Paul GrahamVerified account

What’s an easier path to wealth? PATH 1: VENTURE STARTUP - 95% chance of $0 - Tiny personal income while building startup until IPO/scale - Massive dilution (most founders end up owning 5-15%). $1BN market cap = $50-$150MM for founder. OR...

It's a fallacy to think that the fact that x% of startups fail implies that your probability of failing is x%. It's more a reflection of the distribution of ability among the people who start them.

80% of drivers think they are a better than average drivers... I’m talking to everyone, not YC cream of the crop. Even then, what is YC’s success rate? Huge respect for what you’ve built, but I assume failure rate is very high even at the top.

Talking to everyone, though, is not the same as talking to the median person. The advice to the median person should definitely be: do not start a startup. But advice to everyone should be: few are suited for it, but for those who are, the expected value is high.

What % of the startups you fund fail (acquihire/shut-down/cant pay back investment) at YC? Even the cream of the crop founders selected by YC fail at a very high rate.

Maybe 3/4. But the phrase "cream of the crop" is misleading, because YC deliberately casts a wide net. Early stage, mistakenly rejecting a startup is way worse than mistakenly accepting one.

But you have to recognize that realistically they are the most earnest, push the hardest, and are very smart. And yet, that failure rate. I’m in no way arguing with your model. It makes perfect sense. I’m simply saying compounding profits is a safer path to wealth.

I agree with you that it's a safer path. It would be surprising if a path with lower returns didn't also have lower risk. All I'm saying is that for some people, the less safe path is optimal. And indeed, for some people the even safer path of working for someone else is.