Elon Musk is now a trillionaire, SpaceX has a valuation that can only be explained — wait, it can't be explained — and some people think it's immoral for people to be able to become billionaires and now trillionaires. I don't care for Elon, but I certainly don't have a problem with people creating lots of wealth for themselves. In fact, I think it's the outcome we want, provided we do the things necessary to maintain a healthy middle class.
Nevertheless, there are people who believe you cannot earn a billion dollars without bad behavior. I'd like to think that nobody really believes this and they have simply recognized it makes for good politics or some other self-serving purpose, but maybe I'm wrong.
Paul Graham recently responded to this argument with an essay called "How to Earn a Billion Dollars." With the experience of funding and investing in about 6,500 companies under his belt, he puts it very simply: The most common way to earn a billion dollars is to start a startup that many people like, and then have it grow very quickly for a period of time.
He provides some math:
If your revenues grow at 15% a month, how much more will you be making 5 years from now? To calculate that, we need to find 1.15 to the 60th power (since 5 years is 60 months). So go to Google again and this time type 1.15^60. The answer should be about 4384. Meaning in 5 years your startup will be making 4384 times as much. If you're currently making ten thousand a month, in five years you'll be making about 44 million a month, or 526 million a year. And at that point, if you own as much of the company as founders typically do, you will be a billionaire.
He then goes on to argue that a key founder trait is, in fact, the opposite of exploitation:
There are other ways to get rich than by starting startups. Some of those do require you to exploit people. But startups are the most common way to become really rich, and if you want to start a successful startup, the key is not exploitation but empathy. What do users really want? What could you do for them that would make their lives dramatically better? That kind of empathy is what we look for in founders, and what we cultivate in the ones we accept [at Y Combinator].
If you're interested, here's the full essay.
This week, May 25 to 29, is Toronto Tech Week. If you'd like to check out the event calendar, click here.
What's interesting about how the week is structured is that it's not a traditional conference. It's more of a decentralized, open platform where anyone can join or host an in-person event, as long as it serves the shared goal of showcasing Toronto as a city of builders. It feels very tech-appropriate, and it means you can tailor the week to your interests.
I'm laser-focused on my own building right now (otherwise I'd be all over the it), but I am enjoying following it online and seeing the energy that it brings to our city. Toronto is one of the greatest cities in the world, and there's no shortage of talented entrepreneurs working to build the future right here.
What we do need to be better at, though, is celebrating the people taking risks and providing them with the capital and resources to make wild and crazy bets. But I'm sure that's all happening right now at Tech Week. Go Toronto!
Entrepreneurship is a critical component of city-building. You want people taking risks, starting new companies, and creating jobs to grow the overall economy. And to accomplish this, you roughly need a bunch of smart people, access to money, and a culture that accepts failure and risk-taking. Then, maybe, you might get some successful startups.
The key word, however, is maybe.
Here's an interesting essay by Jerry Neumann — a retired venture investor — called "We Have Learned Nothing." In it, he argues that there is no science of entrepreneurship:
Of course, no science of entrepreneurship can be a science in the sense most people think of the term. There are no fixed and universal recipes, no ultimate truth. This may be unsatisfying to the aspiring founder, but any science that guaranteed success would bring us right back to the perpetual money machine. The best we can hope for is a science that makes startups meaningfully more likely to succeed and that is honest about the limits of its own prescriptions. And then, when those prescriptions harden into orthodoxy, we try something different. A true science of entrepreneurship embraces the Red Queen dynamic so completely that it rejects any attempt to permanently systematize it.
The "Red Queen hypothesis" is an evolutionary biology concept that states that one has to constantly adapt and evolve just to survive and maintain a position, never mind make any progress. It follows that as soon as you stop innovating as a company, you don't just stay where you are; you fall behind. And that's because the entire landscape is constantly shifting around you. Neumann argues that this is a better mental model for startups and that it's a fool's errand to try to permanently codify what it takes to create a successful one.
I'm going to take this even further and say that the same is true for cities. It's not enough to just follow "best practices" and copy what has been successful in other places. There is no set formula for urban leadership. Cities are rewarded most for being different, and for doing that different thing first. This is particularly true in a world of increasing global sameness. Creating a replica of the London Eye or New York's High Line will not magically turn you into a comparable global city. It is a recipe for mediocrity.
Cover photo by Laine Cooper on Unsplash