Bootstrapped Founder #83: Entrepreneurship, Job Security, and Wealth Creation

Dear founder,

If you prefer listening over reading, you can listen to this episode of The Bootstrapped Founder on my podcast.

Being a founder is hard. It's a well-known trope in the business world that giving up a comfortable job with a reliable salary is a risky move.

Whenever I talk about how entrepreneurship is a desirable way of creating wealth, I find someone responding that "some people just prefer security over risk." It's all about personal preference along one particular line: the debate around "entrepreneurship versus employment" is often framed as "opportunity versus security."

But is that really the case? How much security can you find in a position of employment? And how insecure is the life of an entrepreneur?

Now, this isn't going to be yet another attack on employment by a founder who thinks they know better. I don't intend to convince anyone who doesn't want to be a founder to take up entrepreneurship. Every path is valid; every choice is happening within the unique context of a person's life. Instead of telling you how you should make this choice for yourself, I'll share which choices lead me to my opinion on two particular issues.

What I want to talk about are the concepts of job security and wealth creation.

I used to believe that having a job was providing stability in my life. I've held several positions in many companies. I've been a freelancer and a consultant for many years. In addition to that, I've built a few companies and successfully sold one of them.

In retrospect, I think I was never in as unstable a position as I was when I was an employee. I perceived the monthly paycheck to be a reliable source of income. I just had to show up every day of the workweek, produce software, and the money would keep rolling in.

Yet, I used up most of that money to pay my rent, eat, and keep up my not-so-exciting-yet-still-somewhat-expensive lifestyle. At the end of the month, I didn't have much left to put away for savings.

I was living from paycheck to paycheck, and I didn't even know how dangerous that was. I thought I'd quickly find another job anyway should I lose my current one, so I made no precautions. I had a few months of expenses saved up, but by far not enough to sustain me for long.

I never considered the situation I was in as an employee until I became a founder. As a salaried software engineer, I had no say over what I was working on. That's alright if you like your work, and I did, so it didn't appear to me as a problem. In fact, I enjoyed being given new challenges every few weeks. Engineers are problem-solvers, and when presented with a fresh problem, we get all excited.

But here's the thing: whatever value I created, I didn't get compensated for. I got paid for my time and my presence. I didn't build anything valuable for myself; I built lasting value for other people exclusively.

Employment is great because workers are usually protected. Centuries of abusive business practices lead to worker protection regulation. Health insurance is often partially paid by the employer, and they pay into social security systems. You have the right to compensation if you get terminated, and you get paid sick days and vacation. Depending on the country you're in, this can actually be quite comfortable.

Still, here's the catch: your income is entirely dependant on maintaining this relationship. And no matter how well-protected you are by the law, you are on the weaker side of a well-established power dynamic. You get paid as long as you don't mess up while your employer (and all other stakeholders) get to benefit from anything you create — and they get to tell you what to work on.

This is a fair deal, of course. Employers carry a lot of risk and responsibilities while employees work on limited-scope projects within a business. You bind yourself legally to the authority and supervision of a company in exchange for a guaranteed income.

Even when things go south, you'll be protected.

I consider this working in a position with a capped downside. It can "only get so bad." Unless you screw up majorly, you're going to have a soft landing with enough time to find another path forward. For tech workers, in particular, there are usually enough job openings to quickly find a similar position at another company.

But with that limited downside comes a limited upside. Whatever you create during your work — and often enough, during your free time as well — belongs to your employer. Any future gains from that are theirs, and theirs alone.

You don't own your work. Whatever wealth it creates isn't yours to keep.

Entrepreneurship removes those limitations.

Starting a business removes the capped upside, particularly when you're an indie founder. Whatever you create, if it appreciates in value, that value is yours to capture. If you build a business with thousands of customers over a few years, you can choose to sell it for life-changing amounts of money, and that money — after taxes — is all yours. If you're an employee at a business that doesn't offer stock options, you won't see anything in case of such a liquidity event.

Entrepreneurship means ownership. Whatever upside your business creates, you'll benefit from it. Fully.

So what about the capped downside? Well, that vanishes too. If you start a business, you're now the person who takes enormous risks. You put your own money into the business, and you spend your precious time working on it. Instead of going to work at 9 a.m. and tuning out at 4 p.m., you'll constantly be thinking about your company. Any work-life balance you had before needs to be severely revamped. Thankfully, experienced founders like Adii Pienaar have provided frameworks on building a business that works for you, but it will still be a noticeable change.

The cushion will be gone. If your business fails, you won't continue to get paid for a month. There is no severance package. If your money is gone, it's gone.

That's a pretty bleak scenario, but I mention it because it happens. People are going through this right now.

But they keep struggling. They keep working on their business because they have seen reversals of fortune unfold. Stories like the implosion, rebirth, and sustainable growth of Gumroad motivate thousands of founders to give it another go every day.

These founders know that the future upside of having a sustainable business is worth the struggle.

I've been reading The Infinite Game by Simon Sinek recently. It draws a line between the games we play to win and the games we play to stay in the game.

Finite games have known rules, known competitors, and when there are winners, there are losers as well. The more I think about it, the more do I consider employment a series of finite games. Get that job before the others do. Reach that bonus. Climb that next step of your career ladder. Beat your peers to a promotion. When you're employed, you make choices that further your own goals before anyone else's.

Entrepreneurship is an infinite game. You're not trying to win at business. You're trying to build a business that can thrive without you. Being a founder means creating something that is meant to outlast you. You focus on how you can serve others, which then serves you. When you're a founder, you make choices that empower others and help them reach their goals.

One thing that I have seen happening more and more over the last few years is that these founders are building a public founder brand in public. They do this because they understand that no matter where the business goes — up, down, or sideways —, having a reputation as an expert entrepreneur is an opportunity generator. That's infinite game thinking.

If their business fails, they'll still have their followers, many of which are eager to help out, be it by offering them jobs, freelancing gigs, or even becoming collaborators and customers of their next ventures.

A personal founder brand transcends the lifetime of a business. That is the closest thing to a capped downside that an entrepreneur can hope for.

Entrepreneurship is a risky endeavor. But so is having a job — just differently. It isn't a trade between security and opportunity: it's trading limited upside and downside against unlimited upside and downside.

I believe that the conversations about risk and entrepreneurship and employment should shift away from "risky versus safe." A more nuanced view would be looking at the limitations affecting your potential for generating wealth for yourself. Maybe "job security" is a mirage; we should be looking at "wealth security."

In a world where decade-long careers that include reliable income progression schemes are becoming ever rarer, you can't rely on a job being the vehicle towards personal wealth. Jumping between jobs and doing freelance work on the side are becoming the new normal for many workers in all sorts of industries. But all value they create — after being compensated for their time — goes to someone else.

At the same time, bootstrapped businesses are becoming easier to start. With almost infinite amounts of niche markets looking for solutions to their critical problems, side projects have plenty of opportunities to grow into sustainable self-funded businesses over time.

You don't need to choose between employment and entrepreneurship either. Moonlighting, the practice of building a side-project while you're still employed, is a very feasible way of building value and wealth on the side. Just make sure your employer allows this. When Danielle and I started our SaaS FeedbackPanda in 2017, we didn't quit our jobs until we saw solid traction and revenue from our side-project in early 2018.

It's a good idea to transition into entrepreneurship slowly. But don't listen to me, take it from Dolly Parton: the true magic happens from 5 to 9.

I don't think entrepreneurship is for everyone. You don't have to build a business to live a fulfilled life. But I do believe that everyone should at least consider it, maybe even try it at least once. It's a great learning opportunity, and might just be the foundation for a self-directed, financially secure future.

Thank you for reading this week's edition of The Bootstrapped Founder. If you like what I wrote about, please forward the newsletter to anyone you think would enjoy it too.

You can find my book Zero to Sold at zerotosoldbook.com. It is being sold on Amazon, Audible, and Gumroad.

If you want to help me share my thoughts and ideas with the world, please share this episode of the newsletter on Twitter or wherever you like, or reach out on Twitter at @arvidkahl.

See you next week!

Warm Regards from Berlin,

Arvid