Why ‘Living Below Your Means’ Is One Key To Success & Happiness
$0 per year. That’s what my business partner and I decided that we wanted in salary from our newest venture fund. Or at least it was the resulting impact of declining to take additional capital from our investors and commit our own dollars instead. Now, my salary doesn’t go to zero overnight because we’re still drawing down historical management fees but it’s all downhill from here as those income streams taper and end.
Many of my industry colleagues shared that they too would like to pursue the model we chose but they didn’t have the capacity to do so yet. In many cases this was kind of a bullshit answer to be honest. What they really meant was that they enjoyed a lifestyle that was built around fees in addition to profit sharing, had a high personal burn rate, and were risk averse to putting more of their capital in the game. It might seem like I’m shitting on those folks, but actually it’s perfectly sane set of decisions (VCs are generally risk averse, that’s why they’re usually not founders)! But these same folks should be honest with themselves about their priorities because if they wanted to do what Satya and I did, they could!
It all brings me back to Sam Altman’s tweet from a few years back:
Look, I realize this whole post is about rarified air — I’m not talking about the majority of the population who aren’t afforded these ‘decisions’ and who deserve more of a social safety net (including childcare!) so they can make longterm decisions that improve their lives. But I am aiming at early career tech workers and mid career executives who tell me they want to join a startup but are addicted to that FAANG salary+bonus+RSU. Again, nothing wrong with this career path if you want. The surest way to become a millionaire is to join Google and stay there for a decade.
But if you want to prioritize the act of starting a company, or impacting an early one in a big way, you should expect to take a near-term pay cut. It’s no longer always ramen-levels (many early stage startups pay 50th-80th percentile of BigCo tech salaries — FAANG pay multiples of this), but if you can’t imagine earning less for a few years to make more later, then realize you’re limiting your choices.
Low burn rate isn’t just about being able to leave a higher paying job it also lets you walk away from a bad employment situation in general— the freedom to quit a shitty company.
Nice things are nice. Life should be enjoyed in ways that are meaningful to you. But the more you spend on rents, mortgages, lifestyles, etc the more wedded you are to choices you made in the past and not options you want to preserve for the future.