
The most expensive lottery ticket in the world - barretts
http://blogs.reuters.com/felix-salmon/2014/04/21/the-most-expensive-lottery-ticket-in-the-world/
======
fishtoaster
"engineers are invariably happier when they’re working for a big company"

I stopped reading right there* . I've worked for a few big companies, a small
lifestyle company, and a few startups, and I'm invariably happiest at a small
company.

Financially, the book may be right: I'm not going to get rich as a startup
employee, and I'll probably fail if I start my own. However, the thing I do
for more than half my waking hours for the duration of my working life is
something I enjoy. I get up reasonably interested in going to work, and go
home feeling like I'm building something.

You can phrase it cynically if you want. You can say I'm deluded; that I'm
building someone else's dream; that I could be making more money doing
something else.

But I enjoy what I do, and I make enough money to support myself, so don't
tell me I'd invariably be happier at a big company. I've been down that road,
and it's the only time since middle school I ever considered not being a
programmer.

* Ok, so I actually continued reading, but you get the point.

~~~
bicknergseng
The whole article was filled with absurd assumptions and claims:

"...engineers tend to do quite well in structured environments, where there
are clear problems to solve, and relatively badly in the chaos of a startup,
where the most important skills are non-engineering ones, like being able to
attract talent and investors."

What does that have to do with engineers? _People_ tend to do well in
structured environments with clear problems to solve, regardless of their
background or profession. It's a small subset of people who can survive in
unstructured envs, and an even smaller one that is willing to submit
themselves to that masochism. If anything I would surmise that engineers have
a higher percentage of that subset, but I don't have any more data than the
article's writer to prove that.

"A few big-name angels and VCs can do OK for themselves, but in aggregate the
industry of investing in startups does not make money."

No data presented to back that up, either.

I know it's an editorial, but if the writer wants to make such broad sweeping
generalizations, he should have at least a little evidence or data to back
those claims up or it's just wasted text.

~~~
bradleyjg
> No data presented to back that up, either.

It's a book review, not wikipedia. If you want to see the argument made in
full, buy the book.

~~~
ghayes
I mean, yes and no. A book review might better state "Lewis-Kraus argues that
'Silicon Valley trade is also pretty close to being zero-sum'," instead of
saying:

> The Silicon Valley trade is also pretty close to being zero-sum.

On it's face, that statement is inaccurate. The rest of the paragraph looks to
argue that returns are estimated value zero, not that the system itself is
"zero-sum." So now I don't know if it's the review that's bad or the book.

------
diego
What the author does not seem to understand is that some people actually enjoy
doing hard things. 35,755 people signed up for the Boston Marathon yesterday,
and paid for it. Why pay to run 26 miles when you could be having a lazy
Sunday breakfast instead?

I practice a form of rock climbing called bouldering. It's about walking up to
a big boulder and climbing it along the hardest possible line you can. Hikers
sometimes point out that "you could have just walked up on the other side."

Yes, doing a startup is hard. It can also be fun (probably type II or type III
fun if you ask me). A climber named Kevin Jorgeson explained it quite well
during a talk he gave at Google:

[https://www.youtube.com/watch?v=Vsl4evw0a7Q](https://www.youtube.com/watch?v=Vsl4evw0a7Q)

~~~
scrabble
Why pay to run 26 miles when you can run 26 miles for free? I think it's
generally for the prestige of being able to say, "I ran the Boston Marathon."

~~~
baddox
I would guess that's it's not primarily about prestige, except perhaps for the
top level competitors. A well-known marathon gives a concrete deadline for
people to train toward. The fact that thousands of people are running at the
same time gives a feeling of solidarity.

~~~
Someone
Those other runners also show most of the competitors that there are others
who aren't (much) faster or (much) more athletic that can complete a marathon,
and the spectators may also provide inspiration, if only because one may feel
a loser when giving up in front of a crowd, if not entirely exhausted.

------
pyrrhotech
I wish some of these articles would acknowledge that you have to be a top
10-20% engineer to work for Google. A lot of us are doing ok, but don't have
the talent or work-ethic or what have you to do quite that well. Regardless,
great article. I personally wouldn't consider starting a company until after I
was financially independent and could bootstrap it with extra money that I
wouldn't care to lose. And I'd never spend more than a normal workweek at it.

For those who say that doesn't work, my Grandad started his first company at
age 58 with an excess million dollars out of 5 million he had saved from
working a normal job until that point. He's never worked more than 40 hours
per week in his life, and 25 years later, his company is a great success,
turning 1 million into 60MM and having a lot of fun doing it.

~~~
sbov
Note that for $5 million, at 58, assuming he started working at 18, is an
average of $125,000 in savings per year between 1949 and 1989. I'm not sure I
would call that a normal job. It's far above the median even now, much less
back in the 50's, 60's, 70's and 80's.

~~~
gibybo
While you are correct that it would require pretty above median savings, it
wouldn't require anywhere near $125,000 back then. Interest is a very powerful
force over 40 years.

From 1949 to 1989, the stock market averaged 7.2% annually. Saving and
investing only $20,000 per year for those years would net you about $5m at the
end.

~~~
ArkyBeagle
$20k was very good money from 1949 into the 1970s.

The BLS CPI calculator puts $20k in 1949 at $198,565.55 today.

------
srlake
As a startup-founder (Thalmic, YC w13), I wholeheartedly disagree with the
viewpoint of the author here.

Is the pressure high, and the chance of success low? Certainly.

Was the expected value of taking a Google salary rather than the risk-weighted
value of starting a company higher? Again, yes.

But the missing piece here is that sometimes it's not about the money, the
perks, the hours. I love doing what I'm doing today, regardless of all of the
above. My two co-founders here would say the same. We get to choose exactly
who we want to work with, what we want to work on, and get a real shot at
having an impact on people's lives all over the world, through the products we
create.

If we didn't have entrepreneurs taking this irrational leap, we wouldn't have
the Google's of the world to employ those who choose the other path.

------
gpcz
I'd recommend that anyone interested in startups download a capitalization
table (Google "cap table download" without the quotes for a variety of
choices), and just play with different scenarios. Plug in rounds from
companies on Crunchbase (not just super-successful ones) and see what kind of
money the founders are slated to get. See what happens if you don't meet
expectations and go through a down round. It's better to see these
possibilities before you're financially and emotionally invested in a company
going through one of them.

If you still believe your startup idea is a slam-dunk after seeing how
horrible things can get if there's any hiccup in the process, then you're
ready to take an investor's time to give a proposal.

------
NhanH
It seems quite obvious that if you're aiming to optimize your happiness,
putting yourself into a stressful situation is never a good idea, even when
you disregard the financial aspect.

As one of those young kids who've seen a lot of articles (and even HN's
comments) in similar vein of this one, I'd love to see a rebuttal for those
types of articles.

I know that everyone is supposed to have their own reasons, but not all of us
is eloquent enough to put it into words. And some great writing to set our
mind straight (in one way or another) would be great :-)

~~~
ryanjshaw
I don't know any great writing on this topic, but:

> It seems quite obvious that if you're aiming to optimize your happiness,
> putting yourself into a stressful situation is never a good idea, even when
> you disregard the financial aspect.

I disagree. For many people, to find your global optimum you have to first
traverse several local minima.

In this thread there are going to be stories about people who worked a Normal
Job (TM) for years and started a successful business with the savings, stories
about people who bootstrapped a startup before puberty and kept it small,
stories about people countering the other people with _their_ amazing story,
and stories following all kinds of patterns. And unless you're extremely
fortunate, all of these stories have one thing in common: they are most likely
nothing like your life and ultimately you won't be able to completely
integrate them into _your_ life story. Otherwise you'd be the one writing the
story and not asking the questions ;)

While you can, and should, learn from others, at the end of the day you really
do have to find your own reason to do the more difficult thing each day. If
you're waiting for some magic words that are going to unlock your full
potential and turn you into Time's next Person of the Year, you'll wait
forever. I find it better, as I plan my day, to just think of laying on my
deathbed someday, and asking myself if I'll respect the decisions I make
today. (And no, the answer is not always "yes". That's life.)

~~~
NhanH
Just to clarify my stance first: I don't think of "optimizing happiness"
should be a life goal. I think happiness should be a byproduct that you got
when achieving your life goal.

And I agree with everything you said. For the sentence that you quote, my
point was, for certain people who try to always feel content (in other words,
aiming for local maxima) in their life, without explicitly having any other
life goal of unlocking their potential or making X million dollars or starting
a big company, putting themselves through a local minima for a long stretch of
time would be hard to pay off. That was just meant to be an observation of an
extreme case (optimizing happiness/your feeling of happiness at expense of
everything else, as opposed to striving for a goal at expense of your own
feeling). Since most of us would be somewhere in between rather than either
extremes, we would have to go through local minima at varying degrees.

I'm not waiting for some magic words to start my marathon - but I just thought
that there would be some magic words that will help me justify the run to
others, and to myself (also serve as enhancement to make you run faster!).

------
barce
I still think a lottery ticket is still has far worse ROI, than the
YCombinator application and startup process.

Let's say you pony up rent for your YCombinator startup and are paying about
$2400 / month + utilities for 3 months. Let's say you get your food & other
necessities costs to $80 / week.

That's an $8160 investment.

What you get back are the weekly dinners with great speakers. The connections
you make should be worth at least $150k if your startup fails and you have to
use that connection to get a job. I'm assuming a markup in your value as an
employee for just getting into YCombinator.

$8160 and you can make 20% - 35% more than your peers if it fails.

$8160 in lottery tickets will pretty much get you zero if you fail.

~~~
bcbrown
You're forgetting the opportunity cost of forgoing the salary of working for
an existing company. Call that 10k/month for three months, and now your costs
are closer to 40k.

~~~
barce
You still end up ahead since you can day trade yourself into a higher income
bracket.

------
_Adam
"No Exit makes it very clear that the life of a startup founder is a miserable
one, and that engineers are invariably happier when they’re working for a big
company."

Any book that tries to tell me how I'm supposed to be happy is automatically
placed in the same category as religious texts.

~~~
webwright
Really? Do you think people are good at selecting a path that makes them
happy? I don't. Related:
[https://twitter.com/webwright/status/451934942357098496](https://twitter.com/webwright/status/451934942357098496)

I'm not supporting this particular book, but there is plenty of great research
about what correlates to happiness. Here's a great post to read that links to
tons of research on the topic:
[http://lesswrong.com/lw/4su/how_to_be_happy/](http://lesswrong.com/lw/4su/how_to_be_happy/)

~~~
_Adam
That depends how you define happiness. For some people, simply pursuing their
dream makes them the happiest. It may be painful, miserable, and ultimately
end in failure, but for a certain set of people that's the only way they can
live.

------
tunesmith
That argument is a step away from arguing that incubator companies are taking
advantage of the younger tech generation. Along the lines of... by selling the
illusion of likely startup success, and offering support in startups and
entrepreneurship, incubators basically decrease their own investment variance
and increase their own odds of successful investment performance, while the
younger founders will usually (outside of the rare big winners) lose out on a
few years of earning potential in a temporarily hot economy.

------
cousin_it
Is this true?

 _The Silicon Valley trade is also pretty close to being zero-sum. Even on a
purely financial basis, if you add up all the profits from successful
investments, they barely cover the losses on all the unsuccessful ones. A few
big-name angels and VCs can do OK for themselves, but in aggregate the
industry of investing in startups does not make money._

If it's true, that will strongly influence my opinion of the startup scene.

~~~
mhartl
According to Fred Wilson of Union Square Ventures, ten-year venture capital
returns lag major stock indices:

[http://avc.com/2013/02/venture-capital-
returns/](http://avc.com/2013/02/venture-capital-returns/)

That's pretty bad, and it's even worse when you consider that VC is a lot
riskier than buying an index fund.

~~~
cousin_it
That's very informative, thanks!

------
edj
I'm always deeply suspicious of "statistics" that claim startups only have a 1
in 10 chance of success. From the article: _" if 90% of startups fail, it
simply can’t be the case that all of the startups they know are succeeding."_

But it looks like that may not be so far from the truth: _" About three-
quarters of venture-backed firms in the U.S. don't return investors' capital,
according to recent research by Shikhar Ghosh, a senior lecturer at Harvard
Business School._"[1]

1: [http://blogs.reuters.com/felix-salmon/2014/04/21/the-most-
ex...](http://blogs.reuters.com/felix-salmon/2014/04/21/the-most-expensive-
lottery-ticket-in-the-world/)

~~~
riggins
The thing these aggregate statistic ignore are the quality of the founders.

Let me put it concretely.

When Sebastian Thrun decided to launch Udacity I suspect the chance of failure
was less then 90%. OTOH, I have 2 non-technical friends who managed to raise
money to develop 2 more social networking app. I think the chance of failure
there is easily 90%.

So maybe another way to put it is 'don't fool yourself'.

If you have Thrun-esque talent, start a company. If you don't, think twice,
then think a third time for good measure before starting a company.

------
JonoBB
There is a massive gulf between "winning the lottery ticket" and failing.

There are many many many startups (or whatever term you want to give them)
that create a good living for the founder, and perhaps a few employees as
well. Not all startups have to (read: the vat majority don't) get VP funding
et-al in order to be enjoyable and provide an viable level of income.

------
soup10
Start a business, not a startup. You will have much more control and
independence if you aren't desperate for funding and growth, not to mention
you are much more likely to succeed. Startups(defined as extremely risky, high
reward, growth oriented businesses) are not a very rational option for most
people unless you have circumstances that mitigate the risk/stress. Also don't
start _yet another social /cloud/education/trendy thing here_ business, start
something allows you to leverage your unique set of skills/knowledge/interests
and experience.

Also, give up early! When you don't think something isn't worth pursuing
anymore, figure out why, and don't be afraid to give up and try something
else. Not every project is going to be successful and there is no shame in
failing unless you have badly/unrealistically set expectations to the people
you work with, in which case they are going to be rightly pissed.

------
gms
Good thing people don't take the advice in the last sentence, otherwise there
would be no Google for said well-paid engineers.

------
beat
One problem with the article is that is blurs the line between "founder" and
"startup employee". The majority of startup employees are getting a paycheck
on top of options - paycheck at lower rates than mainstream corporate work,
but with a potential payoff if it succeeds. And if it fails, it's not hard for
an experienced programmer to find another job.

Founders are a breed apart from programmers. If someone has that drive to
create their own business from scratch, telling them that it's economically
foolish to do so is like telling Van Gogh that he'd be better off painting
houses - technically true, but irrelevant to the motives of the artist.

~~~
codystebbins
Very true. Most of the people I know working at startups, myself included, had
no delusions of becoming Mark Zuckerberg or winning it big. Startups can
provide a great quality of life with good benefits for employees and the big
pay off can be a very small motivation for some.

~~~
beat
Given the Kafkaesque horror that is most mainstream big-business
programming/ops work, startups represent a significant quality-of-life
improvement for programmers - an improvement worth trading some salary for.
Maximizing salary while minimizing risk isn't and shouldn't be the only
motivation for us. I could go on about how stupid mainstream economics and
journalism are about this, but why bother?

------
tomblomfield
> The Silicon Valley trade is also pretty close to being zero-sum... if you
> add up all the profits from successful investments, they barely cover the
> losses on all the unsuccessful ones

That's a very strange definition of "zero sum". The fact that VC investment is
barely profitable does not mean the industry is zero-sum. There is the
potential for huge value creation - the very opposite of zero-sum

[http://en.wikipedia.org/wiki/Zero_sum](http://en.wikipedia.org/wiki/Zero_sum)

------
iddav
Well, I'm an engineer who quit my cushy job at Google to go it alone. So, I
suppose this makes me an idiot.

I think the big question the author fails to address is: Do these deluded
engineers end up regretting their decisions in the long-term?

I think most people in the startup community understand that failure-- and the
misery that comes with it-- comes with the territory, and the key is whether
you can learn with each failure. And I would argue that there's no better to
place to learn than an environment where your income depends directly on
whether you're genuinely solving a problem for people (the people who "run the
lottery" are your target customers, not the VCs, by the way). In my case, I've
failed at over a dozen projects (some prior to my time at Google) while
finding a few moderately successful ones along the way, and I'm continuing to
fail, learn, and grow.

And I like to think that this better understanding of harsh realities of how
the world actually works gained from doing a startup-- whether you succeed or
fail, whether you end up at a small company or a large company-- is a return
on your investment that continues to serve you for the rest of your career.

~~~
smattiso
I work at Google now. What made you decide to leave?

~~~
iddav
It's been my plan since high school to figure out a way to work for myself
eventually, though I was very grateful for my job at Google. After the initial
2 years, my work at Google began feeling more routine (I chose to stay in the
same team, and I was getting better at my job at the cost of learning fewer
new things). I left after 4 years after deciding that I had learned enough and
saved enough to move on to what I've viewed as the next stage.

------
zmitri
As someone who started a company articles like this make no sense to me.

There's money-driven people everywhere, but if you want to get rich, your best
bet isn't to start a company. Work at a hedge fund and work your way up.
People makes millions a year. Way easier than starting something. That being
said it's also soul sucking and absolutely mindless. Provides little value.

Perhaps there's more to starting company than ecosystem?

Starting company allows you to address a problem directly. Whether that
addresses a real problem, or is a cash grab, depends on founders.

Most "good founders" do it because they want to make it real. That articles
propagates some kind of wannabe culture as being the real value of starting a
company. Which is so lame.

Life is short and starting your own company is way better than being an
employee at a big company in my opinion. If you are young you are undervalued.

Obviously it's more nuanced then this comment and not everyone is in a
position to start a company or work at a small company, and hell no is it a
meritocracy, lots of problems, but damn, do your own thing.

------
rwmj
I'll tell you from experience there is a fate _worse_ than your startup
failing. That is that your startup bumps along neither making it big nor
having the good grace to go out of business. You just have the monthly stress
of making payroll with no end in sight. (Thankfully I'm out of that and
working for The Man, and never happier)

------
funkyy
Some people prefer to aim at the moon rather than look at the ground. The
issue with this article is that even if 5% startups will succeed - thats OK.
Lets create 20 startups over next 20-30 years then. Because once you succeed -
you are way ahead of anything that could happen in your life when just simply
working for big company. Yeah, its hard work. Yeah, you will fail few times.
So what? At least you learn invaluable things. Author seems to be missing the
point... Not everyone is afraid of failure and not everyone wants good pay
every month. Some people wants to fulfill their ego, needs, dreams and the
price tag over this is well above living on the edge of poverty. If author is
happy to live in safety of his job and security - great. But dont judge, or
try to teach people that dont want to. Its very close minded by him to do so.

~~~
zmitri
Great response. Unfortunately as I get older, I see more and more people
falling into the way of thinking he's outlined which is brutal.

------
Futurebot
The book and article might be 100% right, but it still doesn't always matter.
There are other reasons people start their own companies:

1) If you're after personal autonomy, no amount of working at a great company
can give you that.

2) Not everyone has the skills to work at the Googles of the world. A mediocre
engineer can still make a great business owner, though.

3) Not everyone has the right demeanor to work for other people.

4) Some people have worked for other companies, and decided it simply wasn't
for them. Maybe they realized they were not paid anywhere close to enough for
the value they created, or they simply couldn't take the politics.

5) The chance to make your bones (largely) on your own is a powerful thing.

It is often irrational from a short-to-medium-term financial perspective, and
the Lottery Effect is sometimes at play, no question. The reasons above won't
just go away, though.

------
conradev
Having only read the article and not the entire book, I am curious to see if
the author explores the motivations behind starting a company. The article
makes it sound like money and fame are assumed to be the only motivations.

I feel that entrepreneurship is fundamentally about controlling one's own
future.

~~~
smacktoward
I'd sympathize with this point more for startups that aren't on the "take
money from VCs, sell company to BigCo" model, which puts your future pretty
squarely in the hands of the VCs and BigCo execs.

------
ZenPro
To be fair, the article is _not wrong_ in a lot of what it says. In actual
fact, a close reading of VC/Angel writing including Paul Graham pretty much
correlate exactly with the author has posited especially regarding VC
investment.

In the UK, angels can claim 50% tax relief on any investment followed by
claiming back up to 100% of any losses (minus the tax relief). Investing is
almost risk free.

Just find yourself some entrepreneurs, sell them the dream, supply ramen
noodles and repeat x 10 until one of them hits.

------
chrisbennet
Let me see, going to college and coming out with an insane amount of debt - to
work as a writer. That sounds like pretty big gamble. Very, very few writers
"make it big".

------
barretts
Felix conveniently assumes a startup has a binary outcome: Immense riches or
ignominious failure. In reality, there's a spectrum. I know a lot of people
who sold their company for $1 million to $10 million. Depending on how the cap
tables work, this is usually not life-changing money but enough to average out
to a really decent salary for 1-5 years of work, plus a job at a good company
at the end of the ride.

------
josephschmoe
Startups are a double-or-nothing game with 2-3 months between wins and 0
months between losses. Everybody either just won or just restarted.

------
clamprecht
I think one factor at play is that even if your startup fails, you can almost
always fall back on a developer job, which usually pays very well. So yeah
it's like playing a lottery, but not spending your last dollar on the ticket.

Even more, having startup experience on your resume is usually a good thing,
even if the startup failed.

~~~
ZenPro
Is it? Possibly for a small sub-set of developers or those in SV/SF but for
the majority of people having a startup on their CV is suspicious at worst and
_meh_ at best.

I would much rather have McKinsey or Deloitte on my CV.

~~~
UK-AL
The vast vast majority of developers work in small businesses or start ups.

Hiring managers who do that pretty much exclude the majority of developers.

~~~
ZenPro
No one else works in startups obviously. Just devs.

By small business I assume you mean _self employed within Ltd Companies (LLC)_
which are small businesses in name only for tax efficiency. So much so the
Government is trying to ban the practice with the use of disguised employee
declarations.

~~~
UK-AL
No I mean digital/marketing agencies. Web Development agencies, Mobile App
Agencies, etc.

In my area, these are the biggest employers.

------
cpks
The most important thing in life is for life to have meaning. Trying to change
the world -- even if you don't succeed -- does that. Trying to make adsense
profits go up by 0.1% -- perhaps a bit less so.

------
marshray
A 10% chance of succeeding at a startup is far better than that of the average
Journalism school graduate's chance of making a career writing Opinion columns
for a major press outlet like Reuters.

------
lexcorvus
The article exaggerates slightly, but based on my experience it's basically
right. Alas.

------
lutusp
Punch line: "In the world of startups, the only winning move is not to play."

The reviewer says the book gives the required substance behind the punch line,
of that I have no doubt, but this reminds me of the "War Games" (1983) punch
line, almost word for word.

~~~
akavi
Perhaps because it's intended to reference War Games?

~~~
lutusp
Yes, possibly, but (a) most young readers won't remember the original, and (2)
no obvious thematic connection. But possibly -- besides, it's a great punch
line. I regard this as a good example of recycling (if that's what it is). :)

~~~
telvda
Get your head out of your ass. Kids know what wargames is as it has runs on
amc/fx/tv all the time. It's a common phrase now.

~~~
001sky
_Get your head out of your ass._

Wow. That language is a bit uncalled for.

------
001sky
The interesting part of the analysis is the way this is mitigated; social
status displays are often re-source irrational. The issue is whether or not
the latter can be capitalized upon. All evidence points to "yes".

------
pjkundert
Not everyone is cut out for high risk R&D. News at 11:00.

...

Ok, sorry if that was subtle. If only a minority of the population values
risky behavior such as software/hardware R&D highly, and someone in the vast
majority who cannot understand how anyone with the requisite skill-set
wouldn't be happier earning a high, stable salary at Google writes an article
implying that the group in question must be delusional or maybe insane, don't
you think a bit of sarcasm is in order?

\-- someone who turned down a Google offer to do R&D

