I Create Wealth

When I was in college back in the mid-80's, I was faced with a decision: choose between becoming a software engineer or a musician. If I chose software engineer I faced 3 more years of difficult classes and I was already having a hard time keeping my computer science grades up where they needed to be. Choosing music would be the much easier path for me for a variety of reasons. I ultimately chose the former based on a desire to eat -- I knew that as a musician I was good, but not good enough to make a good living as a performer, but as a teacher (the next most likely result) I would not likely make nearly as much money as I could by working for the likes of IBM. Clearly, I chose well.

I really had no idea what I was thinking though. I had data that told me that software engineers were paid more than high school band directors, but I didn't really understand why.

I ran across this essay by Paul Graham some years ago and it has always stuck with me. It's a lengthy discussion about wealth creation and startup companies. It's very well thought out and I think it comes from many years of thought on Mr. Graham's part. To me, the nut of the essay is the definition of wealth itself: "stuff people want." Wealth is not money. Wealth can be embodied in any number of things from art, trees, and barns full of hay, to intangible things such as knowledge or a skill. If you have a shed full of buggy whips in an age where the horse and buggy provide most transportation, then you are wealthy i.e. you have stuff that people want. If you make another buggy whip, you become more wealthy and no one is made poorer in the process. When the automobile is invented you almost instantly lose your wealth because you no longer have stuff people want. With knowledge, or a skill, if you know how to mend a broken bone, you will always be able to exchange that knowledge for money. But when everyone can do that for themselves, your knowledge becomes worthless and your wealth vanishes. Wealth is "stuff people want" ... and people want software to improve their lives more than they want music teachers (this is not an argument to devalue music teachers -- rather, it is an argument about how integral software has become in our lives).

Most of the time, producing the stuff that people want requires large amounts of investment for equipment and raw materials. Or it may take many years of specialized training and a great deal of marketing in a crowded marketplace. But with software, there are virtually no raw materials and all it takes is a good computer, and a quiet, dark, room.

Every day, in a comfortable environment (be it an office or lab, your own home, or even on the beach), a software engineer can create wealth and sell it. The cost of production is the time it takes to create the first copy. After that, there is virtually no cost to make more copies to sell. The cost of delivery can be next to nothing as well. The only real limitations are your imagination and your work ethic.

The business often attracts libertarian folks because it offers a chance to exercise free choice in a meritocracy where the rewards are generally based on who brings the best products to market (where best is defined as most popular). If you don't have an idea of your own, you can offer to implement someone else's idea. Very often, the most successful ventures are the partnerships between a visionary (the idea man) and the technician who brings the idea to life. While there is certainly an element of luck involved, the key to success often just boils down to understanding the market and knowing (or guessing) what it is that people want. Create that and you've created wealth ... by definition.

For me, I can't think of a better business to be in.