Thread by @dunkhippo33

Some Friday thoughts on Why Some Ppl Make So Much Money??

(and some thoughts on solving wealth inequality)...

1) First, let's go back to the ancient days. For much of the 1800s and 1900s, there was limited technology. Human-work directly turned into product or service outputs.

2) If I were say in a factory, and I made widgets, my salary would be tied to the sale of those widgets. And even assuming those widgets sold like hotcakes, if I could hand-make 1 widget/hr, my hourly wage COULD NOT BE MORE than the price of that widget. Right?

Makes sense.

3) In other words, most of our workforce in the old days could not get leverage on their time. The way to make more money back then was to put in more time.

4) In the 1900s you later saw women joining the workforce in greater #s so that households could earn more. And in the last couple of decades, we've seen people take on mulitple jobs -- i.e. put in more hours, so they can earn more.

5) Fast forward to today. Today, you see differences in people's ability to leverage their time into money. And a lot of that is through technology and automation. Let's say we start a SaaS company that makes marketing automation software for hippos. And we charge $5/month.

5b) In the beginning, that isn't very interesting. We are probably just barely making ends meet. We're making $5/hour and we probably have only a handful of clients...

5c) But if this software starts selling like hotcakes, then all of a sudden, with just one person or a very small team, we can leverage our time into a product that millions or even billions of people can use with a low cost structure. This is an amazing leverage of time!

5d) All of a sudden our effective hourly rate might be $1000/hr if enough ppl use this software!

6) This ability to get leverage on time isn't just limited to software entrepreneurs, though. The reason Google employees get paid so much is that their work directly translates into products that billions of people use and pay for (via ads or directly).

6b) Not all tech companies are equal -- working at one tech company may pay a LOT more because your time put into
their product may have a much bigger impact on revenue than your time spent at another company.

6c) This is (just one reason) why salaries in tech for the same role vary so much. It's NOT about your skillset. It's about the leverage of your time.

7) And it's not just about being an engr. You see influencers who make videos, or write blogs who can get leverage on their time too.

The 10 hours it takes to make a video can be watched by 10m ppl or by 10 ppl. The effective salary will differ a LOT for the same type of work.

8) In contrast, there are still a lot of jobs that do not allow you to get leverage on your time. If I am cutting hair, I can only cut hair for X num of ppl per hr and charge an upperbound of $Y. I have no leverage on my time.

I will not be able to increase my $$ by much.

9) As a quick aside, the only way to get leverage on your time with these bounded hourly jobs is to take savings and invest (but this is a topic for another day).

10) Also, bounded hourly jobs aren't limited to physical labor. This applies to all hourly workers. Drs. Lawyers. Consultants. Etc. They all charge by the hour & also cannot get leverage on their time. Their hourly rates are really high, so no one feels sorry for them.

10b) And it's high, because the supply of qualified people is low. Not everyone can go to medical school. Not everyone can pass the bar. But these rates are still bounded, and someday, we may see significant disruption here.

10c) In the "old" days, my parents would say things like "Study hard so you can become a dr!" But this was in a world where most people could not get leverage on their time, and so being paid "more" per hour was the way to make more money. This is not the world we live in anymore

11) Now, we are in a weird dichotomy, where most of the population still cannot get leverage on their time, which means their wages will be capped. But as discussed, some people can. And technology has largely enabled that.

12) This new way to get wealth in this world - to not have an upper bound value on your time. It will be about amassing an audience you can scale things or services to & finding something you are uniquely way better at than others (coding or unboxing videos - it doesn't matter)

13) These are the skills that will succeed in the future. Not college. Not becoming a consultant. We're going to see disruption of a lot of industries in the years to come, & where you want to sit is where you can leverage your time to be UNBOUNDED in value and be useful to lots

14) But part of the problem in going through this transition, & why the country has unrest is not everyone has access or the ability to be able to switch to a career where they can get leverage on their time.

14b) If you have 5 gig jobs right now, you don't have time or financial buffer to be able to learn online marketing or experiment w/ YouTube videos.

15) And usually, there's risk that is involved, because in the beginning of any new endeavor, you're not going to have 10M ppl following you on YouTube or 100k ppl on your newsletter. So, you won't see a lot of results in the beginning.

16) We talk about gender diversity & racial diversity in areas like tech & startups - those are important - but the one that almost NO ONE talks about is socioeconomic diversity. It's hard to start making a switch without some buffer. It's easier for rich ppl to make this switch.

17) For all of these reasons, the rich get richer -- they have buffer to start new endeavors. They can invest in others taking on these new scaled endeavors. If you have no money, you can't do any of these things.

18) But getting leverage on your time is precisely what EVERYONE needs to be thinking about -- how can we as a society move everyone to that state?

19) This isn't meant to be a political post, but for these reasons, I'm a huge supporter of gov-based safety nets that will allow more people to take risk & switch into a leveraged job vs a capped hourly job. This is too big of a problem the private sector can tackle.

20) TL;DR:

Contrary to popular belief, getting wealth is not about having a programming job. Or where you went to school.

It's entirely about getting leverage on your time.

And everyone should be thinking about doing things that allow them to earn uncapped income per hour.