

Reaching the $5 Million Club Takes an Open Mind - breck
http://finance.yahoo.com/banking-budgeting/article/103017/joining-the-5-million-club-takes-an-open-mind

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menloparkbum
I don't think that the 80% extends past this guy's sample group of 3000. In
fact if you do some "fermi calculations" it doesn't appear to be the case that
80% of pentamillionaires in America come from startups.

The article claims there are 930,000 pentamillionaires in the united states.
80% of that is 744,000.

There are about 1.1 million lawyers in the USA. Let's say the top 10% have a
net worth of 5 million. Thus 110,000 of those pentamillionaires are lawyers.
So we've got 634,000 left.

There are about 700,000 doctors in the USA. 15% of those doctors are surgeons
and anesthetists, specialties where you can make $500K/yr. So, 105,000
pentamillionaire doctors...

529,000 pentamillionaires left.

750 MLB players + 460 NBA Players + 1700 NFL players = 2910. Let's multiply
that by the past 10 years = 29,000 current or former pro sports players who
are pentamillionaires

500,000 pentamillionaires left

I'm getting a bit tired to do this math, but it seems like there must be
100,000 guys in the financial sector who have a net worth of 5 million
dollars. So - 400,000 left.

Add in movie and TV stars, rock and pop music stars, guys who manage
movie/TV/rock/pop stars, executives in the entertainment industry, the handful
of other sport stars and entertainers who make a lot of money... that's
probably another 100K. Down to 300,000.

Now think about all the guys who rose up the ranks of fortune 500 companies.
There's probably 100 guys at each fortune 500 company who make a mil a year?
Now we're down to 250,000.

Someone please correct me if I'm padding the numbers too much. I could be dead
wrong on the number of rich finance sector guys, or totally wrong about how
much money the top lawyers and doctors save. But, I also totally left out
other rich people, like presidents of universities, university coaches,
directors of rich nonprofit organizations, and so forth. Even if my math is
off it really doesn't seem likely that 80% of the pentamillionaires in the USA
came from startups. It seems closer to 10-20%, if that. Not trying to be a
debbie downer but 80% seems way off the mark.

~~~
maurycy
"750 MLB players + 460 NBA Players + 1700 NFL players = 2910. Let's multiply
that by the past 10 years = 29,000 current or former pro sports players who
are pentamillionaires"

It is not that completely different players play each season. I don't have any
numbers but I would say that 10% new players each year seems more likely.

Also, I don't know exact salaries but I would say that it is winner takes it
all. Most players don't have so huge payoff.

"There are about 700,000 doctors in the USA. 15% of those doctors are surgeons
and anesthetists, specialties where you can make $500K/yr. So, 105,000
pentamillionaire doctors..."

You don't know their savings habits. If you make such money and have guarantee
of similar earnings in the future, it is hard to resist spending more.

EDIT: The problem with entertainment sector is that some of them actually have
huge salaries, but they are also forced to spend a lot of money. If you're a
celebrity, you're forced by society to rent a jet, wear Dior, own a mansion
etc.

~~~
stcredzero
Robert Maxwell was an avowed socialist. He was once a rival to Rupert Murdoch
in the news business. He was also called a "champagne socialist." I remember
on 60 Minutes, he was asked how he could be a socialist and yet have the
private jet and the yacht. He replied that he was forced by his position in
our society as a captain of industry to have all the trappings.

------
helveticaman
"Not to say that getting rich is simply a matter of having a swell attitude.
The path to riches usually involves the kind of risk that would make most
people feel a little queasy. Harrison Group head Jim Taylor recently persuaded
more than 3,000 pentamillionaires to discuss their path to success. Perhaps
not surprisingly, none of them had a cushy union job down at the DMV. _The
vast majority — 80% — either started their own business or worked for a small
company that saw explosive growth._ And almost all of them made their fortune
in a big lump sum after many years of effort."

The article mentions the other 20% is made up of heirs (10%) and fortunes from
passive income / stock picking. The other 80% made it from startups. Of
course, this leaves out the career ladder; don't MBAs get rich too? I don't
envy them, but I know they exist, and I know they have money, as do MDs and
JDs. Where do they fit in?

Also:

"Getting rich also requires a certain amount of stubbornness and clarity of
purpose. Consultant Joel Kurtzman, who evaluated 350 startups for his book
Startups That Work, found that _successful outlets usually have a team of two
or three founders who share a common vision; the success rate for this model
was a remarkable 50%. The odds for solo founders were more like the oft-quoted
one in 10, in part because they often found themselves working at cross-
purposes with hired guns who see things differently._ That's what 34-year-old
Justin Jarvinen learned the hard way. The entrepreneur saw two promising
business ventures go down the tubes after he took on partners who tweaked his
ideas beyond recognition. But three years ago he started VerveLife, a service
that helps companies promote online marketing efforts with free music
downloads. Knowing that his success depended on his enthusiasm for bringing
the idea to market, he carefully chose partners who supported his vision."

So, according to this article: 80% of people who get rich do so w/ a startup
50% of good teams succeed 10% of solo founders succeed

~~~
BrandonM
I would say that in general, for an MBA to reach the $5M point, they have to
be part of a startup. For an MD to reach that point, he has to start a very
successful practice or make some good investments to go along with his income.
So I think those two positions already fit into the mentioned data.

~~~
jedc
Except for those MBA's that go into the higher tiers of
banking/finance/trading. Those guys can get bonuses that, if saved over a few
years, could easily reach $5M.

~~~
hugh
In my understanding an MBA isn't considered much of a qualification in
finance, banking or trading. Quants have quantitative degrees, while
traders... well, they just seem to be some kind of trained gorilla as far as I
can figure out.

~~~
breck
Quants and traders aren't the only people on wall street. I think most
ibankers, besides the first and second years, have mbas.

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sdpurtill
Surprisingly, today's very rich say that money itself wasn't much of a
motivator. Once you've got food in your belly and a big-screen TV, the mere
prospect of more Benjamins isn't enough to get you leaping out of bed at 5
a.m. Rather, rich folks often make their fortunes after they make up their
minds to solve a problem or do something better than it's been done before.

Very true for me and I'm sure a lot of the HN community. Once you get past a
certain point with money it becomes an after thought, then you have the
freedom to think of other things (like big ideas) that will make you more
money. The rich get richer for a reason...

~~~
13ren
_Paradoxically, the road to riches often means acting as if you already have
that freedom._

I think the only true freedom comes from within. Money can't give you this
freedom; but this freedom can give you money.

~~~
unalone
What's the Warren Buffet quote? The one where he said that he's not happy
because he's made so much money, but he's made so much money because he's
happy?

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paraschopra
Anybody here read The Black Swan or Fooled by Randomness by Nasim Taleb? He so
eloquently describes all the fallacies which this article is full of.

~~~
tyn
Can you spot some?

~~~
paraschopra
Yep sure.

For example, "3,000 pentamillionaires to discuss their path to success.
Perhaps not surprisingly, none of them had a cushy union job down at the DMV.
The vast majority — 80% — either started their own business or worked for a
small company that saw explosive growth. And almost all of them made their
fortune in a big lump sum after many years of effort."

I'm sure Nasim would have laughed at this. Firstly, selecting a group of
successful people and asking what made them successful makes u fall into a
trap of believing that these factors led them to success and hence whoever
adopts these factors will be as successful as them. Secondly, for each
millionaire there would be many other normal people who did what the
millionaire did but didn't see their bank account swelling. For a study to be
insightful, the participants should have as many losers (if not more) as
winners.

Moreover, article confuses correlation with causality.

The article is like: Google, Yahoo, Amazon, etc. have one thing in common:
Silicon Valley hence being in Silicon Valley will get you to that status. Tell
me how many startups actually become Google-like?

~~~
asdflkj
Your response does not address the passage you quoted. First of all, the
author didn't ask them what made them successful. The quote has facts about
their lives, not their thoughts on what made them successful. Second of all,
the author doesn't claim that these traits are a sufficient condition for
becoming rich; only that they'll help.

And what the article says is closer to: "Google and Yahoo and most other
successful internet companies have being in Silicon Valley in common, hence if
you want to be a successful internet company, being in SV will help." Which is
absolutely true.

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baxter001
I started to doubt the wisdom of the article when I read:

"To enter the nation's top 1%, you need more than $5 million."

I know 'more than' isn't the same as 'greater than or equal to' but doesn't
this indicate 1 in 100 Americans are multimillionaires?

~~~
gojomo
The article is pretty sloppy with numbers and definitions. There's no
indication their survey of 3000 is representative of all pentamillionaires,
for example.

But, there were about 106 million 'households' in the US in the 2000 census.
Perhaps there are 110-115 million households today. If 930,000 of those
households have a net worth over $5 million, that's very roughly in the 1%
range.

Wikipedia's article on {Millionaire} suggests about 9 million households have
a million-dollar net worth, so 930,000 at the 5-million level seems plausible.

So it's not that 1-in-100 Americans are pentamillionaires as individuals, but
almost 1-in-100 live in a pentamillionaire household.

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sdurkin
(930,000 / 300,000,000) != 1%

This guy has his own special brand of math.

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smanek
This was somewhat surprising to me: "The vast majority — 80% — either started
their own business or worked for a small company that saw explosive growth.
And almost all of them made their fortune in a big lump sum after many years
of effort."

I guess it just reaffirms the pg/yc philosophy.

~~~
noonespecial
It also decimates the "rich get richer", "us vs them" lines of BS politicians
maniacally shovel our way in order to extract our votes.

Good news folks. Its possible to get rich through hard work and a little
cleverness. That's also the bad news.

~~~
Retric
5M is a good retirement but it's not _rich_. When your assets are passively
generating 5M a year then your _rich_.

~~~
Retric
With a good investment stratagy you can live off of ~4% of your capital per
year and keep up with inflation. 4% of 5M is 200k/year. But if your retiring
early you should aim for a 50% cushion which works out to 133k/year which far
from amazing when you need to pay for your own heathcare etc.

PS: Rich means "Possessing great material wealth" which I think it stands for
more than just the ability to support an upper middle class lifestyle without
working.

~~~
stcredzero
By the standards of most of the world, "comfortably middle class" in the US is
rich.

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mick_m
> ... Takes an Open Mind

... or massive inflation.

