[gumby]

> M&A is one of two ways a pot of gold happens.

I don't know what the second one he has in mind is; the some of the ones I know are:

1 - operate a profitable business that throws off a ton of cash (these can be huge, like Koch, Cargill, Aldi, and can make long term employees extremely, and privately, rich).

2 - sell part of your company to the public (IPO)

3 - sell the whole company (M&A)

4 - spin out or sell off a division (a kind of M&A)

One major disadvantage of 2-4 is that other people tend to hear about it.

[mjr00]

The second one the author had in mind is almost certainly IPO.

Your (1) isn't a pot of gold in the colloquial sense of "suddenly finding a life-changing amount of money". Running a profitable business is ideal, especially in a post-ZIRP world, but it almost never culminates in a single "all my hard work has paid off, I can take it easy now" moment like IPO or acquisition.

[gumby]

> Running a profitable business is ideal, especially in a post-ZIRP world, but it almost never culminates in a single "all my hard work has paid off, I can take it easy now" moment

That first time you pay yourself $20MM sure feels like that, and repurchasing from your employees or paying out large bonuses sure can for them too.

> like IPO or acquisition.

Have you been through either? "Take it easy now" is the opposite of what happens in an IPO -- you're now subject to the scrutiny of the financial press, SEC, and random shareholders when before you could send monthly updates to your board. And unless you avoided an earn-out in your acquisition, the slog just continues.

[bruce511]

agreed. I think IPO is the opposite of "take it easy" (gotta keep that stock price up quarter by quarter.)

acquisition is also "long term". Usually there's months involved before hand, and months, if not years, hitting targets after acquisition to actually get the fully agreed-to payout.

Equally, sure, I agree, there's seldom a "can take it easy" moment running a profitable business, but over the same sort of time frames as IPO and acquisition you can certainly "wake up" and realize that all that hard work is now paying off. Once a company is in the black, for multiple years, and has accumulated "large enough" reserves, and you're not putting out fires three times a week, it can certainly feel like retirement (financial independence) is getting closer...

[paulddraper]

#1 is not a pot of gold, rather a stream of gold.

The authors' two options are #2 or #3 (or #4 which is a smaller #3).

I would classify a true third option as private fundraising with secondary sales.

[fairity]

> One major disadvantage of 2-4 is that other people tend to hear about it

I don’t doubt this, but I’m curious: why do you see the publicity as a disadvantage?

[gumby]

Why on earth would you want to let someone know that you had a big payout? It's none of anybody else's business how much money I have and if nobody knows you can walk downtown in peace, go to restaurants, hang out with your same friends, and still have lovely ski or yacht holidays in peace.

The Bay Area and Seattle have quite a few "unknown" billionares. For example if you had less than 5% of Microsoft when it IPOd you were not listed in the S-1, and if you hung on by the mid 90s you could have been worth 8-9 figures.

[koolba]

> … if you hung on by the mid 90s you could have been worth 8-9 figures.

To not diversify a concentrated wealth of 8+ figures takes some serious diamond hands.

[fairity]

> Why on earth would you want to let someone know that you had a big payout?

One reason is that it can help attract talent & useful connections. If you're a known billionaire, I imagine it's pretty easy to get a meeting with anyone, which could lead to educational & enriching conversations that you otherwise wouldn't have access to.

I'm curious if there's information from ppl who've experienced this type of publicity, where they thoughtfully evaluate the pros & cons, and evaluate how they net out.

[throwup238]

A parasite’s best chance of survival is to avoid discovery.

[gumby]

Running a profitable business with happy customers is parasitical? I thought that was for PE and hedge fund clowns.

[mcmcmc]

The concept of profit itself means you are beating the market by taking advantage of someone else or extracting value through arbitrage. In a perfectly competitive market with zero barriers to entry, profit margins will converge on zero as new entrants capture market share or competitors leave overcrowded markets.

Edit: this is classical economic philosophy, not my personal opinion

https://en.m.wikipedia.org/wiki/Profit_(economics)

[greenhexagon]

This is more like, a gross oversimplification of the first chapter of a freshman intro to economics.

This is to economics what "assume the cow is a perfect sphere moving on a frictionless surface without wind resistance" type of problem is to physics.

In the real world, profit absolutely does not correspond to "taking advantage" or "extracting value through arbitrage".

[mcmcmc]

Just because you dislike it doesn’t mean it’s not a useful framework. And yes, it does come up in first year econ classes, as well as in advanced courses that study the history of economic thought. If you bothered to read the linked page or do your own research on “economic profit” you would realize that the “normal profit” you’re thinking of is a distinct subject.

Edit: also keep in mind that literally all of economics up until relatively recently relied on broad assumptions like the rational consumer. Kepler thought the sun was the center of the universe, does that invalidate his laws of planetary movement?

[paulddraper]

"On a long enough timeline, survival rate drops to 0%."