The problem in these types of discussions is the general conflation between income and wealth.
In the US, most people are taught from a young age that they should strive for high-income, high-status jobs (engineer, doctor, lawyer). Yet that was the path to success 50 years ago, not today. As the article mentions, you can have a huge income while still having lots of debt, being unable to afford a home, etc. - especially if you live somewhere with a huge cost of living, like the Bay Area.
When you are reliant on income, your money scales linearly with the effort and/or time that you put into your labor. (Actually, sub-linearly - the company you work for captures the majority of the value.)
Conversely, to become wealthy, you must build ownership in something. Then, your money accumulates exponentially as a function of your labor input.
One of the most successful people I know worked manual labor jobs, bought a small HVAC business, scaled it up, and now has contracts with most office buildings in one of the largest cities in the US. He is richer than 99% of FAANG engineers.
You can do this by buying index funds, too. That's sorta the whole idea.
> He is richer than 99% of FAANG engineers
Would he be richer than 99% of FAANG engineers who lived the same lifestyle he did during those years and invested the savings in a standard diversified portfolio?
Possibly, but remember, investing in a diversified portfolio doesn't have the same risk profile as starting an HVAC business.
This is essentially an example of survivorship bias. How many people starting HVAC businesses just go out of business within 5 years instead?
It's not much different than a FAANG engineer buying a bunch of Apple stock in 1998. They could have immense wealth or have gone bust if Apple had gone bankrupt as was the most likely outcome at the time.
But with a diversified portfolio we know the outcome, about a 5-10% gain per year over a long-ish period.
You're right, my point is that a saving-focused FAANG engineer (SFFE) likely has a better risk-adjusted path to wealth as a "worker" than the "ownership" path described by 'gringoDan.
An SFFE who was similarly "lucky" with a high variance approach (in their case, by eg, investing in AAPL at the right time) like the anecdotal HVAC businessman would be much wealthier.
Not the gp, but I'd think: maybe, maybe not, simply because he did and they did not. Like, I have the skillset and connections required to build a reasonably successful company. I'd very likely be better off than I am right now if I did. I just don't feel like it. So at the end I'm nowhere close to where my friends who did are.
In the US, most people are taught from a young age that they should strive for high-income, high-status jobs (engineer, doctor, lawyer). Yet that was the path to success 50 years ago, not today. As the article mentions, you can have a huge income while still having lots of debt, being unable to afford a home, etc. - especially if you live somewhere with a huge cost of living, like the Bay Area.
When you are reliant on income, your money scales linearly with the effort and/or time that you put into your labor. (Actually, sub-linearly - the company you work for captures the majority of the value.)
Conversely, to become wealthy, you must build ownership in something. Then, your money accumulates exponentially as a function of your labor input.
One of the most successful people I know worked manual labor jobs, bought a small HVAC business, scaled it up, and now has contracts with most office buildings in one of the largest cities in the US. He is richer than 99% of FAANG engineers.
https://twitter.com/naval/status/1002103360646823936