- Y Combinator co-founder Paul Graham wrote an essay in 2004 on how to get rich.
- The advice is ultra-beneficial even for those who aren’t interested in dabbling in the startup world.
- To become a rock star wherever you work, Graham wrote that you have to have measurement and leverage.
A year before Paul Graham co-founded the esteemed startup accelerator and venture capital firm Y Combinator, he wrote about how to become wildly rich.
The essay was written in 2004, but the advice remains sound for those looking to succeed in or outside of the startup world.
Graham, a prolific investor, boils success in the workplace down to two concepts.
“I think everyone who gets rich by their own efforts will be found to be in a situation with measurement and leverage,” Graham wrote. “Everyone I can think of does: CEOs, movie stars, hedge fund managers, professional athletes.”
Measurement means, simply, that your individual contributions can be measured. And leverage means you contribute something unique to the company that renders you irreplaceable.
“An example of a job with both measurement and leverage would be lead actor in a movie,” Graham wrote. “Your performance can be measured in the gross of the movie. And you have leverage in the sense that your performance can make or break it.”
Here’s what that means for anyone who isn’t Brad Pitt.
Make sure you can measure your contributions
It’s the same advice that career coaches give before you start negotiating your salary or writing your résumé: match what you do with the numbers that prove you do it well.
That, however, is not usually easy. Graham wrote:
“Unfortunately, companies can’t pay everyone like salesmen. Salesmen work alone. Most employees’ work is tangled together. Suppose a company makes some kind of consumer gadget. The engineers build a reliable gadget with all kinds of new features; the industrial designers design a beautiful case for it; and then the marketing people convince everyone that it’s something they’ve got to have. How do you know how much of the gadget’s sales are due to each group’s efforts? Or, for that matter, how much is due to the creators of past gadgets that gave the company a reputation for quality? There’s no way to untangle all their contributions. Even if you could read the minds of the consumers, you’d find these factors were all blurred together.”
He advocates that folks join a startup, or a company with 10 people or fewer, to make their accomplishments clearly seen.
But that’s not always necessary. You can often “untangle” your own contributions to a company’s overall success.
Think of a few key metrics that quantify your performance – how much you’ve generated in sales, how much money you’ve saved the company with certain decisions or solutions, or the number of book proposals you edit in a week. Then, work with your boss as you set benchmarks to push those numbers ever higher.
Even if you can quantify what you contribute to a company, it’s also crucial to make sure that that thing is something only you can produce. As Graham writes:
“Measurement alone is not enough. An example of a job with measurement but not leverage is doing piecework in a sweatshop. Your performance is measured and you get paid accordingly, but you have no scope for decisions. The only decision you get to make is how fast you work, and that can probably only increase your earnings by a factor of two or three.”
He adds, “You have to have leverage, in the sense that the decisions you make have a big effect.”
If you suddenly stopped selling, coding, or writing, would anything about your company change? Or could you be replaced? Leverage means that you’re a changemaker in your company and that your choices and contributions alter its brand.
Graham said leverage also usually comes along with “the possibility of failure.”
Take Graham’s own background as the co-founder of Y Combinator. The seed fund has invested in hundreds of companies that you’ve never heard of, and dozens that don’t even exist anymore.
But he’s also led investments into Reddit, Airbnb, Dropbox, Quora, Instacart, and a bunch of other companies that are worth billions.
“Upside must be balanced by downside, so if there is big potential for gain there must also be a terrifying possibility of loss,” Graham wrote. “If you’re in a job that feels safe, you are not going to get rich, because if there is no danger there is almost certainly no leverage.”