After some excellent insight in a recent email from Jason Calacanis (a VERY sharp and successful startup entrepreneur), I revisited my working hypothesis about folks doing startups. It’s a bit ironic since I did NOT follow this advice myself, but now it’s too late for me, and I’m doing pretty well.
I do think Jason and other entrepreneurial geniuses like Mark Zuckerberg are among the VERY few exceptions to my rule, which is this:
Smart folks should NOT bother with startups. My “research” is only anecdotal but it’s fairly extensive with respect to my own online efforts and the many startups and websites I’ve watched over the years, but I think the typical pattern is for smart entrepreneurial folks to invest many years and get only modest returns. Few – and by few I mean probably less than 10% – are better off with their startup effort than they would be simply working for a big player like Google or Yahoo at 120k per year and saving like crazy.
For a 25 year old, retirement with a few million can be had in an almost guaranteed way by age 50. [math is simple here. A 120k employee can easily save 40k per year over 25 years = 1,000,000. With very modest compounding this will be well over 2 million at age 50. If you are married you can spend more or save more.
I’m doing pretty well myself as a moderately successful entrepreneur with a few decent websites, but even I’d I’d be much better off had I joined up with Google 10 years back (their stock is up about 1000% as well as paying big salaries. I’d be a bit better off if I’d joined up with MS or Yahoo 10 years ago [no stock gain, but I probably would have made more money in salary than I’ve made as an entrepreneur).
The many brighter-than-me folks who have NOT had success with their own startups would be dramatically up after 10 years with a big player.
I think the analogy are the gold miners vs the shopkeepers of the CA Rush of 1849. Most miners left with little to their name, where the bar, brothel, and shopkeepers did pretty well, building the great state of California in the process.
Klondike? Most had little information as to where they were headed or what the hazards of the journey were like. Many gave up. Some bought paste so they could roll down the hills and wash the gold from their clothing. Those who prospered were indeed often those who opened up bars, restaurants, hotels or whorehouses but they did so after having endured all or most of the hazards of the journey to the Klondike. Sure money was made in Seattle but most of the money was made in the Klondike whether it be by pick and shovel or otherwise.
The Yuppie Salary for a few years and then out sounds great but Yuppie Salaries tend to induce Yuppie Lifestyles and savings are just as difficult to accumulate at 120k as at 12k per year. Get an online degree from a decent graduate program, join HP (oops, can’t do that anymore and can’t work from home anymore), save a whopping bundle and then do the Turn On, Tune In, Drop Out routine in Petaluma amidst the artisan breads and artisan beers…but wait. What about real estate and zoning…oops will have to commute.
Google at 22,…retire at 32? Heck, those kids who were born on communes after their Harvard educated parents had done the Turn on, Tune in and Drop out routine tended to leave the world of mung beans and naked ladies for the world of The Rat Race. Yuppies don’t date, they hook up but they also get married and divorced. Next eggs don’t survive divorces.
I fear there will be a generation of LAMPers who will be largely turned away by Google and who after found that startups fizzle will go home along the same trails the Klondikers may have used after enduring a great deal of hardship but not having made it.
Nice post can’t wait to see more