Which professions are paid too much given their value to society?

Many jobs have spillover effects on the rest of society. For instance, the value of new treatments discovered by biomedical researchers is far greater than what they or their employers get paid, so they have positive spillovers. Other jobs have negative spillovers, such as those that generate pollution.

A forthcoming paper, by economists at UPenn and Yale, reports a survey of the economic literature on these spillover benefits for the 11 highest-earning professions.

There’s very little literature, so all these estimates are very, very uncertain, and should be not be taken literally. But it’s interesting reading – it represents a survey of what economists think they know about this topic, and it’s surprisingly little.

Here are the bottom lines – see more detail on the estimates below. (Note that we already discussed an older version of this paper, but the estimates have been updated since then.)

We calculated mean income for 2005 in an earlier article. We increased income by 30% to account for nominal wage growth since then.

The paper uses the expressions spillover and ‘externality’. An ‘externality’ is a technical term for a ‘cost or benefit that affects a party who did not choose to incur that cost or benefit.’ The authors of the paper call it an ‘externality’ when someone who buys a service does (or does not) benefit after taking account of the cost of purchasing it. This is a nonstandard usage,

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Doing good through for-profits: Wave and financial tech

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Get the rest of our series on doing good through start-ups by signing up to our newsletter.

Wave is one of the most high potential social impact for-profit startups we’re aware of, and it was co-founded by someone in our effective altruism community – Lincoln Quirk. Wave allows immigrants to send money from North America to relatives in Kenya, Uganda, Tanzania and Ethiopia with much lower fees than if they used Western Union or MoneyGram. (Though Wave existing is nothing to do with 80,000 Hours, someone we recently coached chose to work for Wave and help them expand into the UK.)

Why is Wave such an important company? Previously, if immigrants wanted to send remittances, they had to use Western Union or MoneyGram. Both the sender and receiver would have to go to a physical outlet to make the transfer, and worst of all, the sender would have to pay 10% in transfer costs! Lincoln Quirk and his cofounder Drew Durbin have built software that allows instant transfers from a mobile phone in the US or Canada to a mobile phone in Eastern Africa or Ethiopia – and they only charge 3%, a saving of 7%.

For each dollar of revenue that they make, they are saving $2.33 for someone in the world’s poorest countries. Assuming a 20% profit margin, the figure is $12 in savings for each $1 of profit.

The potential positive impact of this idea is huge.

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Podcast with Ben West, who expects to donate tens of millions for charity through tech entrepreneurship

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I recently interviewed Ben West (second to left), the founder of Health eFilings. After reading 80,000 Hours’ website, Ben entered tech entrepreneurship – from software engineering – in order to ‘earn to give’. Amazingly, Ben pledged to donate any money he made above the minimum wage. His company helps American physicians file paperwork with the US government, and collect ‘performance based pay’, much more easily. Several other 80,000 Hours alumni have ended up working in his company. You can read a summary of the key points from the interview below.

Summary of the interview

  • Ben West was influenced by Peter Singer’s work when he was young to start donating his income. Four years ago he was a software engineer donating to New Harvest, a meat substitute organisation.
  • He spent almost a decade at a large healthcare IT company, which helped to prepare him for what he’s doing now. He doesn’t think he could have successfully started this company without having experience in the health IT sector first.
  • He learned about 80,000 Hours through a link on the blog Overcoming Bias. Reading our work on entrepreneurship made him willing to consider starting his own business despite the fact that he’s risk averse by nature. He then spoke with some other well-informed people, including Carl Shulman (who volunteered for 80,000 Hours in the early days), who gave him more information about what the path involved.

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One of the most exciting new effective altruist organisations: An interview with David Goldberg of the Founders Pledge

It’s my pleasure to introduce David Goldberg to those who in the effective altruism community who don’t yet know him. He’s behind the Founders Pledge, which in just 8 months has raised $64 million in legally binding pledges of equity, is growing fast, and has got some very exciting (but currently confidential) plans in the works. I met him when I was representing 80,000 Hours at the Founders Forum conference earlier this year and introduced him in more depth to the idea of effective altruism, which he’s now built into the core of the Founders Pledge’s mission.

Tell us about your background

I did my undergraduate work at UCLA in Political Science and Public Policy and then continued with postgraduate study at the University of Cambridge focusing on International Relations. My plan was to get a PhD and then stay in academics and shape International Security policy. However a year in, I realised that the practical impact of my work would be marginal at best, so I finished with a Master’s degree and began to look for opportunities that would actually have a discernible effect on the world. I got involved with Founders Forum For Good — the precursor to what I do now with the Founders Pledge — where I focused on helping social entrepreneurs build and scale businesses. Before all that, I spent a couple years in finance in the US, started and sold a business in Europe, and ran a chain of Segway dealerships in California.

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Take the growth approach to evaluating startup non-profits, not the marginal approach

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In its first 2 years, Google made no revenue. Did this indicate it was a bad idea to invest or work there?

We spent the summer in Y Combinator, and one of the main things we learned about is how Y Combinator identifies the best startups. What we learned made me worry that many in the effective altruism community are taking the wrong approach to evaluating startup non-profits.

In summary, I’ll argue:

  1. There’s two broad approaches to assessing projects – the marginal cost-effectiveness approach and the growth approach.
  2. The community today often wrongly applies the marginal approach to fast growing startups.
  3. This means we’re supporting the wrong projects and not investing enough in growth.

At the end I’ll give some guidelines on how to use the growth approach to evaluate non-profits.

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How to start a career in technology (even if you studied art)

80,000 Hours: Oxford recently hosted a panel on tech careers, co-hosted with Codelaborate, featuring four people who did arts degrees but ended up working in tech and loving their jobs.

The panel included:

  • Matt Clifford – studied Ancient History at Cambridge before doing a degree at MIT, worked in strategy consulting but quit to start Entrepreneur First
  • Jackson Gabbard – studied English at a small college in the US but was one of the first engineers at Facebook London
  • Nabeel Qureshi – studied PPE at Oxford, worked in consultancy but now works at startup GoCardless
  • Steven Shingler – studied double bass at the Royal College of Music in London, but now works at Google as an engineer.

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Learn to code in 16 weeks for free in the UK at Founders and Coders

Introduction

Ben Clifford

Are you interested in doing something like App Academy to learn to program, but in the UK? Makers Academy is often thought to be the best option, and we’ve had good reports from one of our members. But it costs £8,000. What about doing something similar for free?

In this interview, Ben Clifford – another member who changed his career due to 80,000 Hours – tells us about a free alternative called Founders and Coders. Ben recently went through the course, and is currently working at a startup in London.

If interested, you can apply here. the deadline for the next round is on Friday.

Summary of main points:

  • Founders and Coders is a free coding program based in London.
  • The course aims to make people full stack javascript developers in 16 weeks.
  • The biggest benefits of doing a coding course are providing structure and tackling motivation problems.
  • The weakest point of Founders and Coders is links to employers but Ben thinks this would not stop determined students can get jobs.
  • The most important thing for getting a place is commitment to becoming a software developer. Being motivated to do good in your career also improves your chances.
  • Applications for January close on Friday 12th December. You can attend taster days by supporting their Indiegogo campaign.

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What I learned quitting my job to found a tech startup

Ben West

I’ve been earning to give as a software developer for the past several years, and it started to become clear that I could make more money in a different job. But I was torn between a finance career which put my math skills to use and founding a company where I might achieve the vocational equivalent of winning the lottery.

I eventually decided to pursue entrepreneurship because I thought it would better build career capital, i.e. it would prepare me for a wider variety of future careers. After four months of running a company that idea still doesn’t seem completely idiotic, but it doesn’t seem completely true either.

I’ve encountered several people who are in similar positions, so I’d like to give an overview of my motivations (particularly the ones which haven’t been discussed here before), how I went about my career change, and of course how I should’ve gone about my career change. Optimizing for one narrow career path is a bad idea, so I hope this post is useful to everyone, not just potential entrepreneurs.

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The payoff and probability of obtaining venture capital

Venture capital has facilitated the growth of many companies including Apple, Google and Facebook. But is venture capital a key to success for most startups? In this post, we answer three component questions:

  1. What are the likely outcomes for companies backed by venture capital?

  2. What fraction of companies attract venture capital?

    a) How many startups and venture capital deals are there?

    b) What proportion of applicants to venture capitalists say they accept?

  3. How much work is it to apply for venture capital?

We found that:

  • According to the data of Professors Hall and Woodward, the average venture capital-backed founder exits with $5.8 million of equity.

  • Roughly 1% of companies that aspire to obtain venture capital obtain it.

  • Finding out whether you will receive venture capital can take months to years of work.

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How much do Y Combinator founders earn?

Paul Graham

Introduction

We’re interested in estimating how much tech entrepreneurs earn, since it’s one of our top recommended careers, and this is in part because it seems particularly high earning (enabling high donations, and potentially indicating the creation of a lot economic value). As part of this, we wanted to find out: if you can get into Y Combinator, how much will you earn? We’re particularly interested in Y Combinator because it’s the best known seed accelerator, and the data is available. In summary, here’s what we found:

  • The total value of Y Combinator companies is $26 billion, of which the founders own $8 billion.
  • Most of the returns have gone to a tiny minority of super-successes. The founders of AirBnB, Dropbox and Stripe are worth about US$7 billion, about 80% of all founders’ equity, although they account for 0.5% of the companies.
  • Outside of the most successful companies, it was still possible to earn significant returns. 12% of companies from the first five years of Y Combinator are now worth US$40 million or more, and a further 10% have sold for US$5-40 million. The remainder probably earned little more than their (low) salaries.
  • On average, founders from the first five years of Y Combinator are now worth US$18 million after 5-9 years, giving past average earnings of US$2.5 million per year
  • When it invests in its companies, Y Combinator values them at US$1.7 million, of which each founding team owns $1.6 million. This implies that founders must earn (in cash or equity) substantially more than $100,000 per year on average.
  • We expect the average earnings going forward to be less than $2.5 million per founder per year because of competitors to Y Combinator and regression to the mean.
  • Y Combinator accept 2.5% of applications.
  • Your personal expected earnings from applying to Y Combinator depend on your chance of being accepted and your chance of creating the next AirBnB or Dropbox.

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Biographies of Top Entrepreneurs

Lots of the people we coach want to know how to become a successful technological entrepreneur. One approach to this difficult question is to assess which unusual traits are common among the most successful tech entrepreneurs. In this post, we review the biographies of the ten richest tech entrepreneurs. Here is what we found:

  • All attended American Universities, though only half graduated (3 to start companies but 2 dropped out before they started their companies), and none have postgraduate qualifications.

  • 8 of the 10 entrepreneur’s Wikipedia page had stories or achievements demonstrating exceptional tech skills or interest in technology. (Azim Premji (Wipro) and Lawrence Ellison (Oracle)) are the only two whose Wikipedia pages do not demonstrate exceptional talent/interest in tech.

  • Fewer demonstrated early interest in business – Jeff Bezos and Michael Dell being the only exceptions

  • Only three took a job after finishing university and before starting a company.

    • Jeff Bezos, worked in multiple computer science-related jobs

    • Larry Ellison, worked for a data company while developing his product

    • Paul Allen, worked in programming before starting Microsoft

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Interview with Matt Gibb

Introduction

Matt Gibb has been involved with 80,000 Hours since its inception. Early on, he was influenced by the idea of earning to give and has been pursuing this for the last few years through entrepreneurship. When we spoke to him he was focussed on a company dropkic.kr at the startup incubator Betaspring. With dropkic.kr, Matt has tied himself and his co-founders to the mast by adding a legally binding agreement to the company charter to donate ? of any proceeds they from selling their stake to GiveWell or Giving What We Can recommended charities.

Charitable Contributions. Each Founder hereby agrees that, upon the earlier to occur of a Sale of the Company or a Transfer of all Company Securities held by such Founder (such time, the “Charitable Contribution Trigger”), such Founder shall contribute not less than one-third (1/3) of such Founder’s Aggregate Proceeds (measured as of, and after giving effect to any amounts received by such Founder as a result of, such Sale of the Company or Transfer) (such amount, the “Charitable Contribution Amount”), to one or more global health-related charities as may be recognized by givingwhatwecan.org and givewell.org or any similar or successor research organization; provided, however, that each Founder shall be entitled to deduct from such Charitable Contribution Amount, on a dollar-for-dollar basis, the amount of any and all global health-related charitable donations made by such Founder from and after the date hereof and prior to such Charitable Contribution Trigger. (emphasis added)

He has some experience as a successful entrepreneur, having co founded Promo Push Ltd. in 2010 an electronic dance music promotion company, now servicing 250,000 customers including Sony Music and a subsidiary of Universal music. We talked to him about his experience in tech entrepreneurship and his views on getting into it for those just starting out. What follows is a edited and reworked version of the interview.

Summary of Matt’s points

  • The best way to learn what you need in order to make a successful startup is by trying, so the best path into entrepreneurship is to aim to start as soon as possible.
  • For those interested in entrepreneurship web startups are a good option because they are the cheapest to start, but the startup costs of new businesses in physical products is dropping rapidly.
  • When starting out as an entrepreneur it is much more important to focus on execution than the idea, because it is unlikely the idea you end up with will be the same one you started with.
  • The demand for technical skills in backend or frontend development outsrips supply in the startup world, so they are very valuable skills to learn if you want to become an entrepreneur.

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Assessing the social value produced by founding Google

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80,000 Hours has outlined some reasons tech entrepreneurship could be a particularly promising career path. One relevant factor is that the technology sector is a candidate for a sector of the economy that produces significantly more social value than its total earnings. Some reasons for this are:

  • Anecdotally, people report that they benefit substantially more from certain technologies than they pay for them. For example, Google provides services to Google users at the very low cost of unobtrusive advertisements, and Google users benefit substantially relative to this cost.

  • Technological innovation has been a large driver of economic growth, and economic growth helps people who haven’t been born yet, who don’t pay for past technological innovation.

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In which career can you make the most difference?

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Introduction

Previously, we introduced a way to assess career opportunities in terms of their potential for positive impact, but which careers actually do best on these criteria? In this post, we’ll apply an adapted version of this framework to some career paths that seem particularly promising for recent graduates. Using what we’ve learned over the past two years of research and coaching over 100 people, we’ll provide a ranked list of options.

Summary

  • If you’re looking to build career capital, consider entrepreneurship, consulting or an economics PhD.
  • If you’re looking to pursue earning to give, consider high-end finance, tech entrepreneurship, law, consulting and medicine. These careers are all high-earning in part due to being highly demanding. Our impression is that software engineering, being an actuary and dentistry are somewhat less demanding but also highly paid.
  • If you’d like to make an impact more directly, consider party politics, founding effective non-profits, working inside international organisations, government or foundations to improve them, and doing valuable academic research.
  • If you’d like to advocate for effective causes, consider party politics, journalism, and working in international organisations, policy-oriented civil service or foundations.
  • Some career paths that look promising overall are: tech entrepreneurship, consulting, party politics, founding effective non-profits and working in international organisations.
  • Some paths we think are promising but are largely neglected by our members and would like to learn more about are: party politics, working in international organisations, being a program manager at a foundation, journalism, policy-oriented civil service and marketing.

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Careers advice from top tech entrepreneur Marc Andreessen

We just came across a series of four careers advice posts by Marc Andreessen (hat tip, Satvik Beri).

We’re always on the look out for thoughtful careers advice from very successful individuals aimed at people looking to make a big impact – we think it’s one of the best sources of careers advice, and we think these posts qualify. Andressen co-authored Mosaic (the first web browser), founded Netscape, and then led a successful career in venture capital.

The advice is particularly orientated towards people who want to enter the technology industry, which we think is a particularly promising path to social impact.

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Live Q&A in Oxford with Dame Stephanie Shirley

Introduction

We recently held a public Q&A with Dame “Steve” Shirley at our Oxford student group.

In the talk, Dame Stephanie filled us in on her fascinating life, which includes pioneering work in tech entrepreneurship (during which time she took on the name “Steve” in order to secure meetings in the male dominated industry, and built a company of 300 female programmers), followed by a philanthropic career in which she has founded 5 non-profits, became the first UK Ambassador of Philanthropy, and donated £67mn (primarily towards fighting Autism but also interdisciplinary research into the social consequences of the internet at the Oxford Internet Institute). She plans to donate 95% of her wealth.

We held the talk in order to hear about the career ideas of someone extremely successful in areas that are particularly interesting to us (tech entrepreneurship and philanthropy).

This blog post highlights three questions and responses that are of particular interest to our members.

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Interview with Matt Clifford

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In 2011 Matt Clifford and Alice Bentick, left their consulting jobs in McKinsey to found their own non-profit, Entrepreneur First. Their idea is to take about 30 talented and ambitious graduates each year and help them form teams and start companies, in order to promote entrepreneurship as a career path. They have already achieved some impressive results with their first cohort group of 32 graduates founding 11 companies which collectively achieved a market valuation of £22 milion In their first funding round.

As part of our research on the best routes into entrepreneurship we talked to Matt Clifford about this questions.

Summary

Key points Matt made in the interview:

  • A high level of technical skills seems to be the most important single attainment of someone interested in becoming a tech entrepreneur.

  • Startups inevitably involve failures and things going wrong, so determination is an important trait for entrepreneurs.

  • If you are interested in starting a startup consider developing domain expertise in a sector other than tech that is ripe for disruption.

  • It remains hard to find good data on indicators of success in entrepreneurship, current research is more qualitative and indicative.

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Should more altruists consider entrepreneurship?

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One thing you might consider, if you’re aiming to do the most good with your career, is going into entrepreneurship. In this post I’ll summarise our reasons for thinking for-profit entrepreneurship[^1] is a promising career path for altruists, and outline our plans for research which will form the later parts of this blog series.

In summary:

  • For-profit entrepreneurship is potentially one of the highest earning careers, making it an attractive option for earning to give
  • It seems more promising than other high-earning careers for doing good directly, because you have the option to sell products that help the world, and contribute to innovation in the economy
  • Furthermore, we think that startups may be one of the best ways to build career capital early on in your career

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Entrepreneurship: a game of poker, not roulette

Follow-up to: Salary or startup? How do-gooders can gain more from risky careers

In a previous post, I discussed how high-risk, high-reward careers can be a better deal for those who want to do good: if you strike it rich, buying a tenth car will add very little to your personal quality of life, but vaccinating a tenth child will help that child about as much as the first one. This matters in practice: most venture-backed startups fail, but the average (mean) financial gain to founders is measured in millions.

However, it would be a mistake to think of the returns to entrepreneurship as predictably stemming from just showing up and taking a spin at the wheel of startup roulette. Instead, entrepreneurship is more like poker: a game where even the best players cannot predictably win over a single night, but measurable differences predict that some will earn much more than others on average. By paying attention to predictors of entrepreneurial success (whether good news or bad), you can better tell whether you have a winning hand or should walk away for a different game. And even if the known predictors don’t bear on your own situation, knowing about these predictors can dispel the “lottery illusion”, and can let you know that success is not magic, and that it is worth investing in skill, hard work, strategy, and an understanding of the game.

Let’s take a look at some of those predictors…

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