I think the author fail to distinct between how "entrepreneurism" and "venture backed business" differ.
A one man consultancy operation is as much entrepreneurism as serving billions of users world wide.
I think we have this misconception that success mean you need to have hockey stick growth on bunch of metrics, anD that you must make your investors 10x return on their investments.
Fundamentally the wrong approach. As an entrepreneur I don't strive to "make money", I strive to learn, adapt, and survive. Money and success depends solely on how well I can iterate those three things.
Well said. I should add that as an entrepreneur you don’t have to work for some moronic boss or organization. Bearing in mind that if you employ anyone, then you may be it. Either way, this is a biggie for me.
And of course there’s always a boss somewhere, whether it’s the client or the bank or something else.
> And of course there’s always a boss somewhere, whether it’s the client or the bank or something else.
Yes. To paraphrase Don Lancaster, it's better to get one nickel each from 100 different sources than 100 nickels from a single source. When someone is supplying all your nickels, they begin to think they own you in some way and will dictate how you do business (for instance, by requiring you to work in a particular place and time). When you get one nickel from each, then you are free to get rid of the sources that become overly demanding.
> As an entrepreneur I don't strive to "make money", I strive to learn, adapt, and survive. Money and success depends solely on how well I can iterate those three things.
"The most successful people I know didn’t do it with entrepreneurship, but rather they got good-paying jobs, kept expenses low, and invested whatever was left in the stock market or real estate, taking advantage of compounding"
Yea, this guy doesn't get what it means to be an entrepreneur. It is not just about the money. It is an itch that has to be scratched. It is an addiction. Only real entrepreneurs feel that itch. The rest are wantrapreneurs.
Entrepreneurs create something of value. They create a product/service that solves problems. The problems can be big/small but a business cannot exist if it doesn't solve a problem. They love creating teams and putting a bunch of people together to achieve something. Big or small. Unicorn or bootstrapped. Doesn't matter. What matters is that they created something that will exist for some time and leave a legacy (hopefully). Entrepreneurship has nothing to do with just making money or compounding or playing it safer. It is in fact complete opposite. Getting rich as an entrepreneur is literally a side effect. Yes, that is one way to get rich as well but if you just want to be rich with minimal risks, there definitely are better ways.
So yes, it is overrated for those who really don't have the itch. Like I said, you can make good money doing many different things and probably with better probability. But that is not what entrepreneurship is all about. Not even close.
> Yea, this guy doesn't get what it means to be an entrepreneur. It is not just about the money. It is an itch that has to be scratched. It is an addiction. Only real entrepreneurs feel that itch. The rest are wantrapreneurs.
Nice gatekeeping. There are plenty of entrepreneurs who are doing it for purely the money.
Yeah, there is a taste of the No True Scotsman fallacy there, certainly.
That said, I've known and worked with a shedload on entrepreneurs over the decades, and I honestly can't remember a single one that was doing it purely for the money.
In my experience, people who are driven purely by money avoid starting businesses. They tend to invest in startups or get great-paying jobs in established businesses.
I think the reason is that starting a business is a high-risk activity that will consume pretty much all of your time and energy. You need to be driven by something more than just money in order to be willing to do that.
If you're just about money, there are much easier and lower-risk ways of going about doing that.
>Overall, entrepreneurship is overrated. 5 successes for every 100 failures
This is so ridiculously untrue. There are so many businesses you can run that are almost impossible to fail. There are so many failures that are actually just "OK" in that they break even or lose a little money or whatever but don't actually cause you any problem to wind down.
You have to have a certain personality type to do well as an employee and you need to fit a certain mold that employers demand. As an entrepreneur you just have to give your customers and clients what they want and nothing else really matters. You do not even really need many employees to make a very good living doing a whole lot of different things.
If anything, being an employee is overrated particularly when people have career instability in midlife. Unexpected expenses like divorce and medical crisis often hit employees and people in general very hard because it both makes them less employable and disrupts their retirement plans. As soon as an oldster has a major gap in their resume, their ability to continue to ride on the employee gravy train diminishes by a massive degree.
No doubt you can live well on a good salary and investments, but it is not the best option for everyone nor is it the only option. It is the best option for a certain kind of personality but not for everyone. I know people who dream of starting businesses but are employees but all their side projects suck and don't go anywhere in part because they are just not suited for independent business.
When it comes to "safe" businesses, some characteristics you may want to look for are: 1) high margins 2) inefficient operations 3)low barrier to entry 4) ability to drive down costs with technology
As an example, the moving business. The current rates are north of $100/hr. They pay their workers minimum wage. They are run by non-techies who drive inefficient ops.
Remember that you can always find reasons to NOT get into any business. Successful entrepreneurs are the ones who have the persistence to tackle problems and find creative ways to solve them efficiently. And, those creative solutions often won't be apparent until you pick an industry and dive in.
It's not that failure is eliminated, but you can run a business with almost no risk or capital exposure. If that business fails, you walk away with no damage done.
You have no capital exposure if either you (a) work full time and your living expenses are $0 e.g. parent's basement, or (b) you have a job to pay your living expenses and work on your business in your spare time and value your spare time at $0.
Really, what type of companies are those? I've always seen the comment of, "there are so many more ways of making money than X" without the actual proposition of said companies. Hell, even Sam Altman said it in the Stanford Start-up class, but didn't give any examples.
Right. If you bill one hour and don't have to issue a refund, you're in the green. Nearly impossible to mess up. Harder to mess up than being an Uber driver with lower capital requirements.
Pubs have to deal with liquor licenses, rowdy clients, high staff turnover, and very high rents to be anywhere other than a dive.
Bakeries have extremely high turnover, razor thin margins, expensive equipment, large kitchen, odd hours, and significant hours
Gas stations are all franchises. It is notoriously difficult to make money on a franchise (e.g., you might make 30 or 40k a year take home) and there are huge lists of things that a franchisee can be penalized for. Plus you are hiring the least educated staff on earth and have to deal with all that shit.
Compared to white collar work, which can pay 4-8x what you'd make doing any one of these, for a fraction of the headache.
This is a downright bizarre list of "no risk" businesses. The first two of your examples are both restaurants. Enough said on that. The last one is a franchise that sells a highly regulated commodity product from a brick and mortar storefront. I mean geez... what do you consider to be hard business?
> This is so ridiculously untrue. There are so many businesses you can run that are almost impossible to fail. There are so many failures that are actually just "OK" in that they break even or lose a little money or whatever but don't actually cause you any problem to wind down.
This is so ridiculously untrue :). Not a single business is easy. You can’t just coast and get break even. You have to slog from day to day. And if you’re not growing, you’re shrinking. I know that’s not a popular thing to say these days, but I believe that to be true even apart from the wild excesses of capitalism. In a free market, if you’re not constantly reinventing to keep people engaged, no matter what your business, you are going to fail soon enough. People get bored and move on, even if you’re laying golden eggs, people will get bored.
>This is so ridiculously untrue. There are so many businesses you can run that are almost impossible to fail.
What would those be, because from SV style startups (where the rate of fail is atrocious) to small businesses like funeral services, coffee shops and restaurants, most businesses fail.
I've run or helped manage several small businesses and watched folks move into middle age with them. Small businesses are hard and require an emotional detachment from pressure, long hours and risk.
The failures I saw left people in worse positions than being let go - they had to fully retool themselves and find a new career with little in savings. Those new careers ended up being stable, high paying, traditional jobs. The poor insurance situation (at the time) left otherwise functional families begging to help get kids through medical issues.
A hairdresser or a gardener is an entrepreneur too. I dont know where this moronic idea that everyone wants to create some new Facebook or Google just because they want to be on their own.
What happened to growing a sustainable business around the craft you believe you are good at?
> I dont know where this moronic idea that everyone wants to create some new Facebook or Google just because they want to be on their own.
I mean... Go to any coffeeshop in SF and eavesdrop on the derps talking about their big ideas. "It's like twitter mixed with grindr... But for Lyft drivers. I'd tell you more, but I'll need you to sign an nda."
No, the hairdresser/gardener/accountant etc is self-employed. It's a spectrum, but basically it goes from self-employed but not novel all the way across to world-changing. Both are self-employed, but to the difference between the hairdresser and Elon Musk or Steve Jobs isn't scale. It's novelty.
If so, then Microsoft was not an enterprise and Bill Gates was not an entrepreneur when they started. After all, they bought their software and sold for and established company. Zero novelty involved.
(In that vein, almost all enterprises failed, the second coming of the innovation is where things usually happen. Or later.)
This is just the unfocused ramblings of someone who works in finance and is convinced it’s the best possible option.
If your only metric for success is money and you aren’t particularly creative that’s almost certainly true.
If you live in New York and have wandered into the wrong bar or dinner party a couple times you’ll find this sort of self-satisfied pseudo-intellectual rant from a young finance guy pretty familiar.
It may be unfocused, but it makes a valid point that is applicable to the masses of young Silicon Valley entrepreneurs who attempt to create the next unicorn and fail on a yearly basis.
If all you want to do is make money and you're a smart quantitative graduate from a good school, go into finance, because the expected value there is higher and less volatile than building the next unicorn.
The value systems of these young graduates in New York and SV are one in the same -- they are both people who primarily value money. But, the Silicon Valley kid is the one who's wrong about the best solution.
Now, if you're a fresh college grad who values things other than money, like contribution, autonomy, creativity, innovation, etc., then startups are a better fit.
We can sit here and make value judgments, but in my experience, it's impossible to change someone's value framework when they don't want to. So, might as well point them in the right direction.
There’s no reason to “go into finance.” Just get a decent paying job, save, and invest. In some industries this is difficult... but anyone in tech can do this and become a millionaire in 10 to 15 years.
The reason to "go into finance" is you can expect on average to become a millionaire in 4-6 years instead of 10-15 years. So, do that, if you can and all you care about is money. Note: this only applies to smart, quantitative graduates from good schools.
The irony is you've deviated so far from the average population that it's worthless to tell people to just "do this" because virtually no one is listening.
Yeah, if you come from a good school, got a job with no experience and a degree with no loans, and you are 'smart', you can easily become a millionaire. I'm sure all 3 people with these qualities are thanking you right now.
Actually, you will not become a millionaire within 4-6 years of graduation. That's ridiculous.
Graduates do not get paid 250k p/year. Not even in finance positions. And reliable stocks are too long term of an investment to expect a payout in 4 years with no risk. You live in a fantasy world, sir.
>> Graduates do not get paid 250k p/year. Not even in finance positions.
You’re right. They make more when you factor in bonuses — in some cases double that.
I’m guessing you aren’t in the industry or have an outdated perspective. In recent years, the competition for ML talent at hedge funds has become fierce and compensation has skyrocketed.
(quantitative analysts do not differ much from this in salary, but youre being to vague with your job titles so im not sure what you mean)
Either way, you are ridiculous. Unless this magical position requires more advanced knowledge in which case your claim about it being a simple "finance" position is wrong. Not even true in machine learning either. At this point it's no longer a straightforward and safe career path like you said it would be. Maybe you misunderstood and thought we were talking about PhD graduates. My point still stands.
Please, please, do not mislead people down career paths.
Even if we work with averages, it takes on average 2 years [0] to make it from entry level quant at a hedge fund to senior analyst. Senior analysts make on average $750k/yr [1] in total compensation (primarily bonus based) at a mediocre hedge fund. The expected value after 6 years even at a less than mediocre hedge fund puts you north of a million post-tax.
The typical track is 2 years as an analyst @ $200K/year and then 4 years as a senior analyst @ $750k/year. Do the math.
>Overall, entrepreneurship is overrated. 5 successes for every 100 failures
If failure is defined as going out of business, and success is defined as surviving, then the real five year survival rate for new businesses is ten times higher than the author has written.
Personally I have found it a bit sad that in the recent decade people have been so lured by the wealth and glamour of popular startup culture that we have forgotten the value of being in service to others. To master one’s craft for the benefit of others is an egoless endeavor that enriches the soul and not just the wallet.
There is something to be said for an apprenticeship relationship that teaches the respect for learning, method, quality and dedication that a skilled craft requires. However an "enriched soul" doesn't appear anywhere on the list of things I'd be willing to say about it.
The author presupposes the goal of being an entrepreneur is getting rich. Yet his outlier examples all infamously eschewed lavishesness. They were about building something to impact humanity.
No doubt many successful entrepreneurs have a goal of wealth in mind, but for what aim? I can justify my efforts at financial independence to live freely and not to live under any conditions which compromise my personal ethics, as one priceless example.
>> if I had to choose between putting a large sum of money, say, $200,000 into a small business, which has a 90% chance of failing within 5 years, or the S&P 500, the choice is obvious..
Unfortunately, I've come to think that investing in the stock market (especially index funds) is unethical because it gives more power to corporations to lobby for regulations which will further distort the market, increase centralization and increase failure rates for small businesses. It's a vicious cycle, a self-fulfilling prophecy. Without mega-corporations, small businesses would have a much better success rate and consumers would benefit.
Blindly investing in the S&P500 is just feeding the corporate machine. You're giving real money to real companies and you don't know what they're doing with it. In my view, large index funds should be outlawed completely.
> You're giving real money to real companies and you don't know what they're doing with it.
You're really not. You're more than likely buying some other investor's shares. Companies aren't constantly raising money on markets, if they did, shares would get incredibly diluted. Almost all volume is between investors.
Alternatively, investing in the stock market, when feasible for working class people is a very important way for them to improve their financial health. Index Funds and ETFs, while blind, have allowed a lot of people to benefit from the stock market without having an education on finance / business / specific industries.
I feel like I am reading an article from someone who never has run their own business. You start a tech company because you want to do something new, not to get rich.
Further, I don't think it's that uncommon for entrepreneurs to see the employer-employee relations as the following:
- being an employer is a status in which you take risks
- being an employee is a status in which you avoid risks
Blaming the other for their current status is dumb, regardless of on which side you are.
Starting a tech company because you want to get rich is a fine reason to do so, it just shouldn’t be the only reason. When you have a goal of actually making good money it will force you to build a successful company on purpose from the ground up, not by “accident” (i.e making a simple product or app to fulfill some need and then it just happens to spread virally and become a huge success).
Personally, when I've been (as I am now) an employee that has received equity as part of my compensation, the fact that I'm receiving equity doesn't make me feel that I'm taking a risk. In terms of my daily thinking, I don't even count the equity position at all -- at best, it's pure gravy. The only thing I really count is the actual money I'm paid.
The lack of a byline is incredibly telling, I wouldn't attach my name to this drivel either.
> just get a 6 figure job and invest in things created by entrepreneurs because the market is only going up, up up. But don't be an entrepreneur yourself.
Y'all got any of them 6 figure jobs lying around back there?
For a 24 year old? One with job security, so like series C or later? I want to get paid, but not take any risks.
If you're willing to live in a densely populated metro area (where 100k doesn't go as far as you'd think) you just have to learn some hot skill and how to interview.
100k is north of entry level but certainly not a senior paycheck in Denver. If you can explain blue/green deploys, know how http works, and can use terraform to build out a "best practices vpc" then all you really have to do is tell recruiters that and they'll get you lined for interviews where the hiring manager won't balk at 100k.
It feels like there are Devops and Security hiring managers all around who would love to talk to you.
Wow I never knew Bill Gates had a multi million dollar trust fund. Kinda puts the drop out of Harvard and start a software company with your friend in perspective. https://philip.greenspun.com/bg/
While I generally agree with the op's sentiment (if your goal is to gain financial independence, a high income and saving+investing will get you to that goal with less risk than starting a company), it's not really certain we'll be seeing 15% or even 5% annual returns on S&P 500 for much longer.
The short term (10 years to retirement) plans are not going to work if there is another global recession, especially if it's a prolonged one. And this time around there isn't much firepower left for financial manoeuvring (QE+lower interest rates)
The word "entrepreneur" has lost all meaning, and I say "good riddance". When someone asks you "what do you do" do you answer "I'm an entrepreneur"? If so, ask yourself why? Because you haven't answered the persons question, you've only stroked your own ego because you believe saying "entrepreneur" has a certain cache, which has been destroyed by everyone with an idea calling themselves an entrepreneur.
Drop the pomp and just be what you are. I'm not an entrepreneur, I'm a software engineer that runs a tech startup that is creating a new type of media. That actually tells the person what you are doing. Other professions describe what they do. A lawyer, they practice law. A doctor, they keep people healthy. A chef, he cooks food. An entrepreneur... a well, I run a business. Why? what does the business do? what do you do? Running a business can mean so many different things (ok, sure there are all types of lawyers and doctors too, so I can play devils advocate to my own BS).
But seriously, why do we need this word? I cringe when anybody calls me an entrepreneur, and I recently agreed to be on the panel of a tv show about new media. I got there to find out the show was called "The Entrepreneurs". I cried...
>The median success for the typical podcast, Amazon seller, or self-published author in terms of income, after one factors in the number of hours involved and start-up costs, amounts to less than minimum wage.
Potentially for the podcast and self published author, those are both highly saturated niches. But I don't believe that's the case for Amazon sellers. I know many people who make 6-7 figures a year profit on Amazon, well above minimum wage.
Could be, I see a decent number of people who aren't terribly talented doing ok, though. I don't think the median attempt at doing it full time ends in under minimum wage.
I'm surprised didn't expect those figures for Amazon sellers, sort of seems like a saturated marketplace with razor margins for most sales. Would you be willing to share a bit more detail on what kinds of things these fairly successful Amazon sellers you know of sell on the site?
I know people doing many different categories. One guy doing a million a month gross just in clothing. One guy doing used DVDs and making over 1k/day profit. Many people doing wholesale in electronics, toys, grocery, health and beauty, pets, and others.
I'm doing electronics and toys and have done as much as 500k gross in 30 days at peak.
But the competition must be ferocious for such generic things, which is why Im so surprised by these profit margins. I don't mean to pry with too many questions but are these the sort of sales and margins created even by sales of more or less generic products or do these people put heavy effort into positioning themselves differently?
For wholesale it's difficult to position yourself differently than anyone else, you need to get stuff at the right price. I'll have suppliers with thousands of products and I only buy ten of them, have to be very selective.
Other people buy from stores at discounted prices, or any number of different sourcing methods.
Judging by the comments, a lot of people value entrepreneurship for the personal freedom and autonomy.
The article suggests being able to save 89k per year. Under reasonable assumptions, 7.5 years of saving at this rate will support an income of 31k / year (the median US salary) for the rest of your life, leaving you with ~50 years of runway for whatever else you care to do.
This is especially interesting if the thing you actually want to do is something that is valuable to society but not profitable eg maintaining free software or raising a child.
"Entrepreneurism" is the only way to make money in many industries. Things exist outside of the internet. For instance, restaurants, which are one of the nation's largest employers, which everyone spends money on, but where workers are often paid very poorly.
For example, I can take the $200k in the article, build a small restaurant, and expect it to do $500k-$1m in revenue per year over the next decade. Given good management and a reasonable lease, it'll net 10-20% per year, plus pay my salary and those of a few other people.
Hair dressers, landscapers, any construction really, and lots of other industries benefit from entrepreneurs. Yeah, moonshot tech companies usually fail, but that doesn't mean "entrepreneurism" is overrated.
Lives are complex and have many related factors. Leaving the corporate world to make and sell things on my own has changed everything about my life. It is true that I have less money, but it is also true that I have vastly more focus and don't spend time on things I consider irrelevant. Despite the financial losses involved becoming an independent business person greatly improved my quality of life.
> The most successful people I know didn’t do it with entrepreneurship, but rather they got good-paying jobs, kept expenses low, and invested whatever was left in the stock market or real estate, taking advantage of compounding.
The author here is clearly defining "successful" as "wealthy". That means that he isn't talking to entrepreneurs like me, though, as I define it rather differently.
He's comparing the best employment outcome ( cushy working conditions, a six-figure salary, and generous stock options ) with worst entrepreneurism outcome ( failure, small commodity business, too much work ).
There is a BIG difference between what is called "small business" and "startup". Small business doesn't scale, while startup starts small, but it can scale globally and create better moat ( scale, network effects, brand ).
People here are interested in startups, not small business.
tldr: Making it by doing your own thing is most likely going to fail. You are better off being successful working at a high paying job and investing in the stock market.
article seems to just focus on the idea of wealth or making money (more likely on fire). doesn't account for what success is defined as or what people want in their life other than money. eg. lots of people rather be their own boss than be a corporate drone.
I think you have to look at it as a journey as with anything. A good analogy is computer programming. When you first try to write a program you will fail miserably but it will be a major learning experience, with each successive attempt being better than before and offering new learning experiences.
If you are in one swoop starting your first business to share your major passion in life with the world there is a good chance the near inevitable failure will be the end of your entrepreneurship. If you realize that is an almost guaranteed part of the journey you might keep trying.
I want to see the stats on failed entrepreneurship where the person gives at least 5+ good attempts.
A one man consultancy operation is as much entrepreneurism as serving billions of users world wide.
I think we have this misconception that success mean you need to have hockey stick growth on bunch of metrics, anD that you must make your investors 10x return on their investments.
Fundamentally the wrong approach. As an entrepreneur I don't strive to "make money", I strive to learn, adapt, and survive. Money and success depends solely on how well I can iterate those three things.