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A reader provided some very interesting feedback on the Paul Graham essay on how people get rich. As a refresher, PG looked at the original Forbes 400 list in 1982, and noticed that the big sources were inheritance, oil, and real estate. Today, finance and especially technology are better-represented. But, as this reader notes:

In hindsight, the high oil prices of that era look like a blip on any long term chart, as do the low equity prices. A quick google search shows that market cap/gdp back then was 0.3, vs. 2.0 today, and as of 1980, 6 of the 8 highest market cap companies were oil (a lot of Standard Oil progeny behind IBM and AT&T). I think you can basically map back how much that would distort a list ranking who had the highest wealth - the magnitude we're talking about here is huge.

And especially:

He also says that most of the new entrants on the list are founders, which is not what you would expect with power laws. Since the biggest companies are 10x or 100x more valuable than the next tier, you would expect a lot more early employees and investors from super successful companies and fewer founders from the next tier. More Steve Ballmers, if you will. That might just be a measurement problem - I think it's always been known that these lists miss a lot of anonymous Omaha residents, and so maybe it misses a lot of very rich people that don't hit an SEC disclosure requirement - but if not, that would be interesting.

This is a very interesting point! If there's such a strong power law distribution for company returns, why don't we see more cofounders, employee-#1s, and ultra-early angels on the lists? We do see some, but not many. One possible reason is that founding and investing skills correlate—two of Google's earliest investors did not get rich investing in Google, but got rich by co-founding Sun Microsystems and Amazon, respectively.


Open Thread