Absolute wealth, relative wealth, taxes, and staying rich

how to get rich and stay rich

Above a certain amount of assets, wealth is extremely relative.

The goods that most people consume have fairly fixed prices. Some go up 1-10% per year. Some go down 1-10% per year. The prices of the goods and the basket of those goods are fairly predictable.

For most people, wealth is absolute. It is not really about keeping up with the Joneses … it is about keeping your head above water and doing everything possible for your family to have a normal life.

But once your assets cross a certain threshold, almost all your spending is relative to the Joneses. The amount of absolute wealth no longer matters — what matters is the amount of wealth relative to your peers.

Most goods that cater to the wealthy (high-end real estate, charitable giving naming rights, art, buying 10% of a YC company, etc.) are extremely relative. And most really wealthy people are trying to protect their status — their biggest worry is a new class of people getting richer than them fast.

For the super wealthy, the easiest way for them to protect their wealth is to raise taxes. The higher the taxes, the easier it is for wealthy people to maintain their status and to stop pesky outsiders from usurping them.

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Harnessing tension within companies

Companies and orgs can promote and thrive from tension

All companies have tension.

There are at least two axes where tension resides:

  • Long-term vs Short-term projects.
  • Doing things right vs doing things fast.

This tension exists within a company, between departments, within a department, and even between cofounders. This tension is very healthy and often propels companies to succeed greater than they would without the tension.

Let’s dive in.

Doing things right vs doing things fast

This is the classic tension that many companies, especially start-ups, think about. Every individual has a personality trait that has them fall somewhere along the axis.

Mark Zuckerberg’s famous line “move fast and break things” was Facebook’s motto for its first ten years (2004-2014). Moving fast and putting out new features is why Facebook was so successful. But in 2014, Facebook decided to move on the axis from “doing things fast” to “doing things right” and Zuckerberg changed the motto to the less-catchy “Move Fast With Stable Infra.” That change is representative of the tension that exists within companies … and also the evolvement of all companies.

Most venture-backed start-ups err on doing things fast verses doing things right. Moving fast is the main advantage of a small organization because all large organizations move rather slowly. So one of the best vectors to compete against more entrenched incumbents is speed.

In my piece “Pace, Tempo, Speed, and OODA loops” I lead off with the quote from Jeff Bezos: “Being wrong might hurt you a bit, but being slow will kill you.”

The best strategy for larger organizations is to pick a small number of really important things to do — and make sure those things are done right. A great example of “do things right” strategy is Apple … but even Apple also needs to care about speed.

Even within companies, there is a LOT of tension between doings things fast and doing things right. If you were 100% on one side or the other, the company would almost surely fail.

Cofounders themselves can have conflict. I’ve seen successful start-ups with two cofounders where one has a “fast” personality and the other has a “right” personality. I’ve seen successful start-ups where both cofounders have “fast” personalities. Curiously — I have never seen a successful start-up where both founders have a “right” personality — those have always failed. In the end, speed wins for start-ups.

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