuck in the popularity/status rat race and compete to work on Fashionable Problems , the nerds can follow their own curiosities, thus work on stuff no one else is working on, thus discover new things, thus succeed. Plus, they have a much nicer time doing so.

A question to figure out your intrinsic motivation and what to work on: “What are you a big nerd on?”

Let’s end this part with a sharp and practical observation from “ How to Do What You Love ”: 

“To be happy I think you have to be doing something you not only enjoy, but admire. You have to be able to say, at the end, wow, that's pretty cool. This doesn't mean you have to make something. If you learn how to hang glide, or to speak a foreign language fluently, that will be enough to make you say, for a while at least, wow, that's pretty cool.”

You should be working on your own projects

The logical conclusion of following your intrinsic motivation is that you should be working on your own projects (or other people’s projects where you have significant ownership). 

You may have noticed that projects you start on your own feel fundamentally different from tasks handed to you by a manager or teacher. And there’s a reason for that: “ You Weren't Meant to Have a Boss ”.

In that essay, Graham makes the argument that even though working in a large organization is the default now, it’s not how we evolved to work. A large organization is similar to the modern diet - consisting of pizza, candies and other processed foods - while a small group (like a startup) is the hunter-gatherer diet. One is easy and safe and appealing in the short term (but terrible over time) while the other is hard and unappealing, but more natural and better in the long term.

While working in smaller groups makes you happier and gives you more freedom, it’s also the way to do great work, as Graham argues in “ A Project of One’s Own ”. If a project feels like it’s your own, you have motivation and skin in the game that you don’t otherwise have. You’re much more willing to obsess over the details and make something great.

Work on things that you want to take over your life

“It's a mistake to insist dogmatically on ‘work/life balance.’ Indeed, the mere expression ‘work/life’ embodies a mistake: it assumes work and life are distinct. [...] I wouldn't want to work on anything I didn't want to take over my life.” (From “ A Project of One’s Own ”)

For startup founders, the startup is their life - there is time for little else, even sleep. Why would they willingly work 80+ hours a week and eat nothing but ramen , with no guaranteed financial reward, when they could work 40 hours a week and eat lobster at a big company? Because the startup is a project of their own, and they have - hopefully consciously - decided it’s something they want to take over their lives. “People will do any amount of drudgery for companies of which they're the founders.”

How do you know if something has taken over your life? Here’s a simple test: Do you think about it in the shower? 

In “ The Top Idea in Your Mind ”, Graham argues that if something is really important to you, then your mind will think about it subconsciously and ideas will appear in your head whilst walking or showering. Indeed, if this does not happen, you’ll have trouble doing great work - that’s your sign to reconsider what you work on.

Paul Graham on Thinking & Decision-making

Startup founders are an interesting group of people: they seek to change something about the status quo, which means they see something non-obvious that could be improved and they believe in that improvement so much that they’re willing to work 80+ hours a week and eat ramen until their vision becomes a reality.

What drives them? It can’t be just money - there are so many founders who’ve already gotten rich, and they still work in their companies and start new startups. And why aren’t there more founders? What qualities are there in a founder that you don’t find in non-founders?

By trying to understand this group of people, Graham has discovered a lot about thinking, decision-making, and the human mind in general.

The Four Quadrants of Conformism

The Two Kinds of Moderate

Orthodox Privilege

Novelty and Heresy

How to Disagree

How to Think for Yourself

The Bus Ticket Theory of Genius

Is It Worth Being Wise?

Beyond Smart

How to Work Hard

Mind the Gap

Being a Noob

How to Be an Expert in a Changing World

How Art Can Be Good

Taste for Makers

The Island Test

Independent-mindedness vs conventional-mindedness

Independent-minded people prefer to think through things for themselves, and because of this, they may seem weird to conventional-minded people (who follow the average and agreeable). Hence, it is almost a tautology to say that new ideas and new startups are the work of independent-minded people.

In The Four Quadrants of Conformism , Graham goes a bit deeper and differentiates between aggressive and passive forms of independent-mindedness and conventional-mindedness. Notably, aggressively independent-minded people tend to question existing norms and rules, working against them, while aggressively conventional-minded people work to maintain the norms and rules. There’s a clash between the groups, so it’s important for independent-minded people to “be protected”, be given space to innovate, break norms and come up with new ideas and things. (These “protected areas” are important for innovation. You could think of Silicon Valley as one.)

If you know someone is conventional-minded, you know a lot about them. Their beliefs and actions match the average, and you know what the average is. Whereas, if someone is independent-minded, you don’t really know them; they think things through for themselves, and thus they may arrive at conclusions you can’t imagine. In fact, on one issue, independent-minded people can be in the political left, and on another issue, in the political right; they are politically moderate by accident . A conventional-minded person is more likely either in the left or right for every issue.

Conventional-minded people have what Graham calls Orthodox Privilege : it seems to them that everyone is safe to express their opinions because everything they think about is conventional and uncontroversial. “They literally can't imagine a true statement that would get them in trouble.”

So if you do express your controversial, new ideas to them, they may regard them as untrue heresy. Novelty and Heresy go hand-in-hand. “It doesn't seem to conventional-minded people that they're conventional-minded. It just seems to them that they're right.” To them, anything that is unconventional is likely to be false; to the independent-minded, anything too conventional seems suspicious. So if you express your independent-minded thoughts publicly, you may want to learn How to Disagree .

In How to Think for Yourself , Graham shows there are some types of work that you can only do well in if you think differently from others: Scientists aim to discover something new, so being conventional-minded won’t get you very far; an investor who thinks exactly like everyone else will not get rich; a startup founder who shares the same ideas as everyone else won’t build great new stuff. You need to be right and most other people need to be wrong.

Of course, not every type of work is like this. You can be a good administrative worker without thinking differently from others; it’s not essential that everyone else is wrong. Generally, independent-minded people want to work in areas where newness is rewarded.

In How to Think for Yourself , Graham shares some exercises for training your independent-mindedness muscles.

Genius comes from infinite curiosity, intelligence, hard work and courage

We tend to think some people are just blessed with genius, that it’s an innate thing. But Graham has taken this black box apart and argues genius is something you can influence.

“ Those who do really great work have an unexplainable obsession about something ”. Infinite curiosity leads to surprising discoveries, simply because you think about and play with the topic more than any rational person would expect. And all that thinking and tinkering feels like play to you (but looks like work to others) because an obsessive interest “is a proxy for ability and a substitute for determination”. 

Intelligence

There’s a difference between wisdom and intelligence . If wisdom means a high average outcome across all outcomes, intelligence is a spectacularly high outcome in a few situations. If we think of “genius”, it tends to fit the latter description: you can be a terrible fool about everything else, but if you discover relativity, you’re a genius. 

High curiosity in something + high intelligence in that domain are a great beginning. But not necessarily enough to discover important new ideas. As Graham elaborates in Beyond Smart , there are smart people, and then there are those who have important new ideas; “There are a lot of genuinely smart people who don’t achieve very much.”

Intelligence and curiosity are perhaps necessary to become a genius, but not sufficient; you also need hard work to uncover new ideas and courage to pursue them, as developing something new challenges your ego (and irritates the conventional-minded people).

Hard work and courage

Even when you’re undeniably brilliant, you cannot avoid hard work. (Indeed, just knowing How to Work Hard can get you closer to sheer brilliance.) Hard work in itself isn’t the goal, though. Output matters (output being, in this context, important new ideas): “ If I paint someone's house, the owner shouldn't pay me extra for doing it with a toothbrush .”

When you start to do or learn anything new, you’ll Be a Noob at it first. But “the more of a noob you are locally, the less of a noob you are globally.” In How to Be an Expert in a Changing World , Graham notes that if your opinion was right once, it may not be right anymore because the world has changed. So it takes intellectual humility and courage to update your opinions to the new world, instead of clinging to the opinions you formed in the old world.

Putting together Graham’s thoughts, it seems like genius is not an innate quality that you can’t influence, but a combination of multiple qualities like curiosity, intelligence, hard work and courage.

Good taste is necessary for good work

Good taste is a quality related to genius. Some people seem to have an “eye” for design or an “ear” for music, but Graham shows, again, that taste is something you can develop.

”Taste is subjective” isn’t true, and you see it as soon as you start designing or writing or building things. There’s good art and there’s bad art , good writing and bad writing, nice design and less nice design. Saying “taste is subjective” is lazy and won’t help you improve your work.

So if you want to create better stuff, you need to realize that you may have poor taste and you need to develop good taste, normally by getting better at your craft or studying those who have good taste. “Good work happens when you see something is ugly, understand why, and have the ability to fix it into something beautiful.” (From Taste for Makers )

So what is good art or design? Graham gives a list (I redacted a few points):

• Solves the right problem
• Often slightly funny
• Uses symmetry
• Resembles nature
• Often strange
• Often daring 

Good work isn’t necessarily the most popular work; “There are sources of error so powerful that if you take a vote, all you're measuring is the error.” But if you do good work, eventually, people will appreciate it.

Is your argument testable?

If you read Graham closely, you notice that often when he makes an argument, he immediately considers what kind of test is needed to validate the argument. He’s thinking like a scientist: only accepting an argument if it’s testable.

Watch him do it in How to Do What You Love :

 “To be happy I think you have to be doing something you not only enjoy, but admire. You have to be able to say, at the end, wow, that's pretty cool. This doesn't mean you have to make something. If you learn how to hang glide, or to speak a foreign language fluently, that will be enough to make you say, for a while at least, wow, that's pretty cool. What there has to be is a test.”

And in The Island Test , he presents a test to figure out what you’re addicted to: 

“Imagine you were going to spend the weekend at a friend's house on a little island off the coast of Maine. There are no shops on the island and you won't be able to leave while you're there. Also, you've never been to this house before, so you can't assume it will have more than any house might.

What, besides clothes and toiletries, do you make a point of packing? That's what you're addicted to.”

In some cases, the way to make a point (and make it practical) is to devise a test. In How to Start a Startup , Graham explores what makes a good startup employee. He could just say “they are determined and will do whatever it takes”, but that’s not a testable argument, and not very practical for someone who’s hiring. 

Instead, Graham devised a test: “Could you describe the person as an animal?” If you could say “Jaakko is an animal” and don’t laugh but rather take the description seriously, that’s the person you want in your startup. An animal of a salesperson simply won’t take no for an answer; an animal of a programmer will stay up all night to finish the code; an animal of a PR person will pitch every newspaper in the city until your startup gets featured. 

Fun evening activity: Go through an essay you’ve written and see if each of the arguments you make is testable.

Paul Graham on Writing

Paul Graham is known for incredibly clear and simple writing. Each of his essays is easy to understand, no matter how complicated the topic. 

You can learn a lot about writing just by reading Graham, and doubly so if it’s an essay on the topic of writing. Fortunately for us, there are many such essays.

For starters, Graham has summarized his writing philosophy in Writing, Briefly . It’s an entire writing course, condensed into one (long) sentence. I recommend you read it now before continuing below.

Writing, Briefly

Writing and Speaking

The List of N Things

Persuade xor Discover

General and Surprising

The Age of the Essay

How to Write Usefully

Write Simply

Write Like You Talk

Economic Inequality

Writing is how you get ideas, develop ideas and improve your thinking

If you read Writing, Briefly , as you should, you noticed this:

“I think it's far more important to write well than most people realize. Writing doesn't just communicate ideas; it generates them. If you're bad at writing and don't like to do it, you'll miss out on most of the ideas writing would have generated.”

From an idea perspective, being a good writer is better than being a good speaker. You need good ideas to have good essays, but you can do a good speech without saying much at all. Though speeches can be better for motivation and personal touch, writing is better for ideas.

Don’t write to persuade, write to discover something new and useful

There are roughly two types of essays: those where you know exactly where it’s going before you start, and those where you have no clue where it’s going. 

We’re taught to write the first type of essay in school: we write the thesis statement in the introduction and ensure that the rest of the essay supports that thesis. We’re writing to persuade the reader, so that they’ll accept our thesis. A listicle is equivalent to that type of essay, and writing one doesn’t help you discover new ideas or knowledge. “ I worry that if I wrote to persuade, I'd start to shy away unconsciously from ideas I knew would be hard to sell .”

Paul Graham is a supporter (and practitioner) of the second type, writing to discover. In his mind, an essay is supposed to be two things: new and useful.

An essay should be new

If an essay doesn’t share something new or surprising, what good is it? When we write to discover, we want to surprise ourselves and the reader. Most surprising = furthest from what people currently believe . 

But just anything new doesn’t cut it. There’s constantly new info and news, and that doesn’t make a difference in our lives. What we should aim for is something General and Surprising . “Ordinarily, the best that people can do is one without the other: either surprising without being general (e.g. gossip), or general without being surprising (e.g. platitudes).” If you can do some combination of general and surprising (at least to some people), you’ve got a winning essay.

“ Essays should aim for maximum surprise. ”

An essay should be useful

What does it mean for an essay to be useful? Graham offers some ideas in How to Write Usefully : 

• When something is useful, it’s correct. If it’s merely persuasive, it could be false. “Good writing should be convincing, certainly, but it should be convincing because you got the right answers, not because you did a good job of arguing.” (From The Age of the Essay ) 
• “Useful writing makes claims that are as strong as they can be made without becoming false.”
• “Useful writing tells something important that people didn’t already know” (again, going back to the “surprise” idea)

Good writing is rewriting (in particular, rewriting to make the text simpler)

Just like in anything involving skill, the way to get better is through iterations. Good writing is rewriting . Because we can’t see someone’s drafts and rewrites, we compare their end product to our Early Work , then get discouraged looking at the gap. Instead, we must appreciate that something bad now could become great, if we iterate enough. 

“My strategy is loose, then tight. I write the first draft of an essay fast, trying out all kinds of ideas. Then I spend days rewriting it very carefully.” (From How to Write Usefully ) 

And when you rewrite, your main goal is to make your writing simple . Most of the time, the simplest words and simplest sentences are better than decorative, complicated words. Your purpose is to convey an idea, not to use fancy words and make the reader “do extra work just so you can seem cool.”

In Write Like You Talk , Graham shares a trick for writing simply: explain your ideas to a friend by talking; then, use that transcript as a draft for your essay. The spoken and written version of your idea should be as close to each other as possible. “If you simply manage to write in spoken language, you'll be ahead of 95% of writers.” 

When possible, find a metaphor for your idea

This is not direct advice from Graham (though he does recommend you write simply, and what’s simpler than a great metaphor?) 

Instead, this is a theme you notice if you read a lot of Graham. Metaphors are a weapon he wields often.

Some of my favorite metaphors from Paul Graham:

“There's an Italian dish called saltimbocca, which means ‘leap into the mouth.’ My goal when writing might be called saltintesta: the ideas leap into your head and you barely notice the words that got them there.” (From Write Simply )

“People don’t realize that scrapping things together is how big things get started. They unconsciously judge larval startups by the standards of established ones. They're like someone looking at a newborn baby and concluding ‘there's no way this tiny creature could ever accomplish anything.’” (From Do Things that Don’t Scale )

“The list of n things [listicle] is in that respect the cheeseburger of essay forms. If you're eating at a restaurant you suspect is bad, your best bet is to order the cheeseburger. Even a bad cook can make a decent cheeseburger. And there are pretty strict conventions about what a cheeseburger should look like. You can assume the cook isn't going to try something weird and artistic. The list of n things similarly limits the damage that can be done by a bad writer.” (From The List of N Things )

“Sometimes it's because the writer only has very high-level data and so draws conclusions from that, like the proverbial drunk who looks for his keys under the lamppost, instead of where he dropped them, because the light is better there.” (From Economic Inequality ) 

“If I paint someone's house, the owner shouldn't pay me extra for doing it with a toothbrush.” (From Mind the Gap ) 

“I'm not sure why. It may just be my own stupidity. A can-opener must seem miraculous to a dog.” (From Taste for Makers )

“A startup is like a mosquito. A bear can absorb a hit and a crab is armored against one, but a mosquito is designed for one thing: to score. No energy is wasted on defense. The defense of mosquitos, as a species, is that there are a lot of them, but this is little consolation to the individual mosquito.” (From How to Make Wealth ) 

“The independent-minded thus have a horror of ideologies, which require one to accept a whole collection of beliefs at once, and to treat them as articles of faith. To an independent-minded person that would seem revolting, just as it would seem to someone fastidious about food to take a bite of a submarine sandwich filled with a large variety of ingredients of indeterminate age and provenance.” (From How to Think for Yourself )

Paul Graham on Society

Startups turn into big companies, startup founders turn into billionaires , products used by hundreds turn into products used by millions... If you’re working to help startups, you’re working to change society in a big way. 

The Refragmentation

Inequality and Risk

What You Can't Say

“Reducing wealth inequality” isn’t as great as it sounds

As we established earlier, a startup is a wealth-creation machine. As such, it shouldn’t surprise us to see Graham discussing wealth inequality and why it isn’t the demonic thing many believe.

Wealth inequality is a divisive topic, and one I’m no expert in, so I’ll try to provide a general overview without twisting Graham’s ideas into something they aren’t. You might want to read the essays in full if you’re interested in the topic.

By default, we think wealth inequality is inherently bad. 

In Mind the Gap , Graham presents three reasons why we think wealth inequality is inherently bad:

• The Daddy Model of Wealth: We confuse wealth with money and think there is a fixed amount of it. And if there’s a fixed amount, we believe it should be distributed equally. (By now, you should realize that wealth is different from money, and that you can create wealth; there is no “fixed amount” or “fixed pie”; you can increase the pie)
• We think people get rich today like they got rich earlier: In the past, the rich people tended to get rich by stealing (through war or taxes). So some people still believe rich people have gotten rich by stealing, even though today the much better, more reliable, faster and legal way to get rich is by creating wealth, not stealing it.
• We don’t understand leverage: Technology increases the gap between the productive and the unproductive, thus increasing wealth inequality. If a CEO is 100x richer than an employee in the same company, we think it unjust because there’s no way the CEO works 100x more than they do. But because of leverage, the CEO can easily be 100x more productive than an employee, or make decisions that are 100x more valuable. “I have no trouble imagining that one person could be 100 times as productive as another.”  

Wealth inequality can be a sign of good things.

“Variation in wealth can be a sign of variation in productivity. (In a society of one, they're identical.) And that is almost certainly a good thing: if your society has no variation in productivity, it's probably not because everyone is Thomas Edison. It's probably because you have no Thomas Edisons.

In a low-tech society you don't see much variation in productivity. If you have a tribe of nomads collecting sticks for a fire, how much more productive is the best stick gatherer going to be than the worst? A factor of two? Whereas when you hand people a complex tool like a computer, the variation in what they can do with it is enormous.” (From Great Hackers )

“By helping startup founders, you’re helping to increase economic inequality. If economic inequality should be decreased, no one should be helping founders. But that doesn’t sound right.” (From Economic Inequality )

There are many causes of economic inequality. Some of them are bad, like corruption and stealing. But some causes are generally good, like variation in productivity. Some people are vastly better at creating things people want, so it’s unsurprising they are able to make more money than other people.

Remember that startups grow the pie: they get rich by making other people richer. Because they are rich doesn’t mean you must have been screwed over. It’s more like the opposite: the Google founders are rich because they have made life easier and richer for billions of people.

Of course, wealth inequality isn't only due to startups (although startups create the most extreme results). Some people’s salaries are higher than others’, again, because some produce more wealth than others. Salaries are closer to market price than ever before , and get constantly closer, as people are more free to start their own companies, switch companies and work internationally.

Taxing the rich reduces economic inequality, but may not lead to the results you’d hope for. 

If you want to make the poor richer - as is probably the intention when you want to reduce economic inequality - you can either take the money from the rich, or make the poor more productive so they’ll get richer (through education and infrastructure, for example). But if you make people more productive, some people will create 1,000x the results as another, so economic inequality remains. 

So if you want to reduce economic inequality, the only way is to push from the top - to take money from the rich (see Inequality and Risk ). Thus, you reduce the rewards for creating or funding startups and business activity, thus you hinder technological innovation. This doesn’t sound as positive as “reducing economic inequality”. Especially when you consider the many different kinds of inequalities beyond income equality.

The gap between rich and poor is increasing in monetary terms, but probably closing in wealth terms. Today, the average person lives a relatively similar life, materially, to a rich person: both have a fridge, a car, a phone, Netflix… 100 years ago, the rich had a car while the poor didn’t, they had things we now regard as “essentials” while the poor didn’t. Through businesses, essential products are getting cheaper and more accessible to everyone. In many cases, the rich can pay to have a flashier version of something, like a sports car or brand watch, but the basic, affordable version is still good enough.

Today, the difference is appearance and what brand your stuff is; in the past, the difference was either having it or not having it. So yes, the income gap is increasing, but with it, the gap in quality of life is decreasing.

“You need rich people in your society not so much because in spending their money they create jobs, but because of what they have to do to get rich. I'm not talking about the trickle-down effect here. I'm not saying that if you let Henry Ford get rich, he'll hire you as a waiter at his next party. I'm saying that he'll make you a tractor to replace your horse.” (From Mind the Gap ) Trickle-down economics is a bad argument because it misses the point. We need to look at how wealth is created, not how it’s used

Graham’s proposition:

Allow those who create wealth to keep it.

When you’re allowed to keep the wealth you create, people can get rich by creating wealth instead of stealing it. People take bigger risks if they can keep more of the upside when those risks pay off. A startup founder never captures all of the wealth created; most of the wealth is transferred to other people, so we should encourage those who want to get rich, not discourage them.

Based on these ideas, you can probably guess Graham’s opinions on capitalism vs communism (something he discusses in the essays linked in this section, particularly in How to Make Wealth and Mind the Gap ).

Not everything we think is true is true, and not everything we think is false is false

“At every period of history, people have believed things that were just ridiculous, and believed them so strongly that you risked ostracism or even violence by saying otherwise. If our own time were any different, that would be remarkable.” (From Taste for Makers ) 

“And yet at every point in history, there were true things that would get you in terrible trouble to say. Is ours the first where this isn't so? What an amazing coincidence that would be.” (From Orthodox Privilege ) 

Not everything we think is true is true, and not everything we think is false is false.

Graham comes back to this idea repeatedly, particularly in the essays discussing independent-mindedness and conformism (see above). But you can see tones of this idea in his startup essays too; after all, a successful startup has a vision of a future that most other people do not believe in at the time. 

Graham deep-dives into this idea in What You Can't Say , an essay I consider one of his finest - one you must read for yourself. In fact, the whole essay is so intellectually important that I’d do it a disservice by summarizing. Instead, here’s the main takeaway I was left with:

There are things you believe that are incorrect, horribly so. To you, they seem correct without question. Stay open-minded.

Paul Graham on Life

If we accept that writing is thinking (as we addressed earlier), Graham, with over 200 essays and decades of writing, has done a lot of thinking. When he shares life wisdom, you’d be smart to listen.

What You'll Wish You'd Known is sort of Paul Graham’s compilation of life wisdom, targeted at high school students. It’s also one of his most popular essays. While you should read it yourself, here are a few major points that stood out for me:

• It’s okay to not have a plan. In fact, it may be better not to fixate on one plan when you’re young. Optimize for optionality. If you’re unsure, go with the option that gives you more options later down the line. 
• Build something. Work on something hard on your own, doesn’t really matter what it is. You’ll learn so much about yourself in that process. This is a shortcut to finding what you want to work on, which is one of the major questions in life. “If I could go back and redo my twenties, that would be one thing I'd do more of: just try hacking things together. [...] I should have spent less time worrying and more time building. If you're not sure what to do, make something.” (From The Power of the Marginal ) 
• How you succeed in school is in no way representative of how you succeed in life. “One of the most dangerous illusions you get from school is the idea that doing great things requires a lot of discipline. Most subjects are taught in such a boring way that it's only by discipline that you can flog yourself through them.” At school, stuff is forced on you; in real life, it is the stuff you initiate that matters and defines your trajectory.
• “There's no switch inside you that magically flips when you turn a certain age or graduate from some institution. That’s not how you become an adult. You start being an adult when you decide to take responsibility for your life. You can do that at any age. [...] The important thing is to get out there and do stuff. Instead of waiting to be taught, go out and learn.”

Beyond that essay, there are a few bigger themes I want to highlight below.

What You'll Wish You'd Known

Life is Short

The Acceleration of Addictiveness

• How to Lose Time and Money

Lies We Tell Kids

Keep Your Identity Small

Cities and Ambition

The Top of My Todo List

Life is short

“Life is short” is one of those statements everyone kind of agrees with, without giving it too much thought. But Graham has explored the idea a bit deeper.

For starters, a startup itself is a way to appreciate the shortness of life or adapt to it ; instead of a 40-year career, you compress your income-making to a few startup years and thus free up time for activities beyond making a living. The average human lifespan is increasing while the minimum possible time it takes to be set for life is decreasing; startups are one way to maximize the gap.

Whether you agree with the premise that Life is Short , it’s easy to agree that one way to make life seem less short is to minimize anything unimportant. If you do nothing for 5 hours, that 5 hours will feel excruciatingly long. The more we have going on, the shorter life feels. So we should cut all the things we don’t like doing, the stuff that we think life is too short for (Graham calls this, bluntly, “bullshit”).

And if we invert the argument, we realize that we should dedicate more time for the important stuff. If people and relationships are important to you, your calendar should reflect that. When life is short, we must ruthlessly cut the unimportant while making time for the important. Sounds simple and easy to dismiss, but somehow, Graham applies weight to it in Life is Short .

It’s surprisingly easy to waste your life if you’re not careful

Since life is short, it’s easy to let it slip away in a blur if you’re not careful.

One thing you get easily sucked into is “ anti-tests ”. These are tests you can try to excel in, but the way to come on top is to not care about the test at all, to ignore the test. So you could try to be popular in school, but you probably shouldn’t care about popularity; you can try to become important and high-status in life, but you probably shouldn’t care about that. Just because there’s a test doesn’t mean you should try to perform well in it. 

Ignoring tests is especially hard for intelligent, ambitious people, because their ambition provides the motivation and intelligence the means to do well in the test. But try not to get sucked into the anti-tests in life; they are the kind of “bullshit” life is too short for.

Another thing that can corrode your life, if you’re not careful, is addiction. We know to be careful with the standard stuff like alcohol and gambling, but it’s harder to avoid addictions that everyone has because those seem normal to us. In The Acceleration of Addictiveness , Graham makes a division between two normals: statistically normal (that which everyone does) and operationally normal (that which works best). Being addicted to social media and your phone is statistically normal, but not operationally normal. “ Technology tends to separate normal from natural. ”

“ You can probably take it as a rule of thumb from now on that if people don't think you're weird, you're living badly. ” For example, if your approach to consumerism doesn’t seem a bit weird, you probably own too much Stuff .

But being careful about pleasures and self-indulgence and “the bullshit” isn’t enough. We must also be careful about the things we do that feel important and productive. In How to Lose Time and Money , Graham writes: 

“It's hard to spend a fortune without noticing. Someone with ordinary tastes would find it hard to blow through more than a few tens of thousands of dollars without thinking ‘wow, I'm spending a lot of money.’ Whereas if you start trading derivatives, you can lose a million dollars (as much as you want, really) in the blink of an eye.”

Similarly, for a fairly ambitious person, it’s hard to waste your time by watching TV or laying on the sofa - your brain will start thinking “this is a waste of time” sooner or later. But you can easily work 12h a day for 2 years on something that, in retrospect, was a complete waste of your time. 

If you’re not careful about where you invest your time and money, life passes by surprisingly easily. 

You have a lot of unconditioning to do

What’s a lie you were told as a child? Stuff like “if you swallow an apple seed, a tree will grow in your stomach” is easy to identify as a lie. But stuff like “be careful with strangers, they are dangerous”? Less so.

In Lies We Tell Kids , Graham shows that we’ve been lied to as kids, for a variety of reasons (some better than others). Some falsities have flowed into our heads at home, some at school, but the main idea is that we’ve woven lies into our understanding of the world at a young age. And if it’s something we learned as a child, it feels undeniably true as an adult; it takes serious effort to take apart these deep-held beliefs.

As a rule, if you think it’s true because you learned it in school or in your childhood, assume it is not true. It’s better to verify it for yourself, even if it turns out to have been true all along.

If childhood beliefs are a good place to start unconditioning, a good place to continue is whatever you identify as (democrat, minimalist, crypto bull…). This is because we have a terribly hard time thinking clearly about something that’s part of our identity , so you may have taken in opinions one-sidedly. If you identify as x, criticism against x feels like a personal attack because x is a part of your identity, part of you. The bigger your identity, the more you have to process and rethink. 

Another thing to uncondition comes from Cities and Ambition . When most people talk about the essay, they consider the obvious implication: you should go to the city that matches your ambition. So if you want to be in the show biz, go to Hollywood, or if you’re into startups, go to Silicon Valley (or, increasingly, the right corner of the internet). But there’s an inverse consideration, too, and it’s an important one: the places you’ve already lived in have subconsciously influenced your ambition. So, yes, we could match the city we live in to our ambition, but before we do that, we should figure out whether our ambition really is our own or if it’s simply a product of where we have lived in so far.

This idea of unconditioning links back to the earlier point: because you’ve been conditioned a certain way, you’re set on a path that you may not wish to be on, had you consciously made the choice. So unless you do uncondition yourself, it’s easy to waste your life.

You have a lot of unconditioning to do. So better get started.

Paul Graham’s 5 commandments for life

Bronnie Ware, a palliative care nurse, made a list of the biggest regrets of the dying:

• Forgetting your dreams
• Ignoring family
• Suppressing emotions
• Neglecting friends
• Forgetting to be happy with what you have

In The Top of My Todo List , Graham inverted the regrets into his 5 commandments to live by:

• Don’t ignore your dreams
• Don’t work too much
• Say what you think
• Cultivate friendships

Paul Graham’s Best Essays

Paul Graham’s favorites ‍

This is in addition to the three that get the most traffic: https://t.co/zsxRpKm4ew https://t.co/nROmN4eyhO https://t.co/O8hIcjcMd2 I should also have included: https://t.co/CUBGEQ9N7H https://t.co/bAcAN5wROL https://t.co/MVTTJDzyQ2 https://t.co/OKZOGIhi4i — Paul Graham (@paulg) December 20, 2019

My favorites

• What You Can't Say  
• How to Think for Yourself  
• You Weren't Meant to Have a Boss  
• How to Make Wealth  

Final words

This has been nothing but a short introduction to Paul Graham’s ideas. There are so many essays and ideas and topics that weren’t included here, so, who knows, maybe at some point there will be a PG 201. 

Anyhow, I hope this has inspired you to explore the essays yourself and gives you a convenient way to find the essays that interest you. 

If you found this summary useful, please feel free to share around. It took me nearly a year to read all the essays and turn my notes into something useful, so it’d be awesome if many people knew about this.

And if there’s something you’d like to add / edit, reach out: [email protected] / Twitter

Thanks for reading.

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How To Make Wealth by Paul Graham ∞

One of the most brilliant articles I have ever read by Paul Graham . Literally, changed my life & my perceptions about technology, renumeration, hard-work … to say the least.

We could also call this ‘18 Lessons on Wealth from Paul Graham’ .

Emphasis, mine.

Lesson #1: Startups & Life

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.

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.

If starting a startup were easy, everyone would do it.

Lesson #2: How To, Summarized

The advantage of creating wealth, as a way to get rich, is not just that it’s more legitimate (many of the other methods are now illegal) but that it’s more straightforward. You just have to do something people want .

Lesson #3: Wealth Is NOT Money

Wealth is the fundamental thing. Wealth is stuff we want: food, clothes, houses, cars, 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 wouldn’t need money.

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 plan to get rich by counterfeiting, talking about making money can make it harder to understand how to make money.

Lesson #4: The Pie Fallacy

A surprising number of people retain from childhood the idea that there is a fixed amount of wealth in the world. There is, in any normal family, a fixed amount of money at any moment. But that’s not the same thing.

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, you’ll get more for it.

Lesson #5: What Is A Job?

But here there is another layer that tends to obscure the underlying reality. In a company, the work you do is averaged together with a lot of other people’s. You may not even be aware you’re doing something people want. Your contribution may be indirect. But the company as a whole must be giving people something they want, or they won’t make any money. And if they are paying you x dollars a year, then on average you must be contributing at least x dollars a year worth of work, or the company will be spending more than it makes, and will go out of business.

Someone graduating from college thinks, and is told, that he needs to get a job, as if the important thing were becoming a member of an institution. A more direct way to put it would be: you need to start doing something people want. You don’t need to join a company to do that. All a company is is a group of people working together to do something people want. It’s doing something people want that matters, not joining the group.

Lesson #6: The ‘Working Harder’ Misconception & The Value of Work

That averaging gets to be a problem. I think the single biggest problem afflicting large companies is the difficulty of assigning a value to each person’s work. For the most part they punt. In a big company you get paid a fairly predictable salary for working fairly hard. You’re expected not to be obviously incompetent or lazy, but you’re not expected to devote your whole life to your work.

It turns out, though, that there are economies of scale in how much of your life you devote to your work. In the right kind of business, someone who really devoted himself to work could generate ten or even a hundred times as much wealth as an average employee.

Companies are not set up to reward people who want to do this. You can’t go to your boss and say, I’d like to start working ten times as hard, so will you please pay me ten times as much? For one thing, the official fiction is that you are already working as hard as you can. But a more serious problem is that the company has no way of measuring the value of your work.

Salesmen are an exception. It’s easy to measure how much revenue they generate, and they’re usually paid a percentage of it.

There is one other job besides sales where big companies can hire first- rate people: in the top management jobs. And for the same reason: their performance can be measured. The top managers are held responsible for the performance of the entire company. Because an ordinary employee’s performance can’t usually be measured, he is not expected to do more than put in a solid effort. Whereas top management, like salespeople, have to actually come up with the numbers. The CEO of a company that tanks cannot plead that he put in a solid effort. If the company does badly, he’s done badly.

If you want to go faster, it’s a problem to have your work tangled together with a large number of other people’s. In a large group, your performance is not separately measurable– and the rest of the group slows you down.

Lesson #7: Measurement & Leverage

To get rich you need to get yourself in a situation with two things, measurement and leverage. You need to be in a position where your performance can be measured, or there is no way to get paid more by doing more. And you have to have leverage, in the sense that the decisions you make have a big effect.

I think everyone who gets rich by their own efforts will be found to be in a situation with measurement and leverage. Everyone I can think of does: CEOs, movie stars, hedge fund managers, professional athletes. A good hint to the presence of leverage is the possibility of failure. Upside must be balanced by downside, so if there is big potential for gain there must also be a terrifying possibility of loss. CEOs, stars, fund managers, and athletes all live with the sword hanging over their heads; the moment they start to suck, they’re out. If you’re in a job that feels safe, you are not going to get rich, because if there is no danger there is almost certainly no leverage.

But you don’t have to become a CEO or a movie star to be in a situation with measurement and leverage. All you need to do is be part of a small group working on a hard problem.

Lesson #8: Smallness = Measurement

If you can’t measure the value of the work done by individual employees, you can get close. You can measure the value of the work done by small groups.

Starting or joining a startup is thus as close as most people can get to saying to one’s boss, I want to work ten times as hard, so please pay me ten times as much. There are two differences: you’re not saying it to your boss, but directly to the customers (for whom your boss is only a proxy after all), and you’re not doing it individually, but along with a small group of other ambitious people.

It will, ordinarily, be a group. Except in a few unusual kinds of work, like acting or writing books, you can’t be a company of one person. And the people you work with had better be good, because it’s their work that yours is going to be averaged with.

That’s the real point of startups. Ideally, you are getting together with a group of other people who also want to work a lot harder, and get paid a lot more, than they would in a big company. And because startups tend to get founded by self-selecting groups of ambitious people who already know one another (at least by reputation), the level of measurement is more precise than you get from smallness alone. A startup is not merely ten people, but ten people like you.

Lesson #9: Technology = Leverage

What is technology? It’s technique. It’s the way we all do things. And when you discover a new way to do things, its value is multiplied by all the people who use it. It is the proverbial fishing rod, rather than the fish. That’s the difference between a startup and a restaurant or a barber shop. You fry eggs or cut hair one customer at a time. Whereas if you solve a technical problem that a lot of people care about, you help everyone who uses your solution. That’s leverage.

If you look at history, it seems that most people who got rich by creating wealth did it by developing new technology. You just can’t fry eggs or cut hair fast enough.

Lesson #10: Bureaucracy

… Small companies are more at home in this world, because they don’t have layers of bureaucracy to slow them down. Also, technical advances tend to come from unorthodox approaches, and small companies are less constrained by convention.

Big companies can develop technology. They just can’t do it quickly. Their size makes them slow and prevents them from rewarding employees for the extraordinary effort required. So in practice big companies only get to develop technology in fields where large capital requirements prevent startups from competing with them, like microprocessors, power plants, or passenger aircraft. And even in those fields they depend heavily on startups for components and ideas.

Lesson #11: Difficulty As A Guide

Use difficulty as a guide not just in selecting the overall aim of your company, but also at decision points along the way.

What this meant in practice was that we deliberately sought hard problems. If there were two features we could add to our software, both equally valuable in proportion to their difficulty, we’d always take the harder one. Not just because it was more valuable, but because it was harder. We delighted in forcing bigger, slower competitors to follow us over difficult ground. Like guerillas, startups prefer the difficult terrain of the mountains, where the troops of the central government can’t follow. I can remember times when we were just exhausted after wrestling all day with some horrible technical problem. And I’d be delighted, because something that was hard for us would be impossible for our competitors.

Lesson #12: Patents & Competition

Here, as so often, the best defense is a good offense. If you can develop technology that’s simply too hard for competitors to duplicate, you don’t need to rely on other defenses. Start by picking a hard problem, and then at every decision point, take the harder choice.

Lesson #13: The Catch(es) - of The Startup Route

… you can’t choose the point on the curve that you want to inhabit. You can’t decide, for example, that you’d like to work just two or three times as hard, and get paid that much more. When you’re running a startup, your competitors decide how hard you work. And they pretty much all make the same decision: as hard as you possibly can.

… 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. Most startups tank, and not just the dogfood portals we all heard about during the Internet Bubble. It’s common for a startup to be developing a genuinely good product, take slightly too long to do it, run out of money, and have to shut down.

A startup is like a mosquito. A bear can absorb a hit and a crab is armored against one, but a mosquito is designed for one thing: to score. No energy is wasted on defense. The defense of mosquitos, as a species, is that there are a lot of them, but this is little consolation to the individual mosquito.

… companies doing acquisitions are not looking for bargains. A company big enough to acquire startups will be big enough to be fairly conservative, and within the company the people in charge of acquisitions will be among the more conservative, because they are likely to be business school types who joined the company late. They would rather overpay for a safe choice. So it is easier to sell an established startup, even at a large premium, than an early-stage one.

Lesson #14: To Sell Or Not To Sell?

… it’s a good idea to get bought, if you can. Running a business is different from growing one. It is just as well to let a big company take over once you reach cruising altitude. It’s also financially wiser, because selling allows you to diversify. What would you think of a financial advisor who put all his client’s assets into one volatile stock?

Lesson #15: How To Get Bought

Mostly by doing the same things you’d do if you didn’t intend to sell the company. Being profitable, for example. But getting bought is also an art in its own right, and one that we spent a lot of time trying to master.

Potential buyers will always delay if they can. The hard part about getting bought is getting them to act. For most people, the most powerful motivator is not the hope of gain, but the fear of loss. For potential acquirers, the most powerful motivator is the prospect that one of their competitors will buy you. This, as we found, causes CEOs to take red-eyes. The second biggest is the worry that, if they don’t buy you now, you’ll continue to grow rapidly and will cost more to acquire later, or even become a competitor.

Lesson #16: Get Users

… it all comes down to is users. You’d think that a company about to buy you would do a lot of research and decide for themselves how valuable your technology was. Not at all. What they go by is the number of users you have.

In effect, acquirers assume the customers know who has the best technology. And this is not as stupid as it sounds. Users are the only real proof that you’ve created wealth. Wealth is what people want, and if people aren’t using your software, maybe it’s not just because you’re bad at marketing. Maybe it’s because you haven’t made what they want.

Number of users may not be the perfect test, but it will be very close. It’s what acquirers care about. It’s what revenues depend on. It’s what makes competitors unhappy. It’s what impresses reporters, and potential new users. Certainly it’s a better test than your a priori notions of what problems are important to solve, no matter how technically adept you are.

Lesson #17: Premature Optimization

… Now we can recognize this as something hackers already know to avoid: premature optimization. Get a version 1.0 out there as soon as you can. Until you have some users to measure, you’re optimizing based on guesses.

The ball you need to keep your eye on here is the underlying principle that wealth is what people want.

A restaurant can afford to serve the occasional burnt dinner. But in technology, you cook one thing and that’s what everyone eats. So any difference between what people want and what you deliver is multiplied. You please or annoy customers wholesale. The closer you can get to what they want, the more wealth you generate.

Lesson #18: Wealth & Power (with some history)

Making wealth is not the only way to get rich. For most of human history it has not even been the most common. Until a few centuries ago, the main sources of wealth were mines, slaves and serfs, land, and cattle, and the only ways to acquire these rapidly were by inheritance, marriage, conquest, or confiscation. Naturally wealth had a bad reputation.

Two things changed. The first was the rule of law. For most of the world’s history, if you did somehow accumulate a fortune, the ruler or his henchmen would find a way to steal it. But in medieval Europe something new happened. A new class of merchants and manufacturers began to collect in towns. [10] Together they were able to withstand the local feudal lord. So for the first time in our history, the bullies stopped stealing the nerds’ lunch money. This was naturally a great incentive, and possibly indeed the main cause of the second big change, industrialization.

A great deal has been written about the causes of the Industrial Revolution. But surely a necessary, if not sufficient, condition was that people who made fortunes be able to enjoy them in peace. One piece of evidence is what happened to countries that tried to return to the old model, like the Soviet Union, and to a lesser extent Britain under the labor governments of the 1960s and early 1970s. Take away the incentive of wealth, and technical innovation grinds to a halt.

Understanding this may help to answer an important question: why Europe grew so powerful. Was it something about the geography of Europe? Was it that Europeans are somehow racially superior? Was it their religion? The answer (or at least the proximate cause) may be that the Europeans rode on the crest of a powerful new idea: allowing those who made a lot of money to keep it.

Once you’re allowed to do that, people who want to get rich can do it by generating wealth instead of stealing it.

… Don’t let a ruling class of warriors and politicians squash the entrepreneurs. The same recipe that makes individuals rich makes countries powerful. Let the nerds keep their lunch money, and you rule the world.

• More Essays by Paul Graham
• The original excerpt was from a book he wrote called ‘Hackers & Painters’ , you can get if from Amazon here
• Just to be clear, I did not write this article … for your reference, I’ve linked back severally to the original article/essay, including the header …
• If you think this was long, wait till you see the original
• Anything in quoteblocks is the same as what is in the original article - other than the emphasis (i.e. Italics )
• You could comment on the original article reddit.com/info?id=20775 as per the author suggests, but the link on reddit seems to be down.
• I’d encourage you to still read the original or better yet, buy the book , if you can
• Also check out the author’s footnotes in the original article … they are worth a look

Reading 06: Wealth Creation

The readings for this week are:

How To Make Wealth

Mind the Gap

The Other Road Ahead

Reflections

In these essays, Paul Graham discusses the process of creating a startup and the generation of wealth in general:

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.

For this upcoming week, you are to consider the following questions as you perform the readings and participate in class:

What do you make of Paul Graham 's pitch about startup s:

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.

Do you find the possibility of creating your company enticing or frightening? Is this something you have pursued before or wish to pursue in the future? Do you wish to retire early or work for a long time?

What do you make of Paul Graham 's justification of income inequality :

Technology should increase the gap in income, but it seems to decrease other gaps. A hundred years ago, the rich led a different kind of life from ordinary people. They lived in houses full of servants, wore elaborately uncomfortable clothes, and travelled about in carriages drawn by teams of horses which themselves required their own houses and servants. Now, thanks to technology, the rich live more like the average person.

Is technological progress and possible improvement in living conditions worth a widening incoming gap? Do we "unshackle" the "wealth creators" or should we, as a society, "steal" from them?

Finally, Paul Graham made his fortune by targeting the web. What do you think is the next big technological platform? Wearables? VR? Web? Mobile? Desktop? If you had to make an application today, what would you target and why?

Note, you should not simply list the questions and answer each one directly. Instead, the questions are there to help you brainstorm about the question:

What does the success of modern hackers such as Paul Graham say about our present society and its future? Should our society and culture encourage risk taking and starting businesses? What is the next big thing?

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Episode 277: #277 Paul Graham’s Essays Part 3

Episode 277

#277 Paul Graham’s Essays Part 3

Hosted by David Senra

• Business Building

David Senra is the host of Founders, where he studies history's greatest entrepreneurs. This is what he learned from reading Hackers and Painters: Big Ideas From The Computer Age by Paul Graham

What I learned from reading Hackers and Painters: Big Ideas From The Computer Age by Paul Graham 

Come see a live show with me and Patrick O'Shaughnessy from Invest Like The Best on October 19th in New York City. 

Get your tickets here ! 

This episode is brought to you by: 

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[4:00] How To Make Wealth by Paul Graham 

[4:01] Wealth is stuff we want: food, clothes, houses, cars, 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 wouldn't need money. Whereas if you were in the middle of Antarctica, where there is nothing to buy, it wouldn't matter how much money you had.

[6:00] All a company is is a group of people working together to do something people want.

[7:00] It turns out, though, that there are economies of scale in how much of your life you devote to your work. In the right kind of business, someone who really devoted himself to work could generate ten or even a hundred times as much wealth as an average employee .

[8:00] And the people you work with had better be good, because it's their work that yours is going to be averaged with .

[9:00] In the Company of Giants: Candid Conversations With the Visionaries of the Digital World by Rama Dev Jager and Rafael Ortiz.  (Founders #208)

[10:00] A very able person who does care about money will ordinarily do better to go off and work with a small group of peers.

[10:00] Paul Graham’s Essays (Founders #275)

[11:00] What is technology? It's technique . It's the way we all do things.

[12:00] Sam Walton got rich not by being a retailer, but by designing a new kind of store .

[12:00] Sam Walton epiosdes

#150 Sam Walton: The Inside Story of America's Richest Man by Vance H. Trimble.

#234 Sam Walton: Made In America by Sam Walton.

[13:00] Use difficulty as a guide not just in selecting the overall aim of your company, but also at decision points along the way. At Viaweb one of our rules of thumb was run upstairs. Suppose you are a little, nimble guy being chased by a big, fat, bully. You open a door and find yourself in a staircase. Do you go up or down? I say up. The bully can probably run downstairs as fast as you can. Going upstairs his bulk will be more of a disadvantage. Running upstairs is hard for you but even harder for him.

[14:00] So few businesses really pay attention to making customers happy.

[15:00] What people will give you money for depends on them, not you.

[16:00] Hackers and Painters by Paul Graham

[20:00] The other way makers learn is from examples. For a painter, a museum is a reference library of techniques. For hundreds of years it has been part of the traditional education of painters to copy the works of the great masters, because copying forces you to look closely at the way a painting is made.

[21:00] Relentelssness wins. A great product has to be better than it has to be .

[21:00] Relentlessness Wins: Many painters might have thought, this is just something to put in the background to frame her head. No one will look that closely at it.

Not Leonardo. How hard he worked on part of a painting didn't depend at all on how closely he expected anyone to look at it. He was like Michael Jordan. Relentless.

Relentlessness wins because, in the aggregate, unseen details become visibl e.

[22:00] All those unseen details combine to produce something that's just stunning, like a thousand barely audible voices all singing in tune.

[24:00] The right way to collaborate, I think, is to divide projects into sharply defined modules, each with a definite owner, and with interfaces between them that are as carefully designed and, if possible, as articulated as programming languages.

[25:00] It turns out that looking at things from other people's point of view is practically the secret of success.

[25:00] You only get one life. You might as well spend it working on something great .

[26:00] The Other Road Ahead by Paul Graham 

[26:00] Subscribe to listen to Founders Daily (my new daily podcast)

[29:00] Use your product yourself all the time.

[29:00] Mind The Gap by Paul Graham

[29:00] When people care enough about something to do it well, those who do it best tend to be far better than everyone else. There's a huge gap between Leonardo da Vinci and second-rate contemporaries.

[32:00] Technology will certainly increase the gap between the productive and the unproductive.

[33:00] So we should expect to see ever-increasing variation in individual productivity as time goes on.

[34:00] Paul Graham’s answer to how big of a difference can a single developer or a small team make?

The answer is increasingly much. Increasingly much.

Achrimedes said if he had a lever long enough he could move the world.

Well nowawadys from your bedroom —thanks to all the infrastucture that exists — a combination of open source and services like AWS — the lever is enourmoulsy long.

You could be sitting in your bedroom programming … a single person … and if you make something that people like and is novel it can really have a huge effect.

That is very exiciting. You guys may take this for granted but anybody who is as old as me realizes how that was not the case 20 years ago.

It will be interesting to see how far it goes because it is certainly not over yet.

(How far can it go?)

Always further than people expect .

[37:00] Beating The Averages by Paul Graham 

[37:00] Paul Graham on Econtalk: I found that the interesting parts of programming you can’t make scientific. [Startups are the same.] What makes a programmer good at programming is more like what makes a painter good at painting. It is something a little less organized. It is taste. A sense of design. A certain knack.

[40:00] In business, there is nothing more valuable than a technical advantage your competitors don't understand.

[40:00] A startup should give its competitors as little information as possible.

[41:00] Taste For Makers by Paul Graham

[42:00] Whatever job people do, they naturally want to do better .

[43:00] It's surprising how much different fields' ideas of beauty have in common. The same principles of good design crop up again and again.

[44:00] If something is ugly, it can't be the best solution.

[46:00] In most fields the appearance of ease seems to come with practice. Perhaps what practice does is train your unconscious mind to handle tasks that used to require conscious thought.

[48:00] "It is my opinion," Ferrari once wrote, "that there are innate gifts that are a peculiarity of certain regions and that, transferred into industry, these propensities may at times acquire an exceptional importance... In Modena, where I was born and set up my own works, there is a species of psychosis for racing cars." — Go Like Hell: Ford, Ferrari, and Their Battle for Speed and Glory at Le Mans  by A.J. Baime. (Founders #97)

[50:00] The recipe for great work is: very exacting taste, plus the ability to gratify it.

I use Readwise to organize and remember everything I read. You can try Readwise for 60 days for free https://readwise.io/founders/

“ I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers . ” — Gareth

Be like Gareth. Buy a book: All the books featured on Founders Podcast

Introduction

How to make wealth? 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. The advantage of creating wealth as a way to get rich is that it's more straightforward. You just have to do something that people want. Money is not wealth. This paragraph is key to understanding this entire essay. Wealth is the stuff we want, food, clothes, houses, cars, 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 anything else that you wanted, you wouldn't need money or as if you were in the middle of Antarctica, where there's nothing to buy, it wouldn't matter how much money you had. Wealth is what you want, not money. But if wealth is the most 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. The people most likely to grasp that wealth can be created are the ones who are good at making things, the craftsmen. Their handmade objects become store-above ones. But with the rise of industrialization, there are fewer and fewer craftsmen. One of the biggest remaining groups is computer programmers. A programmer can sit down in front of a computer and create wealth. A good piece of software is in itself a valuable thing. Programmers literally think of the product one line at a time. It's also obvious to programmers that there are huge variations in the rate at which wealth is created. At Viaweb, which was Paul's start-up that he sold to Yahoo!. At Viaweb, we had one programmer who was a sort of monster of productivity. I remember watching what he did one long day and estimating that he had added several hundred thousand dollars to the market value of the company. A great programmer could create a million dollars’ worth of wealth in a couple of weeks. A mediocre programmer over the same period will generate zero or even negative wealth. Steve Jobs repeated a variation of this idea his entire career. “You must find extraordinary people”, is what he would repeat over and over again. Wealth is whatever people want. That is a concise description of this essay. Wealth is whatever people want. Think about this, Y Combinator's motto, which Paul is going to found, I think, the year after -- a few months after this essay is written, Y Combinator's motto, ‘Make Something People Want’. When Paul wrote that ‘Wealth is whatever people want’, YC was not founded yet. But you could see the thinking behind it was there. The way most companies make money is by creating wealth. Nearly all companies exist to do something people want. A more direct way to put it would be you need to start doing something people want. You don't need to join a company to do that. All a company is, is a group of people working together to do something people want, which is also why there's always limitless opportunities because people always want new things. A way to think about this is my favorite quote on this from Richard Branson, ‘A business is just an idea that is going to make other people's lives better’. Now, you get to the part of the essay on working harder, which is something that he references a lot in a bunch of his essays. It turns out that there are economies of scale on how much of your life you devote to your work. In the right kind of business, someone who really devoted himself to work could generate 10 or even 100x as much wealth as an average employee. He started this essay that if you wanted to get rich, how would you do it? And he says, “I think your best bet would be to start or join a start-up”. That's the very first sentence. This is a couple of pages later. “And we're seeing why main theme is really hard to generate wealth inside of large companies. Companies are not set up to reward people who want to do this, meaning work 10 or even 100x harder who are not -- company is not set up to reward people who want to do this. You can't go to your boss and say, ‘I'd like to start working 10x as hard, so will you please pay me 10x as much? And one of the reasons Paul says that it's hard to do inside large companies is the lack of measurement and leverage. He says, “To get rich you have to have leverage”. He's not talking about financial leverage, by the way. “To get rich you have to have leverage in the sense that the decisions you make have a big effect. If you're in a job that feels safe, you're not going to get rich because if there's no danger there's almost certainly no leverage". And then he goes into smallness equals measurement. That's the second part of this. You can measure the value of the work done by small groups. The opposite of this is why it's hard to generate personal wealth inside of a large company. Starting or joining a start-up is, thus, as close as most people can get to saying to one's boss, "I want to work 10x as hard, so please pay me 10x as much." There are 2 differences. You're not saying it to your boss, but directly to the customers for whom your boss is only a proxy after all. And you're not doing it individually, but along with a small group of other ambitious people. And this line is so fantastic, “The people you work with had better be good because it's their work that yours is going to get averaged with”. That is why all of history’s greatest founders, including Steve Jobs, say you must find extraordinary people to work with. In fact, you might remember this from Episode 208, where this interview of Steve Jobs is being done in 1997. He says that the founder's most important job -- he said recruiting is the founder's most important job. Back to the essay, extra motivation comes from being in a small group. By selecting that small of a group, you can get the best rowers, each one will be in the top 1%. That is the real point of start-ups. You are getting together with a group of other people who also want to work a lot harder and get paid a lot more than they would in a big company. A start-up is not merely 10 people, but 10 people like you. Steve Jobs once said that the success or failure of a start-up depends on the first 10 employees. I agree. I'm pretty sure Paul is referencing that same interview that I covered in the book, In the Company of Giants, back on Episode 208. So let me just repeat that real quick. Steve Jobs once said the success or failure of a start-up depends on the first 10 employees. I agree. A very able person who does care about money will ordinarily do better to go off and work with a small group of peers. That's a really important part on 275, which is the first episode I did on Paul Graham, when I shared what he would do if he was starting a company now. That part really resonated. I had a ton of people who share it publicly on social media, but also send me private messages about hearing that. And he says -- I'm just going to read the second part of it real quick. He says, “At every point in the company's growth I'd keep the company as small as I could. I'd always want people to be surprised by how few employees we had. Fewer employees equal lower costs and less need to turn into a manager”. This is the most important point though. His punchline here, he says, "When I say small, I mean small in employees, not revenue." That is very important. He's writing that tweet, I think, 15 years, maybe even close to 20 years now, but over 15 years, after he's writing when he's writing in this essay. This is something you and I talk about over and over again that the people building these companies they don't have 20 things or 100 things that they want you to remember, they have a handful of core principles that they repeat decade over decade. And we see that here, a very able person who does care about money will ordinarily do better to go off and work with a small group of peers. Then he gets into the point of what he means about leverage. For him, technology equals leverage. This is another very important line. What is technology? It's technique. It's the way we do -- we all do things. And when you discover a new way to do things, its value is multiplied by all the people who use it. And he goes into that. This is the domain of small companies, right? Small companies are more at home in this world because they don't have layers of bureaucracy to slow them down. Also, technical advances tend to come from unorthodox approaches, and small companies are less constrained by convention. And I love what he does here. He ties this into, no one thinks of Walmart as a technology company, but he makes the point. Sam Walton got rich not by being a retailer, but by designing a new kind of store. Go back to the previous page. What is technology? It's a technique. It's the way we all do things. A few paragraphs later, he ties it in. Sam Walton, the founder of Walmart, no one thinks of Walmart as a technology company. Sam Walton got rich not by being a retailer, but by designing a new kind of store. Episode 150 and Episode 234, if you don't know what Paul Graham is talking about, you will see Sam Walton experiment decade after decade of trying to find a new kind of store and then stumbling on to this idea. It's like, “Oh, there's a ton of business out there in all these little, small rural towns that all the other big retailers ignored. And if you can offer the lowest prices, these people will drive far distances just to save money”. It is also a good idea to go and read about the opening of the first Walmart store, the idea that it's going to generate in the future one of the largest fortunes that a family has ever made in the history of humanity. Starts off with donkey c*** and exploding watermelons. That is not hyperbole. That actually happened. Back to this essay. His idea -- very next paragraph, he talks about one of my favorite ideas that I've learned from him, again, taking a very complex idea and breaking it down to the aphorism level run upstairs, which means the harder something is to do the less competition you're going to have. So Paul writes, use difficulty as a guide, not just as selecting the overall aim of your company, but also add decision points along the way. At Viaweb, one of our rules of thumb was run upstairs. Suppose you're a little nimble guy being chased by a big, fat bully. You open a door and find yourself in a staircase. Do you go up or down? I say up. The bully can probably run downstairs as fast as you can. Going upstairs as bulk will be even more of a disadvantage. Running upstairs is hard for you, but even harder for him. What this meant in practice was that we deliberately sought hard problems. If there were 2 features we could add to our software, both equally valuable in proportion to their difficulty, we would always take the harder one, not just because it was more valuable, but because it was harder. We’re delighted enforcing bigger, slower competitors to follow us over difficult ground. Venture capitalists know about this and have a phrase for it, barriers to entry. If you go to a VC with a new idea and ask him to invest in it, one of the first things he'll ask is how hard would this be for someone else to develop. Now, he gets to the point of what's the catch. There is a large random multiplier in the success of any company. Most start-ups tank. It's common for a start-up to be developing and generating a good product, takes slightly too long to do it, run out of money, and have to shut down. And I think this is a good line to end the essay part before I get to the footnotes. The ball you need to keep your eye on here is the underlying principle that wealth is what people want. So few businesses really pay attention to making customers happy. And just 2 things in the footnote. This last sentence I'll get to you in one second is a really good point at the very end of this paragraph. There are many senses of the word wealth, not all of them material. I'm not trying to make a deep philosophical point here about which is the true kind. I'm writing about one specific rather technical sense of the word wealth, what people will give you money for. This is an interesting sort of wealth to study because it's a kind that prevents you from starving. This is a fantastic sentence that I double-underlined it. It ends it. “And what people will give you money for depends on them, not you”. And then I'll end this essay on really just good life advice from Paul. This is more on his idea of running upstairs, on doing something difficult intentionally. This is a good plan for life in general. If you have 2 choices, choose the harder. If you're trying to decide whether to go out running or sit home and watch TV, go running. Probably the reason the strict works so well is that when you have 2 choices and one is harder, the only reason you're even considering the other is laziness. You know in the back of your mind what's the right thing to do. And this trick merely forces you to acknowledge it.

So that’s an excerpt from the book that we are going to talk to you about today, which is the collection of Paul Graham's essays. It is called Hackers & Painters: Big Ideas from the Computer Age. Okay. So I want to start with the essay that the book is named after, which is Hackers and Painters. And I think the point of reading this essay, from my perspective, is Paul is trying to describe and really teach, like it's learning how to make good things.

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How About a World With Lots More Millionaires, Paul Graham?

Oxfam report released today shows how bad the problem that this y cominbator founder says isn't a problem actually is.

Paul Graham got rich because Yahoo bought his company, Viaweb, in 1998, according to his bio, and then he got even richer investing that money in other startups. He helped found an accelerator called Y Combinator. His story encapsulates why inequality only grows worse over time, one confirmed today as Oxfam released its latest report on inequality, one that shows that the richest 62 people in 2015 owned as much as half the world’s population.

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Yet Mr. Graham defends rising inequality, and penned a fear mongering screed  to that end on his website, asserting that there’s social value for the very wealthy to accumulate wealth unimpeded. His essay has sparked conversations across the Internet, one that’s easier to renew today as Oxfam also reports that the world’s poorest lost a trillion dollars over the last five years, while the richest 1 percent gained nearly twice that.

TL;DR for Graham’s post:

One response that might be worth checking out is the take  at Vox . Mr. Graham thought enough of that one that he penned a response and amended one of his own essay’s heavily quoted claims.

He changed this:

You can’t prevent great variations in wealth without preventing people from getting rich, and you can’t do that without preventing them from starting startups.

Eliminating great variations in wealth would mean eliminating startups.

Mr. Graham’s essay assumes that it doesn’t matter how rich the richest are, what matters is how poor the poorest are.

It also appears to argue that wealthy people are wholly responsible for the riches they create and therefore deserve to keep them.

Lastly, it implicitly assumes that there’s no important difference for society as a whole between the creation of a new fortune (such as creating a startup that actually makes a lot of money) and the further accumulation of wealth from that fortune (investing the money from your exit in other companies or assets).

These are assumptions, and Mr. Graham’s case falters if the assumptions prove weak, so let’s take these one by one. First, though, let’s grant him an assumption: that what really matters, in the end, is the best economic outcome for the most people. Forget fairness, let’s talk about the world in which the most people can be the most well off, financially. Done.

Mr. Graham spells out the first assumption we’ll visit for us when he writes, “I’m sure most of those who want to decrease economic inequality want to do it mainly to help the poor, not to hurt the rich.”

On the contrary, in order to do the most good for the most people, it’s more important that there is less extreme differences between the wealthiest and everyone else in the world than at is that there are fewer poor people. Extreme differences in wealth put stress on all levels of society. That stress presses people to make irresponsible decisions.

Cornell’s Robert Frank has done a good job describing the stress and pressure that extremes in wealth place on people (one place to get a quick summary of his thinking is in this conversation with libertarian economist Russ Roberts, on the EconTalk podcast). To adapt some of his thinking, it can be helpful to shine a new light on the old notion of “keeping up with the Joneses.” A useful notion in itself, but one we usually associate with exhibiting wealth through stuff.

Prof. Frank gave the idea more richness when he wrote in  The New York Times in 2010:

Recent research on psychological well-being has taught us that beyond a certain point, across-the-board spending increases often do little more than raise the bar for what is considered enough. A C.E.O. may think he needs a 30,000-square-foot mansion, for example, just because each of his peers has one. Although they might all be just as happy in more modest dwellings, few would be willing to downsize on their own. People do not exist in a social vacuum. Community norms define clear expectations about what people should spend on interview suits and birthday parties. Rising inequality has thus spawned a multitude of “expenditure cascades,” whose first step is increased spending by top earners.

A more down-to-earth example here is to think of it in terms of middle class parents who want to place their children in a “good school.” Of course, what “good” means is relative to where other parents have placed their kids. Good used to mean classrooms of 20 or so students, reasonably competent teachers, textbooks, some bright peers and a pleasant environment.

Good might come to mean highly specialized schools where teachers outnumber students, who, in turn, are outnumbered by technicians optimizing the computer system that plans bespoke curriculum for precious little Tommy and Lucy.

If that sounds implausible, note that in November, the Observer reported on the open secret in wealthy communities that rich families hire extremely well paid tutors to get their children college entrance exam ready. If that story sounded implausible when you read it, this reporter knew one of those tutors in Philadelphia who was making comparable money in inflation adjusted terms about a decade ago.

As notions of what a “good” education means are pushed by parents with the most disposable income, less well off families will overextend themselves to get as close as they can, such as by buying homes with ZIP codes that they can’t quite afford so their children can attend the right school.

Charles Montgomery’s book  Happy City  follows the theme, providing example after example of ways people chase bigger and more and how it leaves them discontented.

As the very wealthy breathe increasingly rarefied air, their interests become divorced from the common good. As Rome inched toward its fall, its oldest known historian, Sallust, wrote of his nation’s “public squalor and private opulence .” We see similar divisions today as the wealthy move into gated communities, expensive suburbs or urban condos that ape the suburbs .

These divisions undermine the shared purposes that powered trips to the moon, Hoover Dams, New York City subway systems and the public Internet. That sense of mutual reliance leads us to the next important assumption that needs to be picked apart in Mr. Graham’s essay.

Mr. Graham believes the rich deserve their riches, every last dime, because he and his peers built their fortunes on their own, so no one else deserves a penny.

Except, no one does anything on their own. You don’t walk to the corner to buy a gallon of milk on your own. Together, the public built the sidewalk you walked down. Federal policy made sure the milk was safe. The collaboration inherent in our capitalist economy made it possible for you to attain milk without owning a cow. And since the rule of law and social order prevails 99 days out of 100, even in America’s “worst” neighborhoods, you can pretty much guarantee that walk will be safe between pretty much any doorway and the nearest dairy purveyor.

And you’re not safe merely because we have law enforcement, but because we generally buy in to the notion of living in a civilized way, together.

Well, most of us do. In fact, an ethic has taken hold among the rich that not only is our (not especially progressive any longer) tax system too rapacious, but in fact the only tax obligation any of them have is to pay those taxes they can’t evade, as some excellent reporting from  The New York Times illustrated at the end of last year. The spirit of the law doesn’t seem to apply if someone can engineer a trick around its letter.

Which is one piece of evidence that counters this statement from Mr. Graham, who wrote, “The great concentrations of wealth I see around me in Silicon Valley don’t seem to be destroying democracy.” Well, if people aren’t paying their taxes, then the rule of law (the notion that all men and women are equal before the rules we have agreed on together) is undermined. If that isn’t a threat to our way of living together (call it ‘democracy’ if you like), then what is?

Would democracy be stronger if people could vote online?

Further, as the recently cinematized version of Michael Lewis’s book,  The Big Short , reminded us, bankers here have gotten off free from consequences for knowingly bringing down the world economy (though the film wasn’t  the first to point that out). Let’s not harp on one instance, though. Prosecutions of white collar criminals (rich people crimes) have been on a downward trend for 20 years, according to researchers at Syracuse University.

But let’s get to the crux of the matter, the last assumption we mentioned, that creating wealth and then accumulating it are, from a societal perspective, the same. Said another way, what happens when people get wealthier over time and nothing is ever done to redistribute that wealth? They just keep getting richer and richer, relative to the rest of society. See Mr. Graham’s example: he got rich and then started handing his money to people who reminded him of him, making even more money.

Wealthy families stop creating Ubers and Facebooks, they just invest their considerable wealth in reliable generators of income (such as property or banking) and live off the proceeds, except those proceeds turn out to be much more than even they need.

Mr. Graham refers repeatedly to forces that have been at work for “thousands of years” without acknowledging that we don’t really know a load about economies more than a hundred years or so back, but as far as we can tell, for most of human history, there’s been little to no growth. Innovation moved achingly slowly, so there would be little real economic growth at all .

What isn’t new is rich people. Societies formed exclusive groups repeatedly, ones that would attain a preponderance of the wealth and use that wealth to secure their position.

And that’s easy to do, because wealth is power, and it grows. As far as we can tell, from a historical view , we’re lucky if global real economic growth is, in the long run, around one percent or so per year. Typically speaking, growth from investments (or capital) can do a bit better than overall growth, say three or four percent (which is conservative, based on the case of France ), in real terms (“real” means after inflation).

Growth roughly reflects the increase in the income of regular people. With that in mind, it’s simple: the whole society does do better over time, but the rich become better off than everyone else two or three times faster. So the gap just grows.

Mr. Graham is right that people getting rich, on balance, is good for everyone. The cliche critique of startups today is that they provide solutions to rich people problems . The classic example is Uber , which makes it easier to get black car service. Yet, Uber is at its heart a logistics company and in many ways logistics are critical to all kinds of resource distribution problems. As companies scale strategies for more effectively delivering stuff to wealthy people, those same strategies will be used to better distribute resources to everyone.

The work of startups will allocate resources better, with time. So, that critique is a red herring.

The critique that isn’t a red herring is the one that Thomas Piketty made in 2014’s  Capital in the 21st Century ( read Vox’s summary ), that when wealth starts to grow on autopilot, some portion of that needs to be plowed back into the common good, for the express purpose of slowing that divide.

The world needs rich people and it needs creative minds, but it doesn’t need hyperbillionaires. There’s no reason why Silicon Valleys, Alleys, Prairies and Islands can’t keep making men and women rich enough that their children’s college costs can be paid for long before the baby is born. That’s fine. Within reason, inequality is motivating and challenging.

Paul Graham thought he was offering a brave perspective when he wrote, “Can you have a healthy society with great variation in wealth? What would it look like?”

OK, Mr. Graham, here’s an answer. A healthy society with great variation in wealth would be without billionaires and lots more millionaires.

• SEE ALSO : Elon Musk’s Neuralink Has Implanted Its Brain Chip in a Second Human Patient

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Don’t Punish Entrepreneurs Because They’re Richer Than You

It’s difficult to talk openly about income inequality without raising the ire of the Internet, a fact that Paul Graham, co-founder of Y-Combinator, learned this week.

In an essay published on his blog, venture capitalist Graham argued that income inequality, which has been increasing so much of late that representatives of both political parties are now decrying it, is actually a good thing. He was roundly lambasted for the logic of his argument, which he tried to clarify in a simplified version of his essay on Tuesday morning. Graham’s simplified version: Not all causes of income inequality are bad. We should attack poverty, he said, but be careful not to go after the people who are creating new companies, jobs, and innovation, just because they are getting rich from doing so.

The problem with this argument is that there are few people in the mainstream who are arguing that the way to attack the problem of economic inequality is to take away the rewards of success. Sure, thinkers like French economist Thomas Piketty have argued that global income and wealth inequality should be fought in part with a tax on wealth. But the other part of this argument is that the revenue should then be used to fund things like education and affordable housing that would count as “attacking poverty.”

Second, Graham implies that the majority of America’s superrich, the 0.1% of earners who have captured most of the gains in income over the past two generations, are founders of companies. But economic studies show that these people are mostly “executives, managers, supervisors, and financial professionals,” and not the sort of risk-taking entrepreneurs that Graham is defending.

In other words, there’s no reason to believe that the proposals on the mainstream left, like higher taxes on wealth, financial transactions, and income, combined with a higher minimum wage, earned-income tax credits, and investment in infrastructure and education would do much to dissuade Silicon Valley entrepreneurs from inventing the next revolutionary product.

But that doesn’t mean that Graham’s fundamental point is incorrect. The possibility of great wealth is a very important motivator for the entrepreneurial class, and economic studies have shown that countries like those in Scandanavia, with its high tax rates and wealth redistribution, have lower levels of technological innovation. As MIT economist Daron Acemoglu has written :

Imagine if the U.S. increased taxation, reduced rewards for entrepreneurship and discouraged risk-taking: It is reasonable to expect that its entrepreneurs—in Silicon Valley, medicine, robotics, and aerospace, to name a few—would become less daring and innovative. This could have negative consequences for growth and prosperity not only in the United States, but throughout the world. There is no other country that could step in as the innovation engine of the world economy.

This is not to say that the United States couldn’t benefit from a bit more wealth redistribution or more investment in public goods like education, but there is a point at which increased equality is paid for with slower growth and less efficiency. For a more eloquent defense of this important point, however, Graham may have checked out the writing of a fellow tech entrepreneur Bill Gates, who in a 2014 blog post, recognized that we need to reduce income inequality in order to create social stability and faster economic growth. And he did so while proposing policies, like a progressive consumption tax, that wouldn’t curtail entrepreneurship.

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When I was five I thought electricity was created by electric sockets. I didn't realize there were power plants out there generating it. Likewise, it doesn't occur to most kids that wealth is something that has to be generated. It seems to be something that flows from parents. Because of the circumstances in which they encounter it, children tend to misunderstand wealth. They confuse it with money. They think that there is a fixed amount of it. And they think of it as something that's distributed by authorities (and so should be distributed equally), rather than something that has to be created (and might be created unequally). In fact, wealth is not money. Money is just a convenient way of trading one form of wealth for another. Wealth is the underlying stuff—the goods and services we buy. When you travel to a rich or poor country, you don't have to look at people's bank accounts to tell which kind you're in. You can wealth—in buildings and streets, in the clothes and the health of the people. Where does wealth come from? People make it. This was easier to grasp when most people lived on farms, and made many of the things they wanted with their own hands. Then you could see in the house, the herds, and the granary the wealth that each family created. It was obvious then too that the wealth of the world was not a fixed quantity that had to be shared out, like slices of a pie. If you wanted more wealth, you could make it. This is just as true today, though few of us create wealth directly for ourselves (except for a few vestigial domestic tasks). Mostly we create wealth for other people in exchange for money, which we then trade for the forms of wealth we want. ] Because kids are unable to create wealth, whatever they have has to be given to them. And when wealth is something you're given, then of course it seems that it should be distributed equally. ] As in most families it is. The kids see to that. "Unfair," they cry, when one sibling gets more than another. In the real world, you can't keep living off your parents. If you want something, you either have to make it, or do something of equivalent value for someone else, in order to get them to give you enough money to buy it. In the real world, wealth is (except for a few specialists like thieves and speculators) something you have to create, not something that's distributed by Daddy. And since the ability and desire to create it vary from person to person, it's not made equally. You get paid by doing or making something people want, and those who make more money are often simply better at doing what people want. Top actors make a lot more money than B-list actors. The B-list actors might be almost as charismatic, but when people go to the theater and look at the list of movies playing, they want that extra oomph that the big stars have. Doing what people want is not the only way to get money, of course. You could also rob banks, or solicit bribes, or establish a monopoly. Such tricks account for some variation in wealth, and indeed for some of the biggest individual fortunes, but they are not the root cause of variation in income. The root cause of variation in income, as Occam's Razor implies, is the same as the root cause of variation in every other human skill. In the United States, the CEO of a large public company makes about 100 times as much as the average person. ] Basketball players make about 128 times as much, and baseball players 72 times as much. Editorials quote this kind of statistic with horror. But I have no trouble imagining that one person could be 100 times as productive as another. In ancient Rome the price of varied by a factor of 50 depending on their skills. ] And that's without considering motivation, or the extra leverage in productivity that you can get from modern technology. Editorials about athletes' or CEOs' salaries remind me of early Christian writers, arguing from first principles about whether the Earth was round, when they could just walk outside and check. ] How much someone's work is worth is not a policy question. It's something the market already determines. "Are they really worth 100 of us?" editorialists ask. Depends on what you mean by worth. If you mean worth in the sense of what people will pay for their skills, the answer is yes, apparently. A few CEOs' incomes reflect some kind of wrongdoing. But are there not others whose incomes really do reflect the wealth they generate? Steve Jobs saved a company that was in a terminal decline. And not merely in the way a turnaround specialist does, by cutting costs; he had to decide what Apple's next products should be. Few others could have done it. And regardless of the case with CEOs, it's hard to see how anyone could argue that the salaries of professional basketball players don't reflect supply and demand. It may seem unlikely in principle that one individual could really generate so much more wealth than another. The key to this mystery is to revisit that question, are they really worth 100 of us? a basketball team trade one of their players for 100 random people? What would Apple's next product look like if you replaced Steve Jobs with a committee of 100 random people? ] These things don't scale linearly. Perhaps the CEO or the professional athlete has only ten times (whatever that means) the skill and determination of an ordinary person. But it makes all the difference that it's concentrated in one individual. When we say that one kind of work is overpaid and another underpaid, what are we really saying? In a free market, prices are determined by what buyers want. People like baseball more than poetry, so baseball players make more than poets. To say that a certain kind of work is underpaid is thus identical with saying that people want the wrong things. Well, of course people want the wrong things. It seems odd to be surprised by that. And it seems even odder to say that it's that certain kinds of work are underpaid. ] Then you're saying that it's unjust that people want the wrong things. It's lamentable that people prefer reality TV and corndogs to Shakespeare and steamed vegetables, but unjust? That seems like saying that blue is heavy, or that up is circular. The appearance of the word "unjust" here is the unmistakable spectral signature of the Daddy Model. Why else would this idea occur in this odd context? Whereas if the speaker were still operating on the Daddy Model, and saw wealth as something that flowed from a common source and had to be shared out, rather than something generated by doing what other people wanted, this is exactly what you'd get on noticing that some people made much more than others. When we talk about "unequal distribution of income," we should also ask, where does that income come from? ] Who made the wealth it represents? Because to the extent that income varies simply according to how much wealth people create, the distribution may be unequal, but it's hardly unjust. The second reason we tend to find great disparities of wealth alarming is that for most of human history the usual way to accumulate a fortune was to steal it: in pastoral societies by cattle raiding; in agricultural societies by appropriating others' estates in times of war, and taxing them in times of peace. In conflicts, those on the winning side would receive the estates confiscated from the losers. In England in the 1060s, when William the Conqueror distributed the estates of the defeated Anglo-Saxon nobles to his followers, the conflict was military. By the 1530s, when Henry VIII distributed the estates of the monasteries to his followers, it was mostly political. ] But the principle was the same. Indeed, the same principle is at work now in Zimbabwe. In more organized societies, like China, the ruler and his officials used taxation instead of confiscation. But here too we see the same principle: the way to get rich was not to create wealth, but to serve a ruler powerful enough to appropriate it. This started to change in Europe with the rise of the middle class. Now we think of the middle class as people who are neither rich nor poor, but originally they were a distinct group. In a feudal society, there are just two classes: a warrior aristocracy, and the serfs who work their estates. The middle class were a new, third group who lived in towns and supported themselves by manufacturing and trade. Starting in the tenth and eleventh centuries, petty nobles and former serfs banded together in towns that gradually became powerful enough to ignore the local feudal lords. ] Like serfs, the middle class made a living largely by creating wealth. (In port cities like Genoa and Pisa, they also engaged in piracy.) But unlike serfs they had an incentive to create a lot of it. Any wealth a serf created belonged to his master. There was not much point in making more than you could hide. Whereas the independence of the townsmen allowed them to keep whatever wealth they created. Once it became possible to get rich by creating wealth, society as a whole started to get richer very rapidly. Nearly everything we have was created by the middle class. Indeed, the other two classes have effectively disappeared in industrial societies, and their names been given to either end of the middle class. (In the original sense of the word, Bill Gates is middle class.) But it was not till the Industrial Revolution that wealth creation definitively replaced corruption as the best way to get rich. In England, at least, corruption only became unfashionable (and in fact only started to be called "corruption") when there started to be other, faster ways to get rich. Seventeenth-century England was much like the third world today, in that government office was a recognized route to wealth. The great fortunes of that time still derived more from what we would now call corruption than from commerce. ] By the nineteenth century that had changed. There continued to be bribes, as there still are everywhere, but politics had by then been left to men who were driven more by vanity than greed. Technology had made it possible to create wealth faster than you could steal it. The prototypical rich man of the nineteenth century was not a courtier but an industrialist. With the rise of the middle class, wealth stopped being a zero-sum game. Jobs and Wozniak didn't have to make us poor to make themselves rich. Quite the opposite: they created things that made our lives materially richer. They had to, or we wouldn't have paid for them. But since for most of the world's history the main route to wealth was to steal it, we tend to be suspicious of rich people. Idealistic undergraduates find their unconsciously preserved child's model of wealth confirmed by eminent writers of the past. It is a case of the mistaken meeting the outdated. "Behind every great fortune, there is a crime," Balzac wrote. Except he didn't. What he actually said was that a great fortune with no apparent cause was probably due to a crime well enough executed that it had been forgotten. If we were talking about Europe in 1000, or most of the third world today, the standard misquotation would be spot on. But Balzac lived in nineteenth-century France, where the Industrial Revolution was well advanced. He knew you could make a fortune without stealing it. After all, he did himself, as a popular novelist. ] Only a few countries (by no coincidence, the richest ones) have reached this stage. In most, corruption still has the upper hand. In most, the fastest way to get wealth is by stealing it. And so when we see increasing differences in income in a rich country, there is a tendency to worry that it's sliding back toward becoming another Venezuela. I think the opposite is happening. I think you're seeing a country a full step ahead of Venezuela. Will technology increase the gap between rich and poor? It will certainly increase the gap between the productive and the unproductive. That's the whole point of technology. With a tractor an energetic farmer could plow six times as much land in a day as he could with a team of horses. But only if he mastered a new kind of farming. I've seen the lever of technology grow visibly in my own time. In high school I made money by mowing lawns and scooping ice cream at Baskin-Robbins. This was the only kind of work available at the time. Now high school kids could write software or design web sites. But only some of them will; the rest will still be scooping ice cream. I remember very vividly when in 1985 improved technology made it possible for me to buy a computer of my own. Within months I was using it to make money as a freelance programmer. A few years before, I couldn't have done this. A few years before, there was no such as a freelance programmer. But Apple created wealth, in the form of powerful, inexpensive computers, and programmers immediately set to work using it to create more. As this example suggests, the rate at which technology increases our productive capacity is probably exponential, rather than linear. So we should expect to see ever-increasing variation in individual productivity as time goes on. Will that increase the gap between rich and the poor? Depends which gap you mean. Technology should increase the gap in income, but it seems to decrease other gaps. A hundred years ago, the rich led a different of life from ordinary people. They lived in houses full of servants, wore elaborately uncomfortable clothes, and travelled about in carriages drawn by teams of horses which themselves required their own houses and servants. Now, thanks to technology, the rich live more like the average person. Cars are a good example of why. It's possible to buy expensive, handmade cars that cost hundreds of thousands of dollars. But there is not much point. Companies make more money by building a large number of ordinary cars than a small number of expensive ones. So a company making a mass-produced car can afford to spend a lot more on its design. If you buy a custom-made car, something will always be breaking. The only point of buying one now is to advertise that you can. Or consider watches. Fifty years ago, by spending a lot of money on a watch you could get better performance. When watches had mechanical movements, expensive watches kept better time. Not any more. Since the invention of the quartz movement, an ordinary Timex is more accurate than a Patek Philippe costing hundreds of thousands of dollars. ] Indeed, as with expensive cars, if you're determined to spend a lot of money on a watch, you have to put up with some inconvenience to do it: as well as keeping worse time, mechanical watches have to be wound. The only thing technology can't cheapen is brand. Which is precisely why we hear ever more about it. Brand is the residue left as the substantive differences between rich and poor evaporate. But what label you have on your stuff is a much smaller matter than having it versus not having it. In 1900, if you kept a carriage, no one asked what year or brand it was. If you had one, you were rich. And if you weren't rich, you took the omnibus or walked. Now even the poorest Americans drive cars, and it is only because we're so well trained by advertising that we can even recognize the especially expensive ones. ] The same pattern has played out in industry after industry. If there is enough demand for something, technology will make it cheap enough to sell in large volumes, and the mass-produced versions will be, if not better, at least more convenient. ] And there is nothing the rich like more than convenience. The rich people I know drive the same cars, wear the same clothes, have the same kind of furniture, and eat the same foods as my other friends. Their houses are in different neighborhoods, or if in the same neighborhood are different sizes, but within them life is similar. The houses are made using the same construction techniques and contain much the same objects. It's inconvenient to do something expensive and custom. The rich spend their time more like everyone else too. Bertie Wooster seems long gone. Now, most people who are rich enough not to work do anyway. It's not just social pressure that makes them; idleness is lonely and demoralizing. Nor do we have the social distinctions there were a hundred years ago. The novels and etiquette manuals of that period read now like descriptions of some strange tribal society. "With respect to the continuance of friendships..." hints (1880), "it may be found necessary, in some cases, for a mistress to relinquish, on assuming the responsibility of a household, many of those commenced in the earlier part of her life." A woman who married a rich man was expected to drop friends who didn't. You'd seem a barbarian if you behaved that way today. You'd also have a very boring life. People still tend to segregate themselves somewhat, but much more on the basis of education than wealth. ] Materially and socially, technology seems to be decreasing the gap between the rich and the poor, not increasing it. If Lenin walked around the offices of a company like Yahoo or Intel or Cisco, he'd think communism had won. Everyone would be wearing the same clothes, have the same kind of office (or rather, cubicle) with the same furnishings, and address one another by their first names instead of by honorifics. Everything would seem exactly as he'd predicted, until he looked at their bank accounts. Oops. Is it a problem if technology increases that gap? It doesn't seem to be so far. As it increases the gap in income, it seems to decrease most other gaps. One often hears a policy criticized on the grounds that it would increase the income gap between rich and poor. As if it were an axiom that this would be bad. It might be true that increased variation in income would be bad, but I don't see how we can say it's Indeed, it may even be false, in industrial democracies. In a society of serfs and warlords, certainly, variation in income is a sign of an underlying problem. But serfdom is not the only cause of variation in income. A 747 pilot doesn't make 40 times as much as a checkout clerk because he is a warlord who somehow holds her in thrall. His skills are simply much more valuable. I'd like to propose an alternative idea: that in a modern society, increasing variation in income is a sign of health. Technology seems to increase the variation in productivity at faster than linear rates. If we don't see corresponding variation in income, there are three possible explanations: (a) that technical innovation has stopped, (b) that the people who would create the most wealth aren't doing it, or (c) that they aren't getting paid for it. I think we can safely say that (a) and (b) would be bad. If you disagree, try living for a year using only the resources available to the average Frankish nobleman in 800, and report back to us. (I'll be generous and not send you back to the stone age.) The only option, if you're going to have an increasingly prosperous society without increasing variation in income, seems to be (c), that people will create a lot of wealth without being paid for it. That Jobs and Wozniak, for example, will cheerfully work 20-hour days to produce the Apple computer for a society that allows them, after taxes, to keep just enough of their income to match what they would have made working 9 to 5 at a big company. Will people create wealth if they can't get paid for it? Only if it's fun. People will write operating systems for free. But they won't install them, or take support calls, or train customers to use them. And at least 90% of the work that even the highest tech companies do is of this second, unedifying kind. All the unfun kinds of wealth creation slow dramatically in a society that confiscates private fortunes. We can confirm this empirically. Suppose you hear a strange noise that you think may be due to a nearby fan. You turn the fan off, and the noise stops. You turn the fan back on, and the noise starts again. Off, quiet. On, noise. In the absence of other information, it would seem the noise is caused by the fan. At various times and places in history, whether you could accumulate a fortune by creating wealth has been turned on and off. Northern Italy in 800, off (warlords would steal it). Northern Italy in 1100, on. Central France in 1100, off (still feudal). England in 1800, on. England in 1974, off (98% tax on investment income). United States in 1974, on. We've even had a twin study: West Germany, on; East Germany, off. In every case, the creation of wealth seems to appear and disappear like the noise of a fan as you switch on and off the prospect of keeping it. There is some momentum involved. It probably takes at least a generation to turn people into East Germans (luckily for England). But if it were merely a fan we were studying, without all the extra baggage that comes from the controversial topic of wealth, no one would have any doubt that the fan was causing the noise. If you suppress variations in income, whether by stealing private fortunes, as feudal rulers used to do, or by taxing them away, as some modern governments have done, the result always seems to be the same. Society as a whole ends up poorer. If I had a choice of living in a society where I was materially much better off than I am now, but was among the poorest, or in one where I was the richest, but much worse off than I am now, I'd take the first option. If I had children, it would arguably be immoral not to. It's absolute poverty you want to avoid, not relative poverty. If, as the evidence so far implies, you have to have one or the other in your society, take relative poverty. You need rich people in your society not so much because in spending their money they create jobs, but because of what they have to do to rich. I'm not talking about the trickle-down effect here. I'm not saying that if you let Henry Ford get rich, he'll hire you as a waiter at his next party. I'm saying that he'll make you a tractor to replace your horse. [ ] Part of the reason this subject is so contentious is that some of those most vocal on the subject of wealth—university students, heirs, professors, politicians, and journalists—have the least experience creating it. (This phenomenon will be familiar to anyone who has overheard conversations about sports in a bar.) Students are mostly still on the parental dole, and have not stopped to think about where that money comes from. Heirs will be on the parental dole for life. Professors and politicians live within socialist eddies of the economy, at one remove from the creation of wealth, and are paid a flat rate regardless of how hard they work. And journalists as part of their professional code segregate themselves from the revenue-collecting half of the businesses they work for (the ad sales department). Many of these people never come face to face with the fact that the money they receive represents wealth—wealth that, except in the case of journalists, someone else created earlier. They live in a world in which income doled out by a central authority according to some abstract notion of fairness (or randomly, in the case of heirs), rather than given by other people in return for something they wanted, so it may seem to them unfair that things don't work the same in the rest of the economy. (Some professors do create a great deal of wealth for society. But the money they're paid isn't a . It's more in the nature of an investment.) [ ] When one reads about the origins of the Fabian Society, it sounds like something cooked up by the high-minded Edwardian child-heroes of Edith Nesbit's . [ ] According to a study by the Corporate Library, the median total compensation, including salary, bonus, stock grants, and the exercise of stock options, of S&P 500 CEOs in 2002 was $3.65 million. According to , the average NBA player's salary during the 2002-03 season was $4.54 million, and the average major league baseball player's salary at the start of the 2003 season was $2.56 million. According to the Bureau of Labor Statistics, the mean annual wage in the US in 2002 was $35,560. [ ] In the early empire the price of an ordinary adult slave seems to have been about 2,000 sestertii (e.g. Horace, ii.7.43). A servant girl cost 600 (Martial vi.66), while Columella (iii.3.8) says that a skilled vine-dresser was worth 8,000. A doctor, P. Decimus Eros Merula, paid 50,000 sestertii for his freedom (Dessau, 7812). Seneca ( xxvii.7) reports that one Calvisius Sabinus paid 100,000 sestertii apiece for slaves learned in the Greek classics. Pliny ( vii.39) says that the highest price paid for a slave up to his time was 700,000 sestertii, for the linguist (and presumably teacher) Daphnis, but that this had since been exceeded by actors buying their own freedom. Classical Athens saw a similar variation in prices. An ordinary laborer was worth about 125 to 150 drachmae. Xenophon ( ii.5) mentions prices ranging from 50 to 6,000 drachmae (for the manager of a silver mine). For more on the economics of ancient slavery see: Jones, A. H. M., "Slavery in the Ancient World," , 2:9 (1956), 185-199, reprinted in Finley, M. I. (ed.), , Heffer, 1964. [ ] Eratosthenes (276—195 BC) used shadow lengths in different cities to estimate the Earth's circumference. He was off by only about 2%. [ ] No, and Windows, respectively. [ ] One of the biggest divergences between the Daddy Model and reality is the valuation of hard work. In the Daddy Model, hard work is in itself deserving. In reality, wealth is measured by what one delivers, not how much effort it costs. If I paint someone's house, the owner shouldn't pay me extra for doing it with a toothbrush. It will seem to someone still implicitly operating on the Daddy Model that it is unfair when someone works hard and doesn't get paid much. To help clarify the matter, get rid of everyone else and put our worker on a desert island, hunting and gathering fruit. If he's bad at it he'll work very hard and not end up with much food. Is this unfair? Who is being unfair to him? [ ] Part of the reason for the tenacity of the Daddy Model may be the dual meaning of "distribution." When economists talk about "distribution of income," they mean statistical distribution. But when you use the phrase frequently, you can't help associating it with the other sense of the word (as in e.g. "distribution of alms"), and thereby subconsciously seeing wealth as something that flows from some central tap. The word "regressive" as applied to tax rates has a similar effect, at least on me; how can anything be good? [ ] "From the beginning of the reign Thomas Lord Roos was an assiduous courtier of the young Henry VIII and was soon to reap the rewards. In 1525 he was made a Knight of the Garter and given the Earldom of Rutland. In the thirties his support of the breach with Rome, his zeal in crushing the Pilgrimage of Grace, and his readiness to vote the death-penalty in the succession of spectacular treason trials that punctuated Henry's erratic matrimonial progress made him an obvious candidate for grants of monastic property." Stone, Lawrence, , Oxford University Press, 1973, p. 166. [ ] There is archaeological evidence for large settlements earlier, but it's hard to say what was happening in them. Hodges, Richard and David Whitehouse, , Cornell University Press, 1983. [ ] William Cecil and his son Robert were each in turn the most powerful minister of the crown, and both used their position to amass fortunes among the largest of their times. Robert in particular took bribery to the point of treason. "As Secretary of State and the leading advisor to King James on foreign policy, [he] was a special recipient of favour, being offered large bribes by the Dutch not to make peace with Spain, and large bribes by Spain to make peace." (Stone, , p. 17.) [ ] Though Balzac made a lot of money from writing, he was notoriously improvident and was troubled by debts all his life. [ ] A Timex will gain or lose about .5 seconds per day. The most accurate mechanical watch, the Patek Philippe 10 Day Tourbillon, is rated at -1.5 to +2 seconds. Its retail price is about $220,000. [ ] If asked to choose which was more expensive, a well-preserved 1989 Lincoln Town Car ten-passenger limousine ($5,000) or a 2004 Mercedes S600 sedan ($122,000), the average Edwardian might well guess wrong. [ ] To say anything meaningful about income trends, you have to talk about real income, or income as measured in what it can buy. But the usual way of calculating real income ignores much of the growth in wealth over time, because it depends on a consumer price index created by bolting end to end a series of numbers that are only locally accurate, and that don't include the prices of new inventions until they become so common that their prices stabilize. So while we might think it was very much better to live in a world with antibiotics or air travel or an electric power grid than without, real income statistics calculated in the usual way will prove to us that we are only slightly richer for having these things. Another approach would be to ask, if you were going back to the year x in a time machine, how much would you have to spend on trade goods to make your fortune? For example, if you were going back to 1970 it would certainly be less than $500, because the processing power you can get for $500 today would have been worth at least $150 million in 1970. The function goes asymptotic fairly quickly, because for times over a hundred years or so you could get all you needed in present-day trash. In 1800 an empty plastic drink bottle with a screw top would have seemed a miracle of workmanship. [ ] Some will say this amounts to the same thing, because the rich have better opportunities for education. That's a valid point. It is still possible, to a degree, to buy your kids' way into top colleges by sending them to private schools that in effect hack the college admissions process. According to a 2002 report by the National Center for Education Statistics, about 1.7% of American kids attend private, non-sectarian schools. At Princeton, 36% of the class of 2007 came from such schools. (Interestingly, the number at Harvard is significantly lower, about 28%.) Obviously this is a huge loophole. It does at least seem to be closing, not widening. Perhaps the designers of admissions processes should take a lesson from the example of computer security, and instead of just assuming that their system can't be hacked, measure the degree to which it is. How to Get Rich: Paul Graham on Money Versus Wealth Sheeraz is our COO (Chief - Operations), his primary duty is curating and editing of ValueWalk. He is main reason behind the rapid growth of… When you purchase through our sponsored links, we may earn a commission. By using this website you agree to our T&Cs. First an excerpt from Brain Pickings on how to get rich: Paul Graham on money vs. wealth and then a book review on Hackers & Painters: Big Ideas from the Computer Age by Paul Graham. H/T ValueInvestingWorld “The moral challenge and the grim problem we face,” Alan Watts argued in his superb 1970 essay on the difference between money and wealth , “is that the life of affluence and pleasure requires exact discipline and high imagination.” Hardly anywhere is this urgency manifested more vibrantly than in startup culture. So argues English programmer and writer Paul Graham — who went to art school studying painting after finishing grad school in computer science, and whose timelessly wonderful meditation on prestige vs. purpose remains a must-read — in an essay titled “How to Make Wealth,” found in the 2004 anthology Hackers & Painters: Big Ideas from the Computer Age ( public library ). Echoing Watts, Graham defines a startup as “a way to compress your whole working life into a few years” and begins his exploration of “how to make money by creating wealth and getting paid for it” with an essential distinction between the two: If you want to create wealth, it will help to understand what it is. Wealth is not the same thing as money. Wealth is as old as human history. Far older, in fact; ants have wealth. Money is a comparatively recent invention. Wealth is the fundamental thing. Wealth is stuff we want: food, clothes, houses, cars, 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 wouldn’t need money. Whereas if you were in the middle of Antarctica, where there is nothing to buy, it wouldn’t 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 plan 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 can’t make for yourself. If you want a potato or a pencil or a place to live, you have to get it from someone else. See full article by Brain Pickings Hackers & Painters: Description Hackers & Painters: Big Ideas from the Computer Age by Paul Graham. “The computer world is like an intellectual Wild West, in which you can shoot anyone you wish with your ideas, if you’re willing to risk the consequences. ” –from Hackers & Painters: Big Ideas from the Computer Age , by Paul Graham We are living in the computer age, in a world increasingly designed and engineered by computer programmers and software designers, by people who call themselves hackers. Who are these people, what motivates them, and why should you care? Consider these facts: Everything around us is turning into computers. Your typewriter is gone, replaced by a computer. Your phone has turned into a computer. So has your camera. Soon your TV will. Your car was not only designed on computers, but has more processing power in it than a room-sized mainframe did in 1970. Letters, encyclopedias, newspapers, and even your local store are being replaced by the Internet. Hackers & Painters: Big Ideas from the Computer Age , by Paul Graham, explains this world and the motivations of the people who occupy it. In clear, thoughtful prose that draws on illuminating historical examples, Graham takes readers on an unflinching exploration into what he calls “an intellectual Wild West.” The ideas discussed in this book will have a powerful and lasting impact on how we think, how we work, how we develop technology, and how we live. Topics include the importance of beauty in software design, how to make wealth, heresy and free speech, the programming language renaissance, the open-source movement, digital design, internet startups, and more. Hackers & Painters: Reviews An astonishingly good book of essays – By David Bridgeland Hackers & Painters: Big Ideas from the Computer Age  is an astonishingly good collection of essays. In lesser hands, any of the 15 essays here could have been a book by itself — each packs more content than you can find in a typical one idea business book, or a typical one technology book for geeks. Yet his book is not dense or difficult: Graham’s graceful style is a pleasure to read. But what is it? Is it a business book, or a technical book? A bit of both actually, with a pinch of social criticism thrown in. There are essays on business — particularly startups — and essays on programming languages and how to combat spam, and one delightful one on the difficulty being a nerd in American public schools. My favorite essay of the 15 — and picking a favorite is itself a challenge — is called “What you can’t say”. It is about heresy, not historical Middle Ages burned-at-the-stake heresy, but heresy today in 2004. And if you believe nothing is heretical today, that no idea today is so beyond the pale that it would provoke a purely emotional reaction to its very utterance, then read some of the other reviews. Graham’s idea is not that all heresies are worth challenging publicly, or even that all heresies are wrong, but merely that there is value is being aware of what is heretical, so one can notice where the blind spots are. Astonishingly good. Read this if you feel you’re loosing the edge   – By Dmitry Dvoinikov I’m an experiensed software developer and to me reading this book was absolutely refreshing.  Hackers & Painters: Big Ideas from the Computer Age won’t teach you anything in particular but it will feed your mind and curiosity great deal – just one needs after years of office work. This book is a collection of assorted essays, each covering some more or less software-related topic, like history of arts (huh ?). Political correctness, design of things, nerds’ life and simply ways of life made their way into this marvellous book. Some author’s points are controversial, while to some I couldn’t agree more. The magic part is that the author’s judgements are based on not just what he knows or believes, but also on what he feels for no particular reason, and this is the approach I fully appreciate. Only the best books make your mind feel free, and this is one of them. Our Editorial Standards At ValueWalk, we’re committed to providing accurate, research-backed information. Our editors go above and beyond to ensure our content is trustworthy and transparent. Sheeraz Raza Sheeraz is our COO (Chief - Operations), his primary duty is curating and editing of ValueWalk. He is main reason behind the rapid growth of the business. Sheeraz previously ran a taxation firm. He is an expert in technology, he has over 5.5 years of design, development and roll-out experience for SEO and SEM. - Email: sraza(at)www.valuewalk.com Related news Boone County Property Tax Relief for Seniors: Applications Open July 1 Kinesis partners with Valaurum to produce circulating physical gold bills DealHub.io Acquires Usage-based Billing Company Subzee 8fig Raises $140M to Propel Ecommerce SMBs During Economic Turmoil Top Financial Blogging Books You Should Stop and Read Now How to invest in stocks in 2024 – beginner’s guide. Investing in stocks can be a great way to improve your overall wealth – but... Latest News Dow Jones and S&P 500 Soar to Record Highs on Rate Cut Rally It was a great day for stocks, as the markets responded positively to the Fed's interest rate cuts. It was somewhat of a delayed reaction, as the markets seemed to... MicroStrategy to Issue Nearly $1B of Debt, Buy More Bitcoin Bitcoin Extended Its Gains but Will the Uptrend Last? This Cheap Restaurant Stock Climbed 8%: Time to Buy? Decision On U.S. Steel Acquisition Delayed By 90 Days Want financial guidance sent straight to you. Pop your email in the box, and you'll receive bi-weekly emails from ValueWalk. We never send spam — only the latest financial news and guides to help you take charge of your financial future. A Revival in Moscow: Billy Graham’s Legacy in Eurasia 3.13.2018 Rev. Billy Graham Preaching in Moscow, Russia The life of the Reverend Billy Graham -- one of the world’s most inspiring pillars of Christian faith -- has moved us at Mission Eurasia to reflect with immense gratitude on his rich life of service to God’s Kingdom and the ways in which his ministry and ours intersected by God’s grace over the years. Mission Eurasia’s president, Sergey Rakhuba, remembers first meeting Billy Graham in 1987, during the height of the Soviet Union, at a dinner for evangelical pastors in Russia.  Sergey shares the memory of this inspiring meeting with Rev. Graham in Moscow and the impact it had on Sergey’s future ministry and the ministry of Mission Eurasia: “For pastors who had to faithfully lead their churches under the pressures and challenges of the Soviet regime, this dinner with Rev. Graham in Moscow was an encouraging and faith-building night in the midst of a fearful and uncertain time,” says Sergey. It foreshadowed the growing gospel movement that would spread across Eurasia when the Soviet Union fell a few years later . . .  Billy Graham meeting with evangelical pastors and leaders in Moscow, Russia in 1987 “My closest colleague, Dr. Michael Cherenkov (Mission Eurasia’s executive director of field ministries), was also impacted forever by an encounter with Billy Graham in Russia. In 1992, a year after the fall of the Soviet Union, Michael remembers traveling as a young man and brand-new Christian from faraway Donetsk, Ukraine to the Red Square in Moscow in order to hear the great Rev. Graham preach to a crowd of thousands. Michael called this an ‘unbelievable miracle,’ writing, ‘In the center of Moscow, not far from the Kremlin, the most famous evangelist in history preached the gospel to thousands, and everyone who wished could freely obtain a formerly forbidden Bible.  A revival had started, which promised reformation and renewal . A Moscow crowd gathers to see Billy Graham preach in 1992 “Inspired and captivated by what he had seen and heard that day, Michael returned to his village in Ukraine under the influence of Billy Graham’s message. Feeling the promptings of God’s call and seeing a colossal need for the gospel in post-Soviet society, Michael made a decision. He would be a preacher, an evangelist, and a catalyst for reformation and renewal in the post-Soviet sphere. And so Michael began working with Mission Eurasia (then Russian Ministries) to continue this gospel movement across Eurasia, where it blossoms and flourishes to this day as we train and equip thousands of young Christian leaders for strategic ministry. “Like Michael and myself, many of the men and women who heard Rev. Graham preach in Russia on that miraculous day in 1992 went on to be trained as church-planters and evangelists, working with Mission Eurasia and other ministries to plant churches, serve the lost, train new Christian leaders, and deliver God’s Word and the message of Jesus to a broken and hurting post-Soviet world." The incredible legacy of Billy Graham is still being felt in the heart of Eurasia today and in the hearts of those who serve with Mission Eurasia.  We grieve his passing from this world, but we rejoice that Rev. Graham is united with his beloved Savior and hope for the day when we, too, will be united with our Savior and every tear will be wiped away. Try AI-powered search Why Billy Graham went to Russia The sneaking sympathy felt by american evangelicals towards russia goes back to their most famous representative. RELIGIOUS Americans often have mixed feelings about Russia. In recent times, many have waxed indignant at the way Russia curbs most forms of religious practice and preaching, apart from the ones that enjoy an official stamp of approval: Russian Orthodoxy and established forms of Islam, Judaism and Buddhism. In its most recent annual report, the United States Commission on International Religious Freedom, a bipartisan agency, placed Russia on the list of egregious violators of religious freedom, arguing that its record had worsened in every recent year, not only within its own territory, but also in Russian-dominated parts of Ukraine. But that isn’t the whole story. On America’s religious right, and in particular on the isolationist right, a powerful groundswell of opinion applauds Vladimir Putin on at least two grounds: the Russian president’s self-appointment as an international guardian of traditional values, with respect to marriage, sexuality and reproduction, and his advocacy of the rights of persecuted Christians in the Middle East, a Russian concern that goes back to Tsarist times. Consider this extraordinary reversal. It was at a gathering of America’s National Association of Evangelicals in 1983 that, with his famous denunciation of the Soviet Union as an “evil empire”, President Ronald Reagan implied that the cold war was a moral contest rather than a misunderstanding in which both sides bore blame. Some 30 years later Pat Buchanan, a conservative pundit, noted with some approval that Mr Putin was turning that accusation on its head by denouncing Barack Obama's America as a realm of sinfulness, where decadent ideas like same-sex marriage were on the march. At a minimum, the Russian president had a point, said Mr Buchanan, who likewise shared Mr Putin’s disapproval of the “barbarity and blood” caused by ill-advised American military actions round the world. No evangelical has been as defensive of Russia, and of American relations with Russia, as Franklin Graham, a preacher and White House confidant. As a previous Erasmus post has noted, last year he urged Americans to pray for the success of a meeting between Mr Putin and President Donald Trump. Mr Graham also gave a warm welcome to Russian Orthodox grandees at a conference in Washington on religious freedom in the Middle East. The conference was originally due to happen in Moscow but the venue was switched after some American evangelicals protested over the persecution of their co-religionists in Russia. A determination to keep channels of communication to Moscow open, even when political and religious friends urge otherwise, is a trait Mr Graham shared with his father, the great preacher Billy Graham, who died this week. In a rare act of defiance of the Republican establishment, Billy Graham accepted an invitation to a peace conference in Moscow in 1982 (where he is pictured, above) at a time when the cold war was entering its final, bitter phase. Critical friends, including the then vice-president, George H.W. Bush, said his visit could be a propaganda gift to the Soviet authorities. It would mean colluding with the Soviet regime’s claim to respect religious freedom, and with the politically subservient Russian Orthodox church’s insistence that there was no real persecution. This week, after Graham’s death, an American writer on religion and pacifism, Jim Forest, recalled a conversation he had with the famous preacher in which Graham stoutly defended that journey. The conversation took place in Kiev in 1988, when Graham was making yet another Soviet visit, this time to attend ceremonies marking the millennium of the Slavs’ Christian conversion. Graham said that in 1982, “I had been briefed at the Pentagon about what would happen if there was a nuclear war. I had been to Auschwitz and seen how limitless is our capacity for evil. And I was thinking about the [Christian apostle] Paul saying in his first letter to the Corinthians that he was called to be all things to all people. I realised I had closed myself to the people of the Soviet Union.” Perhaps one conclusion from that arresting statement is that however close religious leaders get to political ones, the moral calculus made by the former is never exactly the same as that of their more earthly-minded friends. To be worth the name, spiritual leaders will sometimes follow a different imperative. More from Erasmus A high-noon moment for Pope Francis over the Amazon Ideological rifts widen as Catholic bishops ponder endangered forests and married priests Why American Muslims lean leftwards for 2020 Islam’s followers are not so much firebrands as nomads in search of a home Taking sides in the Orthodox Church’s battles over Russia and Ukraine Conflicts within Slavic Orthodoxy are having some strange side effects Everywhere in chains Why Islamic debates over slavery matter to everyone Blasphemy laws are quietly vanishing in liberal democracies Despite the abolition of outdated laws, a culture of freedom is failing to take hold English cathedrals attract the devout, the dotty and darker forces A cherished tradition of independence can lead to abuses and poor management 179 IMAGES Notes on “How to Make Wealth” Paul Graham's Net Worth and Investor Story Top Must-Read Paul Graham Essays Paul Graham's best essays Top Must-Read Paul Graham Essays Paul Graham：这个时代更有效的财富创造路径 VIDEO Paul Graham Audio Essays OpenAi Alignment Team, Paul Graham Essay, David Shapiro Walks Back AI, & Research Early Work, an essay by Paul Graham The Gospel fo Thealth Andrew Carnegie Five Founders Startup = Growth, an essay by Paul Graham COMMENTS How to Make Wealth To get rich you need to get yourself in a situation with two things, measurement and leverage. You need to be in a position where your performance can be measured, or there is no way to get paid more by doing more. And you have to have leverage, in the sense that the decisions you make have a big effect. Essays The Age of the Essay: The Python Paradox: Great Hackers: Mind the Gap: How to Make Wealth: The Word "Hacker" What You Can't Say: Filters that Fight Back: Hackers and Painters: If Lisp is So Great: The Hundred-Year Language: Why Nerds are Unpopular: Better Bayesian Filtering: Design and Research: A Plan for Spam: Revenge of the Nerds ... How to Get Rich: Paul Graham on Money vs. Wealth "The moral challenge and the grim problem we face," Alan Watts argued in his superb 1970 essay on the difference between money and wealth, "is that the life of affluence and pleasure requires exact discipline and high imagination." Hardly anywhere is this urgency manifested more vibrantly than in startup culture. So argues English programmer and writer Paul Graham — who went to art ... Economic Inequality Economic Inequality. January 2016. Since the 1970s, economic inequality in the US has increased dramatically. And in particular, the rich have gotten a lot richer. Nearly everyone who writes about the topic says that economic inequality should be decreased. I'm interested in this question because I was one of the founders of a company called Y ... Paul Graham: On Determination & Success, Hard Work, Wealth Creation Paul Graham has written several essays on the subject of broadly understood wealth. Additionally, what is worth noting is that his way of thinking about wealth goes beyond narrow points of view. He captured the idea of wealth in the bigger context, combining his knowledge and experience with startups, history, and the economy. Paul Graham on Wealth Inequality and The Difference Between Wealth And Drazen. In his 2004. essay How to make wealth, Paul Graham touches upon the subtle difference between wealth and money: If you want to create wealth, it will help to understand what it is. Wealth is not the same thing as money. Wealth is as old as human history. Far older, in fact; ants have wealth. Money is a comparatively recent invention. Paul Graham 101 Paul Graham 101. Misc. There's probably no one who knows more about startups than Paul Graham. Having helped thousands of startups through Y Combinator, the startup accelerator he co-founded, there's a thing or two to learn from his essays. And Graham's wisdom isn't limited to startups either; his essays, read by millions, touch on ... How To Make Wealth by Paul Graham ∞ Until a few centuries ago, the main sources of wealth were mines, slaves and serfs, land, and cattle, and the only ways to acquire these rapidly were by inheritance, marriage, conquest, or confiscation. Naturally wealth had a bad reputation. Two things changed. The first was the rule of law. Reading 06: Wealth Creation Reflections. In these essays, Paul Graham discusses the process of creating a startup and the generation of wealth in general: 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. What investor Paul Graham learned about achieving 'great things' Graham, 56, wrote about the memory in a blog post reflecting on what he has learned about achieving "great things" since he was a kid. Hard work is key to success, Graham wrote, and giving up ... #277 Paul Graham's Essays Part 3 [4:00] How To Make Wealth by Paul Graham [4:01] Wealth is stuff we want: food, clothes, houses, cars, gadgets, travel to interesting places, and so on. You can have wealth without having money. ... which is the collection of Paul Graham's essays. It is called Hackers & Painters: Big Ideas from the Computer Age. Okay. So I want to start with the ... How People Get Rich Now Roughly 3/4 by starting companies and 1/4 by investing. Of the 73 new fortunes in 2020, 56 derive from founders' or early employees' equity (52 founders, 2 early employees, and 2 wives of founders), and 17 from managing investment funds. There were no fund managers among the 100 richest Americans in 1982. Hedge funds and private equity firms ... How About a World With Lots More Millionaires, Paul Graham? Y Combinator founder's pro-inequality essay undermined by new report that shows only 62 people own as much as half the world's population. Paul Graham: Income Inequality is Necessary for Economic Growth It's difficult to talk openly about income inequality without raising the ire of the Internet, a fact that Paul Graham, co-founder of Y-Combinator, learned this week. In an essay published on ... Paul Graham (programmer) Paul Graham (/ ɡ r æ m /; born November 13, 1964) [3] is an English-American computer scientist, writer, entrepreneur and investor.His work has included the programming language Arc, the startup Viaweb (later renamed Yahoo! Store), co-founding the startup accelerator and seed capital firm Y Combinator, his essays, and Hacker News.. He is the author of the computer programming books On Lisp ... Mind the Gap Money is just a convenient way of trading one form of wealth for another. Wealth is the underlying stuff—the goods and services we buy. When you travel to a rich or poor country, you don't have to look at people's bank accounts to tell which kind you're in. You can see wealth—in buildings and streets, in the clothes and the health of the ... How to Get Rich: Paul Graham on Money Versus Wealth First an excerpt from Brain Pickings on how to get rich: Paul Graham on money vs. wealth and then a book review on Hackers & Painters: Big Ideas from the Computer Age by Paul Graham.. H/T ValueInvestingWorld "The moral challenge and the grim problem we face," Alan Watts argued in his superb 1970 essay on the difference between money and wealth, "is that the life of affluence and pleasure ... The Remarkable Mr. Graham This essay is adapted from "Billy Graham and the Shaping of American Evangelicalism: Legacies," in Great Awakenings: Historical Perspectives (Peabody, MA: Hendrickson Publishers, 2016), 86-99. A Revival in Moscow: Billy Graham's Legacy in Eurasia A revival had started, which promised reformation and renewal. A Moscow crowd gathers to see Billy Graham preach in 1992. "Inspired and captivated by what he had seen and heard that day, Michael returned to his village in Ukraine under the influence of Billy Graham's message. Feeling the promptings of God's call and seeing a colossal need ... Opinion How to Get What We Want From Putin. We'll never agree with the Russian leader on principles, but we might be able to negotiate a better security structure for Europe. Thomas Graham, a ... Billionaires Build Billionaires Build. December 2020. As I was deciding what to write about next, I was surprised to find that two separate essays I'd been planning to write were actually the same. The first is about how to ace your Y Combinator interview. There has been so much nonsense written about this topic that I've been meaning for years to write something ... Why Billy Graham went to Russia In a rare act of defiance of the Republican establishment, Billy Graham accepted an invitation to a peace conference in Moscow in 1982 (where he is pictured, above) at a time when the cold war was ... Modeling a Wealth Tax Suppose your stock is initially worth $2 million, and the company's trajectory is as follows: the value of your stock grows 3x for 2 years, then 2x for 2 years, then 50% for 2 years, after which you just get a typical public company growth rate, which we'll call 8%. [1] Suppose the wealth tax threshold is $50 million. essay homework paper phd project resume review speech thesis