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No, You can't retire rich at 30 if you sell your startup (tonywright.com)
244 points by charliepark on Aug 23, 2010 | hide | past | favorite | 214 comments

Can we conclude that this is the wistful daydream equivalent of the "Maserati Problem"[1]? I can definitely say that if 30 years we're looking at half a million dollars as a "cost of living adjustment", that world will for the people who don't make that kind of money be Thunderdome. I mean wages have barely kept up with inflation. In the last 40 years (between 1967 and 2007), median wages have only gone up US$10000 (from 40k to 50k). How the hell are all of our parents going to fare when you need 500,000 to maintain an upper-middle class lifestyle?

I see the numbers adding up (and it is a nicey-nice spreadsheet), it just doesn't make any kind of a sense. I guess that's why I'm only middle-class. I don't see this heinous future coming for all of us.

[1] http://news.ycombinator.com/item?id=1444003

How the hell are all of our parents going to fare when you need 500,000 to maintain an upper-middle class lifestyle?

If the past 40 years are a guide to the future, then the lifestyle we currently define as "upper-middle class" will be redefined as "poverty" and will be available to virtually everyone, including people who can't even be bothered to find a job.

People will continue to complain about the declining middle class, how the median family can barely afford to live in a 4000 sq ft house with a robotic kitchen/laundry/bathroom and about how unaffordable their stem cell therapy and cloned organs are [1]. They'll watch TV news reports lamenting the bad economy on their 108,000p 10' 3d full immersion TV's, while the uber rich (income inequality will go up as well) do much the same thing, but in a 100,000sq ft house and a 50' TV. Also, the quality of stem cell therapy and robotic surgery available to the rich will be slightly greater.

[1] They will of course lump all medical goods and services together under the catch-all term "health care".

[edit: clarified that I'm thinking about 40 years here.]

I think you're making a mistake trying to apply something like Moore's law to a middle class lifestyle. Niche technological advancements don't necessarily translate to higher standards of living. If you're thinking the middle class life will simply scale the way hard drives and TV resolutions do you're in for a big surprise.

I understand that many of the things we think we "need" or want become very relative over time. But if we include basics like needing food, shelter and then add in middle class health care, mobility, security, leisure and luxury, you are talking about an expensive ticket. Yes we have made impressive advancements and maybe someday we'll have things like 100% robotic aggregation/farming and no longer need to think a lot about how we'll get our food. But I don't think the middle class life will simply becoming the default option anytime soon.

What about overpopulation? Increase demand from developing nations for this "middle class"? What about our numerous energy issues? I'm also not sure what your frame of reference is for the past. I must be stuck in the rebound towards an up trend because I know for a fact that a houses were much more affordable for my parents who lived on one carpenters paycheck, even while I make a higher salary after inflation and have the assistance of my spouses income.

I'm not attempting to apply Moore's law, merely the past 40 years of growth to the next 40 (just as the original poster tried to do).

In any case, the point I'm making is that "middle class life" needs a time period to be attached. "Middle class health care 1970" would be pretty cheap today - any medicine available back then is out of patent, and dying of untreatable cancer is pretty cheap. "Shelter 2010" is 60% bigger than "shelter 1970". "Luxury" in 1970 would be a 32" color TV, as opposed to a plasma screen with playstation today. Basically, "Middle class 1970" == "poverty 2010".

It might be the case that middle class 2010 is as good as it gets - I'm not trying to make predictions. I'm just pointing out that if, as the OP suggested, the next 40 years are as bad as the last 40 years, then we will be doing pretty good.

""Middle class health care 1970" would be pretty cheap today - any medicine available back then is out of patent, and dying of untreatable cancer is pretty cheap."

I question whether availability of drugs is the best indicator of overall health.

We are also a lot more sedentary, the quality of our food is probably not as a good, and we are a lot heavier. Given that, how many drugs do we need to just break even, health wise, with where we were in 1970?

"as opposed to a plasma screen with playstation today"

It would be an interesting psychology study to figure out if a kid with an Atari in the 1970s was objectively less happy and fulfilled than a kid with a plasma screen and playstation today. I suspect it is the relative excitement of being one of the first to get a game before your friends is a bigger factor. I guess it's a little late to start that study at this point, however.

My overall point is that I think comparing quality of life across eras is more complex than just comparing square footage, drug prices, and pixel counts. Unless I misunderstand your point.

I'm not using drug availability as an indicator of health, I'm using it as an indicator of health care. My point is that comparing the cost of health care in the past to health care today is not a fair comparison, since health care today includes vastly more services and products.

As for health, if people enjoy chips more than not being fat, I'm not going to tell them their choices are wrong (at least until 2014, when their choices are inflicted on me). Broccoli is available, they are free to eat it.

As for relative status, only one kid can be the first with a new toy in any era. In principle one could compare opinions and attitudes, but my guess is that they will be roughly constant over long periods. You can find find "kids these days, get off my lawn" and "my parents had it better" articles in newspapers of any era, for example. All I'm really assuming is that having a playstation or viagra is better than not having it.

"Broccoli is available"

In some inner city areas, even this is debatable.

If the past is a guide to the future, then the lifestyle we currently define as "upper-middle class" will be redefined as "poverty" and will be available to virtually everyone, including people who can't even be bothered to find a job.

For many reasons I doubt that the last few hundred years are going to tell us much about the next hundred. So many critical trends are following exponential curves that can't continue on indefinitely.

Exponential curves indeed can't continue indefinitely.

At the same, most of the reasoning about the future by even intelligent people still tends to involve linear extrapolation rather than exponential extrapolation - that's what makes sense to us. Thus it's more likely for a standard prediction is go wrong in the direction of the exponential trends continuing rather than in the direction of the trends stopping.

Moreover, one or another exponential trends might stop but the overall mine that Moore's Law comes out of, miniaturization, is not going to be exhausted at least until human construction reaches the nano scale.

That's exactly why I think trying to predict what the world is going to be like in 40 years is just about impossible. The only thing you can say with much confidence is that it's likely to be very different from the way it is today.

"That's exactly why I think trying to predict what the world is going to be like in 40 years is just about impossible."

Douglas Englebart had a pretty good approximation of what much of our information technology would be like today over 40 years ago.


Of course, this was because he put together all of the necessary underlying technology. I remember reading an interview with him in the 90s, asking him if he was surprised how fast technology was moving. He replied, no, he was shocked how long it took for the things he had working in the lab decades ago to reach the main stream.

It will also stay very similar. The outline of life in the 1970s vs 2010 is still fairly similar. Drive around in cars, live in a house, take the subway, read the newspaper, watch tv, go to the movie theatre, buy food at a grocery store, call people on a landline, plug stuff into the wall, use your fridge and hair drier, drive around in your RV, fly an airplane at supersonic speeds, rent an apartment, have a family reunion, go to the doctor, get surgery, take drugs, read a book, go to the public library, go to school, flush a toliet, use an AC, open the windows. The dragon ball Z live action movie, although pretty horrible has a pretty accurate deception how high school will look like in 20 to 40 years. Pretty much the same with more flat screens and computers.

It will also stay very similar. The outline of life in the 1970s vs 2010 is still fairly similar.

That's the entire point of this (sub)thread. Making predictions of the next 40 years based on the last 40 is likely to lead you astray. A whole bunch of things are coming to a head. Coming revolutions in biotech alone are likely to seriously shake things up, IMO.

"fly an airplane at supersonic speeds"

We consumers actually don't do that anymore: http://en.wikipedia.org/wiki/Concorde

I was only looking at the past 40 years, much like the original poster. My edit clarifies this point.

Even in that window of time if the underlying pattern is this: http://en.wikipedia.org/wiki/File:Bacterial_growth_en.svg

40 years doesn't tell you much about the next 10.

Growth rates in recent times have depended largely on finite resources, many of which are now becoming scarce. It may be that we innovate around all of this, but it's far from certain.

But the bacteria growth in Petri dishes is limited by resource, and bacteria has no way to change the situation.

Maybe we are really limited by available resources. We know for sure that we have limited supply of the solar energy. At the other hand, we are just using what is available on the surface of the Earth. Maybe we are going to figure out how to utilize more resources outside the surface of the Earth, or efficient way to use and recycle resources.


Biking through Oakland the other night, I saw a guy pushing a shopping cart with one hand and talking on his cellphone with the other.

A good deal of your lifestyles of the no-longer-needed description might true except ... the 4000 sq ft house.

For the now-permanently-unemployed, it would be a 40 sq ft "home" or perhaps a car or suped-up shopping cart. But still with lots of gadgets.

Space (at the least) isn't going to be made cheaper by mass production even if everything else will.

Any city that's learned to grow vertically would disagree with you. If you thought real-estate was expensive in New York now....

NYC is expensive because its more expensive to build skyscrapers than houses. Its not cheaper because of mass production, there's just enough incentive to spend more money than it takes to build houses because of the local population density.

That's not even imaginative enough. We'll be living in space and the rich will own whole solar systems with strong AI civilizations dedicated to working for them and worshipping them. The poor will barely be able to afford immortality and a space ship for going to work. Your great-granddaughter will complain, "Dad, why can't our Spaceballs One even move a diddly little gas giant while those people have whole solar systems to play with?" "Oww... blame our great-grandfather, he spent all his startup money on a measly 4000 sq ft house 200 years ago. Douchebag thinks he'd only live for 90 years."

this is a libertarian fantasy and nothing more. Wages for most people have been stagnant or declining while energy prices are steadily rising. This is a huge problem

> Wages for most people have been stagnant or declining

Wage growth has been slower than you'd expect because healthcare is getting much more expensive, so the increase is hidden in a worker's benefits, rather than being revealed in higher wages. Overall compensation is increasing: http://www.marginalrevolution.com/marginalrevolution/2007/10...

Unfortunately, most workers don't realize that their healthcare costs have a zero-sum relationship to their wages. This graph shows that point very well: http://voices.washingtonpost.com/ezra-klein/2009/10/will_low...)

yes and no. If we look at the economic growth of the past decade a disproportionate amount has gone to the super rich. If it were only healthcare to blame, or even primarily healthcare, then the delta for different income brackets would match historical trends. It hasn't, and healthcare is getting more expensive, and energy is getting more expensive.

It's a trifecta that is going to hurt.

Please tell me which point I'm wrong on. Do most people not live in larger houses, enjoy greater automation of housework, enjoy larger and better entertainment technologies, and benefit from medical procedures which did not exist in 1967?

I'm disputing the prediction that the future, if we remain on our current course, will be more of the same. Here's what you said, "If the past 40 years are a guide to the future". I'm disputing the idea that income inequality doesn't mean anything because the "poor" will have a higher standard of living that the middle class does today. Again, incomes are on the decline for most americans, and energy prices are rising. There is no way that we will get more of the same if that remains true.

Also, most people I know live in smaller houses than their parents, but that's purely anecdotal and based on the obvious fact that there are more people living on the same amount of earth. I happen to live in a major city.

A quick google search finds many links suggesting house sizes have gone way up. This one says 1500ft^2 in 1973, 2500ft^2 in 2006.


In spite of the purported declining income and increasing energy prices, people in 2007 have more and better material goods and services than in 1967, far more than the mere $10k increase in real incomes would predict. You could be right, the next 40 years may be different from the last 40 - I'll leave predicting the future to you and Ray Kurzweil.

There was a ridiculous downgrade in credit quality to facilitate that build out of McMansions over the last 10 years . A better analysis of how much real income and how much purchasing power per sq foot of home would have to take in credit quality/debt into account over time to be anywhere near informative. Secondly, increasing energy prices are not purported, they are real: http://www.eia.doe.gov/EMEU/steo/realprices/index.cfm

Real income analysis would require more time than I'm willing to commit right now.

That's an excellent visualization. Thanks for the link.

"I'll leave predicting the future to you and Ray Kurzweil."

Except that you did try to predict the future earlier. Energy prices haven't risen much yet. You have an odd pattern of dodging my main point, and picking at tangential details.

Btw, I put a caveat on the house thing, I live in a major city and I'm sure it's different in most parts of the country. I'll bet this changes when driving long distances to work becomes much more expensive.

I didn't try to predict the future - I explicitly qualified that everything I wrote applied only under certain circumstances: "If the past 40 years are a guide to the future..." You even quoted my qualification.

As for dodging your main point, let me address it more carefully now. You seem to believe that incomes (by which I assume you mean income adjusted for CPI) is decreasing. And yet, over a period in which CPI adjusted incomes remained flat, quality of life dramatically increased. So why do you believe that decreasing CPI-adjusted incomes are worth worrying about?

" why do you believe that decreasing CPI-adjusted incomes are worth worrying about?"

I've said it at least three times already. Because it is highly probable that energy prices are going to increase significantly.

Btw, how do you measure quality of life. I always find it funny when people throw around that term relating to economics.

You are concerned oil prices might increase by a factor of 8? Like in the 70's?


In any case, I'm not sure what this has to do with CPI-adjusted incomes.

By quality of life, I'm only estimating the direction of change rather than the magnitude. I'm assuming that having more stuff is better - I'm happier with flush toilets/a washing machine/Bioshock than without.

"most people I know live in smaller houses than their parents"

But do they live in smaller houses than their parents lived when they were your friends' age?

yes, but I live in L.A. and I'm sure it's different in most parts of the country. I make way more money than my parents or grandparents, even when adjusted for inflation, but I live in a much smaller place than they did.

I'm curious - do you live in a way smaller space than your parents did when you grew up, or when they were your age?

When I compare my current living space with the house I grew up in, it's significantly smaller. However, my parents were over 40 years old by the time I have my first memories. They'd been saving for close to 20 years to afford that place, while I've been saving for maybe 5 years.

When my mom was my age, she lived in a 4th floor walk-up with one of her friends from college. And yes, it was smaller than my current apartment. If you compare my mom's childhood with my childhood, she lived in a small apartment almost her whole life, until about 3 years before I was born, while I grew up in a house in the suburbs.

I wonder if this is behind a lot of the 20-something angst. We compare our current living standards to our living standards as children, and realize (correctly) that it's not as good. However, that childhood living standard is based on parents that were already at the peak of their careers, and had scrimped for years to get there. Of course we're not going to live as well.

I'm not a 20-something.

We're still safe to assume your parents are around 20 years older than you.

right, but the comment I was replying to was focused on the idea that I'm an angstful 20-something who is just starting a professional career. I'm not, and i have a much smaller place than my parents did at my age. 1200 sq/ft vs 3000ish sq/ft. I think my theory holds for areas that have already developed most of the available land. As population density increases we'll have smaller places than the generation before us in areas that have very little new land to develop.

I actually don't care that my place is smaller, and a bigger place wouldn't increase my quality of life much.

Touche. In order to get an accurate comparison, you'd have to compare to someone your age living in a city as large and dense as LA at the time they were your age. That probably means NYC, London, or Tokyo for your parents or grandparents since there weren't many megacities 30 or 60 years ago.

Your trying to make the population density a constant, my point is that it isn't a constant, but will likely increase going forward.

Why is any of that relevant? If we're discussing poverty rates, then we need to come up with a reasonably objective metric for poverty, not just throw together some cherry-picked indicators. Economists have put a lot of thought into a few metrics, like inflation-adjusted median wage, which you simply ignore in favor of your own 'tv-size index'.

For example, those larger houses may be on cheaper land (further from cities), or people may be spending more of their income on housing (at the cost of, say, food quality, or education). There are a million ways for an individual statistic to be misleading. This is the whole reason that we use aggregated statistics like real median wage.

There is a big difference between that and going from poverty to upper middle class. By your logic those stuck in poverty in 1967 will now have graduated to upper middle class by 2010. Even if that is how you define middle class I don't see very great strides. I rent because the housing market is a mess (http://seekingalpha.com/article/115464-new-home-prices-vs-me...), I wash dishes by hand and don't care for an iRobot vacuum with a state of the art cat fascinating feature, health care is very costly or down right unattainable, but yes I do enjoy my Xbox 360. It hasn't convinced me of your point though.

No, by my logic those living in poverty in 2010 will be living a life that the 1970's would describe as middle class.

Fun fact: the bottom 11% in 1970 didn't have flush toilets.


In 2001, the bottom 7-8% don't have dishwashers, which were generally considered a luxury item in the 1970's. Go read this article, describing the material conditions of the poor (circa 2001):


Tell me, what items did the middle class of 1970 have that the poor of 2001 lack?

"what items did the middle class of 1970 have that the poor of 2001 lack?"

They're not items, but I'd say hope, stability, confidence, status, etc.

They're not items, but I'd say hope, stability, confidence, status, etc.

Really? In the US? In the 70's? This was at the end of the Vietnam War, during the oil crisis, remember?

As a random example consumer confidence at the lowest point during the financial crisis was still higher than it was in 1973 (during the Oil Crisis): http://useconomy.about.com/b/2008/04/01/consumer-pessimism-s...

I'm guessing the middle class had more than the poor had.

Not outside of the United States, Western Europe, and some parts of Asia and South America. What makes you think the same thing (over 50% reduction in GDP and almost ten million excess deaths) that happened following the bankruptcy of the USSR can not happen once the US is unable service its debt any longer?

it seems to me that predicting the distant (20+ years) future based on the past never really works out.

That's because you're assuming the wrong frame of reference on your singularity. http://www.kmeme.com/2010/07/singularity-is-always-steep.htm...

If you were to drop back to 1970 and estimate the next 20 years by the 2010 scale, things are almost identical. If you measure 2000-2010 on the 1970 scale, things are a hard takeoff.

Can we conclude that this is the wistful daydream equivalent of the "Maserati Problem"

I'll go out on a limb and say that even normal retirement planning (50 years into the future) is a Maserati Problem.

Everybody that makes very long-term projections about money -- whether it's the gloomy "interest on $4m won't last 40 years" variety to the rosy "save $300 a month and the compound interest will make you a millionaire in 50 years" -- commits the same error: They neglect the fact that wars, revolutions, devaluations, confiscations, and other economic disasters have wiped out all savings at frequent points throughout history.

There should be some trillionaires walking around whose ancestors started saving in the Renaissance when modern banking began -- but there aren't.

So if you're talking time scales of 50 years, there is significant probability that your carefully calculated spending or savings plan is self deceit.

There should be some trillionaires walking around whose ancestors started saving in the Renaissance when modern banking began -- but there aren't.

The reason for that isn't financial but usually due to wealth dissipating though marriage. Some wealthy families relied on arranged marriages to keep the wealth in the family, but this kind of arrangement had it's own problems (first cousins marrying each other for multiple generations has clear genetic issues).

Nevertheless, some examples still exist: http://en.wikipedia.org/wiki/Rothschild_family (often claimed to have controlled the largest private fortune in history) http://en.wikipedia.org/wiki/House_of_Medici (although the Medici's lost most of their fortune in the 18th century)

Many rich European families were ennobled at some point, which makes their history more confusing. For example, the Duke of Westminster (6th richest man in the UK) is rich mostly because of his London land holdings. There are numerous other examples like that.

"There should be some trillionaires walking around whose ancestors started saving in the Renaissance when modern banking began -- but there aren't."

Carlisle Cullen. ;-)

Anyway - this is a really good point, but I'll point out something else. Most of the wealthy would-be trillionaires whose fortunes got wiped out passed down another inheritance: their genes. Those same disasters that wipe out the savings of the rich tend to kill the poor, who simply can't afford transportation away from disaster areas, bribes for border guards and security forces, political connections to ensure safety for their children, or information savvy to know when a crisis is coming.

Most of today's middle class is descended from the kings and nobility of the high middle ages. The peasantry just mostly died out, leaving no descendants.

Most of today's middle class is descended from the kings and nobility of the high middle ages. The peasantry just mostly died out, leaving no descendants.

That's simply untrue. For example, the majority of people of European decent in the US, Canada & Australia are from the "peasantry" classes (ok, by the time mass emigration was happing the "peasantry" class had mostly migrated to the factory cities in Europe, but they were still the poor people).

In Australia's case the early white population was mostly prisoners who were almost entirely poor, unprivileged and most certainly not nobility.

Most of today's middle class is descended from the kings and nobility of the high middle ages. The peasantry just mostly died out, leaving no descendants.


My Google-fu is failing me at the moment. It was from an absolutely fascinating article that suggested that the middle-class arose because of downward social mobility in post-Plague Europe. With the serfs mostly killed off by Black Death, the 3rds and 4th sons of the nobility typically couldn't support a feudal household, and so they had to take jobs as merchants or artisans in the emerging market economies. Along the way, they brought with them some of the values of the nobility (most notably, not having kids until they could support the lifestyle they were accustomed to as children), which allowed Europe to escape the Malthusian trap of the Dark Ages.

IIRC, the genealogical records (of most present-day Europeans and Americans being descended from the nobility) was presented as fact, but the causal link with the rise of the middle class was more tenuous.

I'll look again after I've gotten some actual work for $realjob done.

Sounds like _A Farewell to Alms_ by Clark. Though as far as I can remember the data showed the "merchant class" crowding out the lower classes, not the nobility. Nobles only had about an average amount of surviving children while rich merchants had an above average one. Makes more sense that way: medieval nobility doesn't sound like a great base for middle-class values...

I'm not totally convinced about the theory, but the book was a surprisingly good read.

I'd like to see a source for this. It seems counter-intuitive. A lot of the peasantry were sent to the United States as indentured servants. Most of the white poor land working classes from 17th century on. And it would be consistent with birth rates everywhere else in the agricultural world, that these people had more offspring than the wealthy. So. It just doesn't seem that this would be correct.

That being said. What we call 'The Middle Class' in the United States is kind of deceiving. Class can't simply be a function of how much cash income you bring in a year. Class has more to do with where that income comes from.

Those of us trading our time in exchange for money are working class, even if ( in the rarer case ) it is a greater dollar amount from a person whose primary source of income is the buying low, and selling high of commodities... such as, human labor, or pork bellies... and accumulating and reinvesting the difference.

Most of today's middle class is descended from the kings and nobility of the high middle ages.

Not true for Britain. The peasantry did mostly die out but the nobility did very badly as well. The middle classes were the forefathers. Sources etc. in "Farewell to Alms" by Gregory Clark

  >> There should be some trillionaires walking around whose ancestors started saving in the Renaissance when modern banking began
This ignores that people born to wealth do not have the same sense of frugality of the people who build the wealth.

""From shirtsleeves to shirtsleeves in three generations.": moneycentral.msn.com/content/retirementandwills/planyourestate/p147046.asp

"In the last 40 years (between 1967 and 2007), median wages have only gone up US$10000 (from 40k to 50k)."

That figure that you're citing is IN CONSTANT 2003 DOLLARS.

The nominal median household income in 1967, without adjusting for inflation, was $7,260.87. [1] So a "middle class" income has increased from $7,260 to $50,000 in 40 years.

Hopefully this clarification will make the author's nicey-nice spreadsheet make sense now.

[1] http://www.census.gov/hhes/www/income/data/historical/househ...

The US inflation rate over the last 40 years is readily available from the US Department of Labor based on the Consumer Price Index.


$35,594 in 1970 got you the same as $200,000 today.

So why does it strain credulity to believe that $200,000 today will be equivalent to $500,000 in the year 2050? Inflation was much higher over the previous 40 years.

The CPI index is highly "massaged" (looking for a lower than actual value). A better inflation measure would probably be compare commodity prices then and now (copper, silver, gold, oil, etc).

Of course that is compensated partly with productivity increases.

More to the point, of course, is how much you will have to work to have that number of nominal dollars.

Right. People are going crazy over the $500k number 40 years out but, in real dollars, that could easily convert to a middle-class wage today.

Actually, one of my (many) issues with political discourse today is that thanks to inflations, "the rich" has been defined down brutally over the past 30 to 40 years. Anyone currently making $250/year, yeah, if they're hurting it's their own damn fault for overreaching, but that is very rapidly becoming merely upper middle class. Meanwhile, neither our legal/tax nor our social definitions of "rich" are being updated at anywhere near the proper speed.

I recall somewhere seeing that if you take the term "millionaire" at the time that it was coined, it would today take 130 million to have that same level of wealth. I can't seem to scare up a reference, but it's at least broadly correct even if I'm off by 10 or 20%. If you don't retire a millionaire in 2030/2040 money, you're going to be in real trouble. You're probably in trouble if you retire merely as a millionaire.

And yet many of the things that average people enjoy today could not be obtained with any amount of money when my grandfather was alive. Where I live, today, an annual income of U.S.$250,000 is very comfortable indeed (and rather rare).

Right, this is a common economic discussion. People under the poverty line today can afford a roof, TV, and a home phone; 70 years ago they would stand in bread lines. Quality of life has definitely improved.

Whoa, that 40->50k over 40 years stat seemed ridiculous to me so I looked it up and you're right. This strikes me as bizarre because in the UK, both prices and wages have blown through the roof over the same period. I wonder what the deal is here (though the USD-GBP rate was significantly different decades ago).

Those numbers are adjusted for inflation.

Tony's calculations are wrong because he assumed constant inflation.

There will be periods of deflation, and many think that one is starting now. It also won't be the last.

It's not a terrible thing to do though, because it also reflects uncertainty in your income, albeit in a way that people aren't used to seeing. There is a non-zero chance that 10 million dollars today will end up being 3 million dollars next year, and I don't mean "next year" metaphorically, and I'm not even talking about the nastiness of the current economy, either; that's always true, regardless of the state of the economy, just the odds change.

No, he doesn't assume that. He assumes an average rate of inflation with the mean average being above zero, because it's always been that way. http://www.usinflationcalculator.com/inflation/historical-in...

When you're talking about decades of retirement, the compound annual growth rate of inflation is all that really matters.

There isn't clear consensus on inflation/deflation in the near term. While last year saw deflation, a lot of economists think that printing money like we are will cause unusual deflation.

I think it was Jadakiss who said "Entrepreneurs don't retire, they just get chubby and become angel investors."

I don't know of many people in this business who actually plan on being utterly retired while they blow hundreds of thousands of dollars a year. Most just want to not be obligated to work on things that don't interest them.

But you ARE. Or at least you are obligated to work on things that throw off meaningful amounts of money. What if what interests you is poetry? Raising foster kids? Working on open source projects?

If what interests you is not an income source, then you're going to need to avoid "living rich". Which, IMO, is fine and dandy. I get very little joy out of huge houses, expensive wines, and 1st class travel.

all kinds of things can be turned into income sources if you're serious about them and any good. making money off of poetry and open source is obvious. (not at the sports car level, but below that, sure.)

i'll admit it isn't not immediately obvious to me how you could profit from raising foster kids in a moral fashion, though that does not mean there isn't one.

Easy. Set up a non-profit dedicated to the foster kids' well being. Accept donations and funding from other organisations. Pay yourself a wage as an administrator. Sell the movie rights and retire rich!

The question is what percentage of successful entrepreneurs are really concerned with living rich and how many are just after the freedom. Looking at it in terms of expected value of a startup there would be far better ways for one to focus solely on making money if that was the only goal.

He's right that you won't get rich as an early stage employee unless you worked somewhere like Google. I learned that the hard way.

He's wrong about not being in it for the money. I've known about 10 serial entrepreneurs in Boston and Silicon Valley who were in it for the money, and they were all focused and successful at it. The key is to have a clear idea and a clear exit plan, and adjust to the market as quickly as possible. These guys were all like minor versions of Mike Cassidy. 3+ successful exits, each more money than the previous. All doing stuff you've probably used as a part of another product, but you've never heard of the original company or the founders.

A lot of guys know can't decide whether they are in it for the money, or the love, or to be famous on Hacker News, so they fail. Lack of focus and not knowing why they were in it is why they failed. Guys who know they are in it for the money and can execute often win. If you're really in it for the money and lose, you might just suck. That's just the way it works. YMMV.

The other thing he's wrong about is living to 90. Working at a desk 16 hours a day, living on soda and junk food, no exercise, estranged from families and friends... most hackers are going to need a lot of luck or serious medical breakthroughs if they want to make it to 70.

...where retiring rich is defined as spending $300,000 annually.

I'd personally move somewhere cheaper once my income no longer depended on my location.

Looks like it's time to recommend The Millionaire Next Door:


Don't bother to buy it: Get it out of the library and skim it. It's not a difficult read and it belabors its own point a bit. My own summary:

The secret to retaining a high net worth is the same as the secret to accumulating it: Control spending. Don't waste money.

Most of the people you know who look like they're wealthy -- fancy cars, country club memberships, stylish clothes -- are actually spending money as fast as they can get it, or faster. They have no savings and are living paycheck to paycheck.

Meanwhile, many of the wealthiest people in your town are wearing four-year-old work clothes and driving ten-year-old trucks that they bought used.

It doesn't do your future any good if you make $300k per year and spend $325k per year. Contrariwise, if you make $75k per year and only spend $50k per year you'll be a millionaire in under forty years.

So you'll either be a poor-ish young playboy or a rich old guy? Why does the first option sound more attractive?

Of course, fast cars and country clubs are all superficial, but being a miser just so you can die with millions isn't that much better...

"Living frugally" isn't what it used to be in the pain department. I have a Netflix subscription for one DVD and unlimited streaming instead of a $70 cable subscription (or an expensive antenna for my area), and while I made this choice to be "frugal" in the end I've actually been happier than I was with the cable. Do you need a smartphone with unlimited Internet? I can't speak for you, but I'm almost always within range of a computer and Wifi, and when I'm not I don't really need it. Does a new car bring you proportionate joy to the cost? It doesn't me, so mine are chosen to be relatively cheap to buy and operate, and I don't miss out on much I care about. (And I'm examining doing without my car; without going into my personal analysis it isn't a drop-dead win for my real numbers, but I'm looking at it. Note: I do not live in an area where I can trivially use public transportation.)

And so on. You don't really have to eschew the pleasures of the flesh entirely to be a "miser" nowadays; you can eat well (cooking yourself), drive adequately, be entertained for a reasonable price, etc, and still save enough money to retire comfortably. You do have to avoid credit card debt, not overcommit on your housing, and there's some tricks and issues (can you psychologically deal with having $10K+ in the bank without spending it, without relenting on the discipline?), but the days of actually facing the choice you outline are gone for most of the people who would be on HN in the first place.

Oh, recently internalized "trick": Take all "monthly fees" and mentally multiply by 12 to get the yearly cost, then treat that as the real cost. $24.95 a month for a service may sound reasonable; does $300 a year sound just as reasonable? I've been using this as part of my cell-phone upgrade resistance; there's a lot of ways I'd personally rather spend $300 than on a cell plan upgrade, up to and including not spending it at all. My Netflix savings is ($70 - $9) x 12 yearly, or $732/yr. My only regret is that I didn't do it about a year earlier!

Any tips on finding a reliable, inexpensive car?

My approach is to live in Michigan and have half my family work as engineers for car companies.

This approach may not scale, and may carry certain other disadvantages. (I like the Michigan part, honestly, but your mileage most assuredly may vary.)

Live close to work, and cycle. You also get free exercise, feel better in the mornings, and now can travel lots of other places cheaply.

Used Japanese. Any of them.

You've got the dichotomy disease. There is no need to go to either extreme.

You can belong to a country club and still live within your means.

You can certainly drive a fast car and live within your means. Fast cars can be bought for well under $10k, especially in California where a fast car can last for thirty years and more without rusting. Most of the stuff on more expensive cars is just bling, or comfort features that have nothing to do with high performance.

What you have to do is pay attention. Don't spend more money than you have. Don't spend at an unsustainable rate. That doesn't mean "spend no money at all". There's a happy medium there.

And you don't have to be a miser. Though, in fact, you probably do have to die with millions, or at least several tens of thousands, unless you plan your own suicide and stick to that plan. To ensure that you're living as comfortably on your last day as your first, you need a bunch of money in the bank. And you don't know which day will be your last. So, die with a million in the bank and endow an amusing trust fund in your will.

Anybody can buy a fast car, but few can actually afford to maintain it.

A $10K fast car you buy might cost you a good bit of money per year to drive and keep in shape. Especially when it's thirty years old.

That's mostly the reason it's only $10K to begin with (and the fact that the market for impractical cars is not too large).

When I lived in the Valley I bought a 1986 Toyota MR2 for about $6k. It had hilarious 80s-era retro styling with angles reminiscent of Tron, and it admittedly has been through an engine and transmission rebuild in the last 24 years, but it still runs great (for the friend I sold it to) and doesn't cost much more to maintain than any car of that age would cost.

It is marginally less fuel efficient than many cars, despite its tiny size, and one does go through tires when one is tearing off the starting line at the entrance ramp to 101. Fast cars are more expensive than regular cars. But not necessarily much so.

Of course, if your definition of a fast car includes the word "Chevy" or, god help you, "Porsche" I take back everything I said. ;)

The WRX has been mentioned in this thread, that's one that I would definitely stay away from second hand.

People that drive those usually push them as far as they'll go (and further) whenever they get the chance.

MR2 is a great little car and about as reliable as sports cars come.

First Gen MR2s are definitely fun (and cool/quirky looking), but I sure wouldn't call them "fast". The NA cars are 0-60 in the mid/high 8s and standing quarter mile well over 16 seconds.

The average 2010 soul-less imported sedan will easily show its taillights to a 1986 MR2 in a stop-light grand prix (and most will give the MRS2 a good run).

The fun in driving a sports car is all in the handling and improving your skills as a driver, not necessarily in raw power.

I drove this little thingy for years: http://pics.ww.com/v/jacques/cars/copen/dscf1074.jpg.html , 700 cc, not even 80 HP and an absolute hoot to drive. On the straights not the fastest car (about 175 real km/h), but very quick of the mark because it's so light and absolutely unbeatable in corners.

It's also RHD which helped a lot in not having it stolen.

Most fun I've ever had driving a car.

well the car doesn't really need to be 30 years old.

sure if you buy some unreliable piece of crap...but there are plenty of fast cars that only require regular oil changes to keep in shape.

granted there are different definitions of fast, some people are fine with 14 second cars, others need 12s...and others don't consider anything fast that doesn't run 10s.

But overall, $10K is plenty to get yourself a reliable 6-7 year old car that's quick/fast.

Fast, fun cars are emphatically middle class these days. The Subaru Impreza WRX is $25k new, for example. A millionaire who started collecting fast bargainmobiles would be killed by garaging and insurance, not maintenance.

As others have pointed out, with the buyout presented in the article, you can live forever spending low six figures (like $120k, with inflation adjustments.) That's not "rich young playboy" territory, but it's not "miser" territory either. At that level, you can raise a family in a comfortable house in a nice neighborhood, drive a nice car, have an RV or a boat or a cabin in the woods, have a country club membership and season tickets for your favorite sports team.

Or you can live a little bit cheaper, still doing most of that stuff but maybe skipping out on the country club membership or something, and become a rich old guy who can leave a huge estate to his kids... and still not be a miser.

The key is to position yourself in that middle ground.

Saving a buck is a lot easier than making a buck.

That's one very good reason why plenty of rich people are seen as 'misers', if they let it roll then they'd stop being rich pretty quickly.

The secret to that is to not make it plain what your financial situation is and to live well within your means.

The tax situation on work you do for yourself (saving money) is also as favorable as it gets.

There's a sense in which dollars saved are like tax-free income.

The millionaire next door makes too much of a deal about stuff like clothing and cars. You have to control your bleed, sure. I've found that if you have half a brain and live somewhere with a lot of money flowing around like NYC you can buy fancy shirts, go out to dinner, AND save 6-10 grand a month, which is the best of all worlds.

Millionaire next door is more for people running a landscaping business in the suburbs, and saving every extra dollar instead of blowing it on a new home theatre system or an expensive vacation to somewhere that isn't as boring.

I.e. it's more for lower middle class people trying to get a leg up. In my experience it's better to become a "millionaire next door" ... next door to multimillionaires or billionaires. It's way easier if you're around a bunch of people with a lot of extra dough.


I hang around with two distinct groups of people a lot: grad student types with essentially no money and young professionals (doctors, lawyers, etc) with nice, solid salaries. From my experience, it's much easier to not spend money when I hang out with the first group, because they have no expectation of spending a lot of money. On the other hand, you'd feel out of place with the other group if you don't spend some higher base level for doing "normal" things like going out to eat, trip to Vegas, whatever.

I assume this scales if you are just the millionaire and you hang out with multimillionaires.

It depends. In NYC if you work in finance you'll probably find yourself getting taken out to nice cigar bars or steak houses after a good Friday trading session and running up several thousand dollar bar tabs on somebody's corporate card, rather than paying anything out of pocket.

> "Let's assume you want to live in a major metro area, send your kids to private school..."

That's his problem. When we moved to this country, my dad had an H1B visa and was making far below what an entry level Google employee is making. Nonetheless we had quite a comfortable life: rented an apartment in a suburb with a good school. Later, my parents (both of them finally rising to market rate) were able to afford a house and send me to college (two years of community college and then transferring to a university) without taking a penny of financial aid.

This isn't just a rant against the OP and this has nothing to do with "fuck you money" (I have my own opinion on it, but I am not qualified to state it). I am sick and tired of the premise that these days a comfortable family life is two six digit incomes. No, you don't need a private school, no you don't need to live in San Francisco or a New York (try a suburb instead, which also solves the "private school" problem), no you don't need a single family home, no you don't need two BMWs. Even if you don't retire, it makes sense to live below your means to have money available for a rainy day.

If you know how to live below your means than even as an employee (looking to make a few hundred thousand from options) you have the chance of earning de-facto "fuck you money": the sum of money which means you no longer have to accept a boring/stifling job just to have a job; the money you need to take the time off to work on a "science project" (a technical project that doesn't have an immediate business model).

Agree, except the single family home.

Because the quality of life in US apartment buildings is appalling. I don't want to hear every step that my upstairs neighbors take. I don't need to know when they go to the restroom in the middle of the night. I don't need my downstairs neighbor ask me not to walk after 10pm.

This is ridiculous. I'll live in a US apartment once the sound insulation issue is resolved (hint to US architects: It was solved by 1930 in the rest of the world).

Maybe you just picked the wrong building? The only noise I hear from my neighbors is when the windows are open and the kids are screaming two doors down. But no insulation is going to fix that problem.

I am actually talking about 4 different buildings in 3 different bay area towns. If there is a secret to picking buildings, obviously I'm not in on it.

But - I looked at apartment ranking website, and on every single building there will be some very negative comments about noise levels. So I still suspect a more systematic problem.

Yeah, I'm not getting where that number comes from. (And I love the suggestion that it's merely "upper middle class".) Personally, I can live a pretty nice lifestyle on "only" a couple thousand in disposable income a month. I really can't imagine what I would do with $20-25,000 / month to spend.

With that in mind, I tried a few numbers in the spreadsheet. Just to be more "realistic" I dropped the payday back down to $4.5mil. I'm also assuming that the first thing I would do is to pay off my mortgage, so what remains is basically entirely discretionary spending.

On a restrained budget of $50K/yr ($4K/mo), my assets grow faster than I'm spending, and I die with $20M in the bank. On a more extravagant $100K/yr (over $8K/mo), things are a bit closer, but still earning more than I spend and leveling out at about $7M in the bank. The crossover point is about $125K, leaving you broke at 70.

So, I'm going to say that, yes, I really could retire and not work again with a $5-10M payout.

So, I'm going to say that, yes, I really could retire and not work again with a $5-10M payout.

I calculated some time ago that ~$4M would be enough for me to never think about money again. I could do anything that I wanted to do for the rest of my life. A key point, of course, is that I could do anything that I wanted to do--I don't want a Maserati or my own private jet or any of the other customary extravagances of the idle rich.

I'd say that most people who couldn't retire on $4M would not be able to retire on ten times that amount--you could give them $1M a year and they'd find a way to squander it. It's amazingly easy to spend money if you have expensive tastes.

I seriously don't mean this in an insulting/trollish way but I think you are either lacking imagination or underestimating how quickly you can adapt to a richer lifestyle. Given you are even here and thinking about entrepreneurial rewards I'd guess the latter. On the other hand perhaps I underestimate how... modest you like to live?

Whilst I also raised my eyebrows at "upper middle class", I know people in that range who have spent rather too much and fallen (not totally) in only a handful of years. They never seemed stupid or excessive. It's probably partly to do with expectations: exactly the bias this article tries to correct.

It seems obvious to you and many others here that everyone slides down the slippery spending slope. I have the same problem understanding this position that I have understanding "compulsive shoppers" who buy luxury goods on credit cards. Wouldn't one just... not do it? It seems that the type of person who overspends when rich will also overspend when poor, i.e. that it's more a function of willpower than income level. I don't overspend now; why would having more money make me any more likely to overspend?

I'm starting to think there's some major psychological division here; why is it so hard for you to imagine having willpower, or for me to imagine not having it? I'd like to say it's just that there aren't that many more things I want, but perhaps that feeling is a higher function of willpower, and I've just conditioned myself not to want things I can't afford. If this kind of cognitive shielding is involved, it might partially explain why the two sides have so much trouble relating.

It was more of a rhetorical device. It's not that I can't imagine how to blow through tens of thousands of dollars a month. It's that that lifestyle just isn't appealing to me.

Spending 10's of thousands a month is getting up there, but "blowing through" more than $4k per month isn't necessarily an extravagant lifestyle. My guess would be that you don't live an as expensive a metro area as the author is basing his calculations on.

In a place like San Francisco, a few non-frivolous expenses can add up quickly:

- Your residence. A decent 2 bedroom place in a desirable part of San Francisco will run $3,000 per month in rent, a mortgage will be much higher. We're not talking anything extravagant here, just 600-900 sq ft.

- Travel. Paying for more than one person to travel to visit family/friends a few times a year can easily add up to $1,000 or more per month. We're not talking luxury vacations here, either -- just basic airfare (coach) and accommodations.

- Health expenses. As you earn more, you'll probably be more likely to spend more on optional health items. Things like LASIK for example. Also, as you get older, these expenses will get much larger.

- Kids. It doesn't even have to be private school we're talking about, but I imagine that clothing/feeding/entertaining more than one person adds up quickly.

- Any time/money trade-off. You have a limited amount of time and, similar to health expenses, you will be more likely to spend money to save time as you earn more. Each person's choices will be different here, but again, we're not talking luxury. Maybe paying for parking instead of a time intensive bus trip? Or arranging for laundry service? Or paying an unjust $40 bill that would otherwise take you 5 hours to fight?

Notice there's no talk of fancy cars, big screen TVs, luxury trips, large mansions, or extravagant dinners. I think this is the definition of "upper-middle class" that Tony is talking about. Nothing fancy, but a few things to make your life more convenient.

> Your residence. A decent 2 bedroom place in a desirable part of San Francisco will run $3,000 per month in rent, a mortgage will be much higher. We're not talking anything extravagant here, just 600-900 sq ft.

As I said, "I'm also assuming that the first thing I would do is to pay off my mortgage, so what remains is basically entirely discretionary spending." Now, I've chosen not to live in one of those 3 or 4 ridiculously expensive cities. You might not consider spending $3K for < 1000sqft extravagant, but let me assure you that most people do. (Also, FWIW, I have friends with a 2 bdrm apartment, across the street from golden gate park, surrounded by good restaurants, which they only pay $1600 for.)

> Kids. It doesn't even have to be private school we're talking about, but I imagine that clothing/feeding/entertaining more than one person adds up quickly.

You imagine, but I actually live it. Kids don't actually eat that much, and amuse themselves much more easily than people seem to give them credit for. Their clothing is fairly cheap, and since they usually grow out of things faster than they wear them out, you can pick up a lot of stuff even cheaper at second-hand shops.

I certainly enjoy travel, and it's a non-trivial portion of my discretionary spending. My point is not that you need to live live a pauper, just that you don't need as much money as you think to have an enjoyable life. There was a time in my life when I blew through twice what I spend today. And I use that phrase because I literally couldn't tell you how I did it. An attitude of "we've got money; might as well spend it" caused money to seemingly evaporate with nothing to show for it. I don't feel any less well off today. Honestly I feel better and richer knowing that I'm not spending every cent I make.


Tom Wolfe's "Bonfire of the Vanities" (Going broke on a million a year), p.137 "One breath of scandal, and not only would the Giscard scheme collapse but his very career would be finished! And what would he do then? I’m already going broke on a million a year! The appalling figures came popping up into his brain. Last year his income had been $980,000. But he had to pay out $21,000 a month for the $1.8 million loan he had to take out to buy the apartment... Of the $560,000 remaining of his income last year, $44,400 was required for the apartment’s monthly maintenance fee… $18,000 for heat, utilities, insurance and repairs, $6,000 for lawn and hedge cutting, $8,000 for taxes. Entertaining at home and in restaurants had come to $37,000. This was a modest sum compared to what other people spent."

- Any time/money trade-off

Exactly! It is surprisingly easy to buy something in a store instead of ordering from Amazon and waiting, for +20%, or taking a cab home instead of the subway/bus, or hiring a weekly cleaning service, or buying nicer ingredients and eating out at nicer places because it's convenient, or, ...

Its all the little things in life that really make your experience better and allow you to do the things you want to be doing, not the big ticket items that people traditionally associate with wealth. I think that that is what FYM is all about, really

Sorry, one more note:

> Spending 10's of thousands a month is getting up there, but "blowing through" more than $4k per month isn't necessarily an extravagant lifestyle

I don't believe I ever said it was. In fact, I called $4K/mo a "restrained budget". Meaning I would need to pay attention to my spending and not indulge in all the discretionary activities I might like.

Also, perhaps you are young and naive like me and don't think about the real cost of kids ;)

Or maybe I do have a child and have figured out that you don't actually have to send them to private school, pay for their college (my parents didn't for me), buy them a new car for their 16th birthday, etc.

Kids are expensive w/o doing all that rich kid stuff. With three kids I have Tae Kwon Do, Abacus, piano, Kumon and they go to public schools. Add on school supplies, clothing, shoes, good will bikes, etc and it gets expensive fast w/o even looking expensive.

For my daughter, I spend about $100/mo on extracurricular activites, $25/mo (averaged over the year) on clothes, $50 once a year on school supplies, a $100 bike will last her for a couple years.

Yeah, how do those plebes manage to raise kids with their pathetic 5-figure salaries...

Well, I wasn't saying it was impossible, just expensive. Also, I don't know where you live, but one child's extracurricular activities for me is ~400 (100 piano+100 TKD+100 kumon+100 math) and during the summer it is higher since they have camps to attend (since there are no crops to harvest). Once your daughter gets older, I guarantee your clothing costs will increase.

You say this as if there is a law requiring you to provide all of these services for your daughter, or Children and Youth Services will come and take her from you.

Did I say law? No, I want my children to have the same gift I was given - an education. I would hope most parents would want that for their children.

Well, yes, it's true. My daughter doesn't have 4 extracurricular activities going at once, she has one or two... or sometimes even none at all! The rest of the time, she and her friends just have unstructured play.

And, yes, her clothes will get a bit more expensive as she gets older, but I don't expect my spending there will ever more than double. If she feels that she needs more or fancier clothes, she can get a job to pay for them.

Defining "rich" as a fixed amount is silly - define "Rich" as "all your time is your own, and the passive income you make on the side is enough to cover your expenses, whatever they are".

There's little that's specific to startups here. What he's arguing is that being independently wealthy doesn't work the way one might naively think. But few things do work the way one might naively think.

Certainly his title is false though. Obviously it depends how much you clear.

> But few things do work the way one might naively think.

A bit cryptic. Can you elaborate?

Everything that has been written about how anything works explains how it doesn't work the way one might naïvely think. So, read everything that's ever been written about how anything works, and you'll have your answer.

I've been doing startups since I was 31 (22 years ago), and figured that out quickly. And I've been at successful startups (IPO, acquisitions).

Much more realistic to aim for being employed (you do love working for startups, right?), but having your kids' college paid for, buying nice vacations, taking long unpaid leaves, buying nice toys for yourself and your family, having retirement (in your 50s or 60s) taken care of, and so on.

Also, for someone who really does love startups (technology, business side, whatever), "retirement" probably means doing the same thing you've been doing, but at a more leisurely pace, and that will probably earn something.

> I've been doing startups since I was 31 (22 years ago), and figured that out quickly.

When you are 31 it is easy to figure out you won't retire rich at 30. Just saying.

A more accurate title would be "No, you can't retire rich at 30 if you sell your startup and not think about money ever again". It's perfectly doable to retire at 30 with $4m just as it's perfectly doable to blow through $100m at 50.

1. If 4 mil at 30 is not enough, it would never be enough. 2. Someone with the drive, intelligence etc to accumulate 4mil by age 30 would be extremely bored retiring at 30. 3. There are different forms of wealth (relationships, experiences, reputation, health, intelligence, peace of mind etc), and money is merely one kind.

most people can live quite richly on around $50k/year, depending on where they live and what they're doing. especially if you're willing to pony up some cash up front to buy your house/car if you want to own one.

but, if your idea of richly is tainted by popular culture, and you want to buy some yachts and collect expensive cars, then yeah, you're going to go broke.

It depends on your idea of yachts and fancy cars.

My dream boat is one of these: http://yachtpals.com/files/userimages/laserworlds.jpg

I don't want to be rich, for me being free on my (an my family's) current standard of living is enough. I live in Eastern Europe (Hungary) and my current net income is $24000 per year. $30000 per year would be enough. (It is a very strong middle-class level here, maybe I can say upper-middle class especially if you don't have debts and already have a reasonable house.) I am 35 years old and let's say I want this money to last until I am 80. So I need $1.350.000. Provided that I will most probably always be a single founder and most probably will always bootstrap because no one will want to give me money, it will be enough to sell my company at $1.350.000, which I think would be more than doable if I would succeed with my current idea.

Edit: and also it is hard to imagine that I would absolutely not make any income with the lots of fun-projects I would do after my 'retirement'.

15% tax on $4M is only if you live in a state with no capital gains tax. In California it would be 15% + 9.3% = 24.3% - this makes a big difference.

State by state rates as of a few years ago: http://www.thereibrain.com/realestate-blog/2007/10/capital-g...

Luckily, my take from the Kongregate sale was enough to be real FYM (though I enjoy running the site enough to want to keep doing it for a long time anyway).

The main problem with the premise of this article is that someone with $4 million is just going to stick it in a money market fund and live off of the pitiful interest. The interest rate in a money market fund is below inflation, so of course your money is going to dwindle.

If you took the same $4 million and invested it wisely, in something like the Permanent Portfolio, which has averaged 9.3% annual returns over the last 40 years and avoids all market timing, you'd probably be fine for the rest of your life.


Similar things were said about property in America to, that it was a sure thing that had gone up every year for 50 years. Unless your somehow beating the market in general return is going to correlate with risk being taken on.

Microsoft held a launch event for the original Xbox back in Fall of 2001 for retailers. It showed what it was all about, let people play almost-complete versions of Halo and several other launch titles, etc...

One of the speakers started talking about demographics, such as who they expected to buy the console. One point of their market research jumped out: The average male Xbox consumer in the (approx) 18-25 year old range expected to be a millionaire by age 30.

Hmmm, that's me! (I was 21 at the time) But this would be an impossible goal for 99.9% of us. At the time a lot of paper-millionaires were recently minted in the dot-com boom, likely throwing off my perception and that of others.

It turns out I felt "entitled" to be a millionaire by 30. But in reality, entitlement usually disappoints since it discourages hard work, dreams get shattered, and expectations are eventually lowered. It's a chronic disease best avoided.

Fortunately this triggered a wake-up-call and encouraged me to work harder. Being a millionaire by age 30 isn't as important anymore. Instead, being intelligent enough and positioned properly by age 30 to do great things, and maybe eventually become a millionaire, is far more important. The goal of money is still desired as it brings elevated freedom, and the sooner you get it the better, of course. But it can be blinding if that's all you care about.

Or, and here's an idea, don't spend $200k a year. When you were creating that startup, you lived on a lot less.

That gets to the idea at the bottom of the piece: "You can live rich, or you can retire early. But don't think you can do both."

I think I could get by on $30,000 a year and working on my own ISV in a nice Latin American country. Is anyone doing that here?

I live on U$ 12,000 a year* in a Latin American country (Uruguay), but it isn't a good enough amount to retire on.

U$ 30,000 is doable, but not millionaire-ish. You could live quite comfortably and with housemaids and eating out often, but forget about a (good) car or high-end electronic toys (unless you bring them with you from abroad).

There are some nice places to retire, but I'm not sure if you wouldn't find it boring quite quickly.

Oh, and government loves to swamp you with taxes.

(*) that's after taxes, my pre-tax earnings are about U$ 24,000

How is living in Uruguay, apart from the money angle?

I've heard lots of good stuff about it but never from someone that actually lived there.

Most curious!

It's not bad :)

The grass is always greener on the other side, but I'll try to be less biased:

- It's reasonably safe and orderly by South American standards (1)

- Some things are much cheaper, like anything labor-related (like housemaids) (2), or meat (we're the biggest per capita meat consumers in the world, as there are 5 cows per inhabitant)

- Healthcare is in a socialist style (actually Mutualism) (3), and while it's always "on the brink of collapse", it works,

- People are reasonably educated, you'll find enough English-speakers if you come here :) , quite an important "hacker"/IT population (small in numbers, but big relative to the overall 3.000.000 inhabitants).

- OTOH, there's a big marginalized community (similar to the "favelas" in Brazil) that make about 10% of the population, but are the fastest-growing segment. So far, the most striking for an American will be seeing horse-drawn carriages full of litter, with poor children darting to collect the garbage bags of the middle class (needless to say, avoid them or they will relieve them of your wallet or cell phone as well), and beggars at quite a few street lights, or begging on the buses.

- There's a mix of almost-cutting edge (countrywide 3G cell phone and internet access) with old-tech (all the paper-based bureaucracy for example)

- Climate is quite moderate, although it's humid - some people, especially from middle Europe or Canada, think they won't experience the cold or heat. They're wrong. Humid cold and heat are way worse than their dry equivalents. Also, housing is not built to minimize the weather (no double or triple pane windows, bad insulation, bad or no heating in most houses)

There are nice vacation spots if you like beaches, though the water is colder and less clear than in Brazil and way less so than in the Caribbean :) (sand is among the best in the world, though)

- Several first world niceties like modern cars or electronics are out of reach for the masses, because the government likes to tax them out of reach. For smaller electronics, it's cheaper to fly to the US and smuggle them back than to buy them in a store. For larger stuff (say, a LCD TV) you're out of luck. Also, several easy credit options available in the US are not available here.

- Housing in the nicer parts of Montevideo is expensive (on par with some of the not-as-nice parts of American or Canadian cities), as the housing bubble hasn't exploded yet, and credit is not as easily available.

(1) it reminds me of a National Geographic story about the Baltic countries. If you arrived at them from Russia, they seem 1st world and orderly. But if you came to them from Europe, they seem disorderly and third-worldish :P

(2) there are several legal pitfalls, as there are quite cumbersome legal regulations. Most people live in a "grey" economy, complying with most regulations but underreporting or not complying with others (it's quite usual to underreport salaries to the tax collectors)

(3) The best explanation I could come up with after some Googling is: http://www.hmg.gov.uk/media/60217/mutuals.pdf "Mutual organisations do not have external shareholders - they are controlled by their members. Members may be users of the mutual, employees, other stakeholders or a combination of these Mutual organisations are either owned by and run in the interests of existing members, as is the case in building societies, cooperatives and friendly societies, or, as in many public services, owned on behalf of the wider community and run in the interests of the wider community"

Mutual organizations sound like credit unions.

Thanks for writing that very detailed response, there is lots of concrete information in there.

I've visited Latin America several times, Bogota, Colombia and Coronado, Panama but never got around to visiting Uruguay. I hear lots of good stuff about Costa Rica as well.

wow you pay 50% taxes on $24k in Uruguay?

It's not really all taxes,more like "deductions". Out of my typical paycheck

- 17.5% is withdrawn for retirements savings/pension funds

- the first 600 dollars are untaxed, then bracketed 10%, 15%, 20% and 22%. I pay up to 22% tax bracket, 25% on the extra holidays check. (in all, it's about 12% of my pre-deductions income except in Christmas where it shoots up to 20% or so)(1)

- 6% goes to healthcare (it's mandatory), I pay an extra 6% on top of that but that was entirely my option (for better healthcare).

- some miscellaneous taxes (a reconversion fund for workers and others)

Well that makes out like 40%, not 50%, but you get the idea :)

After that, we have a 22% Value Added Tax on everything, and a minimum of 60% taxes on imports, but those are "optional" (optional, that is, if you don't eat or buy anything - and it's regressive taxation)

(1)Some companies cheat the DGI (IRS equivalent) by under-reporting employee's salaries (typically so they fall in a lower income bracket, or untaxed income bracket), and then pay a slightly higher than average market salary overall. Of course, that means you can't go to the government and complain if they fail to pay you, and it goes back to bite you when you retire (retirement plans are tied to how much you were paid when working).

About $35000 here in Thailand gives me a lifestyle that I think of as lavish and decadent, but I guess the OP would consider frugal and cautious. 120sqm condo beside the sea, eat out every night, tennis and language lessons. I could probably cut the budget down to around $20000 in a pinch and still live comfortably. The major downside is that there aren't many hackers about.

Doing the same in Shenzhen, China.

In my opinion, with a 25,000$ salary here, you can live more comfortably than you can in the US on a 50,000+$ salary. For instance, at 500$/month, you can get a spacious 2br apartment that comes with a nice inner courtyard, tennis courts and a swimming pool. You can go to nice restaurants for under 6$ and take the taxi for ridiculously cheap (less than 5$ for a 15 minutes ride).

And don't worry about getting bored. There are tons of bars, amusement parks, movie theaters, not to mention that most commerces close very late (11pm+). And if you're not into Asian girls, a lot of female foreigners are models from Russia/Eastern Europe that haven't seen westerners in a long time. :)

Hmm. Interesting, I'd like to point out though 50K isn't a really comfortable salary in a major US metro anymore after federal/state tax, social security, healthcare/misc. deduction. Add on top of 401(k) contribution and also monthly rent of 1K+ for rent in downtown (actually on the cheaper end of a 1BR apartment in NYC/Boston), you are down to literally peanuts. Boozing and eating out will literally have you living from month to month.

I heard that this is the case in China nowadays too. Boozing and going out to bars in China is dollar-by-dollar as expensive as the States. Real estate is sky-rocketing.

I looked into moving to China as well, your salary range looks comparable to the numbers I was told. But I'm not sure it 25K is even sustainable in Shenzhen. Perhaps cost of living there is lower than Shanghai, but my guess is that it's not that much lower as it's located in the Pearl River Delta.

There are actually two things that I found surprisingly expensive in Shenzhen: bars (1 beer = ~7$) and movie theaters (1 ticket = ~15$). But that's about it. Clothing (except Italian brands), food, beer, transportation, rent (although Shenzhen is a bit expensive for China), massage, Internet, mobile phone, hairdressers... are very cheap. 25K isn't my actual salary but I know some people here who live very comfortably on that salary. Anecdote: I just go a nice haircut for 1.50$.

May I ask how you received a visa to stay there? I looked into Thailand but axed the idea when I could only get a 30-day visitor visa.

Whereas Costa Rica lets you stay for 3 months before you need to cross the border to extend your visitor visa. And apparently obtaining a permanent residency isn't difficult if you can prove income from foreign sources.

Thailand has an education visa program - you need to be learning something for a minimum of 4 hours/week to qualify. Technically, it can be pretty much anything, but languages are popular. People do the visa run thing too - every sixty days I think.

Costa Rica sounds like a good destination - I may check that out one day.

Thailand is pretty relaxed. You can start a company with a thai friend who "hires" you and work there indefinitely. There are probably a few smart thais that already have that as a business. Property and companies must be majority thai owned, which may seem like it really sucks, but is actually pretty smart since keeps everything there significantly cheaper and more affordable for everybody.

Aren't you concerned that there seems to be a coup every second week blockading the airport and then every other week someone is arrested for accidentally insulting the King? I'd feel a little edgy living their as a foreigner!

There has only been one airport blockage in history and three "coups" this decade, which is just political factions of elites fighting with each other in the background. Life goes on as normal for most of thailand, no matter if there is coup going on or not. The king thing is really nothing to worry about, you'd have to be really stupid to get in trouble for that.

I worry about road traffic accidents and heart disease. You might like this book -

"The Culture of Fear: Why Americans Are Afraid of the Wrong Things"


how much does the condo rent cost you?

$900 p/m. Easy to cut back to $500 a month for a smaller place, or $300 to lose the view too, or $200 to lose the location too. You wouldn't want to go any lower than that though.

Where are you? You can get a nice 2 bedroom in phuket for $200.

Pattaya, I guess the rental market is diverse. I didn't care for Phuket much myself - a bit of a tourist trap I thought.

My annual spending in Atlanta, GA is about 30k/year. I honestly consider that to be a bit high. I've been eating too many meals at restaurants, and my monthly coffee budget (which isn't all coffee -- my preferred coffee shop also has great beer on tap) is creeping up over $200.

Hell, I'm getting by on $15,000 a year right now, and could make do with a lot less if I was living some place cheap. I eat well, sleep well, and live well. I don't fly first class, but it's not exactly killing me.

I quit my day job last year and began my ISV/web startup after I calculated I could live very comfortably in Costa Rica on $20,000 per year. I haven't made a full time move there quite yet though, I go there for the winter to surf and code.

    s/a nice Latin American country/Japan/;
    if($user == 'patio11') { 
      print "yes";
    # http://www.bingocardcreator.com/expenses/profitability-pie-chart

In case anybody wonders if that's for real, yes, Patrick has made all his expenses/profits/turnover figures public.

he has. He makes ~$30,000/year (before taxes). Not only is this not "rich", most people couldn't survive on it. It's even worse if you have a family.

I'd agree that's not rich, but plenty of people can and do survive on that.

Obviously it varies from area to area, but 35% of households in the US make under 30,000 a year. And that's not all just twenty-two year-olds fresh out of school.

The thing is, whenever this comes up on a tech site, software engineers don't realize how much money they really do make. If you look at the median household income anywhere, it's shockingly low. ( $38,000 in NYC? $60,000 in San Fran proper? )

I guarantee that if most people here looked at the median income in their region, their jaws would drop at the thought of families getting by on that. But somehow they are.

(Not that this has anything to do with FU money. It's just a pet peeve of mine whenever 'money needed to live' comes up in a group of highly-skilled highly-paid people, and they don't realize how good they have it.)

30k is the prefectural median income for a household w/o dependents. I assure you, this is survivable in Gifu.

The person I was replying to said

> I think I could get by on $30,000 a year

Also, most people couldn't survive? Seriously? I live on two thirds of this, and I'm putting money in the bank every month.

It is worse if you have a family, but then you have two incomes to play with.

> It is worse if you have a family, but then you have two incomes to play with.

Unless of course you have one or more young children in the house, in which case a good bit of time that you could spend on work goes towards taking care of the kids. Effectively that works out to about one full timer.

It's true. My own mom decided to be a stay-at-home one, and it certainly caused financial hardship.

But, at the risk of sounding callous... that's what happens when you make those choices.

I believe you can. Some rough estimates:

- 3 room house on nice neighborhood $150,000 USD

- A 2010 Toyota corolla. $15,000 USD.

- A maid visiting twice a week. $1,700 USD a year. (This is really nice!)

- Private school for kids $3,000 USD a year for each kid.

- Dinner for two twice a week. $3,100 USD a year.

Edit:fixed number formatting

$3,000 USD per year for a kid? That seems low. I think the private middle school by my house costs something like $12K a year.

I have similar ideas. I've gathered that Buenos Aires is nice, incidentally.

I'm not a fan of Buenos Aires personally, but you can visit there for cheap :) .

(I live in Montevideo, Uruguay which is quite close to Buenos Aires)

Why not BA? Curious why you say that.

If you're into Tango, or more bohemian, or from the US, you probably will like Buenos Aires.

But I see it much like I expect Canadians see the US: something like my home city (Montevideo), with both the good and (especially) the bad things magnified.

There are beautiful parts of Buenos Aires (I recommend Recoleta and Palermo), and lively parts of Buenos Aires (not my speciality :) ), and they're both nice.

You could get by on that in a "nice" latin american country.. but it won't go as far as you think.

I think the 'retire' desire is more of something that first-timers or non-wealthy (at some level) most aspire too. I've realized that it's more about getting comfortable to the point of being able to do things that you're passionate about, and being able to say no to the opposite, that's most important.

Agreed. while exiting one startup may not be enough to retire, its a pretty good start for plowing it into your next one.

I live in the Midwest, and I think I would have a hard time spending 200K a year. Maybe my idea of happiness is wrong?

Right or wrong is difficult to pin down but living in the Midwest isn't something that most of the developed world would aspire to.

You would be surprised.

I don't really get the obsession with wanting to be retired at 30. What would you do for the next 60 years? Honestly, the math here is pretty encouraging. If you're the founder of a company that makes a smallish exit, you've just freed up about 20 years of your life when you've only been alive for 30 years.

I'd be rather more worried about retiring at 65 when your 'contributions' have been locked away in some pension fund than if you sold your startup at 30 for a good chunk of cash.

Who knows, you might not even live that long, life is fickle.

While the math isn't glaringly erroneous, the assumptions used are.

For one thing, it's looking at nearly risk-free rates of return while assuming a long-term horizon. (30 year treasuries are paying 3.65% now.) Sure it's easy to point out during the worst financial crisis of the last 70+ years that the S&P has fared poorly over the last decade. However even now, in a time of relative disaster, over the last 50 years (the timeline we're looking at if we're retiring at 30 and dieing at 80) it's returned about 8.5%. (That's using this chart http://moneycentral.msn.com/investor/charts/chartdl.aspx?sym... and a little math). Average since the Great Depression is more like 10%. While many people now believe it will be lower going forward even the worst skeptics are talkinng more like 7-8%. I don't know that I buy it because, as the old joke goes, economists have predicted 9 out of the last 5 recessions, but even if so that's a vastly different picture than 4%, and excludes the fact that there are many investments with higher ROIs to be found readily if you're either willing to do more work or accept more risk.

That's not to mention, FU money doesn't have to mean a jet-setting lifestyle. It just means enough to do what you want. One could live very happily in most of America spending $100k/yr, including their home. That's actually quite a bit when you consider that you're not paying income taxes, just capital gains. It's like making $150k, or 3x the national average. With $4m this is achievable even at money market rates.

> There are too many mechanics out there to make sure that the folks taking the real risks (investors and founders) make the real money.

I resent this attitude, that somebody investing a fraction of their (somebody else's) money is taking the "real risk".

> There are too many mechanics out there to make sure that the folks taking the real risks (investors and founders) make the real money.

If a founder invests little to no money in the startup, what is the founder risking that someone working under her isn't? One could argue that employees are risking more - in hard times they are more likely to be out of a job.

I can't imagine needing $200k / year to live comfortably. I'd like to see this analysis performed with a $100k / year income. That is still very comfortable, especially if it means you can afford to live somewhere cheaper and cut a lot of your other expenses.

Open the spreadsheet link, File / MAke a copy, and enter in 100000$. Voila: it works, you never run out of money with the 4M$.

What startup entrepreneur would want to retire at 30?

One who wants to devote himself to philanthropic pursuits for marginal pay (or none at all)?

I don't think stock options have "zero" value. For a lot of people working on a salary it's hard to save money, so when a startup sells and an employee gets a sizable chunk of money from the sale, it's huge relative to their cash-flow perspective.

Except a liquidity event rarely happens. When they do, it's often a shell game for the investors to mask losses. The early stage employee's options are from the common pool; the investors get preferred options which are paid out first. Generally it's quite easy for the board to zero out employee options if things aren't going as well as hoped.

Many years ago, at the first company I worked for that IPO'd, I think I was something like employee number 30. Employee number 1 was a good friend of mine, and after the event we and a few others decided "I'll show you mine if you show me yours". Jewel was big at the time, total honesty was all the rage. Now I had made "a bit" of money on my stock options, not an amount to be sniffed at, but far from a life-changing amount. Think on the order of, a car, or a year's tuition, or an amazing vacation. What was shocking tho' is that we'd all made that much. We all had exactly the same options package.

Executives hired well after me, mere months before the IPO, were buying racehorses. Go figure.

Yeah. I've worked at a company where I was middling employee 250 but had the same number of options as important employee 8 simply because I was bros with the founder. I think hackers think the non-technical side of the business is going to be merit based and "fair" but that's generally not the case in my experience.

The difference here was 5-figures for the technical types who'd been there for years vs 7-figures or more for business types who'd been there for months. If nothing else it was a real eye opener into how the world really worked. Not that I'd had any illusions that I was going to retire there and then, mind. But still.

I believe they were "bros" with the VCs rather than the founders, tho'. The founders didn't do too badly but today, they aren't retired either...

I've heard the same argument about making interest-free loans to the US government so you can get a refund later. I don't buy it there, either.

The second major programming assignment I was given during my freshman year of college was a retirement calculator. Although the main goal of the assignment was to implement a interest compounding program, I believe my professor used this assignment to get us out of the get rich retire early mentality.

If I recall correctly, an average single person would need to save well over $1 million USD by retirement if they wanted to live comfortably for the next 10 years.

To play with the numbers yourself, File->Make a Copy.

My personal numbers: I upped cap gains to 30% since apparently that's coming. If I get a $4M check when I'm 20, I get $2.8M after taxes. At a $100k burn rate (leaving the investment yield and inflation at 5% and 3% respectively), I'm set 'til I'm 68.

I'm pretty happy with that. That gives me 48 years to angel invest, do another startup, marry someone who works and cuts my burn rate, etc.

Let me make sure I understand this: The supposition is that if you take your millions and put it in a money market account you're not going to earn enough interest to offset inflation? No kidding. How about putting your money into something that makes money at a much greater rate - like a business. Is your risk increased, sure. Is your potential profit considerably increased, absolutely.

It's interesting how the calculation is quite sensitive to your initial capital - if you start with 6.2 million then at age 70 you have about 4 million remaining. Which you then burn through in the next 7 years.

This is true! Instead I'm looking for a scenario where I wouldn't have to retire

As someone who just witnessed two non-founders of a startup that had a recent IPO become wealthy enough to retire -- B.S. You can do it with stock options (even without an IPO). Tony seems to be making a binary argument: it's not guaranteed, so you may as well give up on the idea.

Of course I'm doing it for the money. I'm also doing it for other reasons. Did someone die and tell Tony Wright that the world is only comprised of on/off states?

I couldn't agree with you more sabat, it isn't an either or scenario. I'm hoping for my first success to just be a springboard into more money making ventures.

A good point that I'd thought but not expressed! Who says any one startup experience will be your only one? If you like startups and the kind of people they attract, you'll want to spend some time in those kind of environments. It's not wham-bam-thank-you-startup.

You can also get your FU money playing the lottery. It's probably a better deal overall, since the odds are about the same and you don't have to pull any all-nighters to win the lotto.

The odds are nowhere near the same. Besides the raw odds -- obviously much better than the zillion-to-one odds on the lottery -- you can actually affect the outcome of your startup to some degree.

As an employee, you start out with such a small grant and have so little control over vesting conditions and dilution that participating in a liquidity event to that degree is essentially an act of charity on the part of the investors.

It depends on the company, your timing, and what terms you agree to (number of options, vesting period, ISO vs. Non-qual). If you're actually interested in doing well, you may need multiple startups, and the earlier the stage, the better. I know multiple people, including myself to some degree, who have done well as employees in startups.

And of course, you could always try to start your own -- multiple times as needed.

Depressing.... but,

Screw that. I want to retire rich at 23.

If you want to retire at 30 you're not the kind of person that can execute a startup and retire at 30.

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