Apr 14, 2021 06:00:00

How is the 'how to become a millionaire' changing with the times?

The world's economic situation is changing day by day, and so is the trend of millionaires in the world.

Paul Graham, a programmer and founder of Y Combinator , which supports startups, talks about the difference between 'Millionaires' based on the 1892 and 2020 billionaire rankings.

How People Get Rich Now
http://paulgraham.com/richnow.html

Forbes, an economic newspaper, has published a ranking of the wealthiest Americans since 1982. Comparing the top 100 people on this ranking between 1982 and 2020 reveals a big difference, Graham said.

First, of the 100 wealthiest people in 1982, 60 were 'inherited' as the source of their wealth, compared to 27 in 2020. One of the reasons for this is 'increasing the number of heirs'. As the number of heirs increased, the amount of inheritance per person decreased.

Among the top 100 people in the top 100 rankings as of 2020, 56 of the 73 people who gained wealth by means other than inheritance are 'founders of companies' or 'initial employees of startups.' The remaining 17 people are those who have made a fortune by investing.

Changes in the market are related to why entrepreneurs are sweeping the top of the rankings. In 1982, the source of wealth was dominated by 'oil' and 'real estate.' However, as of 2020, the source of wealth has been replaced by 'technology.' The technology category is relatively new, and it is possible to squeeze one seemingly different category, the 'automobile company' Tesla and the 'retailer' Amazon.

Technology companies have the characteristic that venture capitalists can easily invest. This is because tech companies can make a lot of money by 'good technology' rather than by CEO trading.

On the other hand, in 1982 oil and real estate companies were wealthy through trading, not technology. The history of the method of obtaining wealth by trading goes back to before the Industrial Revolution era, and it is said that royalty and aristocrats in the 16th and 17th centuries basically increased wealth by trading.

Looking at the Gini coefficient, which indicates social disparity, the

disparity is increasing year by year in the United States, but many millionaires in 1982 'earned wealth by inheriting the wealth of people other than themselves and by trading. On the other hand, in 2020, considering that many millionaires 'earn wealth by starting their own businesses and creating excellent technologies,' it is said that the social situation is uniformly deteriorating. Graham suggests that there isn't.

The changes in the Gini coefficient of major OECD countries announced by the Ministry of Health, Labor and Welfare are as follows.

In fact, as of 1892, there were many people who started a business, but few companies started a business in this era and have achieved great success since then.

This is because financial institutions such as JP Morgan Chase acquired small and medium-sized enterprises under the law from the end of the 19th century to the beginning of the 20th century, and by the end of World War II, 'the major sectors of the economy were companies. Organized as a supporting cartel or dominated by a small number of oligopolistic companies. ' Startups couldn't break through the oligopoly and enter the market, and people had no choice but to succeed within existing companies rather than launching their own. After that, the government, which became aware of economic problems, abolished the policies that support oligopoly, and the economic structure up to that point was destroyed.

After the economic collapse centered on JP Morgan, the technology industry emerged and many people were able to earn wealth by starting a company. And technology itself has reduced costs in terms of both product building and customer acquisition, making startups cheaper and easier.

In the past, starting a startup meant creating a factory and required an investor, but as of 2021, it is possible to start a startup without the need for an investor. Also, newly created companies are attractive to investors because they tend to grow faster than ever before. In such a situation, there are situations where investors need startups more than they need investors.

For example, IBM, founded in 1896, took 45 years to generate $ 1 billion in revenue. However, for Hewlett-Packard, which was founded in 1939, this period is 25 years, and Microsoft, which was founded in 1975, says that the standard for fast-growing companies is 13 years and 7-8 years as of 2021. He says.

Founders and early employees can become surprisingly wealthy in a few years because they can start a startup with a small initial cost and grow the company rapidly. Startups were repressed in the 20th century, but with this repression gone, founders and early employees of startups now occupy the top ranks of the World's Billionaires.