4 Jan 2013 davidw   » (Master)

The Software Millionaire Next Door

I've been reading "The Millionaire Next Door" and have so far found it to be a pleasant book with a good message: don't waste your money on silly things and appearance (fancy suits, fancy cars, expensive boats, etc...), save what you do earn consistently and constantly, invest wisely, and so on.   Wikipedia has a good summary:


http://en.wikipedia.org/wiki/The_Millionaire_Next_Door

One of the things I like about it is that it focuses on "ordinary" wealthy people, those with a million or more in the bank, but not the Warren Buffets or Bill Gates types that are extreme statistical outliers.  There are plenty of people in the US who have done well by themselves by slowly but surely putting together enough money to be financially independent, without, however, being in the spotlight.   As the book says, these are the kind of people who maybe own a local chain of businesses doing something fairly ordinary, but doing it well enough to succeed.  They may very well not live in a fancy house, nor drive an expensive car, or otherwise outwardly draw much attention to themselves.

The world of software does not revolve around "dressing for success" (you noticed?), but we do tend to focus on the "big winners".  Gates, Jobs, Zuckerberg, Larry & Sergey, Larry Ellison, and so on are the stars of the show.  Of course, the economics of software being what they are, instances of winner-take-all markets with one big fish and a lot of also-rans are not uncommon.   However, that is not the only story, and I think it'd be interesting to know more about those in our industry who have accumulated significant wealth, yet are not the guys with more money than they could possibly ever spend on things that aren't, say, country-sized chunks of real-estate.

I'm guessing they'd fall into these categories:

  • Highly paid workers who have consistently saved over the years.  There are examples in the aforementioned book about people with relatively low salaries who happened to be very frugal and invest well (and have had some luck in their investments too).  These people would probably tend to be older, as it takes a while to save up that kind of money, and since this industry is so young with so much turnover, I would not think there would be a lot of people out there like this, but who knows, maybe there are a bunch of IBMers with this kind of story.
  • Those who got in on the right IPO, like Google or Facebook or something like that.  These events not only generate billions for those at the top of the heap, but for the right person at the right place at the right time, can mean significant wealth even without being in the upper echelons of the company.  My suspicion is that this kind of IPO, where everyone cashes out, is not common enough to have a lot of people in this category, but who knows, maybe it adds up over the years.
  • Those who own or started software firms that do something that's not very visible, but nonetheless dominates some particular niche.  This is where I'd guess most of them would be, but I certainly have no data or even anecdotes to back this up.

It'd be very interesting to gather some actual data on this, although I'm not in a position to do so myself - I wouldn't even really know where to start. 

As I age, I think the third category has begun to seem appealing in many ways - I'm simply not cut out for the Big Company life, and I'm not interested in living in Silicon Valley and going "all in" on the latest startup - I already did that, and while it was fun and I don't regret it, it's not the kind of thing I'd want to do now that I'm married and have kids.   Incidentally, this more relaxed, under the radar approach is exactly what is expoused in one of my favorite books of the past few years, Start Small, Stay Small.

Edit : I finished reading the book and reviewed it here: http://davids-book-reviews.blogspot.com/

Syndicated 2013-01-04 21:55:33 (Updated 2013-01-14 22:23:44) from David's Computer Stuff Journal

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