Playing the Startup Lottery

I wrote a long-winded post about some minor point in Graham's article, only to realize that I disagree with his central point.
Graham tends to write about taking big risks and working long hours as if it is something that anyone with talent and a desire for success could do. As if they don't have families depending on them.
And because he took a big risk with a startup, and they succeeded, he tends to think that it is the way to go, even though, by his own admission, "most startups tank," and the people who poured their lives into them walk away with nothing.

He even says:

There is a large random factor in the success of any company. So the guys you end up reading about in the papers are the ones who are very smart, totally dedicated, and win the lottery.

But he's talking about those who get very rich, not the guys who only get moderately rich. He claims,

There is a conservation law at work here: if you want to make a million dollars, you have to endure a million dollars' worth of pain...If starting a startup were easy, everyone would do it.

Buddy! It's not that! We just aren't willing to work like mules for 5 years, just to lose it all when our company tanks! We aren't willing to take that kind of risk!

Graham seems to acknowledge the risk, much later:

Startups, like mosquitos, tend to be an all-or-nothing proposition. And you don't generally know which of the two you're going to get till the last minute.

While we were visiting Yahoo in California to talk about selling the company to them, we had to borrow a conference room to reassure an investor who was about to back out of a new round of funding that we needed to stay alive.

The all-or-nothing aspect of startups was not something we wanted. Viaweb's hackers were all extremely risk-averse. If there had been some way just to work super hard and get paid for it, without having a lottery mixed in, we would have been delighted. We would have much preferred a 100% chance of $1 million to a 20% chance of $10 million, even though theoretically the second is worth twice as much. Unfortunately, there is not currently any space in the business world where you can get the first deal.

Graham talks about the "lottery" being "mixed in," but he seems to think that it doesn't affect his thesis that a startup is the best place to translate hard work into wealth. However, the "20% chance of $10 million" is also an "80% chance of bankruptcy," and that's the pill that most corporate drones like me are unwilling to swallow.

By Graham's logic, if I do the math and realize that I can buy a certain number of Hospital Lottery tickets, and that will give me a 20% of winning the "Dream House," and I calculate that if I win the house, I can pay off the loans I got to buy the tickets and walk away with a handsome profit, I should jump at the chance. After all, a 20% chance is worth the risk, right?

But what happens when I don't win the Dream Home, and I have to declare bankruptcy to pay the loans?

What do you suggest, Mr. Graham? Or, do you think (and I suspect you do,) that you are smarter and harder working than the average startup owner, and so therefore your chances are actually higher? The lottery doesn't work like that, my friend. Starting a company is like Russian Roullette, except 5 of the 6 chambers have bullets in them.