The restaurant industry and the 5 forces essay

This is the most controversial post I have ever written in ten years of blogging.

The restaurant industry and the 5 forces essay

Want to start a startup? Get funded by Y Combinator. 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. The word "startup" dates from the s, but what happens in one is very similar to the venture-backed trading voyages of the Middle Ages.

Startups usually involve technology, so much so that the phrase "high-tech startup" is almost redundant. A startup is a small company that takes on a hard technical problem.

Lots of people get rich knowing nothing more than that. You don't have to know physics to be a good pitcher. But I think it could give you an edge to understand the underlying principles. Why do startups have to be small? Will a startup inevitably stop being a startup as it grows larger?

And why do they so often work on developing new technology?

The restaurant industry and the 5 forces essay

Why are there so many startups selling new drugs or computer software, and none selling corn oil or laundry detergent? The Proposition Economically, you can think of a startup as a way to compress your whole working life into a few years.

Instead of working at a low intensity for forty years, you work as hard as you possibly can for four. This pays especially well in technology, where you earn a premium for working fast.

Here is a brief sketch of the economic proposition. You could probably work twice as many hours as a corporate employee, and if you focus you can probably get three times as much done in an hour.

Then there is one more multiple: Suppose another multiple of three.

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Combine all these multipliers, and I'm claiming you could be 36 times more productive than you're expected to be in a random corporate job. Like all back-of-the-envelope calculations, this one has a lot of wiggle room. I wouldn't try to defend the actual numbers. But I stand by the structure of the calculation.

I'm not claiming the multiplier is precisely 36, but it is certainly more than 10, and probably rarely as high as 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: For example, one way to make a million dollars would be to work for the Post Office your whole life, and save every penny of your salary.

Imagine the stress of working for the Post Office for fifty years. In a startup you compress all this stress into three or four years. You do tend to get a certain bulk discount if you buy the economy-size pain, but you can't evade the fundamental conservation law.

If starting a startup were easy, everyone would do it. How do I get to be a billionaire, like Bill Gates? So let's get Bill Gates out of the way right now.

It's not a good idea to use famous rich people as examples, because the press only write about the very richest, and these tend to be outliers.

Bill Gates is a smart, determined, and hardworking man, but you need more than that to make as much money as he has. You also need to be very lucky. There is a large random factor in the success of any company.A company that grows at 1% a week will grow x a year, whereas a company that grows at 5% a week will grow x.

A company making $ a month (a typical number early in YC) and growing at 1% a week will 4 years later be making $ a month, which is less than a good programmer makes in salary in Silicon Valley.

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We have now placed Twitpic in an archived state. A collection of articles about Reporting from The New Yorker, including news, in-depth reporting, commentary, and analysis. May (This essay was originally published in Hackers & Painters.) If you wanted to get rich, how would you do it?

I think your best bet would be to start or join a startup.

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