Original question from Quora:
Do you have to start your own company to become a millionaire?
I would say that starting your own company to become a millionaire is a myth. However, I would say that starting your own company improves your odds of becoming a millionaire, though for reasons you might not expect.
You see, starting a business is a terrible recipe for getting rich, but working in a traditional corporate, small business, or government job is an even worse recipe.
The truth is, there is no “beautiful” recipe to getting rich or making a million dollars. Sure, there are principles, and they improve your odds, and yet those who are wealthy often have trouble replicating their success don’t they?
Look at Shark Tank, you have 5 great business people who invest in companies, and at best they are guessing about which company they invest in will succeed. Even what they hail as a “great investment” can turn out to be a lot of smoke and mirrors.
Even a Shark can’t escape the 80/20 law where the majority of their profits come from a handful of investments.
So, back to starting a businesss…
You can become a millionaire by working at someone else’s company and it’s not difficult if you have a smart system working for you. For example, you could become a lawyer and work at a law firm where you pull back as much as $160,000 if you land a gig at a top firm.
If you were smart, you would live on a fraction of that and save at least 10–20% and never touch it. If you added $15,000 a year and got a 5% compound rate, you’d be a millionaire in 30 years.
Realistically, a lawyer could get to a million dollars even faster if they are smart in two ways. If you figure out how to make $160,000 a year, you can probably figure out how to raise that to $250,000 or even higher. I’m sure some lawyers are making in the 7 figure range.
I have no idea what the top end for a lawyer or a doctor is, but in those fields you can work for someone and still make a ton of money. Also in those fields, working for yourself is potentially even more lucrative.
But making a lot of money is not the same as having a lot of money and that brings us to the second point…
Becoming a millionaire is about how much you keep, not how much you earn. By definition a millionaire is someone who has a million dollars, ideally in liquid assets.
The way that most people get to being a millionaire is a smart combination of making a lot of money and keeping a lot of money.
Those who spend a lot of money don’t often end up millionaires, despite having large houses, fancy cars, private school educations, and so on. It is easy to spend your riches away and that’s why fools blowing their riches have been cautionary tales since the dawn of time itself.
Now, if you notice my example of becoming a millionaire employee is as a high paid professional. I say that for good reason. You are more likely to end up with a lot of money being a high paid professional person than you are as a lower end wage slave.
I know, that isn’t fun news, but it’s honest. If you are making $30,000 a year and living like everybody around you, spending as fast as you get it, you aren’t going to end up with a million dollars. The math doesn’t work in your favor.
Oh, and joining a startup is often a pretty terrible way to make a million dollars too. It’s possible that stock options can end up being worth a lot, but most of the time they aren’t worth anything at all in 95% of cases. Just because you hear about Facebook millionaires or Google billionaires doesn’t mean that a startup is easy money. It isn’t.
All of this is to say that no matter how you look at being an employee, it’s hard to end up really rich unless you get paid at the top end of the spectrum for long enough in your career to store up money.
And if you don’t have the skill of saving money, you won’t end up with much no matter how much you make.
Now what about starting your own company? Surely that is easier, right?
Well, yes I would say your odds improve of getting rich if you are running your own show by starting your own business or other similar type of venture.
But the reason that starting a business (or band, or other type of bootstrapped adventures turning nothing into something) is that you gain so many skills and abilities and experiences that you don’t get unless you start a business.
For example, imagine you are an accountant at a large corporation. Money comes in, money goes out, and you keep track. That is a useful and necessary function of a business.
However, how does the money come in? Where does your paycheck come from?
A business creator learns very quickly they must sell or they don’t have a business. Period.
Even a hamburger stand requires salesmanship. Even a band has to figure out how land gigs. It’s not magic.
If you build it, nothing happens. You have to sell whatever you build.
Once you are able to sell, you learn another wonderful thing. There is no limit to how much money you can make.
Seriously, I write books and sell them as an independent self-published author. Nobody else sells my books for me. I have to.
What is cool is nobody is saying I can only sell 1 or 10 books a day. I could sell millions of books a year potentially.
Knowing that is an incredibly powerful perspective. The better I get at writing and selling, the more I can sell. The more I sell, the more likely I am to end up wealthy right?
Now, at the moment I’m not wealthy and I don’t have a million dollars. I don’t sell a million books and I’m not mentioned alongside Stephen King or J.K. Rowling as a bestselling author…
And yet, I sold more books this year than I did last year. I am getting better at writing and selling every day.
Years from now I will be selling many, many more books than I sell now. If I do this long enough I might become a millionaire one day.
My approach is to improve my odds by learning and growing every day towards greater success and prosperity in all that I do. If I add even a little more value today than I did yesterday, eventually I’ll have a giant snowball rolling downhill.
And even if I don’t get rich, I still end up more valuable today than I was yesterday, more valuable tomorrow than today.
P.S. I unpack more ideas in Creative Genius.