Exponential growth has an almost magical power to create seemingly impossible results.

Written by: Paul Graham, Co-founder of Y Combinator

Adapted from the author's speech at the Oxford Union

This is the cradle of future prime ministers, so today I want to talk to you about something that every politician should understand: how ordinary people can become billionaires. Even if you have no intention of entering politics, I believe this content can provide inspiration. Even if you don’t become a prime minister, you can choose to become a billionaire.

The reason I can speak on this topic is that 21 years ago, Jessica and I co-founded the startup incubator Y Combinator. If you haven't heard of Y Combinator, it is a combination of an investment firm and a startup school. Since our founding in 2005, we have invested in about 6,500 startups.

Starting a successful startup is currently the most mainstream way to become a billionaire. Over the past 21 years, I have essentially been nurturing entrepreneurs to reach the peak of wealth. Currently, about 30 of our students have successfully become billionaires, and many more entrepreneurs are on this path.

For this reason, I was quite surprised by a statement made by an American politician last month. She claimed that making a billion dollars is simply impossible. It felt like a figure skating coach hearing someone say that a triple axel cannot be completed. Making a billion dollars is indeed challenging, but it is not fantasy.

Of course, this politician is not simply denying that anyone can become a billionaire, nor is she entangled in the accounting concepts of income versus capital gains. Her real viewpoint is that a person cannot accumulate such immense wealth without unethical means, exploiting loopholes, or harming others' interests.

A few days later, I spoke with one of the entrepreneurs we invested in. As usual, I first asked her about her company's business growth rate. She replied that last month's revenue growth rate was 93%. I immediately pointed out that this means her personal net worth is also skyrocketing at a rate of 93% per month, which is astonishing in terms of wealth accumulation. And she has not done anything illegal or harmed anyone in the process. The reason for her company’s rapid growth is simple: users genuinely love the product they have built.

This entrepreneur's personal experience is enough to confirm that the politician's perspective is fundamentally flawed. She has never exploited anyone; in fact, the opposite is true: she and her co-founder are fully focused on refining the product and serving users, and satisfied users actively recommend it to friends and family, leading to exponential growth for the business.

Later that day, I shared this case online, and someone commented that having millions in assets while maintaining a 93% growth rate is completely different from being a true billionaire.

I believe many people share the same thought, but this viewpoint is not only incorrect; it also hides a logic that deserves deep consideration.

Next, I would like everyone to do something. Take out your phones and calculate a set of data. This might seem contrived, but it is crucial for understanding the essence of startups and is something I, as an investor, often calculate.

We interpret "millions of dollars" using the most conservative standards, assuming an initial asset of $2 million. To grow $2 million to $1 billion, assets need to increase 500 times. Now let's calculate: how long does it take to achieve 500 times growth at a monthly growth rate of 93%?

This calculation is equivalent to finding the logarithm of 500 with base 1.93. You can type the formula log(500, 1.93) directly into Google, and the result will be approximately 9.45 months.

This means that starting from $2 million, as long as you maintain a monthly growth rate of 93%, you can possess $1 billion in just nine and a half months. This shows that the starting scale of millions of dollars and the wealth of billions is not as far apart as imagined; the gap is merely a little over nine months.

This also explains why I always ask about growth rates when I meet entrepreneurs.

To prevent anyone from questioning the idealization of this growth rate, let’s take a more conservative number: a monthly growth rate of 15%. This growth rate is quite common in the startup industry, and I have encountered many startups that maintain this growth rate.

Assuming a company's monthly revenue growth rate remains stable at 15%, what will the revenue scale be in five years? Over five years, there are a total of 60 months, and the calculation is 1.15^60, which results in approximately 4384.

This means that in five years, the company's revenue will grow to 4384 times its original amount. If the current monthly revenue is $10,000, the monthly revenue after five years will reach about $44 million, with annual revenue exceeding $526 million. Based on the typical equity holding ratio of startup founders, by then, the individual will naturally become a billionaire.

In reality, company growth rates usually slow down gradually. A rapidly growing startup often has a growth rate above 15% in its first year, but by the fourth year, it may fall below this level. However, the overall growth achieved ultimately is not significantly different. If a person starts their entrepreneurial journey in their early twenties, it is entirely possible to become a billionaire before they turn thirty. This path is challenging, but it is indeed feasible.

I hope everyone calculates these results themselves to intuitively understand the core logic of entrepreneurship: exponential growth has an almost magical power to create seemingly impossible results. This is also the reason why some politicians hold prejudices — they do not understand the mathematical laws of exponential growth and, when they see someone rapidly accumulating large amounts of wealth, they automatically assume that the person must have used unethical means.

Now, through calculation, everyone understands: earning a billion dollars requires no speculation or trickery. The entire process depends solely on two core variables: growth rate and the duration for which the growth rate is maintained. If earning a billion legally is truly impossible, then where does the problem lie in these variables?

First, achieving a 15% monthly growth rate without illegal practices has long been the norm in the entrepreneurial circle, and this is beyond dispute. The sustainability of this growth depends on market size. To achieve thousands of times growth, market demand must also expand thousands of times. However, the market size objectively exists, and there is no way to artificially enlarge the market through tricks.

If your goal is merely to enter politics and possibly become a prime minister, you can stop reading here. We have clearly demonstrated that earning a billion legally is entirely feasible, and this is determined by two objective variables, one of which is the norm for startups, and the other is certainly not something that illegal practices can influence.

But if you genuinely want to become a billionaire, let’s delve deeper, starting with the first variable — growth rate. To maintain a stable growth rate over the long term, the key is to create a product with a strong reputation that users spontaneously recommend to others. This is also another reason why I prioritize growth rate: the level of growth directly reflects whether the product truly meets user needs.

So, how can we create products that people actively recommend?

The market economy has dual aspects: on one hand, existing products in the market basically cover the known demands of the public, making it not easy to tap into new demands. Once a new demand that can be satisfied is discovered, a large number of practitioners will rush in. Therefore, you must identify untapped potential demands that others have not yet noticed.

The simplest way to uncover new demands is to start from your own needs.

The advantage of young entrepreneurs lies here; at this stage, you may not have enough experience to accurately assess the demands of other groups, but your own needs are highly valuable as they often represent future market trends. Young people are the first users of new things, and the products you and your friends love today will likely be popular with the masses in ten years.

Predicting others' needs can easily lead to deviations, but your own genuine needs are reliable signals. Thus, young entrepreneurs' first choice should be to create products that they and their close friends require.

Creating products for personal use does not mean you can only target ordinary consumer applications. If you and your friends work in the field of molecular biology, you might discover overlooked innovative directions in DNA technology; if you and your peers are enthusiastic about drones, you can also delve deeply into that field. Initial ideas do not need to cater to the masses; as long as they resonate with you and those in your circle, that is sufficient.

There is no need to worry too early about the second variable — market size. Since your needs represent future trends, the corresponding market will naturally gradually grow, and you can later expand into peripheral fields. You just need to find an unmet demand as a starting point and gradually expand based on that.

How to find such entrepreneurial inspiration? This is one of the most counterintuitive rules in the entrepreneurial field — deliberately searching for business ideas often makes it hard to generate quality concepts.

When you approach creativity with a "find projects" mentality, you unintentionally become conservative and will filter out ideas that appear niche or unconventional. However, top-notch ideas often seem plain and even ridiculous at first, and this is why they remain undiscovered for a long time.

Consider the early days of Apple, Facebook, and Airbnb: who would have predicted back then that everyone would need a personal computer? Who would have believed that a platform for online socializing among college students could be profitable? Would anyone be willing to pay to stay at a stranger's house and sleep on an air mattress?

Now that these companies have achieved success, it's easy for us to glorify their origins, but I clearly remember that when Facebook and Airbnb first emerged, the general consensus was quite skeptical. When we invested in Airbnb back then, it was not because we were optimistic about the business model; we simply admired the founding team itself.

Since we cannot deliberately search for ideas, where does inspiration come from? The answer is: work on projects you are interested in together with friends. The vast majority of top startups are born from this, and they often do not start with the goal of establishing a company, but rather as a group of people finding the endeavor fun and worth trying. Apple, Google, Facebook, all began this way.

This logic further confirms the earlier point: the preferences of young people signal future demand. Seemingly casual creations may actually hide market opportunities.

Many times, subconscious judgments are much more acute than rational thinking. As long as you genuinely feel that a project is worth pursuing, even if the idea sounds absurd, it is highly likely to evolve into a high-quality entrepreneurial direction. No matter how absurd an idea may seem, it pales in comparison to Justin.TV, which we invested in back in 2006. The founder Justin Kan wore a camera and live-streamed his daily life; this seemingly nonsensical project eventually grew into the well-known streaming platform Twitch.

The core of founding a successful company is to deeply understand a certain type of user and precisely create the products they truly want. Young entrepreneurs can utilize the shortcut of "building products for themselves," as you know your own needs best. This is merely an embodiment of a universal principle: only through deep insights into users can one create products that receive widespread acclaim and, subsequently, achieve exponential growth that propels the company forward.

There are other ways to become wealthy apart from entrepreneurship; some methods indeed rely on exploiting others for profit. However, founding startups is currently the most mainstream way to accumulate vast wealth. Successfully doing this relies not on calculation and exploitation, but on empathy: understanding users' true needs and considering how to use products to genuinely improve their lives. This is also the quality we value most when selecting entrepreneurs and nurturing incoming teams.

The wealth distribution method in a society is key to understanding that society. Do not let entrenched ideologies, film clichés, or outdated examples from hundreds of years ago mislead you; always remain grounded in the present and see through the true logic of wealth movement. If you plan to start your own business, you will naturally dig into its intricacies. I am more concerned about future rulers and hope everyone can remember the content shared today. Lastly, I will summarize the core points again.

The scale of a startup and the founder's wealth are determined by two core elements: growth rate and the duration of sustained growth. To achieve high growth, you must create quality products that users are eager to share; to maintain long-term growth, you must enter a sufficiently large market.

Achieving exponential growth in a vast market will cause the value of the business to rise, and the founders who hold shares will naturally reap wealth. The entire process requires no illegal practices; as long as you continue to sincerely serve users, wealth growth will follow naturally.