Why business owners get rich (or very poor)

By on October 30, 2010 10:28:27 PM from JoeUser Forums JoeUser Forums

Draginol

Join Date 03/2001
+102

So as some of you know, I recently built a big house. And by big I mean ridiculously, offensively big.

Naturally, the class warfare people have come out of the woodwork in certain circles to complain.

Do I need such a large house? Nope.

Then why?

Because I wanted it. It was one of the personal objectives I had set out for back when I started my business.

But doesn’t such an extravagant display of wealth merely demonstrate how unfair our system is? Sure, I may have worked very hard for 20 years to achieve this level of financial success but so have plenty of other people. I work with people who have worked their tails off over the years. Why me and not them?

One word: Risk.

A guy starts a business. He needs seed capital so he gets a $100,000 loan on his house. He hires a guy and pays him $50,000 a year. At the end of the year, his business has failed and he has to sell his house and move to an apartment. The guy still got his $50k but the owner is out of a house. 

9 out of 10 times, that, or something like that, is what happens.

Over the 20 years I’ve run a business, I’ve made a lot of calculated risks. Usually they pay off. Sometimes they don’t.  When the OS/2 market tanked in the mid 90s I nearly lost everything. It was a scary time.  It was a very close call. I could have ended up with 7 years of crazy amounts of work with nothing to show for it. I would have lost my house and had no retirement. My wife, young son, and I would have had nothing.

Most businesses fail. But such failings are so common that we don’t tend to notice them as much as we do the guy who gets the big house.

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October 30, 2010 11:01:27 PM from Stardock Forums Stardock Forums

I've read that building a big house and laying off workers are two of the important things you can do to acheive happiness, especially if you can manage to do them both at once.

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October 30, 2010 11:10:41 PM from JoeUser Forums JoeUser Forums

Cute.

The two aren't really connected.  For instance, the house I built took 4 years to construct.  It was "paid for" long ago.  

Though, even if it hadn't been paid for long ago, it would still be irrelevant. Jobs exist to achieve an objective. If a given product fails to make $X then you have to look at cutting costs in the area of that project. Otherwise, you're just delaying the inevitable.

The minute you start treating job creation as charity you start down a slippery slope.   

 

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October 31, 2010 12:04:30 AM from Stardock Forums Stardock Forums

Yeah but if the reason the given product failed to make $X is that the CEO kept insisting that the product would be market-ready by launch date in spite of all the beta-testers suggesting that it might not be, then laying people off doesn't really address the root cause of the issue.  By the way, how good do you think the AI was when Elemental launched?

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October 31, 2010 12:08:21 AM from JoeUser Forums JoeUser Forums

I noted with interest the recent brouhaha about Google paying so little in US taxes.  The general drift, even in conservative circles, was that it was somehow wrong.  Lots of sentiment in response that we should do something to punish Google or somehow force them to pay their 'fair share'.  Even Drudge gave it a demonizing headline.  Like they were bad for making money & using a strategy to minimize taxes.

Completely assbackwards way to look at the 'problem' if you ask me.  We should be asking ourselves what is our government doing wrong that incentivizes companies like Google to go to all the convoluted trouble they go to to minimize those taxes.  There is a reason they do - there is a healthy return on that investment.  The government should eliminate (or at least drastically reduce) corporate taxes and remove those incentives so that those investments are redirected to productive activity & keeping jobs here.

We have a media culture that considers success a bad thing, unless it's their success, of course, or the success of their designated 'Worthies', and characterizes any others' success as somehow obscene.

I say more power to you and may there be, by the grace of God, many more like you.  We need to do more to advocate a culture of success, which, contrary to liberal ideology, is not the same thing as greed.

Congrats on taking that risk, winning the bet and realizing your dreams.

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October 31, 2010 12:51:31 AM from JoeUser Forums JoeUser Forums

Quoting Maxpower179,
Yeah but if the reason the given product failed to make $X is that the CEO kept insisting that the product would be market-ready by launch date in spite of all the beta-testers suggesting that it might not be, then laying people off doesn't really address the root cause of the issue.  By the way, how good do you think the AI was when Elemental launched?

There's a number of misconceptions here.  

First, you are making the mistake of ignoring the distinction between a business owner and a CEO. They aren't necessarily the same.  In my case, they are the same but it's an important distinction which I'll talk about in a minute.

Second, you assume that CEOs make decisions in isolation which is not how things work.  I'm not going to rehash the particulars of Elemental but let's assume for the sake of argument that it is 100% my fault that project lost money (which it didn't incidentally, it just isn't going to be enough to fund two projects at once).  As the owner, I still decide how I want to use my capital -- hire people, invest it in a house, buy jewels, what have you.

The owner yells at the CEO. The CEO would yell at the President. The President would yell at the VP of QA, the Director of Publishing and the Director of the Games Unit, the Games unit director would yell at the PM, and on and on and on.  Publicly, the buck stops at the CEO and that is as much as the public gets. You still get some numbnuts who thinks that the CEO personally programmed the whole game or should be making shipping decisions based on forum users with a month+ old build versus the consensus of dev/qa/publishing.  But that's a different topic.

Ultimately, the business owner still decides what he wants to do with his money. For the sake of argument, let's say the house wasn't already built. The owner still would have to decide whether to cut the budget on the house thereby resulting in the layoffs of workers on the house or cut the budget on the software business thereby resulting in the layoffs of workers at the software company. No matter how you slice it, someone is going to get laid off.

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October 31, 2010 12:53:19 AM from JoeUser Forums JoeUser Forums

Quoting Daiwa,
I noted with interest the recent brouhaha about Google paying so little in US taxes.  The general drift, even in conservative circles, was that it was somehow wrong.  Lots of sentiment in response that we should do something to punish Google or somehow force them to pay their 'fair share'.  Even Drudge gave it a demonizing headline.  Like they were bad for making money & using a strategy to minimize taxes.

Completely assbackwards way to look at the 'problem' if you ask me.  We should be asking ourselves what is our government doing wrong that incentivizes companies like Google to go to all the convoluted trouble they go to to minimize those taxes.  There is a reason they do - there is a healthy return on that investment.  The government should eliminate (or at least drastically reduce) corporate taxes and remove those incentives so that those investments are redirected to productive activity & keeping jobs here.

We have a media culture that considers success a bad thing, unless it's their success, of course, or the success of their designated 'Worthies', and characterizes any others' success as somehow obscene.

I say more power to you and may there be, by the grace of God, many more like you.  We need to do more to advocate a culture of success, which, contrary to liberal ideology, is not the same thing as greed.

Congrats on taking that risk, winning the bet and realizing your dreams.

Thanks and I agree.  People don't realize sometimes that money is a tool, nothing more. The purpose of having a business is to generate money to use for other purposes (such as building a nice house or going on a trip to Tahiti or constructing a gold plated rocket car).

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October 31, 2010 2:36:09 AM from JoeUser Forums JoeUser Forums
John Carmack.
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October 31, 2010 11:22:10 PM from Stardock Forums Stardock Forums

Quoting Draginol,

Thanks and I agree.  People don't realize sometimes that money is a tool, nothing more. The purpose of having a business is to generate money to use for other purposes (such as building a nice house or going on a trip to Tahiti or constructing a gold plated rocket car).

As I understand it, Google later clarified it to be a small number of their taxes, not all that much.

I may not agree with the pay scale in America but I certainly respect the work people do to earn it.

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November 4, 2010 2:17:36 PM from Stardock Forums Stardock Forums

You mentioned the guy you paid $50k to  - but then did not mention that all that "money" that went into the "house" - most of it was in the form of wages to people.  If you add up the raw materials of the house, the amount is ridiculously small in comparison to the total price.

So you did more for America by building a big house than Obama has done in 2 years and most politicians do in a life time.

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November 6, 2010 11:09:56 PM from Stardock Forums Stardock Forums

Indeed.  It is interesting to see guys like "Max Power" complain how I spent my capital. As if one group of people are more worthy than another.

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November 7, 2010 1:09:45 AM from Stardock Forums Stardock Forums

Quoting Draginol,
Indeed.  It is interesting to see guys like "Max Power" complain how I spent my capital. As if one group of people are more worthy than another.

Yeah.  The Elemental launch was...messy.  I'm sure we can all agree on that at this point.  You'll be seeing people complain in various fashions for a while.

And now, I'm going to go back to being invisible.

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November 7, 2010 1:50:38 AM from Stardock Forums Stardock Forums

You go Draginol.

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November 7, 2010 1:33:32 PM from Stardock Forums Stardock Forums

Yeah.  The Elemental launch was...messy.  I'm sure we can all agree on that at this point.  You'll be seeing people complain in various fashions for a while.

As the CEO I looked at what went wrong and took steps to address it. But there is nothing constructive about endlessly self-flagellating on the issue. I think the "fandom" has had their pound of flesh at this point. At the end of the day, it's a video game. 

 

 

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November 8, 2010 9:54:28 AM from Stardock Forums Stardock Forums

That's true, but this is the internet.  Some people never let things go.

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