Limiting Yourself
The goal should never be material comfort, only optionality. The goal, even for those who aspire to wealth should never be amassing wealth, only the opportunities to become wealthier.
Much has been written about the idea of “golden handcuffs.” The inexorable increase in lifestyle as adulthood unfolds and the financial obligations to which we become beholden create the trappings of wealth, but often bar further progress.
Optimization
Optimization is a simple enough idea—find the best solution, given an objective and some constraints. The devil is in the details. First, the choice of objective is rarely easy, especially in the game of life. Are we optimizing for wealth, happiness, or longevity? What about the wealth, happiness, and longevity of offspring? Secondly, the enumeration of constraints deceives with its simplicity (cannot spend more than you earn, cannot procreate without proper mating habits, cannot influence any personal goals after one’s death, etc).
Perhaps all is not as simple as imagined -are the constraints above, in a world of credit cards and cryonics, truly binding?
Regardless, perceiving a constraint eliminates possibilities.1 If you believe that you cannot live without a seven-figure home in an affluent suburb and two luxury vehicles in the garage, then unquestionably, there are avenues open to others, but closed to you.
Philosophy
Opportunity often presents itself in the form of a short-term cost. Famously, we point to examples of tech billionaires who dropped out of college or eschewed university education altogether. We also romanticize artists who eschew stable employment in favor of their own creative processes. We rarely glamorize the opposite behavior patterns, even when the outcome is some traditional definition of success.
Imagine, in a hypothetical scenario, you are presented with a job offer that presents every desirable attribute of which you could conceive. From the role, to the product, to the team, to the culture, to the geography, every box is checked.
Now imagine that role requires a 20% decrease in base salary.
Are you prepared to take that job? Or do you feel trapped in a position where making such a decision would be irresponsible?
Aspiration
Job performance is often contingent upon interest and motivation. Wouldn’t a role that aligns with preferences and aspirations maximize personal performance? Wouldn’t that role help optimize for happiness (and by extension, health)? Wouldn’t such a role ultimately produce a higher probability of personal success and subsequently, promotions, compensation, and fulfillment?
More depressingly, wouldn’t the need to reluctantly, begrudgingly, turn down such an offer be demotivating? Wouldn’t it require a certain internal admission that the short-term cost is one you are unwilling or unable to pay? Wouldn’t you then become increasingly cynical and narrowly (read: financially) motivated at work to maintain the lifestyle you chose not to compromise?
This is, sadly, all too common among the professional class.
Prestige
We all have standards for ourselves with respect to wealth—material baselines below which we would be deeply unhappy or uncomfortable. Perhaps I am perfectly content without a luxury sedan, but not without indoor plumbing.
We also have standards for our own personal prestige. The increasingly vicious bloodsport that is the college admissions process is fed by the desire of parents and children alike to attain the status conferred by praise of those around them.
That primal urge is then fed by an assortment of prestigious internships, name-brand employment, MBAs, and senior titles.
Again, this becomes a constraint, eliminating high-potential, high-upside alternatives. As a point of comparison, who among the most notable billionaire moguls holds an MBA?2
Baselines
We all have baselines of material wealth and social prestige. Before we have reached them, our pursuit fixates our efforts upon reaching the necessary thresholds. They later become the constraints that bind our choices.
Those with the lowest baselines are empowered to act on the widest array of opportunities.
The FAANG employee whose lifestyle crumbles without an upper-echelon salary and whose prestige baseline is unmet without the name recognition of a well-known employer has, paradoxically, fewer options, despite the material comfort.
The person of simple tastes, capable of living comfortably on a manageable fraction of their salary, not overleveraged, and generally unconcerned with external perceptions is, in a truer sense, free.
Ironically, but unsurprisingly, it is that individual who might land upon the startup with a trajectory bound for the stratosphere. It is that individual whose creativity and productive potential is most likely to be realized. It is this person who can follow where passion leads.
The FAANG employee is more likely to live in a comfortable suburban home with the trappings of material success by 35. Who is more likely to be fulfilled?
College and Startups
Bryan Caplan’s “The Case Against Education” argues that universities are much ado about signaling, and that elite institutions yield stellar outcomes as a result of who they accept rather than what they confer upon those who matriculate.3
At AE, we hire plenty of developers and designers without college degrees. Once we verify their excellence (we check if they have the potential to be 10x devs, not 10x term paper writers), we integrate them with extraordinary developers and data scientists on Experimental Skunkworks projects before they begin Primetime Skunkworks and work for clients. We intentionally hire people whose baseline for prestige is clearly lower than the average tech employee.
At AE, we hire former founders who, rather than accept material comfort from a larger employer, would prefer to maintain their founder mentality. In doing so, we’ve hired people whose baseline for material wealth is clearly lower than the average tech employee.
In turn, these people are free to pursue human agency, and develop internal Skunkworks projects with extraordinary long-term potential for themselves, AE, and end-users, without the short-term reassurance of immediate remuneration.
Some of these Skunkworks projects are quite lucrative—we just sold one for six million and a pile of equity.4 Our equity plan ensures that we all partake in the potential reward.
Lower baselines mean fewer constraints. Fewer constraints mean a larger feasible region (more options, for those of you who didn’t sit in optimization classes). A larger feasible region means a better solution.
Those with ambition who are unconstrained in the short-term by a need for wealth, in the long-term, will be wealthier. They will be able to pursue high-upside investments and employment that the over-leveraged suburbanite must eschew.
Those with aptitude who are unconstrained in the short-term by a need for status and prestige, are more likely to become founders themselves. They will try their own hand at founding rather than allow someone else to take the risk on their behalf and then hire them to a senior management role.
Don’t limit yourself. Lower your baselines - the long tail rewards those who do.
1 In the parlance of optimization, we would describe this as diminishing the “feasible region.”
2 Admittedly, some. 11 of the top 100 to be precise. Ironically, Steve Ballmer was convinced by Bill Gates to drop out of Stanford’s MBA program to join Microsoft in 1980. That worked out well enough for him.
3 The argument, distilled, is that students who attend elite institutions are already outliers in terms of intellectual aptitude, conscientiousness, ambition, motivation, etc…this is how they compose the resume that earned their admissions. Comparing these students to those who attended “state schools” is inapt. The proper comparison is students who were admitted to elite institutions, but nonetheless attended a state school against students who attended an elite institution. In this comparison, the difference in outcome is minimal. In other words, you are the secret ingredient, not the school. If you have the ability to get into Harvard, whether or not you attend Harvard is unlikely to matter.
4 And we continue to build and plan for exponentially-larger outcomes in the future - this is, as with many things, only the beginning.
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