How to Do Great Work - # 217
July 2023
If you collected lists of techniques for doing great work in a lot of different fields, what would the
intersection look like? I decided to find out by making it.
Partly my goal was to create a guide that could be used by someone working in any field. But I
was also curious about the shape of the intersection. And one thing this exercise shows is that
it does have a definite shape; it's not just a point labelled "work hard."
The following recipe assumes you're very ambitious.
The first step is to decide what to work on. The work you choose needs to have three qualities:
it has to be something you have a natural aptitude for, that you have a deep interest in, and that
offers scope to do great work.
In practice you don't have to worry much about the third criterion. Ambitious people are if
anything already too conservative about it. So all you need to do is find something you have an
aptitude for and great interest in. [1]
That sounds straightforward, but it's often quite difficult. When you're young you don't know
what you're good at or what different kinds of work are like. Some kinds of work you end up
doing may not even exist yet. So while some people know what they want to do at 14, most
have to figure it out.
The way to figure out what to work on is by working. If you're not sure what to work on, guess.
But pick something and get going. You'll probably guess wrong some of the time, but that's fine.
It's good to know about multiple things; some of the biggest discoveries come from noticing
connections between different fields.
Develop a habit of working on your own projects. Don't let "work" mean something other people
tell you to do. If you do manage to do great work one day, it will probably be on a project of your
own. It may be within some bigger project, but you'll be driving your part of it.
What should your projects be? Whatever seems to you excitingly ambitious. As you grow older
and your taste in projects evolves, exciting and important will converge. At 7 it may seem
excitingly ambitious to build huge things out of Lego, then at 14 to teach yourself calculus, till at
21 you're starting to explore unanswered questions in physics. But always preserve
excitingness.
There's a kind of excited curiosity that's both the engine and the rudder of great work. It will not
only drive you, but if you let it have its way, will also show you what to work on.
What are you excessively curious about — curious to a degree that would bore most other
people? That's what you're looking for.
Once you've found something you're excessively interested in, the next step is to learn enough
about it to get you to one of the frontiers of knowledge. Knowledge expands fractally, and from a
distance its edges look smooth, but once you learn enough to get close to one, they turn out to
be full of gaps.
The next step is to notice them. This takes some skill, because your brain wants to ignore such
gaps in order to make a simpler model of the world. Many discoveries have come from asking
questions about things that everyone else took for granted. [2]
If the answers seem strange, so much the better. Great work often has a tincture of
strangeness. You see this from painting to math. It would be affected to try to manufacture it, but
if it appears, embrace it.
Boldly chase outlier ideas, even if other people aren't interested in them — in fact, especially if
they aren't. If you're excited about some possibility that everyone else ignores, and you have
enough expertise to say precisely what they're all overlooking, that's as good a bet as you'll
find. [3]
Four steps: choose a field, learn enough to get to the frontier, notice gaps, explore promising
ones. This is how practically everyone who's done great work has done it, from painters to
physicists.
Steps two and four will require hard work. It may not be possible to prove that you have to work
hard to do great things, but the empirical evidence is on the scale of the evidence for mortality.
That's why it's essential to work on something you're deeply interested in. Interest will drive you
to work harder than mere diligence ever could.
The three most powerful motives are curiosity, delight, and the desire to do something
impressive. Sometimes they converge, and that combination is the most powerful of all.
The big prize is to discover a new fractal bud. You notice a crack in the surface of knowledge,
pry it open, and there's a whole world inside.
Let's talk a little more about the complicated business of figuring out what to work on. The main
reason it's hard is that you can't tell what most kinds of work are like except by doing them.
Which means the four steps overlap: you may have to work at something for years before you
know how much you like it or how good you are at it. And in the meantime you're not doing, and
thus not learning about, most other kinds of work. So in the worst case you choose late based
on very incomplete information. [4]
The nature of ambition exacerbates this problem. Ambition comes in two forms, one that
precedes interest in the subject and one that grows out of it. Most people who do great work
have a mix, and the more you have of the former, the harder it will be to decide what to do.
The educational systems in most countries pretend it's easy. They expect you to commit to a
field long before you could know what it's really like. And as a result an ambitious person on an
optimal trajectory will often read to the system as an instance of breakage.
It would be better if they at least admitted it — if they admitted that the system not only can't do
much to help you figure out what to work on, but is designed on the assumption that you'll
somehow magically guess as a teenager. They don't tell you, but I will: when it comes to figuring
out what to work on, you're on your own. Some people get lucky and do guess correctly, but the
rest will find themselves scrambling diagonally across tracks laid down on the assumption that
everyone does.
What should you do if you're young and ambitious but don't know what to work on? What you
should not do is drift along passively, assuming the problem will solve itself. You need to take
action. But there is no systematic procedure you can follow. When you read biographies of
people who've done great work, it's remarkable how much luck is involved. They discover what
to work on as a result of a chance meeting, or by reading a book they happen to pick up. So
you need to make yourself a big target for luck, and the way to do that is to be curious. Try lots
of things, meet lots of people, read lots of books, ask lots of questions. [5]
When in doubt, optimize for interestingness. Fields change as you learn more about them. What
mathematicians do, for example, is very different from what you do in high school math classes.
So you need to give different types of work a chance to show you what they're like. But a field
should become increasingly interesting as you learn more about it. If it doesn't, it's probably not
for you.
Don't worry if you find you're interested in different things than other people. The stranger your
tastes in interestingness, the better. Strange tastes are often strong ones, and a strong taste for
work means you'll be productive. And you're more likely to find new things if you're looking
where few have looked before.
One sign that you're suited for some kind of work is when you like even the parts that other
people find tedious or frightening.
But fields aren't people; you don't owe them any loyalty. If in the course of working on one thing
you discover another that's more exciting, don't be afraid to switch.
If you're making something for people, make sure it's something they actually want. The best
way to do this is to make something you yourself want. Write the story you want to read; build
the tool you want to use. Since your friends probably have similar interests, this will also get you
your initial audience.
This should follow from the excitingness rule. Obviously the most exciting story to write will be
the one you want to read. The reason I mention this case explicitly is that so many people get it
wrong. Instead of making what they want, they try to make what some imaginary, more
sophisticated audience wants. And once you go down that route, you're lost. [6]
There are a lot of forces that will lead you astray when you're trying to figure out what to work
on. Pretentiousness, fashion, fear, money, politics, other people's wishes, eminent frauds. But if
you stick to what you find genuinely interesting, you'll be proof against all of them. If you're
interested, you're not astray.
Following your interests may sound like a rather passive strategy, but in practice it usually
means following them past all sorts of obstacles. You usually have to risk rejection and failure.
So it does take a good deal of boldness.
But while you need boldness, you don't usually need much planning. In most cases the recipe
for doing great work is simply: work hard on excitingly ambitious projects, and something good
will come of it. Instead of making a plan and then executing it, you just try to preserve certain
invariants.
The trouble with planning is that it only works for achievements you can describe in advance.
You can win a gold medal or get rich by deciding to as a child and then tenaciously pursuing
that goal, but you can't discover natural selection that way.
I think for most people who want to do great work, the right strategy is not to plan too much. At
each stage do whatever seems most interesting and gives you the best options for the future. I
call this approach "staying upwind." This is how most people who've done great work seem to
have done it.
Even when you've found something exciting to work on, working on it is not always
straightforward. There will be times when some new idea makes you leap out of bed in the
morning and get straight to work. But there will also be plenty of times when things aren't like
that.
You don't just put out your sail and get blown forward by inspiration. There are headwinds and
currents and hidden shoals. So there's a technique to working, just as there is to sailing.
For example, while you must work hard, it's possible to work too hard, and if you do that you'll
find you get diminishing returns: fatigue will make you stupid, and eventually even damage your
health. The point at which work yields diminishing returns depends on the type. Some of the
hardest types you might only be able to do for four or five hours a day.
Ideally those hours will be contiguous. To the extent you can, try to arrange your life so you
have big blocks of time to work in. You'll shy away from hard tasks if you know you might be
interrupted.
It will probably be harder to start working than to keep working. You'll often have to trick yourself
to get over that initial threshold. Don't worry about this; it's the nature of work, not a flaw in your
character. Work has a sort of activation energy, both per day and per project. And since this
threshold is fake in the sense that it's higher than the energy required to keep going, it's ok to
tell yourself a lie of corresponding magnitude to get over it.
It's usually a mistake to lie to yourself if you want to do great work, but this is one of the rare
cases where it isn't. When I'm reluctant to start work in the morning, I often trick myself by
saying "I'll just read over what I've got so far." Five minutes later I've found something that
seems mistaken or incomplete, and I'm off.
Similar techniques work for starting new projects. It's ok to lie to yourself about how much work
a project will entail, for example. Lots of great things began with someone saying "How hard
could it be?"
This is one case where the young have an advantage. They're more optimistic, and even
though one of the sources of their optimism is ignorance, in this case ignorance can sometimes
beat knowledge.
Try to finish what you start, though, even if it turns out to be more work than you expected.
Finishing things is not just an exercise in tidiness or self-discipline. In many projects a lot of the
best work happens in what was meant to be the final stage.
Another permissible lie is to exaggerate the importance of what you're working on, at least in
your own mind. If that helps you discover something new, it may turn out not to have been a lie
after all. [7]
Since there are two senses of starting work — per day and per project — there are also two
forms of procrastination. Per-project procrastination is far the more dangerous. You put off
starting that ambitious project from year to year because the time isn't quite right. When you're
procrastinating in units of years, you can get a lot not done. [8]
One reason per-project procrastination is so dangerous is that it usually camouflages itself as
work. You're not just sitting around doing nothing; you're working industriously on something
else. So per-project procrastination doesn't set off the alarms that per-day procrastination does.
You're too busy to notice it.
The way to beat it is to stop occasionally and ask yourself: Am I working on what I most want to
work on? When you're young it's ok if the answer is sometimes no, but this gets increasingly
dangerous as you get older. [9]
Great work usually entails spending what would seem to most people an unreasonable amount
of time on a problem. You can't think of this time as a cost, or it will seem too high. You have to
find the work sufficiently engaging as it's happening.
There may be some jobs where you have to work diligently for years at things you hate before
you get to the good part, but this is not how great work happens. Great work happens by
focusing consistently on something you're genuinely interested in. When you pause to take
stock, you're surprised how far you've come.
The reason we're surprised is that we underestimate the cumulative effect of work. Writing a
page a day doesn't sound like much, but if you do it every day you'll write a book a year. That's
the key: consistency. People who do great things don't get a lot done every day. They get
something done, rather than nothing.
If you do work that compounds, you'll get exponential growth. Most people who do this do it
unconsciously, but it's worth stopping to think about. Learning, for example, is an instance of
this phenomenon: the more you learn about something, the easier it is to learn more. Growing
an audience is another: the more fans you have, the more new fans they'll bring you.
The trouble with exponential growth is that the curve feels flat in the beginning. It isn't; it's still a
wonderful exponential curve. But we can't grasp that intuitively, so we underrate exponential
growth in its early stages.
Something that grows exponentially can become so valuable that it's worth making an
extraordinary effort to get it started. But since we underrate exponential growth early on, this
too is mostly done unconsciously: people push through the initial, unrewarding phase of
learning something new because they know from experience that learning new things always
takes an initial push, or they grow their audience one fan at a time because they have nothing
better to do. If people consciously realized they could invest in exponential growth, many more
would do it.
Work doesn't just happen when you're trying to. There's a kind of undirected thinking you do
when walking or taking a shower or lying in bed that can be very powerful. By letting your mind
wander a little, you'll often solve problems you were unable to solve by frontal attack.
You have to be working hard in the normal way to benefit from this phenomenon, though. You
can't just walk around daydreaming. The daydreaming has to be interleaved with deliberate
work that feeds it questions. [10]
Everyone knows to avoid distractions at work, but it's also important to avoid them in the other
half of the cycle. When you let your mind wander, it wanders to whatever you care about most
at that moment. So avoid the kind of distraction that pushes your work out of the top spot, or
you'll waste this valuable type of thinking on the distraction instead. (Exception: Don't avoid
love.)
Consciously cultivate your taste in the work done in your field. Until you know which is the best
and what makes it so, you don't know what you're aiming for.
And that is what you're aiming for, because if you don't try to be the best, you won't even be
good. This observation has been made by so many people in so many different fields that it
might be worth thinking about why it's true. It could be because ambition is a phenomenon
where almost all the error is in one direction — where almost all the shells that miss the target
miss by falling short. Or it could be because ambition to be the best is a qualitatively different
thing from ambition to be good. Or maybe being good is simply too vague a standard. Probably
all three are true. [11]
Fortunately there's a kind of economy of scale here. Though it might seem like you'd be taking
on a heavy burden by trying to be the best, in practice you often end up net ahead. It's exciting,
and also strangely liberating. It simplifies things. In some ways it's easier to try to be the best
than to try merely to be good.
One way to aim high is to try to make something that people will care about in a hundred years.
Not because their opinions matter more than your contemporaries', but because something that
still seems good in a hundred years is more likely to be genuinely good.
Don't try to work in a distinctive style. Just try to do the best job you can; you won't be able to
help doing it in a distinctive way.
Style is doing things in a distinctive way without trying to. Trying to is affectation.
Affectation is in effect to pretend that someone other than you is doing the work. You adopt an
impressive but fake persona, and while you're pleased with the impressiveness, the fakeness is
what shows in the work. [12]
The temptation to be someone else is greatest for the young. They often feel like nobodies. But
you never need to worry about that problem, because it's self-solving if you work on sufficiently
ambitious projects. If you succeed at an ambitious project, you're not a nobody; you're the
person who did it. So just do the work and your identity will take care of itself.
"Avoid affectation" is a useful rule so far as it goes, but how would you express this idea
positively? How would you say what to be, instead of what not to be? The best answer is
earnest. If you're earnest you avoid not just affectation but a whole set of similar vices.
The core of being earnest is being intellectually honest. We're taught as children to be honest
as an unselfish virtue — as a kind of sacrifice. But in fact it's a source of power too. To see new
ideas, you need an exceptionally sharp eye for the truth. You're trying to see more truth than
others have seen so far. And how can you have a sharp eye for the truth if you're intellectually
dishonest?
One way to avoid intellectual dishonesty is to maintain a slight positive pressure in the opposite
direction. Be aggressively willing to admit that you're mistaken. Once you've admitted you were
mistaken about something, you're free. Till then you have to carry it. [13]
Another more subtle component of earnestness is informality. Informality is much more
important than its grammatically negative name implies. It's not merely the absence of
something. It means focusing on what matters instead of what doesn't.
What formality and affectation have in common is that as well as doing the work, you're trying to
seem a certain way as you're doing it. But any energy that goes into how you seem comes out
of being good. That's one reason nerds have an advantage in doing great work: they expend
little effort on seeming anything. In fact that's basically the definition of a nerd.
Nerds have a kind of innocent boldness that's exactly what you need in doing great work. It's
not learned; it's preserved from childhood. So hold onto it. Be the one who puts things out there
rather than the one who sits back and offers sophisticated-sounding criticisms of them. "It's
easy to criticize" is true in the most literal sense, and the route to great work is never easy.
There may be some jobs where it's an advantage to be cynical and pessimistic, but if you want
to do great work it's an advantage to be optimistic, even though that means you'll risk looking
like a fool sometimes. There's an old tradition of doing the opposite. The Old Testament says it's
better to keep quiet lest you look like a fool. But that's advice for seeming smart. If you actually
want to discover new things, it's better to take the risk of telling people your ideas.
Some people are naturally earnest, and with others it takes a conscious effort. Either kind of
earnestness will suffice. But I doubt it would be possible to do great work without being earnest.
It's so hard to do even if you are. You don't have enough margin for error to accommodate the
distortions introduced by being affected, intellectually dishonest, orthodox, fashionable, or cool.
[14]
Great work is consistent not only with who did it, but with itself. It's usually all of a piece. So if
you face a decision in the middle of working on something, ask which choice is more consistent.
You may have to throw things away and redo them. You won't necessarily have to, but you have
to be willing to. And that can take some effort; when there's something you need to redo, status
quo bias and laziness will combine to keep you in denial about it. To beat this ask: If I'd already
made the change, would I want to revert to what I have now?
Have the confidence to cut. Don't keep something that doesn't fit just because you're proud of it,
or because it cost you a lot of effort.
Indeed, in some kinds of work it's good to strip whatever you're doing to its essence. The result
will be more concentrated; you'll understand it better; and you won't be able to lie to yourself
about whether there's anything real there.
Mathematical elegance may sound like a mere metaphor, drawn from the arts. That's what I
thought when I first heard the term "elegant" applied to a proof. But now I suspect it's
conceptually prior — that the main ingredient in artistic elegance is mathematical elegance. At
any rate it's a useful standard well beyond math.
Elegance can be a long-term bet, though. Laborious solutions will often have more prestige in
the short term. They cost a lot of effort and they're hard to understand, both of which impress
people, at least temporarily.
Whereas some of the very best work will seem like it took comparatively little effort, because it
was in a sense already there. It didn't have to be built, just seen. It's a very good sign when it's
hard to say whether you're creating something or discovering it.
When you're doing work that could be seen as either creation or discovery, err on the side of
discovery. Try thinking of yourself as a mere conduit through which the ideas take their natural
shape.
(Strangely enough, one exception is the problem of choosing a problem to work on. This is
usually seen as search, but in the best case it's more like creating something. In the best case
you create the field in the process of exploring it.)
Similarly, if you're trying to build a powerful tool, make it gratuitously unrestrictive. A powerful
tool almost by definition will be used in ways you didn't expect, so err on the side of eliminating
restrictions, even if you don't know what the benefit will be.
Great work will often be tool-like in the sense of being something others build on. So it's a good
sign if you're creating ideas that others could use, or exposing questions that others could
answer. The best ideas have implications in many different areas.
If you express your ideas in the most general form, they'll be truer than you intended.
True by itself is not enough, of course. Great ideas have to be true and new. And it takes a
certain amount of ability to see new ideas even once you've learned enough to get to one of the
frontiers of knowledge.
In English we give this ability names like originality, creativity, and imagination. And it seems
reasonable to give it a separate name, because it does seem to some extent a separate skill.
It's possible to have a great deal of ability in other respects — to have a great deal of what's
often called "technical ability" — and yet not have much of this.
I've never liked the term "creative process." It seems misleading. Originality isn't a process, but
a habit of mind. Original thinkers throw off new ideas about whatever they focus on, like an
angle grinder throwing off sparks. They can't help it.
If the thing they're focused on is something they don't understand very well, these new ideas
might not be good. One of the most original thinkers I know decided to focus on dating after he
got divorced. He knew roughly as much about dating as the average 15 year old, and the
results were spectacularly colorful. But to see originality separated from expertise like that
made its nature all the more clear.
I don't know if it's possible to cultivate originality, but there are definitely ways to make the most
of however much you have. For example, you're much more likely to have original ideas when
you're working on something. Original ideas don't come from trying to have original ideas. They
come from trying to build or understand something slightly too difficult. [15]
Talking or writing about the things you're interested in is a good way to generate new ideas.
When you try to put ideas into words, a missing idea creates a sort of vacuum that draws it out
of you. Indeed, there's a kind of thinking that can only be done by writing.
Changing your context can help. If you visit a new place, you'll often find you have new ideas
there. The journey itself often dislodges them. But you may not have to go far to get this benefit.
Sometimes it's enough just to go for a walk. [16]
It also helps to travel in topic space. You'll have more new ideas if you explore lots of different
topics, partly because it gives the angle grinder more surface area to work on, and partly
because analogies are an especially fruitful source of new ideas.
Don't divide your attention evenly between many topics though, or you'll spread yourself too
thin. You want to distribute it according to something more like a power law. [17] Be
professionally curious about a few topics and idly curious about many more.
Curiosity and originality are closely related. Curiosity feeds originality by giving it new things to
work on. But the relationship is closer than that. Curiosity is itself a kind of originality; it's roughly
to questions what originality is to answers. And since questions at their best are a big
component of answers, curiosity at its best is a creative force.
Having new ideas is a strange game, because it usually consists of seeing things that were
right under your nose. Once you've seen a new idea, it tends to seem obvious. Why did no one
think of this before?
When an idea seems simultaneously novel and obvious, it's probably a good one.
Seeing something obvious sounds easy. And yet empirically having new ideas is hard. What's
the source of this apparent contradiction? It's that seeing the new idea usually requires you to
change the way you look at the world. We see the world through models that both help and
constrain us. When you fix a broken model, new ideas become obvious. But noticing and fixing
a broken model is hard. That's how new ideas can be both obvious and yet hard to discover:
they're easy to see after you do something hard.
One way to discover broken models is to be stricter than other people. Broken models of the
world leave a trail of clues where they bash against reality. Most people don't want to see these
clues. It would be an understatement to say that they're attached to their current model; it's
what they think in; so they'll tend to ignore the trail of clues left by its breakage, however
conspicuous it may seem in retrospect.
To find new ideas you have to seize on signs of breakage instead of looking away. That's what
Einstein did. He was able to see the wild implications of Maxwell's equations not so much
because he was looking for new ideas as because he was stricter.
The other thing you need is a willingness to break rules. Paradoxical as it sounds, if you want to
fix your model of the world, it helps to be the sort of person who's comfortable breaking rules.
From the point of view of the old model, which everyone including you initially shares, the new
model usually breaks at least implicit rules.
Few understand the degree of rule-breaking required, because new ideas seem much more
conservative once they succeed. They seem perfectly reasonable once you're using the new
model of the world they brought with them. But they didn't at the time; it took the greater part of
a century for the heliocentric model to be generally accepted, even among astronomers,
because it felt so wrong.
Indeed, if you think about it, a good new idea has to seem bad to most people, or someone
would have already explored it. So what you're looking for is ideas that seem crazy, but the right
kind of crazy. How do you recognize these? You can't with certainty. Often ideas that seem bad
are bad. But ideas that are the right kind of crazy tend to be exciting; they're rich in implications;
whereas ideas that are merely bad tend to be depressing.
There are two ways to be comfortable breaking rules: to enjoy breaking them, and to be
indifferent to them. I call these two cases being aggressively and passively independent-minded.
The aggressively independent-minded are the naughty ones. Rules don't merely fail to stop
them; breaking rules gives them additional energy. For this sort of person, delight at the sheer
audacity of a project sometimes supplies enough activation energy to get it started.
The other way to break rules is not to care about them, or perhaps even to know they exist. This
is why novices and outsiders often make new discoveries; their ignorance of a field's
assumptions acts as a source of temporary passive independent-mindedness. Aspies also
seem to have a kind of immunity to conventional beliefs. Several I know say that this helps them
to have new ideas.
Strictness plus rule-breaking sounds like a strange combination. In popular culture they're
opposed. But popular culture has a broken model in this respect. It implicitly assumes that
issues are trivial ones, and in trivial matters strictness and rule-breaking are opposed. But in
questions that really matter, only rule-breakers can be truly strict.
An overlooked idea often doesn't lose till the semifinals. You do see it, subconsciously, but then
another part of your subconscious shoots it down because it would be too weird, too risky, too
much work, too controversial. This suggests an exciting possibility: if you could turn off such
filters, you could see more new ideas.
One way to do that is to ask what would be good ideas for someone else to explore. Then your
subconscious won't shoot them down to protect you.
You could also discover overlooked ideas by working in the other direction: by starting from
what's obscuring them. Every cherished but mistaken principle is surrounded by a dead zone of
valuable ideas that are unexplored because they contradict it.
Religions are collections of cherished but mistaken principles. So anything that can be
described either literally or metaphorically as a religion will have valuable unexplored ideas in
its shadow. Copernicus and Darwin both made discoveries of this type. [18]
What are people in your field religious about, in the sense of being too attached to some
principle that might not be as self-evident as they think? What becomes possible if you discard
it?
People show much more originality in solving problems than in deciding which problems to
solve. Even the smartest can be surprisingly conservative when deciding what to work on.
People who'd never dream of being fashionable in any other way get sucked into working on
fashionable problems.
One reason people are more conservative when choosing problems than solutions is that
problems are bigger bets. A problem could occupy you for years, while exploring a solution
might only take days. But even so I think most people are too conservative. They're not merely
responding to risk, but to fashion as well. Unfashionable problems are undervalued.
One of the most interesting kinds of unfashionable problem is the problem that people think has
been fully explored, but hasn't. Great work often takes something that already exists and shows
its latent potential. Durer and Watt both did this. So if you're interested in a field that others think
is tapped out, don't let their skepticism deter you. People are often wrong about this.
Working on an unfashionable problem can be very pleasing. There's no hype or hurry.
Opportunists and critics are both occupied elsewhere. The existing work often has an oldschool solidity. And there's a satisfying sense of economy in cultivating ideas that would
otherwise be wasted.
But the most common type of overlooked problem is not explicitly unfashionable in the sense of
being out of fashion. It just doesn't seem to matter as much as it actually does. How do you find
these? By being self-indulgent — by letting your curiosity have its way, and tuning out, at least
temporarily, the little voice in your head that says you should only be working on "important"
problems.
You do need to work on important problems, but almost everyone is too conservative about
what counts as one. And if there's an important but overlooked problem in your neighborhood,
it's probably already on your subconscious radar screen. So try asking yourself: if you were
going to take a break from "serious" work to work on something just because it would be really
interesting, what would you do? The answer is probably more important than it seems.
Originality in choosing problems seems to matter even more than originality in solving them.
That's what distinguishes the people who discover whole new fields. So what might seem to be
merely the initial step — deciding what to work on — is in a sense the key to the whole game.
Few grasp this. One of the biggest misconceptions about new ideas is about the ratio of
question to answer in their composition. People think big ideas are answers, but often the real
insight was in the question.
Part of the reason we underrate questions is the way they're used in schools. In schools they
tend to exist only briefly before being answered, like unstable particles. But a really good
question can be much more than that. A really good question is a partial discovery. How do new
species arise? Is the force that makes objects fall to earth the same as the one that keeps
planets in their orbits? By even asking such questions you were already in excitingly novel
territory.
Unanswered questions can be uncomfortable things to carry around with you. But the more
you're carrying, the greater the chance of noticing a solution — or perhaps even more
excitingly, noticing that two unanswered questions are the same.
Sometimes you carry a question for a long time. Great work often comes from returning to a
question you first noticed years before — in your childhood, even — and couldn't stop thinking
about. People talk a lot about the importance of keeping your youthful dreams alive, but it's just
as important to keep your youthful questions alive. [19]
This is one of the places where actual expertise differs most from the popular picture of it. In the
popular picture, experts are certain. But actually the more puzzled you are, the better, so long
as (a) the things you're puzzled about matter, and (b) no one else understands them either.
Think about what's happening at the moment just before a new idea is discovered. Often
someone with sufficient expertise is puzzled about something. Which means that originality
consists partly of puzzlement — of confusion! You have to be comfortable enough with the
world being full of puzzles that you're willing to see them, but not so comfortable that you don't
want to solve them. [20]
It's a great thing to be rich in unanswered questions. And this is one of those situations where
the rich get richer, because the best way to acquire new questions is to try answering existing
ones. Questions don't just lead to answers, but also to more questions.
The best questions grow in the answering. You notice a thread protruding from the current
paradigm and try pulling on it, and it just gets longer and longer. So don't require a question to
be obviously big before you try answering it. You can rarely predict that. It's hard enough even to
notice the thread, let alone to predict how much will unravel if you pull on it.
It's better to be promiscuously curious — to pull a little bit on a lot of threads, and see what
happens. Big things start small. The initial versions of big things were often just experiments, or
side projects, or talks, which then grew into something bigger. So start lots of small things.
Being prolific is underrated. The more different things you try, the greater the chance of
discovering something new. Understand, though, that trying lots of things will mean trying lots of
things that don't work. You can't have a lot of good ideas without also having a lot of bad ones.
[21]
Though it sounds more responsible to begin by studying everything that's been done before,
you'll learn faster and have more fun by trying stuff. And you'll understand previous work better
when you do look at it. So err on the side of starting. Which is easier when starting means
starting small; those two ideas fit together like two puzzle pieces.
How do you get from starting small to doing something great? By making successive versions.
Great things are almost always made in successive versions. You start with something small
and evolve it, and the final version is both cleverer and more ambitious than anything you could
have planned.
It's particularly useful to make successive versions when you're making something for people
— to get an initial version in front of them quickly, and then evolve it based on their response.
Begin by trying the simplest thing that could possibly work. Surprisingly often, it does. If it
doesn't, this will at least get you started.
Don't try to cram too much new stuff into any one version. There are names for doing this with
the first version (taking too long to ship) and the second (the second system effect), but these
are both merely instances of a more general principle.
An early version of a new project will sometimes be dismissed as a toy. It's a good sign when
people do this. That means it has everything a new idea needs except scale, and that tends to
follow. [22]
The alternative to starting with something small and evolving it is to plan in advance what you're
going to do. And planning does usually seem the more responsible choice. It sounds more
organized to say "we're going to do x and then y and then z" than "we're going to try x and see
what happens." And it is more organized; it just doesn't work as well.
Planning per se isn't good. It's sometimes necessary, but it's a necessary evil — a response to
unforgiving conditions. It's something you have to do because you're working with inflexible
media, or because you need to coordinate the efforts of a lot of people. If you keep projects
small and use flexible media, you don't have to plan as much, and your designs can evolve
instead.
Take as much risk as you can afford. In an efficient market, risk is proportionate to reward, so
don't look for certainty, but for a bet with high expected value. If you're not failing occasionally,
you're probably being too conservative.
Though conservatism is usually associated with the old, it's the young who tend to make this
mistake. Inexperience makes them fear risk, but it's when you're young that you can afford the
most.
Even a project that fails can be valuable. In the process of working on it, you'll have crossed
territory few others have seen, and encountered questions few others have asked. And there's
probably no better source of questions than the ones you encounter in trying to do something
slightly too hard.
Use the advantages of youth when you have them, and the advantages of age once you have
those. The advantages of youth are energy, time, optimism, and freedom. The advantages of
age are knowledge, efficiency, money, and power. With effort you can acquire some of the latter
when young and keep some of the former when old.
The old also have the advantage of knowing which advantages they have. The young often
have them without realizing it. The biggest is probably time. The young have no idea how rich
they are in time. The best way to turn this time to advantage is to use it in slightly frivolous
ways: to learn about something you don't need to know about, just out of curiosity, or to try
building something just because it would be cool, or to become freakishly good at something.
That "slightly" is an important qualification. Spend time lavishly when you're young, but don't
simply waste it. There's a big difference between doing something you worry might be a waste
of time and doing something you know for sure will be. The former is at least a bet, and possibly
a better one than you think. [23]
The most subtle advantage of youth, or more precisely of inexperience, is that you're seeing
everything with fresh eyes. When your brain embraces an idea for the first time, sometimes the
two don't fit together perfectly. Usually the problem is with your brain, but occasionally it's with
the idea. A piece of it sticks out awkwardly and jabs you when you think about it. People who
are used to the idea have learned to ignore it, but you have the opportunity not to. [24]
So when you're learning about something for the first time, pay attention to things that seem
wrong or missing. You'll be tempted to ignore them, since there's a 99% chance the problem is
with you. And you may have to set aside your misgivings temporarily to keep progressing. But
don't forget about them. When you've gotten further into the subject, come back and check if
they're still there. If they're still viable in the light of your present knowledge, they probably
represent an undiscovered idea.
One of the most valuable kinds of knowledge you get from experience is to know what you don't
have to worry about. The young know all the things that could matter, but not their relative
importance. So they worry equally about everything, when they should worry much more about
a few things and hardly at all about the rest.
But what you don't know is only half the problem with inexperience. The other half is what you
do know that ain't so. You arrive at adulthood with your head full of nonsense — bad habits
you've acquired and false things you've been taught — and you won't be able to do great work
till you clear away at least the nonsense in the way of whatever type of work you want to do.
Much of the nonsense left in your head is left there by schools. We're so used to schools that
we unconsciously treat going to school as identical with learning, but in fact schools have all
sorts of strange qualities that warp our ideas about learning and thinking.
For example, schools induce passivity. Since you were a small child, there was an authority at
the front of the class telling all of you what you had to learn and then measuring whether you
did. But neither classes nor tests are intrinsic to learning; they're just artifacts of the way
schools are usually designed.
The sooner you overcome this passivity, the better. If you're still in school, try thinking of your
education as your project, and your teachers as working for you rather than vice versa. That
may seem a stretch, but it's not merely some weird thought experiment. It's the truth,
economically, and in the best case it's the truth intellectually as well. The best teachers don't
want to be your bosses. They'd prefer it if you pushed ahead, using them as a source of advice,
rather than being pulled by them through the material.
Schools also give you a misleading impression of what work is like. In school they tell you what
the problems are, and they're almost always soluble using no more than you've been taught so
far. In real life you have to figure out what the problems are, and you often don't know if they're
soluble at all.
But perhaps the worst thing schools do to you is train you to win by hacking the test. You can't
do great work by doing that. You can't trick God. So stop looking for that kind of shortcut. The
way to beat the system is to focus on problems and solutions that others have overlooked, not
to skimp on the work itself.
Don't think of yourself as dependent on some gatekeeper giving you a "big break." Even if this
were true, the best way to get it would be to focus on doing good work rather than chasing
influential people.
And don't take rejection by committees to heart. The qualities that impress admissions officers
and prize committees are quite different from those required to do great work. The decisions of
selection committees are only meaningful to the extent that they're part of a feedback loop, and
very few are.
People new to a field will often copy existing work. There's nothing inherently bad about that.
There's no better way to learn how something works than by trying to reproduce it. Nor does
copying necessarily make your work unoriginal. Originality is the presence of new ideas, not the
absence of old ones.
There's a good way to copy and a bad way. If you're going to copy something, do it openly
instead of furtively, or worse still, unconsciously. This is what's meant by the famously
misattributed phrase "Great artists steal." The really dangerous kind of copying, the kind that
gives copying a bad name, is the kind that's done without realizing it, because you're nothing
more than a train running on tracks laid down by someone else. But at the other extreme,
copying can be a sign of superiority rather than subordination. [25]
In many fields it's almost inevitable that your early work will be in some sense based on other
people's. Projects rarely arise in a vacuum. They're usually a reaction to previous work. When
you're first starting out, you don't have any previous work; if you're going to react to something,
it has to be someone else's. Once you're established, you can react to your own. But while the
former gets called derivative and the latter doesn't, structurally the two cases are more similar
than they seem.
Oddly enough, the very novelty of the most novel ideas sometimes makes them seem at first to
be more derivative than they are. New discoveries often have to be conceived initially as
variations of existing things, even by their discoverers, because there isn't yet the conceptual
vocabulary to express them.
There are definitely some dangers to copying, though. One is that you'll tend to copy old things
— things that were in their day at the frontier of knowledge, but no longer are.
And when you do copy something, don't copy every feature of it. Some will make you ridiculous
if you do. Don't copy the manner of an eminent 50 year old professor if you're 18, for example,
or the idiom of a Renaissance poem hundreds of years later.
Some of the features of things you admire are flaws they succeeded despite. Indeed, the
features that are easiest to imitate are the most likely to be the flaws.
This is particularly true for behavior. Some talented people are jerks, and this sometimes makes
it seem to the inexperienced that being a jerk is part of being talented. It isn't; being talented is
merely how they get away with it.
One of the most powerful kinds of copying is to copy something from one field into another.
History is so full of chance discoveries of this type that it's probably worth giving chance a hand
by deliberately learning about other kinds of work. You can take ideas from quite distant fields if
you let them be metaphors.
Negative examples can be as inspiring as positive ones. In fact you can sometimes learn more
from things done badly than from things done well; sometimes it only becomes clear what's
needed when it's missing.
If a lot of the best people in your field are collected in one place, it's usually a good idea to visit
for a while. It will increase your ambition, and also, by showing you that these people are
human, increase your self-confidence. [26]
If you're earnest you'll probably get a warmer welcome than you might expect. Most people who
are very good at something are happy to talk about it with anyone who's genuinely interested. If
they're really good at their work, then they probably have a hobbyist's interest in it, and
hobbyists always want to talk about their hobbies.
It may take some effort to find the people who are really good, though. Doing great work has
such prestige that in some places, particularly universities, there's a polite fiction that everyone
is engaged in it. And that is far from true. People within universities can't say so openly, but the
quality of the work being done in different departments varies immensely. Some departments
have people doing great work; others have in the past; others never have.
Seek out the best colleagues. There are a lot of projects that can't be done alone, and even if
you're working on one that can be, it's good to have other people to encourage you and to
bounce ideas off.
Colleagues don't just affect your work, though; they also affect you. So work with people you
want to become like, because you will.
Quality is more important than quantity in colleagues. It's better to have one or two great ones
than a building full of pretty good ones. In fact it's not merely better, but necessary, judging from
history: the degree to which great work happens in clusters suggests that one's colleagues
often make the difference between doing great work and not.
How do you know when you have sufficiently good colleagues? In my experience, when you do,
you know. Which means if you're unsure, you probably don't. But it may be possible to give a
more concrete answer than that. Here's an attempt: sufficiently good colleagues offer surprising
insights. They can see and do things that you can't. So if you have a handful of colleagues good
enough to keep you on your toes in this sense, you're probably over the threshold.
Most of us can benefit from collaborating with colleagues, but some projects require people on
a larger scale, and starting one of those is not for everyone. If you want to run a project like that,
you'll have to become a manager, and managing well takes aptitude and interest like any other
kind of work. If you don't have them, there is no middle path: you must either force yourself to
learn management as a second language, or avoid such projects. [27]
Husband your morale. It's the basis of everything when you're working on ambitious projects.
You have to nurture and protect it like a living organism.
Morale starts with your view of life. You're more likely to do great work if you're an optimist, and
more likely to if you think of yourself as lucky than if you think of yourself as a victim.
Indeed, work can to some extent protect you from your problems. If you choose work that's
pure, its very difficulties will serve as a refuge from the difficulties of everyday life. If this is
escapism, it's a very productive form of it, and one that has been used by some of the greatest
minds in history.
Morale compounds via work: high morale helps you do good work, which increases your morale
and helps you do even better work. But this cycle also operates in the other direction: if you're
not doing good work, that can demoralize you and make it even harder to. Since it matters so
much for this cycle to be running in the right direction, it can be a good idea to switch to easier
work when you're stuck, just so you start to get something done.
One of the biggest mistakes ambitious people make is to allow setbacks to destroy their morale
all at once, like a balloon bursting. You can inoculate yourself against this by explicitly
considering setbacks a part of your process. Solving hard problems always involves some
backtracking.
Doing great work is a depth-first search whose root node is the desire to. So "If at first you don't
succeed, try, try again" isn't quite right. It should be: If at first you don't succeed, either try
again, or backtrack and then try again.
"Never give up" is also not quite right. Obviously there are times when it's the right choice to
eject. A more precise version would be: Never let setbacks panic you into backtracking more
than you need to. Corollary: Never abandon the root node.
It's not necessarily a bad sign if work is a struggle, any more than it's a bad sign to be out of
breath while running. It depends how fast you're running. So learn to distinguish good pain from
bad. Good pain is a sign of effort; bad pain is a sign of damage.
An audience is a critical component of morale. If you're a scholar, your audience may be your
peers; in the arts, it may be an audience in the traditional sense. Either way it doesn't need to
be big. The value of an audience doesn't grow anything like linearly with its size. Which is bad
news if you're famous, but good news if you're just starting out, because it means a small but
dedicated audience can be enough to sustain you. If a handful of people genuinely love what
you're doing, that's enough.
To the extent you can, avoid letting intermediaries come between you and your audience. In
some types of work this is inevitable, but it's so liberating to escape it that you might be better
off switching to an adjacent type if that will let you go direct. [28]
The people you spend time with will also have a big effect on your morale. You'll find there are
some who increase your energy and others who decrease it, and the effect someone has is not
always what you'd expect. Seek out the people who increase your energy and avoid those who
decrease it. Though of course if there's someone you need to take care of, that takes
precedence.
Don't marry someone who doesn't understand that you need to work, or sees your work as
competition for your attention. If you're ambitious, you need to work; it's almost like a medical
condition; so someone who won't let you work either doesn't understand you, or does and
doesn't care.
Ultimately morale is physical. You think with your body, so it's important to take care of it. That
means exercising regularly, eating and sleeping well, and avoiding the more dangerous kinds of
drugs. Running and walking are particularly good forms of exercise because they're good for
thinking. [29]
People who do great work are not necessarily happier than everyone else, but they're happier
than they'd be if they didn't. In fact, if you're smart and ambitious, it's dangerous not to be
productive. People who are smart and ambitious but don't achieve much tend to become bitter.
It's ok to want to impress other people, but choose the right people. The opinion of people you
respect is signal. Fame, which is the opinion of a much larger group you might or might not
respect, just adds noise.
The prestige of a type of work is at best a trailing indicator and sometimes completely mistaken.
If you do anything well enough, you'll make it prestigious. So the question to ask about a type of
work is not how much prestige it has, but how well it could be done.
Competition can be an effective motivator, but don't let it choose the problem for you; don't let
yourself get drawn into chasing something just because others are. In fact, don't let competitors
make you do anything much more specific than work harder.
Curiosity is the best guide. Your curiosity never lies, and it knows more than you do about
what's worth paying attention to.
Notice how often that word has come up. If you asked an oracle the secret to doing great work
and the oracle replied with a single word, my bet would be on "curiosity."
That doesn't translate directly to advice. It's not enough just to be curious, and you can't
command curiosity anyway. But you can nurture it and let it drive you.
Curiosity is the key to all four steps in doing great work: it will choose the field for you, get you
to the frontier, cause you to notice the gaps in it, and drive you to explore them. The whole
process is a kind of dance with curiosity.
Believe it or not, I tried to make this essay as short as I could. But its length at least means it
acts as a filter. If you made it this far, you must be interested in doing great work. And if so
you're already further along than you might realize, because the set of people willing to want to
is small.
The factors in doing great work are factors in the literal, mathematical sense, and they are:
ability, interest, effort, and luck. Luck by definition you can't do anything about, so we can ignore
that. And we can assume effort, if you do in fact want to do great work. So the problem boils
down to ability and interest. Can you find a kind of work where your ability and interest will
combine to yield an explosion of new ideas?
Here there are grounds for optimism. There are so many different ways to do great work, and
even more that are still undiscovered. Out of all those different types of work, the one you're
most suited for is probably a pretty close match. Probably a comically close match. It's just a
question of finding it, and how far into it your ability and interest can take you. And you can only
answer that by trying.
Many more people could try to do great work than do. What holds them back is a combination
of modesty and fear. It seems presumptuous to try to be Newton or Shakespeare. It also seems
hard; surely if you tried something like that, you'd fail. Presumably the calculation is rarely
explicit. Few people consciously decide not to try to do great work. But that's what's going on
subconsciously; they shy away from the question.
So I'm going to pull a sneaky trick on you. Do you want to do great work, or not? Now you have
to decide consciously. Sorry about that. I wouldn't have done it to a general audience. But we
already know you're interested.
Don't worry about being presumptuous. You don't have to tell anyone. And if it's too hard and
you fail, so what? Lots of people have worse problems than that. In fact you'll be lucky if it's the
worst problem you have.
Yes, you'll have to work hard. But again, lots of people have to work hard. And if you're working
on something you find very interesting, which you necessarily will if you're on the right path, the
work will probably feel less burdensome than a lot of your peers'.
The discoveries are out there, waiting to be made. Why not by you?
Notes:
[1] I don't think you could give a precise definition of what counts as great work. Doing great work means doing
something important so well that you expand people's ideas of what's possible. But there's no threshold for
importance. It's a matter of degree, and often hard to judge at the time anyway. So I'd rather people focused on
developing their interests rather than worrying about whether they're important or not. Just try to do something
amazing, and leave it to future generations to say if you succeeded.
[2] A lot of standup comedy is based on noticing anomalies in everyday life. "Did you ever notice...?" New ideas come
from doing this about nontrivial things. Which may help explain why people's reaction to a new idea is often the first
half of laughing: Ha!
[3] That second qualifier is critical. If you're excited about something most authorities discount, but you can't give a
more precise explanation than "they don't get it," then you're starting to drift into the territory of cranks.
[4] Finding something to work on is not simply a matter of finding a match between the current version of you and a
list of known problems. You'll often have to coevolve with the problem. That's why it can sometimes be so hard to
figure out what to work on. The search space is huge. It's the cartesian product of all possible types of work, both
known and yet to be discovered, and all possible future versions of you.
There's no way you could search this whole space, so you have to rely on heuristics to generate promising paths
through it and hope the best matches will be clustered. Which they will not always be; different types of work have
been collected together as much by accidents of history as by the intrinsic similarities between them.
[5] There are many reasons curious people are more likely to do great work, but one of the more subtle is that, by
casting a wide net, they're more likely to find the right thing to work on in the first place.
[6] It can also be dangerous to make things for an audience you feel is less sophisticated than you, if that causes you
to talk down to them. You can make a lot of money doing that, if you do it in a sufficiently cynical way, but it's not the
route to great work. Not that anyone using this m.o. would care.
[7] This idea I learned from Hardy's A Mathematician's Apology, which I recommend to anyone ambitious to do great
work, in any field.
[8] Just as we overestimate what we can do in a day and underestimate what we can do over several years, we
overestimate the damage done by procrastinating for a day and underestimate the damage done by procrastinating
for several years.
[9] You can't usually get paid for doing exactly what you want, especially early on. There are two options: get paid for
doing work close to what you want and hope to push it closer, or get paid for doing something else entirely and do
your own projects on the side. Both can work, but both have drawbacks: in the first approach your work is
compromised by default, and in the second you have to fight to get time to do it.
[10] If you set your life up right, it will deliver the focus-relax cycle automatically. The perfect setup is an office you
work in and that you walk to and from.
[11] There may be some very unworldly people who do great work without consciously trying to. If you want to
expand this rule to cover that case, it becomes: Don't try to be anything except the best.
[12] This gets more complicated in work like acting, where the goal is to adopt a fake persona. But even here it's
possible to be affected. Perhaps the rule in such fields should be to avoid unintentional affectation.
[13] It's safe to have beliefs that you treat as unquestionable if and only if they're also unfalsifiable. For example, it's
safe to have the principle that everyone should be treated equally under the law, because a sentence with a "should"
in it isn't really a statement about the world and is therefore hard to disprove. And if there's no evidence that could
disprove one of your principles, there can't be any facts you'd need to ignore in order to preserve it.
[14] Affectation is easier to cure than intellectual dishonesty. Affectation is often a shortcoming of the young that
burns off in time, while intellectual dishonesty is more of a character flaw.
[15] Obviously you don't have to be working at the exact moment you have the idea, but you'll probably have been
working fairly recently.
[16] Some say psychoactive drugs have a similar effect. I'm skeptical, but also almost totally ignorant of their effects.
[17] For example you might give the nth most important topic (m-1)/m^n of your attention, for some m > 1. You
couldn't allocate your attention so precisely, of course, but this at least gives an idea of a reasonable distribution.
[18] The principles defining a religion have to be mistaken. Otherwise anyone might adopt them, and there would be
nothing to distinguish the adherents of the religion from everyone else.
[19] It might be a good exercise to try writing down a list of questions you wondered about in your youth. You might
find you're now in a position to do something about some of them.
[20] The connection between originality and uncertainty causes a strange phenomenon: because the conventionalminded are more certain than the independent-minded, this tends to give them the upper hand in disputes, even
though they're generally stupider. The best lack all conviction, while the worst
Are full of passionate intensity. [21] Derived from Linus Pauling's "If you want to have good ideas, you must have
many ideas."
[22] Attacking a project as a "toy" is similar to attacking a statement as "inappropriate." It means that no more
substantial criticism can be made to stick.
[23] One way to tell whether you're wasting time is to ask if you're producing or consuming. Writing computer games
is less likely to be a waste of time than playing them, and playing games where you create something is less likely to
be a waste of time than playing games where you don't.
[24] Another related advantage is that if you haven't said anything publicly yet, you won't be biased toward evidence
that supports your earlier conclusions. With sufficient integrity you could achieve eternal youth in this respect, but few
manage to. For most people, having previously published opinions has an effect similar to ideology, just in quantity 1.
[25] In the early 1630s Daniel Mytens made a painting of Henrietta Maria handing a laurel wreath to Charles I. Van
Dyck then painted his own version to show how much better he was.
[26] I'm being deliberately vague about what a place is. As of this writing, being in the same physical place has
advantages that are hard to duplicate, but that could change.
[27] This is false when the work the other people have to do is very constrained, as with SETI@home or Bitcoin. It
may be possible to expand the area in which it's false by defining similarly restricted protocols with more freedom of
action in the nodes.
[28] Corollary: Building something that enables people to go around intermediaries and engage directly with their
audience is probably a good idea.
[29] It may be helpful always to walk or run the same route, because that frees attention for thinking. It feels that way
to me, and there is some historical evidence for it.
Thanks to Trevor Blackwell, Daniel Gackle, Pam Graham, Tom Howard, Patrick Hsu, Steve Huffman, Jessica
Livingston, Henry Lloyd-Baker, Bob Metcalfe, Ben Miller, Robert Morris, Michael Nielsen, Courtenay Pipkin, Joris
Poort, Mieke Roos, Rajat Suri, Harj Taggar, Garry Tan, and my younger son for suggestions and for reading drafts.
How to Get New Ideas - # 216
January 2023
(Someone fed my essays into GPT to make something that could answer questions based on
them, then asked it where good ideas come from. The answer was ok, but not what I would
have said. This is what I would have said.)
The way to get new ideas is to notice anomalies: what seems strange, or missing, or broken?
You can see anomalies in everyday life (much of standup comedy is based on this), but the best
place to look for them is at the frontiers of knowledge.
Knowledge grows fractally. From a distance its edges look smooth, but when you learn enough
to get close to one, you'll notice it's full of gaps. These gaps will seem obvious; it will seem
inexplicable that no one has tried x or wondered about y. In the best case, exploring such gaps
yields whole new fractal buds.
The Need to Read - # 215
November 2022
In the science fiction books I read as a kid, reading had often been replaced by some more
efficient way of acquiring knowledge. Mysterious "tapes" would load it into one's brain like a
program being loaded into a computer.
That sort of thing is unlikely to happen anytime soon. Not just because it would be hard to build
a replacement for reading, but because even if one existed, it would be insufficient. Reading
about x doesn't just teach you about x; it also teaches you how to write. [1]
Would that matter? If we replaced reading, would anyone need to be good at writing?
The reason it would matter is that writing is not just a way to convey ideas, but also a way to
have them.
A good writer doesn't just think, and then write down what he thought, as a sort of transcript. A
good writer will almost always discover new things in the process of writing. And there is, as far
as I know, no substitute for this kind of discovery. Talking about your ideas with other people is a
good way to develop them. But even after doing this, you'll find you still discover new things
when you sit down to write. There is a kind of thinking that can only be done by writing.
There are of course kinds of thinking that can be done without writing. If you don't need to go
too deeply into a problem, you can solve it without writing. If you're thinking about how two
pieces of machinery should fit together, writing about it probably won't help much. And when a
problem can be described formally, you can sometimes solve it in your head. But if you need to
solve a complicated, ill-defined problem, it will almost always help to write about it. Which in
turn means that someone who's not good at writing will almost always be at a disadvantage in
solving such problems.
You can't think well without writing well, and you can't write well without reading well. And I
mean that last "well" in both senses. You have to be good at reading, and read good things. [2]
People who just want information may find other ways to get it. But people who want to have
ideas can't afford to.
Notes:
[1] Audiobooks can give you examples of good writing, but having them read to you doesn't teach you as much about
writing as reading them yourself.
[2] By "good at reading" I don't mean good at the mechanics of reading. You don't have to be good at extracting
words from the page so much as extracting meaning from the words.
What You -Want to-- Want - # 214
November 2022
Since I was about 9 I've been puzzled by the apparent contradiction between being made of
matter that behaves in a predictable way, and the feeling that I could choose to do whatever I
wanted. At the time I had a self-interested motive for exploring the question. At that age (like
most succeeding ages) I was always in trouble with the authorities, and it seemed to me that
there might possibly be some way to get out of trouble by arguing that I wasn't responsible for
my actions. I gradually lost hope of that, but the puzzle remained: How do you reconcile being a
machine made of matter with the feeling that you're free to choose what you do? [1]
The best way to explain the answer may be to start with a slightly wrong version, and then fix it.
The wrong version is: You can do what you want, but you can't want what you want. Yes, you
can control what you do, but you'll do what you want, and you can't control that.
The reason this is mistaken is that people do sometimes change what they want. People who
don't want to want something — drug addicts, for example — can sometimes make themselves
stop wanting it. And people who want to want something — who want to like classical music, or
broccoli — sometimes succeed.
So we modify our initial statement: You can do what you want, but you can't want to want what
you want.
That's still not quite true. It's possible to change what you want to want. I can imagine someone
saying "I decided to stop wanting to like classical music." But we're getting closer to the truth.
It's rare for people to change what they want to want, and the more "want to"s we add, the rarer
it gets.
We can get arbitrarily close to a true statement by adding more "want to"s in much the same
way we can get arbitrarily close to 1 by adding more 9s to a string of 9s following a decimal
point. In practice three or four "want to"s must surely be enough. It's hard even to envision what
it would mean to change what you want to want to want to want, let alone actually do it.
So one way to express the correct answer is to use a regular expression. You can do what you
want, but there's some statement of the form "you can't (want to)* want what you want" that's
true. Ultimately you get back to a want that you don't control. [2]
Notes:
[1] I didn't know when I was 9 that matter might behave randomly, but I don't think it affects the problem much.
Randomness destroys the ghost in the machine as effectively as determinism.
[2] If you don't like using an expression, you can make the same point using higher-order desires: There is some n
such that you don't control your nth-order desires.
Thanks to Trevor Blackwell, Jessica Livingston, Robert Morris, and Michael Nielsen for reading drafts of this.
Alien Truth - # 213
October 2022
If there were intelligent beings elsewhere in the universe, they'd share certain truths in common
with us. The truths of mathematics would be the same, because they're true by definition. Ditto
for the truths of physics; the mass of a carbon atom would be the same on their planet. But I
think we'd share other truths with aliens besides the truths of math and physics, and that it
would be worthwhile to think about what these might be.
For example, I think we'd share the principle that a controlled experiment testing some
hypothesis entitles us to have proportionally increased belief in it. It seems fairly likely, too, that
it would be true for aliens that one can get better at something by practicing. We'd probably
share Occam's razor. There doesn't seem anything specifically human about any of these ideas.
We can only guess, of course. We can't say for sure what forms intelligent life might take. Nor is
it my goal here to explore that question, interesting though it is. The point of the idea of alien
truth is not that it gives us a way to speculate about what forms intelligent life might take, but
that it gives us a threshold, or more precisely a target, for truth. If you're trying to find the most
general truths short of those of math or physics, then presumably they'll be those we'd share in
common with other forms of intelligent life.
Alien truth will work best as a heuristic if we err on the side of generosity. If an idea might
plausibly be relevant to aliens, that's enough. Justice, for example. I wouldn't want to bet that all
intelligent beings would understand the concept of justice, but I wouldn't want to bet against it
either.
The idea of alien truth is related to Erdos's idea of God's book. He used to describe a
particularly good proof as being in God's book, the implication being (a) that a sufficiently good
proof was more discovered than invented, and (b) that its goodness would be universally
recognized. If there's such a thing as alien truth, then there's more in God's book than math.
What should we call the search for alien truth? The obvious choice is "philosophy." Whatever
else philosophy includes, it should probably include this. I'm fairly sure Aristotle would have
thought so. One could even make the case that the search for alien truth is, if not an accurate
description of philosophy, a good definition for it. I.e. that it's what people who call themselves
philosophers should be doing, whether or not they currently are. But I'm not wedded to that;
doing it is what matters, not what we call it.
We may one day have something like alien life among us in the form of AIs. And that may in
turn allow us to be precise about what truths an intelligent being would have to share with us.
We might find, for example, that it's impossible to create something we'd consider intelligent
that doesn't use Occam's razor. We might one day even be able to prove that. But though this
sort of research would be very interesting, it's not necessary for our purposes, or even the
same field; the goal of philosophy, if we're going to call it that, would be to see what ideas we
come up with using alien truth as a target, not to say precisely where the threshold of it is.
Those two questions might one day converge, but they'll converge from quite different
directions, and till they do, it would be too constraining to restrict ourselves to thinking only
about things we're certain would be alien truths. Especially since this will probably be one of
those areas where the best guesses turn out to be surprisingly close to optimal. (Let's see if
that one does.)
Whatever we call it, the attempt to discover alien truths would be a worthwhile undertaking. And
curiously enough, that is itself probably an alien truth.
Thanks to Trevor Blackwell, Greg Brockman, Patrick Collison, Robert Morris, and Michael
Nielsen for reading drafts of this.
What I-ve Learned from Users - # 212
September 2022
I recently told applicants to Y Combinator that the best advice I could give for getting in, per
word, was Explain what you've learned from users. That tests a lot of things: whether you're
paying attention to users, how well you understand them, and even how much they need what
you're making.
Afterward I asked myself the same question. What have I learned from YC's users, the startups
we've funded?
The first thing that came to mind was that most startups have the same problems. No two have
exactly the same problems, but it's surprising how much the problems remain the same,
regardless of what they're making. Once you've advised 100 startups all doing different things,
you rarely encounter problems you haven't seen before.
This fact is one of the things that makes YC work. But I didn't know it when we started YC. I
only had a few data points: our own startup, and those started by friends. It was a surprise to
me how often the same problems recur in different forms. Many later stage investors might
never realize this, because later stage investors might not advise 100 startups in their whole
career, but a YC partner will get this much experience in the first year or two.
That's one advantage of funding large numbers of early stage companies rather than smaller
numbers of later-stage ones. You get a lot of data. Not just because you're looking at more
companies, but also because more goes wrong.
But knowing (nearly) all the problems startups can encounter doesn't mean that advising them
can be automated, or reduced to a formula. There's no substitute for individual office hours with
a YC partner. Each startup is unique, which means they have to be advised by specific partners
who know them well. [1]
We learned that the hard way, in the notorious "batch that broke YC" in the summer of 2012. Up
till that point we treated the partners as a pool. When a startup requested office hours, they got
the next available slot posted by any partner. That meant every partner had to know every
startup. This worked fine up to 60 startups, but when the batch grew to 80, everything broke.
The founders probably didn't realize anything was wrong, but the partners were confused and
unhappy because halfway through the batch they still didn't know all the companies yet. [2]
At first I was puzzled. How could things be fine at 60 startups and broken at 80? It was only a
third more. Then I realized what had happened. We were using an O(n2) algorithm. So of
course it blew up.
The solution we adopted was the classic one in these situations. We sharded the batch into
smaller groups of startups, each overseen by a dedicated group of partners. That fixed the
problem, and has worked fine ever since. But the batch that broke YC was a powerful
demonstration of how individualized the process of advising startups has to be.
Another related surprise is how bad founders can be at realizing what their problems are.
Founders will sometimes come in to talk about some problem, and we'll discover another much
bigger one in the course of the conversation. For example (and this case is all too common),
founders will come in to talk about the difficulties they're having raising money, and after digging
into their situation, it turns out the reason is that the company is doing badly, and investors can
tell. Or founders will come in worried that they still haven't cracked the problem of user
acquisition, and the reason turns out to be that their product isn't good enough. There have
been times when I've asked "Would you use this yourself, if you hadn't built it?" and the
founders, on thinking about it, said "No." Well, there's the reason you're having trouble getting
users.
Often founders know what their problems are, but not their relative importance. [3] They'll come
in to talk about three problems they're worrying about. One is of moderate importance, one
doesn't matter at all, and one will kill the company if it isn't addressed immediately. It's like
watching one of those horror movies where the heroine is deeply upset that her boyfriend
cheated on her, and only mildly curious about the door that's mysteriously ajar. You want to say:
never mind about your boyfriend, think about that door! Fortunately in office hours you can. So
while startups still die with some regularity, it's rarely because they wandered into a room
containing a murderer. The YC partners can warn them where the murderers are.
Not that founders listen. That was another big surprise: how often founders don't listen to us. A
couple weeks ago I talked to a partner who had been working for YC for a couple batches and
was starting to see the pattern. "They come back a year later," she said, "and say 'We wish
we'd listened to you.'"
It took me a long time to figure out why founders don't listen. At first I thought it was mere
stubbornness. That's part of the reason, but another and probably more important reason is
that so much about startups is counterintuitive. And when you tell someone something
counterintuitive, what it sounds to them is wrong. So the reason founders don't listen to us is
that they don't believe us. At least not till experience teaches them otherwise. [4]
The reason startups are so counterintuitive is that they're so different from most people's other
experiences. No one knows what it's like except those who've done it. Which is why YC
partners should usually have been founders themselves. But strangely enough, the
counterintuitiveness of startups turns out to be another of the things that make YC work. If it
weren't counterintuitive, founders wouldn't need our advice about how to do it.
Focus is doubly important for early stage startups, because not only do they have a hundred
different problems, they don't have anyone to work on them except the founders. If the founders
focus on things that don't matter, there's no one focusing on the things that do. So the essence
of what happens at YC is to figure out which problems matter most, then cook up ideas for
solving them — ideally at a resolution of a week or less — and then try those ideas and
measure how well they worked. The focus is on action, with measurable, near-term results.
This doesn't imply that founders should rush forward regardless of the consequences. If you
correct course at a high enough frequency, you can be simultaneously decisive at a micro scale
and tentative at a macro scale. The result is a somewhat winding path, but executed very
rapidly, like the path a running back takes downfield. And in practice there's less backtracking
than you might expect. Founders usually guess right about which direction to run in, especially
if they have someone experienced like a YC partner to bounce their hypotheses off. And when
they guess wrong, they notice fast, because they'll talk about the results at office hours the next
week. [5]
A small improvement in navigational ability can make you a lot faster, because it has a double
effect: the path is shorter, and you can travel faster along it when you're more certain it's the
right one. That's where a lot of YC's value lies, in helping founders get an extra increment of
focus that lets them move faster. And since moving fast is the essence of a startup, YC in effect
makes startups more startup-like.
Speed defines startups. Focus enables speed. YC improves focus.
Why are founders uncertain about what to do? Partly because startups almost by definition are
doing something new, which means no one knows how to do it yet, or in most cases even what
"it" is. Partly because startups are so counterintuitive generally. And partly because many
founders, especially young and ambitious ones, have been trained to win the wrong way. That
took me years to figure out. The educational system in most countries trains you to win by
hacking the test instead of actually doing whatever it's supposed to measure. But that stops
working when you start a startup. So part of what YC does is to retrain founders to stop trying
to hack the test. (It takes a surprisingly long time. A year in, you still see them reverting to their
old habits.)
YC is not simply more experienced founders passing on their knowledge. It's more like
specialization than apprenticeship. The knowledge of the YC partners and the founders have
different shapes: It wouldn't be worthwhile for a founder to acquire the encyclopedic knowledge
of startup problems that a YC partner has, just as it wouldn't be worthwhile for a YC partner to
acquire the depth of domain knowledge that a founder has. That's why it can still be valuable for
an experienced founder to do YC, just as it can still be valuable for an experienced athlete to
have a coach.
The other big thing YC gives founders is colleagues, and this may be even more important than
the advice of partners. If you look at history, great work clusters around certain places and
institutions: Florence in the late 15th century, the University of Gÿýttingen in the late 19th, The
New Yorker under Ross, Bell Labs, Xerox PARC. However good you are, good colleagues make
you better. Indeed, very ambitious people probably need colleagues more than anyone else,
because they're so starved for them in everyday life.
Whether or not YC manages one day to be listed alongside those famous clusters, it won't be
for lack of trying. We were very aware of this historical phenomenon and deliberately designed
YC to be one. By this point it's not bragging to say that it's the biggest cluster of great startup
founders. Even people trying to attack YC concede that.
Colleagues and startup founders are two of the most powerful forces in the world, so you'd
expect it to have a big effect to combine them. Before YC, to the extent people thought about
the question at all, most assumed they couldn't be combined — that loneliness was the price of
independence. That was how it felt to us when we started our own startup in Boston in the
1990s. We had a handful of older people we could go to for advice (of varying quality), but no
peers. There was no one we could commiserate with about the misbehavior of investors, or
speculate with about the future of technology. I often tell founders to make something they
themselves want, and YC is certainly that: it was designed to be exactly what we wanted when
we were starting a startup.
One thing we wanted was to be able to get seed funding without having to make the rounds of
random rich people. That has become a commodity now, at least in the US. But great
colleagues can never become a commodity, because the fact that they cluster in some places
means they're proportionally absent from the rest.
Something magical happens where they do cluster though. The energy in the room at a YC
dinner is like nothing else I've experienced. We would have been happy just to have one or two
other startups to talk to. When you have a whole roomful it's another thing entirely.
YC founders aren't just inspired by one another. They also help one another. That's the happiest
thing I've learned about startup founders: how generous they can be in helping one another. We
noticed this in the first batch and consciously designed YC to magnify it. The result is
something far more intense than, say, a university. Between the partners, the alumni, and their
batchmates, founders are surrounded by people who want to help them, and can.
Notes:
[1] This is why I've never liked it when people refer to YC as a "bootcamp." It's intense like a bootcamp, but the
opposite in structure. Instead of everyone doing the same thing, they're each talking to YC partners to figure out what
their specific startup needs.
[2] When I say the summer 2012 batch was broken, I mean it felt to the partners that something was wrong. Things
weren't yet so broken that the startups had a worse experience. In fact that batch did unusually well.
[3] This situation reminds me of the research showing that people are much better at answering questions than they
are at judging how accurate their answers are. The two phenomena feel very similar.
[4] The Airbnbs were particularly good at listening — partly because they were flexible and disciplined, but also
because they'd had such a rough time during the preceding year. They were ready to listen.
[5] The optimal unit of decisiveness depends on how long it takes to get results, and that depends on the type of
problem you're solving. When you're negotiating with investors, it could be a couple days, whereas if you're building
hardware it could be months.
Thanks to Trevor Blackwell, Jessica Livingston, Harj Taggar, and Garry Tan for reading drafts of this.
Heresy - # 211
April 2022
One of the most surprising things I've witnessed in my lifetime is the rebirth of the concept of
heresy.
In his excellent biography of Newton, Richard Westfall writes about the moment when he was
elected a fellow of Trinity College: Supported comfortably, Newton was free to devote himself
wholly to whatever he chose. To remain on, he had only to avoid the three unforgivable sins:
crime, heresy, and marriage. [1] The first time I read that, in the 1990s, it sounded amusingly
medieval. How strange, to have to avoid committing heresy. But when I reread it 20 years later it
sounded like a description of contemporary employment.
There are an ever-increasing number of opinions you can be fired for. Those doing the firing
don't use the word "heresy" to describe them, but structurally they're equivalent. Structurally
there are two distinctive things about heresy: (1) that it takes priority over the question of truth
or falsity, and (2) that it outweighs everything else the speaker has done.
For example, when someone calls a statement "x-ist," they're also implicitly saying that this is
the end of the discussion. They do not, having said this, go on to consider whether the
statement is true or not. Using such labels is the conversational equivalent of signalling an
exception. That's one of the reasons they're used: to end a discussion.
If you find yourself talking to someone who uses these labels a lot, it might be worthwhile to ask
them explicitly if they believe any babies are being thrown out with the bathwater. Can a
statement be x-ist, for whatever value of x, and also true? If the answer is yes, then they're
admitting to banning the truth. That's obvious enough that I'd guess most would answer no. But
if they answer no, it's easy to show that they're mistaken, and that in practice such labels are
applied to statements regardless of their truth or falsity.
The clearest evidence of this is that whether a statement is considered x-ist often depends on
who said it. Truth doesn't work that way. The same statement can't be true when one person
says it, but x-ist, and therefore false, when another person does. [2]
The other distinctive thing about heresies, compared to ordinary opinions, is that the public
expression of them outweighs everything else the speaker has done. In ordinary matters, like
knowledge of history, or taste in music, you're judged by the average of your opinions. A heresy
is qualitatively different. It's like dropping a chunk of uranium onto the scale.
Back in the day (and still, in some places) the punishment for heresy was death. You could have
led a life of exemplary goodness, but if you publicly doubted, say, the divinity of Christ, you were
going to burn. Nowadays, in civilized countries, heretics only get fired in the metaphorical
sense, by losing their jobs. But the structure of the situation is the same: the heresy outweighs
everything else. You could have spent the last ten years saving children's lives, but if you
express certain opinions, you're automatically fired.
It's much the same as if you committed a crime. No matter how virtuously you've lived, if you
commit a crime, you must still suffer the penalty of the law. Having lived a previously blameless
life might mitigate the punishment, but it doesn't affect whether you're guilty or not.
A heresy is an opinion whose expression is treated like a crime — one that makes some people
feel not merely that you're mistaken, but that you should be punished. Indeed, their desire to
see you punished is often stronger than it would be if you'd committed an actual crime. There
are many on the far left who believe strongly in the reintegration of felons (as I do myself), and
yet seem to feel that anyone guilty of certain heresies should never work again.
There are always some heresies — some opinions you'd be punished for expressing. But there
are a lot more now than there were a few decades ago, and even those who are happy about
this would have to agree that it's so.
Why? Why has this antiquated-sounding religious concept come back in a secular form? And
why now?
You need two ingredients for a wave of intolerance: intolerant people, and an ideology to guide
them. The intolerant people are always there. They exist in every sufficiently large society.
That's why waves of intolerance can arise so suddenly; all they need is something to set them
off.
I've already written an essay describing the aggressively conventional-minded. The short
version is that people can be classified in two dimensions according to (1) how independent- or
conventional-minded they are, and (2) how aggressive they are about it. The aggressively
conventional-minded are the enforcers of orthodoxy.
Normally they're only locally visible. They're the grumpy, censorious people in a group — the
ones who are always first to complain when something violates the current rules of propriety.
But occasionally, like a vector field whose elements become aligned, a large number of
aggressively conventional-minded people unite behind some ideology all at once. Then they
become much more of a problem, because a mob dynamic takes over, where the enthusiasm of
each participant is increased by the enthusiasm of the others.
The most notorious 20th century case may have been the Cultural Revolution. Though initiated
by Mao to undermine his rivals, the Cultural Revolution was otherwise mostly a grass-roots
phenomenon. Mao said in essence: There are heretics among us. Seek them out and punish
them. And that's all the aggressively conventional-minded ever need to hear. They went at it
with the delight of dogs chasing squirrels.
To unite the conventional-minded, an ideology must have many of the features of a religion. In
particular it must have strict and arbitrary rules that adherents can demonstrate their purity by
obeying, and its adherents must believe that anyone who obeys these rules is ipso facto morally
superior to anyone who doesn't. [3]
In the late 1980s a new ideology of this type appeared in US universities. It had a very strong
component of moral purity, and the aggressively conventional-minded seized upon it with their
usual eagerness — all the more because the relaxation of social norms in the preceding
decades meant there had been less and less to forbid. The resulting wave of intolerance has
been eerily similar in form to the Cultural Revolution, though fortunately much smaller in
magnitude. [4]
I've deliberately avoided mentioning any specific heresies here. Partly because one of the
universal tactics of heretic hunters, now as in the past, is to accuse those who disapprove of the
way in which they suppress ideas of being heretics themselves. Indeed, this tactic is so
consistent that you could use it as a way of detecting witch hunts in any era.
And that's the second reason I've avoided mentioning any specific heresies. I want this essay to
work in the future, not just now. And unfortunately it probably will. The aggressively
conventional-minded will always be among us, looking for things to forbid. All they need is an
ideology to tell them what. And it's unlikely the current one will be the last.
There are aggressively conventional-minded people on both the right and the left. The reason
the current wave of intolerance comes from the left is simply because the new unifying ideology
happened to come from the left. The next one might come from the right. Imagine what that
would be like.
Fortunately in western countries the suppression of heresies is nothing like as bad as it used to
be. Though the window of opinions you can express publicly has narrowed in the last decade,
it's still much wider than it was a few hundred years ago. The problem is the derivative. Up till
about 1985 the window had been growing ever wider. Anyone looking into the future in 1985
would have expected freedom of expression to continue to increase. Instead it has decreased.
[5]
The situation is similar to what's happened with infectious diseases like measles. Anyone
looking into the future in 2010 would have expected the number of measles cases in the US to
continue to decrease. Instead, thanks to anti-vaxxers, it has increased. The absolute number is
still not that high. The problem is the derivative. [6]
In both cases it's hard to know how much to worry. Is it really dangerous to society as a whole if
a handful of extremists refuse to get their kids vaccinated, or shout down speakers at
universities? The point to start worrying is presumably when their efforts start to spill over into
everyone else's lives. And in both cases that does seem to be happening.
So it's probably worth spending some amount of effort on pushing back to keep open the
window of free expression. My hope is that this essay will help form social antibodies not just
against current efforts to suppress ideas, but against the concept of heresy in general. That's
the real prize. How do you disable the concept of heresy? Since the Enlightenment, western
societies have discovered many techniques for doing that, but there are surely more to be
discovered.
Overall I'm optimistic. Though the trend in freedom of expression has been bad over the last
decade, it's been good over the longer term. And there are signs that the current wave of
intolerance is peaking. Independent-minded people I talk to seem more confident than they did
a few years ago. On the other side, even some of the leaders are starting to wonder if things
have gone too far. And popular culture among the young has already moved on. All we have to
do is keep pushing back, and the wave collapses. And then we'll be net ahead, because as well
as having defeated this wave, we'll also have developed new tactics for resisting the next one.
Notes:
[1] Or more accurately, biographies of Newton, since Westfall wrote two: a long version called Never at Rest, and a
shorter one called The Life of Isaac Newton. Both are great. The short version moves faster, but the long one is full of
interesting and often very funny details. This passage is the same in both.
[2] Another more subtle but equally damning bit of evidence is that claims of x-ism are never qualified. You never hear
anyone say that a statement is "probably x-ist" or "almost certainly y-ist." If claims of x-ism were actually claims about
truth, you'd expect to see "probably" in front of "x-ist" as often as you see it in front of "fallacious."
[3] The rules must be strict, but they need not be demanding. So the most effective type of rules are those about
superficial matters, like doctrinal minutiae, or the precise words adherents must use. Such rules can be made
extremely complicated, and yet don't repel potential converts by requiring significant sacrifice.
The superficial demands of orthodoxy make it an inexpensive substitute for virtue. And that in turn is one of the
reasons orthodoxy is so attractive to bad people. You could be a horrible person, and yet as long as you're orthodox,
you're better than everyone who isn't.
[4] Arguably there were two. The first had died down somewhat by 2000, but was followed by a second in the 2010s,
probably caused by social media.
[5] Fortunately most of those trying to suppress ideas today still respect Enlightenment principles enough to pay lip
service to them. They know they're not supposed to ban ideas per se, so they have to recast the ideas as causing
"harm," which sounds like something that can be banned. The more extreme try to claim speech itself is violence, or
even that silence is. But strange as it may sound, such gymnastics are a good sign. We'll know we're really in trouble
when they stop bothering to invent pretenses for banning ideas — when, like the medieval church, they say "Damn
right we're banning ideas, and in fact here's a list of them."
[6] People only have the luxury of ignoring the medical consensus about vaccines because vaccines have worked so
well. If we didn't have any vaccines at all, the mortality rate would be so high that most current anti-vaxxers would be
begging for them. And the situation with freedom of expression is similar. It's only because they live in a world created
by the Enlightenment that kids from the suburbs can play at banning ideas.
Thanks to Marc Andreessen, Chris Best, Trevor Blackwell, Nicholas Christakis, Daniel Gackle, Jonathan Haidt, Claire
Lehmann, Jessica Livingston, Greg Lukianoff, Robert Morris, and Garry Tan for reading drafts of this.
Putting Ideas into Words - # 210
February 2022
Writing about something, even something you know well, usually shows you that you didn't
know it as well as you thought. Putting ideas into words is a severe test. The first words you
choose are usually wrong; you have to rewrite sentences over and over to get them exactly
right. And your ideas won't just be imprecise, but incomplete too. Half the ideas that end up in
an essay will be ones you thought of while you were writing it. Indeed, that's why I write them.
Once you publish something, the convention is that whatever you wrote was what you thought
before you wrote it. These were your ideas, and now you've expressed them. But you know this
isn't true. You know that putting your ideas into words changed them. And not just the ideas you
published. Presumably there were others that turned out to be too broken to fix, and those you
discarded instead.
It's not just having to commit your ideas to specific words that makes writing so exacting. The
real test is reading what you've written. You have to pretend to be a neutral reader who knows
nothing of what's in your head, only what you wrote. When he reads what you wrote, does it
seem correct? Does it seem complete? If you make an effort, you can read your writing as if
you were a complete stranger, and when you do the news is usually bad. It takes me many
cycles before I can get an essay past the stranger. But the stranger is rational, so you always
can, if you ask him what he needs. If he's not satisfied because you failed to mention x or didn't
qualify some sentence sufficiently, then you mention x or add more qualifications. Happy now?
It may cost you some nice sentences, but you have to resign yourself to that. You just have to
make them as good as you can and still satisfy the stranger.
This much, I assume, won't be that controversial. I think it will accord with the experience of
anyone who has tried to write about anything nontrivial. There may exist people whose thoughts
are so perfectly formed that they just flow straight into words. But I've never known anyone who
could do this, and if I met someone who said they could, it would seem evidence of their
limitations rather than their ability. Indeed, this is a trope in movies: the guy who claims to have
a plan for doing some difficult thing, and who when questioned further, taps his head and says
"It's all up here." Everyone watching the movie knows what that means. At best the plan is
vague and incomplete. Very likely there's some undiscovered flaw that invalidates it completely.
At best it's a plan for a plan.
In precisely defined domains it's possible to form complete ideas in your head. People can play
chess in their heads, for example. And mathematicians can do some amount of math in their
heads, though they don't seem to feel sure of a proof over a certain length till they write it down.
But this only seems possible with ideas you can express in a formal language. [1] Arguably
what such people are doing is putting ideas into words in their heads. I can to some extent write
essays in my head. I'll sometimes think of a paragraph while walking or lying in bed that
survives nearly unchanged in the final version. But really I'm writing when I do this. I'm doing
the mental part of writing; my fingers just aren't moving as I do it. [2]
You can know a great deal about something without writing about it. Can you ever know so
much that you wouldn't learn more from trying to explain what you know? I don't think so. I've
written about at least two subjects I know well — Lisp hacking and startups — and in both
cases I learned a lot from writing about them. In both cases there were things I didn't
consciously realize till I had to explain them. And I don't think my experience was anomalous. A
great deal of knowledge is unconscious, and experts have if anything a higher proportion of
unconscious knowledge than beginners.
I'm not saying that writing is the best way to explore all ideas. If you have ideas about
architecture, presumably the best way to explore them is to build actual buildings. What I'm
saying is that however much you learn from exploring ideas in other ways, you'll still learn new
things from writing about them.
Putting ideas into words doesn't have to mean writing, of course. You can also do it the old way,
by talking. But in my experience, writing is the stricter test. You have to commit to a single,
optimal sequence of words. Less can go unsaid when you don't have tone of voice to carry
meaning. And you can focus in a way that would seem excessive in conversation. I'll often
spend 2 weeks on an essay and reread drafts 50 times. If you did that in conversation it would
seem evidence of some kind of mental disorder. If you're lazy, of course, writing and talking are
equally useless. But if you want to push yourself to get things right, writing is the steeper hill. [3]
The reason I've spent so long establishing this rather obvious point is that it leads to another
that many people will find shocking. If writing down your ideas always makes them more precise
and more complete, then no one who hasn't written about a topic has fully formed ideas about
it. And someone who never writes has no fully formed ideas about anything nontrivial.
It feels to them as if they do, especially if they're not in the habit of critically examining their own
thinking. Ideas can feel complete. It's only when you try to put them into words that you discover
they're not. So if you never subject your ideas to that test, you'll not only never have fully formed
ideas, but also never realize it.
Putting ideas into words is certainly no guarantee that they'll be right. Far from it. But though it's
not a sufficient condition, it is a necessary one.
Notes:
[1] Machinery and circuits are formal languages.
[2] I thought of this sentence as I was walking down the street in Palo Alto.
[3] There are two senses of talking to someone: a strict sense in which the conversation is verbal, and a more
general sense in which it can take any form, including writing. In the limit case (e.g. Seneca's letters), conversation in
the latter sense becomes essay writing.
It can be very useful to talk (in either sense) with other people as you're writing something. But a verbal conversation
will never be more exacting than when you're talking about something you're writing.
Thanks to Trevor Blackwell, Patrick Collison, and Robert Morris for reading drafts of this.
Is There Such a Thing as Good Taste- - # 209
November 2021
(This essay is derived from a talk at the Cambridge Union.)
When I was a kid, I'd have said there wasn't. My father told me so. Some people like some
things, and other people like other things, and who's to say who's right?
It seemed so obvious that there was no such thing as good taste that it was only through
indirect evidence that I realized my father was wrong. And that's what I'm going to give you
here: a proof by reductio ad absurdum. If we start from the premise that there's no such thing
as good taste, we end up with conclusions that are obviously false, and therefore the premise
must be wrong.
We'd better start by saying what good taste is. There's a narrow sense in which it refers to
aesthetic judgements and a broader one in which it refers to preferences of any kind. The
strongest proof would be to show that taste exists in the narrowest sense, so I'm going to talk
about taste in art. You have better taste than me if the art you like is better than the art I like.
If there's no such thing as good taste, then there's no such thing as good art. Because if there
is such a thing as good art, it's easy to tell which of two people has better taste. Show them a
lot of works by artists they've never seen before and ask them to choose the best, and whoever
chooses the better art has better taste.
So if you want to discard the concept of good taste, you also have to discard the concept of
good art. And that means you have to discard the possibility of people being good at making it.
Which means there's no way for artists to be good at their jobs. And not just visual artists, but
anyone who is in any sense an artist. You can't have good actors, or novelists, or composers, or
dancers either. You can have popular novelists, but not good ones.
We don't realize how far we'd have to go if we discarded the concept of good taste, because we
don't even debate the most obvious cases. But it doesn't just mean we can't say which of two
famous painters is better. It means we can't say that any painter is better than a randomly
chosen eight year old.
That was how I realized my father was wrong. I started studying painting. And it was just like
other kinds of work I'd done: you could do it well, or badly, and if you tried hard, you could get
better at it. And it was obvious that Leonardo and Bellini were much better at it than me. That
gap between us was not imaginary. They were so good. And if they could be good, then art
could be good, and there was such a thing as good taste after all.
Now that I've explained how to show there is such a thing as good taste, I should also explain
why people think there isn't. There are two reasons. One is that there's always so much
disagreement about taste. Most people's response to art is a tangle of unexamined impulses. Is
the artist famous? Is the subject attractive? Is this the sort of art they're supposed to like? Is it
hanging in a famous museum, or reproduced in a big, expensive book? In practice most
people's response to art is dominated by such extraneous factors.
And the people who do claim to have good taste are so often mistaken. The paintings admired
by the so-called experts in one generation are often so different from those admired a few
generations later. It's easy to conclude there's nothing real there at all. It's only when you isolate
this force, for example by trying to paint and comparing your work to Bellini's, that you can see
that it does in fact exist.
The other reason people doubt that art can be good is that there doesn't seem to be any room
in the art for this goodness. The argument goes like this. Imagine several people looking at a
work of art and judging how good it is. If being good art really is a property of objects, it should
be in the object somehow. But it doesn't seem to be; it seems to be something happening in the
heads of each of the observers. And if they disagree, how do you choose between them?
The solution to this puzzle is to realize that the purpose of art is to work on its human audience,
and humans have a lot in common. And to the extent the things an object acts upon respond in
the same way, that's arguably what it means for the object to have the corresponding property. If
everything a particle interacts with behaves as if the particle had a mass of m, then it has a
mass of m. So the distinction between "objective" and "subjective" is not binary, but a matter of
degree, depending on how much the subjects have in common. Particles interacting with one
another are at one pole, but people interacting with art are not all the way at the other; their
reactions aren't random.
Because people's responses to art aren't random, art can be designed to operate on people,
and be good or bad depending on how effectively it does so. Much as a vaccine can be. If
someone were talking about the ability of a vaccine to confer immunity, it would seem very
frivolous to object that conferring immunity wasn't really a property of vaccines, because
acquiring immunity is something that happens in the immune system of each individual person.
Sure, people's immune systems vary, and a vaccine that worked on one might not work on
another, but that doesn't make it meaningless to talk about the effectiveness of a vaccine.
The situation with art is messier, of course. You can't measure effectiveness by simply taking a
vote, as you do with vaccines. You have to imagine the responses of subjects with a deep
knowledge of art, and enough clarity of mind to be able to ignore extraneous influences like the
fame of the artist. And even then you'd still see some disagreement. People do vary, and
judging art is hard, especially recent art. There is definitely not a total order either of works or of
people's ability to judge them. But there is equally definitely a partial order of both. So while it's
not possible to have perfect taste, it is possible to have good taste.
Thanks to the Cambridge Union for inviting me, and to Trevor Blackwell, Jessica Livingston,
and Robert Morris for reading drafts of this.
Beyond Smart - # 208
October 2021
If you asked people what was special about Einstein, most would say that he was really smart.
Even the ones who tried to give you a more sophisticated-sounding answer would probably
think this first. Till a few years ago I would have given the same answer myself. But that wasn't
what was special about Einstein. What was special about him was that he had important new
ideas. Being very smart was a necessary precondition for having those ideas, but the two are
not identical.
It may seem a hair-splitting distinction to point out that intelligence and its consequences are
not identical, but it isn't. There's a big gap between them. Anyone who's spent time around
universities and research labs knows how big. There are a lot of genuinely smart people who
don't achieve very much.
I grew up thinking that being smart was the thing most to be desired. Perhaps you did too. But I
bet it's not what you really want. Imagine you had a choice between being really smart but
discovering nothing new, and being less smart but discovering lots of new ideas. Surely you'd
take the latter. I would. The choice makes me uncomfortable, but when you see the two options
laid out explicitly like that, it's obvious which is better.
The reason the choice makes me uncomfortable is that being smart still feels like the thing that
matters, even though I know intellectually that it isn't. I spent so many years thinking it was. The
circumstances of childhood are a perfect storm for fostering this illusion. Intelligence is much
easier to measure than the value of new ideas, and you're constantly being judged by it.
Whereas even the kids who will ultimately discover new things aren't usually discovering them
yet. For kids that way inclined, intelligence is the only game in town.
There are more subtle reasons too, which persist long into adulthood. Intelligence wins in
conversation, and thus becomes the basis of the dominance hierarchy. [1] Plus having new
ideas is such a new thing historically, and even now done by so few people, that society hasn't
yet assimilated the fact that this is the actual destination, and intelligence merely a means to an
end. [2]
Why do so many smart people fail to discover anything new? Viewed from that direction, the
question seems a rather depressing one. But there's another way to look at it that's not just
more optimistic, but more interesting as well. Clearly intelligence is not the only ingredient in
having new ideas. What are the other ingredients? Are they things we could cultivate?
Because the trouble with intelligence, they say, is that it's mostly inborn. The evidence for this
seems fairly convincing, especially considering that most of us don't want it to be true, and the
evidence thus has to face a stiff headwind. But I'm not going to get into that question here,
because it's the other ingredients in new ideas that I care about, and it's clear that many of
them can be cultivated.
That means the truth is excitingly different from the story I got as a kid. If intelligence is what
matters, and also mostly inborn, the natural consequence is a sort of Brave New World fatalism.
The best you can do is figure out what sort of work you have an "aptitude" for, so that whatever
intelligence you were born with will at least be put to the best use, and then work as hard as
you can at it. Whereas if intelligence isn't what matters, but only one of several ingredients in
what does, and many of those aren't inborn, things get more interesting. You have a lot more
control, but the problem of how to arrange your life becomes that much more complicated.
So what are the other ingredients in having new ideas? The fact that I can even ask this
question proves the point I raised earlier — that society hasn't assimilated the fact that it's this
and not intelligence that matters. Otherwise we'd all know the answers to such a fundamental
question. [3]
I'm not going to try to provide a complete catalogue of the other ingredients here. This is the
first time I've posed the question to myself this way, and I think it may take a while to answer.
But I wrote recently about one of the most important: an obsessive interest in a particular topic.
And this can definitely be cultivated.
Another quality you need in order to discover new ideas is independent-mindedness. I wouldn't
want to claim that this is distinct from intelligence — I'd be reluctant to call someone smart who
wasn't independent-minded — but though largely inborn, this quality seems to be something
that can be cultivated to some extent.
There are general techniques for having new ideas — for example, for working on your own
projects and for overcoming the obstacles you face with early work — and these can all be
learned. Some of them can be learned by societies. And there are also collections of
techniques for generating specific types of new ideas, like startup ideas and essay topics.
And of course there are a lot of fairly mundane ingredients in discovering new ideas, like
working hard, getting enough sleep, avoiding certain kinds of stress, having the right
colleagues, and finding tricks for working on what you want even when it's not what you're
supposed to be working on. Anything that prevents people from doing great work has an
inverse that helps them to. And this class of ingredients is not as boring as it might seem at first.
For example, having new ideas is generally associated with youth. But perhaps it's not youth
per se that yields new ideas, but specific things that come with youth, like good health and lack
of responsibilities. Investigating this might lead to strategies that will help people of any age to
have better ideas.
One of the most surprising ingredients in having new ideas is writing ability. There's a class of
new ideas that are best discovered by writing essays and books. And that "by" is deliberate: you
don't think of the ideas first, and then merely write them down. There is a kind of thinking that
one does by writing, and if you're clumsy at writing, or don't enjoy doing it, that will get in your
way if you try to do this kind of thinking. [4]
I predict the gap between intelligence and new ideas will turn out to be an interesting place. If
we think of this gap merely as a measure of unrealized potential, it becomes a sort of
wasteland that we try to hurry through with our eyes averted. But if we flip the question, and
start inquiring into the other ingredients in new ideas that it implies must exist, we can mine this
gap for discoveries about discovery.
Notes:
[1] What wins in conversation depends on who with. It ranges from mere aggressiveness at the bottom, through
quick-wittedness in the middle, to something closer to actual intelligence at the top, though probably always with
some component of quick-wittedness.
[2] Just as intelligence isn't the only ingredient in having new ideas, having new ideas isn't the only thing intelligence
is useful for. It's also useful, for example, in diagnosing problems and figuring out how to fix them. Both overlap with
having new ideas, but both have an end that doesn't.
Those ways of using intelligence are much more common than having new ideas. And in such cases intelligence is
even harder to distinguish from its consequences.
[3] Some would attribute the difference between intelligence and having new ideas to "creativity," but this doesn't
seem a very useful term. As well as being pretty vague, it's shifted half a frame sideways from what we care about:
it's neither separable from intelligence, nor responsible for all the difference between intelligence and having new
ideas.
[4] Curiously enough, this essay is an example. It started out as an essay about writing ability. But when I came to the
distinction between intelligence and having new ideas, that seemed so much more important that I turned the original
essay inside out, making that the topic and my original topic one of the points in it. As in many other fields, that level
of reworking is easier to contemplate once you've had a lot of practice.
Thanks to Trevor Blackwell, Patrick Collison, Jessica Livingston, Robert Morris, Michael Nielsen, and Lisa Randall
for reading drafts of this.
Weird Languages - # 207
August 2021
When people say that in their experience all programming languages are basically equivalent,
they're making a statement not about languages but about the kind of programming they've
done.
99.5% of programming consists of gluing together calls to library functions. All popular
languages are equally good at this. So one can easily spend one's whole career operating in
the intersection of popular programming languages.
But the other .5% of programming is disproportionately interesting. If you want to learn what it
consists of, the weirdness of weird languages is a good clue to follow.
Weird languages aren't weird by accident. Not the good ones, at least. The weirdness of the
good ones usually implies the existence of some form of programming that's not just the usual
gluing together of library calls.
A concrete example: Lisp macros. Lisp macros seem weird even to many Lisp programmers.
They're not only not in the intersection of popular languages, but by their nature would be hard
to implement properly in a language without turning it into a dialect of Lisp. And macros are
definitely evidence of techniques that go beyond glue programming. For example, solving
problems by first writing a language for problems of that type, and then writing your specific
application in it. Nor is this all you can do with macros; it's just one region in a space of programmanipulating techniques that even now is far from fully explored.
So if you want to expand your concept of what programming can be, one way to do it is by
learning weird languages. Pick a language that most programmers consider weird but whose
median user is smart, and then focus on the differences between this language and the
intersection of popular languages. What can you say in this language that would be impossibly
inconvenient to say in others? In the process of learning how to say things you couldn't
previously say, you'll probably be learning how to think things you couldn't previously think.
Thanks to Trevor Blackwell, Patrick Collison, Daniel Gackle, Amjad Masad, and Robert Morris
for reading drafts of this.
How to Work Hard - # 206
June 2021
It might not seem there's much to learn about how to work hard. Anyone who's been to school
knows what it entails, even if they chose not to do it. There are 12 year olds who work
amazingly hard. And yet when I ask if I know more about working hard now than when I was in
school, the answer is definitely yes.
One thing I know is that if you want to do great things, you'll have to work very hard. I wasn't
sure of that as a kid. Schoolwork varied in difficulty; one didn't always have to work super hard
to do well. And some of the things famous adults did, they seemed to do almost effortlessly.
Was there, perhaps, some way to evade hard work through sheer brilliance? Now I know the
answer to that question. There isn't.
The reason some subjects seemed easy was that my school had low standards. And the
reason famous adults seemed to do things effortlessly was years of practice; they made it look
easy.
Of course, those famous adults usually had a lot of natural ability too. There are three
ingredients in great work: natural ability, practice, and effort. You can do pretty well with just two,
but to do the best work you need all three: you need great natural ability and to have practiced a
lot and to be trying very hard. [1]
Bill Gates, for example, was among the smartest people in business in his era, but he was also
among the hardest working. "I never took a day off in my twenties," he said. "Not one." It was
similar with Lionel Messi. He had great natural ability, but when his youth coaches talk about
him, what they remember is not his talent but his dedication and his desire to win. P. G.
Wodehouse would probably get my vote for best English writer of the 20th century, if I had to
choose. Certainly no one ever made it look easier. But no one ever worked harder. At 74, he
wrote with each new book of mine I have, as I say, the feeling that this time I have picked a
lemon in the garden of literature. A good thing, really, I suppose. Keeps one up on one's toes
and makes one rewrite every sentence ten times. Or in many cases twenty times. Sounds a bit
extreme, you think. And yet Bill Gates sounds even more extreme. Not one day off in ten years?
These two had about as much natural ability as anyone could have, and yet they also worked
about as hard as anyone could work. You need both.
That seems so obvious, and yet in practice we find it slightly hard to grasp. There's a faint xor
between talent and hard work. It comes partly from popular culture, where it seems to run very
deep, and partly from the fact that the outliers are so rare. If great talent and great drive are
both rare, then people with both are rare squared. Most people you meet who have a lot of one
will have less of the other. But you'll need both if you want to be an outlier yourself. And since
you can't really change how much natural talent you have, in practice doing great work, insofar
as you can, reduces to working very hard.
It's straightforward to work hard if you have clearly defined, externally imposed goals, as you do
in school. There is some technique to it: you have to learn not to lie to yourself, not to
procrastinate (which is a form of lying to yourself), not to get distracted, and not to give up when
things go wrong. But this level of discipline seems to be within the reach of quite young
children, if they want it.
What I've learned since I was a kid is how to work toward goals that are neither clearly defined
nor externally imposed. You'll probably have to learn both if you want to do really great things.
The most basic level of which is simply to feel you should be working without anyone telling you
to. Now, when I'm not working hard, alarm bells go off. I can't be sure I'm getting anywhere
when I'm working hard, but I can be sure I'm getting nowhere when I'm not, and it feels awful. [2]
There wasn't a single point when I learned this. Like most little kids, I enjoyed the feeling of
achievement when I learned or did something new. As I grew older, this morphed into a feeling
of disgust when I wasn't achieving anything. The one precisely dateable landmark I have is
when I stopped watching TV, at age 13.
Several people I've talked to remember getting serious about work around this age. When I
asked Patrick Collison when he started to find idleness distasteful, he said I think around age
13 or 14. I have a clear memory from around then of sitting in the sitting room, staring outside,
and wondering why I was wasting my summer holiday. Perhaps something changes at
adolescence. That would make sense.
Strangely enough, the biggest obstacle to getting serious about work was probably school,
which made work (what they called work) seem boring and pointless. I had to learn what real
work was before I could wholeheartedly desire to do it. That took a while, because even in
college a lot of the work is pointless; there are entire departments that are pointless. But as I
learned the shape of real work, I found that my desire to do it slotted into it as if they'd been
made for each other.
I suspect most people have to learn what work is before they can love it. Hardy wrote eloquently
about this in A Mathematician's Apology: I do not remember having felt, as a boy, any passion
for mathematics, and such notions as I may have had of the career of a mathematician were far
from noble. I thought of mathematics in terms of examinations and scholarships: I wanted to
beat other boys, and this seemed to be the way in which I could do so most decisively. He didn't
learn what math was really about till part way through college, when he read Jordan's Cours
d'analyse. I shall never forget the astonishment with which I read that remarkable work, the first
inspiration for so many mathematicians of my generation, and learnt for the first time as I read it
what mathematics really meant. There are two separate kinds of fakeness you need to learn to
discount in order to understand what real work is. One is the kind Hardy encountered in school.
Subjects get distorted when they're adapted to be taught to kids — often so distorted that
they're nothing like the work done by actual practitioners. [3] The other kind of fakeness is
intrinsic to certain types of work. Some types of work are inherently bogus, or at best mere
busywork.
There's a kind of solidity to real work. It's not all writing the Principia, but it all feels necessary.
That's a vague criterion, but it's deliberately vague, because it has to cover a lot of different
types. [4]
Once you know the shape of real work, you have to learn how many hours a day to spend on it.
You can't solve this problem by simply working every waking hour, because in many kinds of
work there's a point beyond which the quality of the result will start to decline.
That limit varies depending on the type of work and the person. I've done several different kinds
of work, and the limits were different for each. My limit for the harder types of writing or
programming is about five hours a day. Whereas when I was running a startup, I could work all
the time. At least for the three years I did it; if I'd kept going much longer, I'd probably have
needed to take occasional vacations. [5]
The only way to find the limit is by crossing it. Cultivate a sensitivity to the quality of the work
you're doing, and then you'll notice if it decreases because you're working too hard. Honesty is
critical here, in both directions: you have to notice when you're being lazy, but also when you're
working too hard. And if you think there's something admirable about working too hard, get that
idea out of your head. You're not merely getting worse results, but getting them because you're
showing off — if not to other people, then to yourself. [6]
Finding the limit of working hard is a constant, ongoing process, not something you do just
once. Both the difficulty of the work and your ability to do it can vary hour to hour, so you need
to be constantly judging both how hard you're trying and how well you're doing.
Trying hard doesn't mean constantly pushing yourself to work, though. There may be some
people who do, but I think my experience is fairly typical, and I only have to push myself
occasionally when I'm starting a project or when I encounter some sort of check. That's when
I'm in danger of procrastinating. But once I get rolling, I tend to keep going.
What keeps me going depends on the type of work. When I was working on Viaweb, I was
driven by fear of failure. I barely procrastinated at all then, because there was always something
that needed doing, and if I could put more distance between me and the pursuing beast by
doing it, why wait? [7] Whereas what drives me now, writing essays, is the flaws in them.
Between essays I fuss for a few days, like a dog circling while it decides exactly where to lie
down. But once I get started on one, I don't have to push myself to work, because there's
always some error or omission already pushing me.
I do make some amount of effort to focus on important topics. Many problems have a hard core
at the center, surrounded by easier stuff at the edges. Working hard means aiming toward the
center to the extent you can. Some days you may not be able to; some days you'll only be able
to work on the easier, peripheral stuff. But you should always be aiming as close to the center
as you can without stalling.
The bigger question of what to do with your life is one of these problems with a hard core. There
are important problems at the center, which tend to be hard, and less important, easier ones at
the edges. So as well as the small, daily adjustments involved in working on a specific problem,
you'll occasionally have to make big, lifetime-scale adjustments about which type of work to do.
And the rule is the same: working hard means aiming toward the center — toward the most
ambitious problems.
By center, though, I mean the actual center, not merely the current consensus about the center.
The consensus about which problems are most important is often mistaken, both in general
and within specific fields. If you disagree with it, and you're right, that could represent a valuable
opportunity to do something new.
The more ambitious types of work will usually be harder, but although you should not be in
denial about this, neither should you treat difficulty as an infallible guide in deciding what to do.
If you discover some ambitious type of work that's a bargain in the sense of being easier for you
than other people, either because of the abilities you happen to have, or because of some new
way you've found to approach it, or simply because you're more excited about it, by all means
work on that. Some of the best work is done by people who find an easy way to do something
hard.
As well as learning the shape of real work, you need to figure out which kind you're suited for.
And that doesn't just mean figuring out which kind your natural abilities match the best; it
doesn't mean that if you're 7 feet tall, you have to play basketball. What you're suited for
depends not just on your talents but perhaps even more on your interests. A deep interest in a
topic makes people work harder than any amount of discipline can.
It can be harder to discover your interests than your talents. There are fewer types of talent than
interest, and they start to be judged early in childhood, whereas interest in a topic is a subtle
thing that may not mature till your twenties, or even later. The topic may not even exist earlier.
Plus there are some powerful sources of error you need to learn to discount. Are you really
interested in x, or do you want to work on it because you'll make a lot of money, or because
other people will be impressed with you, or because your parents want you to? [8]
The difficulty of figuring out what to work on varies enormously from one person to another.
That's one of the most important things I've learned about work since I was a kid. As a kid, you
get the impression that everyone has a calling, and all they have to do is figure out what it is.
That's how it works in movies, and in the streamlined biographies fed to kids. Sometimes it
works that way in real life. Some people figure out what to do as children and just do it, like
Mozart. But others, like Newton, turn restlessly from one kind of work to another. Maybe in
retrospect we can identify one as their calling — we can wish Newton spent more time on math
and physics and less on alchemy and theology — but this is an illusion induced by hindsight
bias. There was no voice calling to him that he could have heard.
So while some people's lives converge fast, there will be others whose lives never converge.
And for these people, figuring out what to work on is not so much a prelude to working hard as
an ongoing part of it, like one of a set of simultaneous equations. For these people, the process
I described earlier has a third component: along with measuring both how hard you're working
and how well you're doing, you have to think about whether you should keep working in this
field or switch to another. If you're working hard but not getting good enough results, you should
switch. It sounds simple expressed that way, but in practice it's very difficult. You shouldn't give
up on the first day just because you work hard and don't get anywhere. You need to give
yourself time to get going. But how much time? And what should you do if work that was going
well stops going well? How much time do you give yourself then? [9]
What even counts as good results? That can be really hard to decide. If you're exploring an
area few others have worked in, you may not even know what good results look like. History is
full of examples of people who misjudged the importance of what they were working on.
The best test of whether it's worthwhile to work on something is whether you find it interesting.
That may sound like a dangerously subjective measure, but it's probably the most accurate one
you're going to get. You're the one working on the stuff. Who's in a better position than you to
judge whether it's important, and what's a better predictor of its importance than whether it's
interesting?
For this test to work, though, you have to be honest with yourself. Indeed, that's the most
striking thing about the whole question of working hard: how at each point it depends on being
honest with yourself.
Working hard is not just a dial you turn up to 11. It's a complicated, dynamic system that has to
be tuned just right at each point. You have to understand the shape of real work, see clearly
what kind you're best suited for, aim as close to the true core of it as you can, accurately judge
at each moment both what you're capable of and how you're doing, and put in as many hours
each day as you can without harming the quality of the result. This network is too complicated
to trick. But if you're consistently honest and clear-sighted, it will automatically assume an
optimal shape, and you'll be productive in a way few people are.
Notes:
[1] In "The Bus Ticket Theory of Genius" I said the three ingredients in great work were natural ability, determination,
and interest. That's the formula in the preceding stage; determination and interest yield practice and effort.
[2] I mean this at a resolution of days, not hours. You'll often get somewhere while not working in the sense that the
solution to a problem comes to you while taking a shower, or even in your sleep, but only because you were working
hard on it the day before.
It's good to go on vacation occasionally, but when I go on vacation, I like to learn new things. I wouldn't like just sitting
on a beach.
[3] The thing kids do in school that's most like the real version is sports. Admittedly because many sports originated
as games played in schools. But in this one area, at least, kids are doing exactly what adults do.
In the average American high school, you have a choice of pretending to do something serious, or seriously doing
something pretend. Arguably the latter is no worse.
[4] Knowing what you want to work on doesn't mean you'll be able to. Most people have to spend a lot of their time
working on things they don't want to, especially early on. But if you know what you want to do, you at least know what
direction to nudge your life in.
[5] The lower time limits for intense work suggest a solution to the problem of having less time to work after you have
kids: switch to harder problems. In effect I did that, though not deliberately.
[6] Some cultures have a tradition of performative hard work. I don't love this idea, because (a) it makes a parody of
something important and (b) it causes people to wear themselves out doing things that don't matter. I don't know
enough to say for sure whether it's net good or bad, but my guess is bad.
[7] One of the reasons people work so hard on startups is that startups can fail, and when they do, that failure tends
to be both decisive and conspicuous.
[8] It's ok to work on something to make a lot of money. You need to solve the money problem somehow, and there's
nothing wrong with doing that efficiently by trying to make a lot at once. I suppose it would even be ok to be
interested in money for its own sake; whatever floats your boat. Just so long as you're conscious of your motivations.
The thing to avoid is unconsciously letting the need for money warp your ideas about what kind of work you find most
interesting.
[9] Many people face this question on a smaller scale with individual projects. But it's easier both to recognize and to
accept a dead end in a single project than to abandon some type of work entirely. The more determined you are, the
harder it gets. Like a Spanish Flu victim, you're fighting your own immune system: Instead of giving up, you tell
yourself, I should just try harder. And who can say you're not right?
Thanks to Trevor Blackwell, John Carmack, John Collison, Patrick Collison, Robert Morris, Geoff Ralston, and Harj
Taggar for reading drafts of this.
A Project of One-s Own - # 205
June 2021
A few days ago, on the way home from school, my nine year old son told me he couldn't wait to
get home to write more of the story he was working on. This made me as happy as anything
I've heard him say — not just because he was excited about his story, but because he'd
discovered this way of working. Working on a project of your own is as different from ordinary
work as skating is from walking. It's more fun, but also much more productive.
What proportion of great work has been done by people who were skating in this sense? If not
all of it, certainly a lot.
There is something special about working on a project of your own. I wouldn't say exactly that
you're happier. A better word would be excited, or engaged. You're happy when things are going
well, but often they aren't. When I'm writing an essay, most of the time I'm worried and puzzled:
worried that the essay will turn out badly, and puzzled because I'm groping for some idea that I
can't see clearly enough. Will I be able to pin it down with words? In the end I usually can, if I
take long enough, but I'm never sure; the first few attempts often fail.
You have moments of happiness when things work out, but they don't last long, because then
you're on to the next problem. So why do it at all? Because to the kind of people who like
working this way, nothing else feels as right. You feel as if you're an animal in its natural habitat,
doing what you were meant to do — not always happy, maybe, but awake and alive.
Many kids experience the excitement of working on projects of their own. The hard part is
making this converge with the work you do as an adult. And our customs make it harder. We
treat "playing" and "hobbies" as qualitatively different from "work". It's not clear to a kid building
a treehouse that there's a direct (though long) route from that to architecture or engineering.
And instead of pointing out the route, we conceal it, by implicitly treating the stuff kids do as
different from real work. [1]
Instead of telling kids that their treehouses could be on the path to the work they do as adults,
we tell them the path goes through school. And unfortunately schoolwork tends to be very
different from working on projects of one's own. It's usually neither a project, nor one's own. So
as school gets more serious, working on projects of one's own is something that survives, if at
all, as a thin thread off to the side.
It's a bit sad to think of all the high school kids turning their backs on building treehouses and
sitting in class dutifully learning about Darwin or Newton to pass some exam, when the work
that made Darwin and Newton famous was actually closer in spirit to building treehouses than
studying for exams.
If I had to choose between my kids getting good grades and working on ambitious projects of
their own, I'd pick the projects. And not because I'm an indulgent parent, but because I've been
on the other end and I know which has more predictive value. When I was picking startups for Y
Combinator, I didn't care about applicants' grades. But if they'd worked on projects of their own,
I wanted to hear all about those. [2]
It may be inevitable that school is the way it is. I'm not saying we have to redesign it (though I'm
not saying we don't), just that we should understand what it does to our attitudes to work — that
it steers us toward the dutiful plodding kind of work, often using competition as bait, and away
from skating.
There are occasionally times when schoolwork becomes a project of one's own. Whenever I
had to write a paper, that would become a project of my own — except in English classes,
ironically, because the things one has to write in English classes are so bogus. And when I got
to college and started taking CS classes, the programs I had to write became projects of my
own. Whenever I was writing or programming, I was usually skating, and that has been true
ever since.
So where exactly is the edge of projects of one's own? That's an interesting question, partly
because the answer is so complicated, and partly because there's so much at stake. There turn
out to be two senses in which work can be one's own: 1) that you're doing it voluntarily, rather
than merely because someone told you to, and 2) that you're doing it by yourself.
The edge of the former is quite sharp. People who care a lot about their work are usually very
sensitive to the difference between pulling, and being pushed, and work tends to fall into one
category or the other. But the test isn't simply whether you're told to do something. You can
choose to do something you're told to do. Indeed, you can own it far more thoroughly than the
person who told you to do it.
For example, math homework is for most people something they're told to do. But for my father,
who was a mathematician, it wasn't. Most of us think of the problems in a math book as a way
to test or develop our knowledge of the material explained in each section. But to my father the
problems were the part that mattered, and the text was merely a sort of annotation. Whenever
he got a new math book it was to him like being given a puzzle: here was a new set of problems
to solve, and he'd immediately set about solving all of them.
The other sense of a project being one's own — working on it by oneself — has a much softer
edge. It shades gradually into collaboration. And interestingly, it shades into collaboration in two
different ways. One way to collaborate is to share a single project. For example, when two
mathematicians collaborate on a proof that takes shape in the course of a conversation
between them. The other way is when multiple people work on separate projects of their own
that fit together like a jigsaw puzzle. For example, when one person writes the text of a book
and another does the graphic design. [3]
These two paths into collaboration can of course be combined. But under the right conditions,
the excitement of working on a project of one's own can be preserved for quite a while before
disintegrating into the turbulent flow of work in a large organization. Indeed, the history of
successful organizations is partly the history of techniques for preserving that excitement. [4]
The team that made the original Macintosh were a great example of this phenomenon. People
like Burrell Smith and Andy Hertzfeld and Bill Atkinson and Susan Kare were not just following
orders. They were not tennis balls hit by Steve Jobs, but rockets let loose by Steve Jobs. There
was a lot of collaboration between them, but they all seem to have individually felt the
excitement of working on a project of one's own.
In Andy Hertzfeld's book on the Macintosh, he describes how they'd come back into the office
after dinner and work late into the night. People who've never experienced the thrill of working
on a project they're excited about can't distinguish this kind of working long hours from the kind
that happens in sweatshops and boiler rooms, but they're at opposite ends of the spectrum.
That's why it's a mistake to insist dogmatically on "work/life balance." Indeed, the mere
expression "work/life" embodies a mistake: it assumes work and life are distinct. For those to
whom the word "work" automatically implies the dutiful plodding kind, they are. But for the
skaters, the relationship between work and life would be better represented by a dash than a
slash. I wouldn't want to work on anything that I didn't want to take over my life.
Of course, it's easier to achieve this level of motivation when you're making something like the
Macintosh. It's easy for something new to feel like a project of your own. That's one of the
reasons for the tendency programmers have to rewrite things that don't need rewriting, and to
write their own versions of things that already exist. This sometimes alarms managers, and
measured by total number of characters typed, it's rarely the optimal solution. But it's not always
driven simply by arrogance or cluelessness. Writing code from scratch is also much more
rewarding — so much more rewarding that a good programmer can end up net ahead, despite
the shocking waste of characters. Indeed, it may be one of the advantages of capitalism that it
encourages such rewriting. A company that needs software to do something can't use the
software already written to do it at another company, and thus has to write their own, which
often turns out better. [5]
The natural alignment between skating and solving new problems is one of the reasons the
payoffs from startups are so high. Not only is the market price of unsolved problems higher, you
also get a discount on productivity when you work on them. In fact, you get a double increase in
productivity: when you're doing a clean-sheet design, it's easier to recruit skaters, and they get
to spend all their time skating.
Steve Jobs knew a thing or two about skaters from having watched Steve Wozniak. If you can
find the right people, you only have to tell them what to do at the highest level. They'll handle
the details. Indeed, they insist on it. For a project to feel like your own, you must have sufficient
autonomy. You can't be working to order, or slowed down by bureaucracy.
One way to ensure autonomy is not to have a boss at all. There are two ways to do that: to be
the boss yourself, and to work on projects outside of work. Though they're at opposite ends of
the scale financially, startups and open source projects have a lot in common, including the fact
that they're often run by skaters. And indeed, there's a wormhole from one end of the scale to
the other: one of the best ways to discover startup ideas is to work on a project just for fun.
If your projects are the kind that make money, it's easy to work on them. It's harder when they're
not. And the hardest part, usually, is morale. That's where adults have it harder than kids. Kids
just plunge in and build their treehouse without worrying about whether they're wasting their
time, or how it compares to other treehouses. And frankly we could learn a lot from kids here.
The high standards most grownups have for "real" work do not always serve us well.
The most important phase in a project of one's own is at the beginning: when you go from
thinking it might be cool to do x to actually doing x. And at that point high standards are not
merely useless but positively harmful. There are a few people who start too many new projects,
but far more, I suspect, who are deterred by fear of failure from starting projects that would have
succeeded if they had.
But if we couldn't benefit as kids from the knowledge that our treehouses were on the path to
grownup projects, we can at least benefit as grownups from knowing that our projects are on a
path that stretches back to treehouses. Remember that careless confidence you had as a kid
when starting something new? That would be a powerful thing to recapture.
If it's harder as adults to retain that kind of confidence, we at least tend to be more aware of
what we're doing. Kids bounce, or are herded, from one kind of work to the next, barely
realizing what's happening to them. Whereas we know more about different types of work and
have more control over which we do. Ideally we can have the best of both worlds: to be
deliberate in choosing to work on projects of our own, and carelessly confident in starting new
ones.
Notes:
[1] "Hobby" is a curious word. Now it means work that isn't real work — work that one is not to be judged by — but
originally it just meant an obsession in a fairly general sense (even a political opinion, for example) that one
metaphorically rode as a child rides a hobby-horse. It's hard to say if its recent, narrower meaning is a change for the
better or the worse. For sure there are lots of false positives — lots of projects that end up being important but are
dismissed initially as mere hobbies. But on the other hand, the concept provides valuable cover for projects in the
early, ugly duckling phase.
[2] Tiger parents, as parents so often do, are fighting the last war. Grades mattered more in the old days when the
route to success was to acquire credentials while ascending some predefined ladder. But it's just as well that their
tactics are focused on grades. How awful it would be if they invaded the territory of projects, and thereby gave their
kids a distaste for this kind of work by forcing them to do it. Grades are already a grim, fake world, and aren't harmed
much by parental interference, but working on one's own projects is a more delicate, private thing that could be
damaged very easily.
[3] The complicated, gradual edge between working on one's own projects and collaborating with others is one
reason there is so much disagreement about the idea of the "lone genius." In practice people collaborate (or not) in
all kinds of different ways, but the idea of the lone genius is definitely not a myth. There's a core of truth to it that goes
with a certain way of working.
[4] Collaboration is powerful too. The optimal organization would combine collaboration and ownership in such a way
as to do the least damage to each. Interestingly, companies and university departments approach this ideal from
opposite directions: companies insist on collaboration, and occasionally also manage both to recruit skaters and
allow them to skate, and university departments insist on the ability to do independent research (which is by custom
treated as skating, whether it is or not), and the people they hire collaborate as much as they choose.
[5] If a company could design its software in such a way that the best newly arrived programmers always got a clean
sheet, it could have a kind of eternal youth. That might not be impossible. If you had a software backbone defining a
game with sufficiently clear rules, individual programmers could write their own players.
Thanks to Trevor Blackwell, Paul Buchheit, Andy Hertzfeld, Jessica Livingston, and Peter Norvig for reading drafts of
this.
Fierce Nerds - # 204
May 2021
Most people think of nerds as quiet, diffident people. In ordinary social situations they are — as
quiet and diffident as the star quarterback would be if he found himself in the middle of a
physics symposium. And for the same reason: they are fish out of water. But the apparent
diffidence of nerds is an illusion due to the fact that when non-nerds observe them, it's usually
in ordinary social situations. In fact some nerds are quite fierce.
The fierce nerds are a small but interesting group. They are as a rule extremely competitive —
more competitive, I'd say, than highly competitive non-nerds. Competition is more personal for
them. Partly perhaps because they're not emotionally mature enough to distance themselves
from it, but also because there's less randomness in the kinds of competition they engage in,
and they are thus more justified in taking the results personally.
Fierce nerds also tend to be somewhat overconfident, especially when young. It might seem
like it would be a disadvantage to be mistaken about one's abilities, but empirically it isn't. Up to
a point, confidence is a self-fullfilling prophecy.
Another quality you find in most fierce nerds is intelligence. Not all nerds are smart, but the
fierce ones are always at least moderately so. If they weren't, they wouldn't have the confidence
to be fierce. [1]
There's also a natural connection between nerdiness and independent-mindedness. It's hard to
be independent-minded without being somewhat socially awkward, because conventional
beliefs are so often mistaken, or at least arbitrary. No one who was both independent-minded
and ambitious would want to waste the effort it takes to fit in. And the independent-mindedness
of the fierce nerds will obviously be of the aggressive rather than the passive type: they'll be
annoyed by rules, rather than dreamily unaware of them.
I'm less sure why fierce nerds are impatient, but most seem to be. You notice it first in
conversation, where they tend to interrupt you. This is merely annoying, but in the more
promising fierce nerds it's connected to a deeper impatience about solving problems. Perhaps
the competitiveness and impatience of fierce nerds are not separate qualities, but two
manifestations of a single underlying drivenness.
When you combine all these qualities in sufficient quantities, the result is quite formidable. The
most vivid example of fierce nerds in action may be James Watson's The Double Helix. The first
sentence of the book is "I have never seen Francis Crick in a modest mood," and the portrait he
goes on to paint of Crick is the quintessential fierce nerd: brilliant, socially awkward,
competitive, independent-minded, overconfident. But so is the implicit portrait he paints of
himself. Indeed, his lack of social awareness makes both portraits that much more realistic,
because he baldly states all sorts of opinions and motivations that a smoother person would
conceal. And moreover it's clear from the story that Crick and Watson's fierce nerdiness was
integral to their success. Their independent-mindedness caused them to consider approaches
that most others ignored, their overconfidence allowed them to work on problems they only half
understood (they were literally described as "clowns" by one eminent insider), and their
impatience and competitiveness got them to the answer ahead of two other groups that would
otherwise have found it within the next year, if not the next several months. [2]
The idea that there could be fierce nerds is an unfamiliar one not just to many normal people
but even to some young nerds. Especially early on, nerds spend so much of their time in
ordinary social situations and so little doing real work that they get a lot more evidence of their
awkwardness than their power. So there will be some who read this description of the fierce
nerd and realize "Hmm, that's me." And it is to you, young fierce nerd, that I now turn.
I have some good news, and some bad news. The good news is that your fierceness will be a
great help in solving difficult problems. And not just the kind of scientific and technical problems
that nerds have traditionally solved. As the world progresses, the number of things you can win
at by getting the right answer increases. Recently getting rich became one of them: 7 of the 8
richest people in America are now fierce nerds.
Indeed, being a fierce nerd is probably even more helpful in business than in nerds' original
territory of scholarship. Fierceness seems optional there. Darwin for example doesn't seem to
have been especially fierce. Whereas it's impossible to be the CEO of a company over a certain
size without being fierce, so now that nerds can win at business, fierce nerds will increasingly
monopolize the really big successes.
The bad news is that if it's not exercised, your fierceness will turn to bitterness, and you will
become an intellectual playground bully: the grumpy sysadmin, the forum troll, the hater, the
shooter down of new ideas.
How do you avoid this fate? Work on ambitious projects. If you succeed, it will bring you a kind
of satisfaction that neutralizes bitterness. But you don't need to have succeeded to feel this;
merely working on hard projects gives most fierce nerds some feeling of satisfaction. And those
it doesn't, it at least keeps busy. [3]
Another solution may be to somehow turn off your fierceness, by devoting yourself to meditation
or psychotherapy or something like that. Maybe that's the right answer for some people. I have
no idea. But it doesn't seem the optimal solution to me. If you're given a sharp knife, it seems to
me better to use it than to blunt its edge to avoid cutting yourself.
If you do choose the ambitious route, you'll have a tailwind behind you. There has never been a
better time to be a nerd. In the past century we've seen a continuous transfer of power from
dealmakers to technicians — from the charismatic to the competent — and I don't see anything
on the horizon that will end it. At least not till the nerds end it themselves by bringing about the
singularity.
Notes:
[1] To be a nerd is to be socially awkward, and there are two distinct ways to do that: to be playing the same game as
everyone else, but badly, and to be playing a different game. The smart nerds are the latter type.
[2] The same qualities that make fierce nerds so effective can also make them very annoying. Fierce nerds would do
well to remember this, and (a) try to keep a lid on it, and (b) seek out organizations and types of work where getting
the right answer matters more than preserving social harmony. In practice that means small groups working on hard
problems. Which fortunately is the most fun kind of environment anyway.
[3] If success neutralizes bitterness, why are there some people who are at least moderately successful and yet still
quite bitter? Because people's potential bitterness varies depending on how naturally bitter their personality is, and
how ambitious they are: someone who's naturally very bitter will still have a lot left after success neutralizes some of
it, and someone who's very ambitious will need proportionally more success to satisfy that ambition.
So the worst-case scenario is someone who's both naturally bitter and extremely ambitious, and yet only moderately
successful.
Thanks to Trevor Blackwell, Steve Blank, Patrick Collison, Jessica Livingston, Amjad Masad, and Robert Morris for
reading drafts of this.
Crazy New Ideas - # 203
May 2021
There's one kind of opinion I'd be very afraid to express publicly. If someone I knew to be both a
domain expert and a reasonable person proposed an idea that sounded preposterous, I'd be
very reluctant to say "That will never work."
Anyone who has studied the history of ideas, and especially the history of science, knows that's
how big things start. Someone proposes an idea that sounds crazy, most people dismiss it, then
it gradually takes over the world.
Most implausible-sounding ideas are in fact bad and could be safely dismissed. But not when
they're proposed by reasonable domain experts. If the person proposing the idea is reasonable,
then they know how implausible it sounds. And yet they're proposing it anyway. That suggests
they know something you don't. And if they have deep domain expertise, that's probably the
source of it. [1]
Such ideas are not merely unsafe to dismiss, but disproportionately likely to be interesting.
When the average person proposes an implausible-sounding idea, its implausibility is evidence
of their incompetence. But when a reasonable domain expert does it, the situation is reversed.
There's something like an efficient market here: on average the ideas that seem craziest will, if
correct, have the biggest effect. So if you can eliminate the theory that the person proposing an
implausible-sounding idea is incompetent, its implausibility switches from evidence that it's
boring to evidence that it's exciting. [2]
Such ideas are not guaranteed to work. But they don't have to be. They just have to be
sufficiently good bets — to have sufficiently high expected value. And I think on average they
do. I think if you bet on the entire set of implausible-sounding ideas proposed by reasonable
domain experts, you'd end up net ahead.
The reason is that everyone is too conservative. The word "paradigm" is overused, but this is a
case where it's warranted. Everyone is too much in the grip of the current paradigm. Even the
people who have the new ideas undervalue them initially. Which means that before they reach
the stage of proposing them publicly, they've already subjected them to an excessively strict
filter. [3]
The wise response to such an idea is not to make statements, but to ask questions, because
there's a real mystery here. Why has this smart and reasonable person proposed an idea that
seems so wrong? Are they mistaken, or are you? One of you has to be. If you're the one who's
mistaken, that would be good to know, because it means there's a hole in your model of the
world. But even if they're mistaken, it should be interesting to learn why. A trap that an expert
falls into is one you have to worry about too.
This all seems pretty obvious. And yet there are clearly a lot of people who don't share my fear
of dismissing new ideas. Why do they do it? Why risk looking like a jerk now and a fool later,
instead of just reserving judgement?
One reason they do it is envy. If you propose a radical new idea and it succeeds, your
reputation (and perhaps also your wealth) will increase proportionally. Some people would be
envious if that happened, and this potential envy propagates back into a conviction that you
must be wrong.
Another reason people dismiss new ideas is that it's an easy way to seem sophisticated. When
a new idea first emerges, it usually seems pretty feeble. It's a mere hatchling. Received wisdom
is a full-grown eagle by comparison. So it's easy to launch a devastating attack on a new idea,
and anyone who does will seem clever to those who don't understand this asymmetry.
This phenomenon is exacerbated by the difference between how those working on new ideas
and those attacking them are rewarded. The rewards for working on new ideas are weighted by
the value of the outcome. So it's worth working on something that only has a 10% chance of
succeeding if it would make things more than 10x better. Whereas the rewards for attacking
new ideas are roughly constant; such attacks seem roughly equally clever regardless of the
target.
People will also attack new ideas when they have a vested interest in the old ones. It's not
surprising, for example, that some of Darwin's harshest critics were churchmen. People build
whole careers on some ideas. When someone claims they're false or obsolete, they feel
threatened.
The lowest form of dismissal is mere factionalism: to automatically dismiss any idea associated
with the opposing faction. The lowest form of all is to dismiss an idea because of who proposed
it.
But the main thing that leads reasonable people to dismiss new ideas is the same thing that
holds people back from proposing them: the sheer pervasiveness of the current paradigm. It
doesn't just affect the way we think; it is the Lego blocks we build thoughts out of. Popping out of
the current paradigm is something only a few people can do. And even they usually have to
suppress their intuitions at first, like a pilot flying through cloud who has to trust his instruments
over his sense of balance. [4]
Paradigms don't just define our present thinking. They also vacuum up the trail of crumbs that
led to them, making our standards for new ideas impossibly high. The current paradigm seems
so perfect to us, its offspring, that we imagine it must have been accepted completely as soon
as it was discovered — that whatever the church thought of the heliocentric model, astronomers
must have been convinced as soon as Copernicus proposed it. Far, in fact, from it. Copernicus
published the heliocentric model in 1532, but it wasn't till the mid seventeenth century that the
balance of scientific opinion shifted in its favor. [5]
Few understand how feeble new ideas look when they first appear. So if you want to have new
ideas yourself, one of the most valuable things you can do is to learn what they look like when
they're born. Read about how new ideas happened, and try to get yourself into the heads of
people at the time. How did things look to them, when the new idea was only half-finished, and
even the person who had it was only half-convinced it was right?
But you don't have to stop at history. You can observe big new ideas being born all around you
right now. Just look for a reasonable domain expert proposing something that sounds wrong.
If you're nice, as well as wise, you won't merely resist attacking such people, but encourage
them. Having new ideas is a lonely business. Only those who've tried it know how lonely. These
people need your help. And if you help them, you'll probably learn something in the process.
Notes:
[1] This domain expertise could be in another field. Indeed, such crossovers tend to be particularly promising.
[2] I'm not claiming this principle extends much beyond math, engineering, and the hard sciences. In politics, for
example, crazy-sounding ideas generally are as bad as they sound. Though arguably this is not an exception,
because the people who propose them are not in fact domain experts; politicians are domain experts in political
tactics, like how to get elected and how to get legislation passed, but not in the world that policy acts upon. Perhaps
no one could be.
[3] This sense of "paradigm" was defined by Thomas Kuhn in his Structure of Scientific Revolutions, but I also
recommend his Copernican Revolution, where you can see him at work developing the idea.
[4] This is one reason people with a touch of Asperger's may have an advantage in discovering new ideas. They're
always flying on instruments.
[5] Hall, Rupert. From Galileo to Newton. Collins, 1963. This book is particularly good at getting into contemporaries'
heads.
Thanks to Trevor Blackwell, Patrick Collison, Suhail Doshi, Daniel Gackle, Jessica Livingston, and Robert Morris for
reading drafts of this.
An NFT That Saves Lives - # 202
May 2021
Noora Health, a nonprofit I've supported for years, just launched a new NFT. It has a dramatic
name, Save Thousands of Lives, because that's what the proceeds will do.
Noora has been saving lives for 7 years. They run programs in hospitals in South Asia to teach
new mothers how to take care of their babies once they get home. They're in 165 hospitals now.
And because they know the numbers before and after they start at a new hospital, they can
measure the impact they have. It is massive. For every 1000 live births, they save 9 babies.
This number comes from a study of 133,733 families at 28 different hospitals that Noora
conducted in collaboration with the Better Birth team at Ariadne Labs, a joint center for health
systems innovation at Brigham and Womenÿýs Hospital and Harvard T.H. Chan School of Public
Health.
Noora is so effective that even if you measure their costs in the most conservative way, by
dividing their entire budget by the number of lives saved, the cost of saving a life is the lowest
I've seen. $1,235.
For this NFT, they're going to issue a public report tracking how this specific tranche of money is
spent, and estimating the number of lives saved as a result.
NFTs are a new territory, and this way of using them is especially new, but I'm excited about its
potential. And I'm excited to see what happens with this particular auction, because unlike an
NFT representing something that has already happened, this NFT gets better as the price gets
higher.
The reserve price was about $2.5 million, because that's what it takes for the name to be
accurate: that's what it costs to save 2000 lives. But the higher the price of this NFT goes, the
more lives will be saved. What a sentence to be able to write.
The Real Reason to End the Death Penalty - # 201
April 2021
When intellectuals talk about the death penalty, they talk about things like whether it's
permissible for the state to take someone's life, whether the death penalty acts as a deterrent,
and whether more death sentences are given to some groups than others. But in practice the
debate about the death penalty is not about whether it's ok to kill murderers. It's about whether
it's ok to kill innocent people, because at least 4% of people on death row are innocent.
When I was a kid I imagined that it was unusual for people to be convicted of crimes they hadn't
committed, and that in murder cases especially this must be very rare. Far from it. Now, thanks
to organizations like the Innocence Project, we see a constant stream of stories about murder
convictions being overturned after new evidence emerges. Sometimes the police and
prosecutors were just very sloppy. Sometimes they were crooked, and knew full well they were
convicting an innocent person.
Kenneth Adams and three other men spent 18 years in prison on a murder conviction. They
were exonerated after DNA testing implicated three different men, two of whom later confessed.
The police had been told about the other men early in the investigation, but never followed up
the lead.
Keith Harward spent 33 years in prison on a murder conviction. He was convicted because
"experts" said his teeth matched photos of bite marks on one victim. He was exonerated after
DNA testing showed the murder had been committed by another man, Jerry Crotty.
Ricky Jackson and two other men spent 39 years in prison after being convicted of murder on
the testimony of a 12 year old boy, who later recanted and said he'd been coerced by police.
Multiple people have confirmed the boy was elsewhere at the time. The three men were
exonerated after the county prosecutor dropped the charges, saying "The state is conceding
the obvious."
Alfred Brown spent 12 years in prison on a murder conviction, including 10 years on death row.
He was exonerated after it was discovered that the assistant district attorney had concealed
phone records proving he could not have committed the crimes.
Glenn Ford spent 29 years on death row after having been convicted of murder. He was
exonerated after new evidence proved he was not even at the scene when the murder occurred.
The attorneys assigned to represent him had never tried a jury case before.
Cameron Willingham was actually executed in 2004 by lethal injection. The "expert" who
testified that he deliberately set fire to his house has since been discredited. A re-examination
of the case ordered by the state of Texas in 2009 concluded that "a finding of arson could not
be sustained."
Rich Glossip has spent 20 years on death row after being convicted of murder on the testimony
of the actual killer, who escaped with a life sentence in return for implicating him. In 2015 he
came within minutes of execution before it emerged that Oklahoma had been planning to kill
him with an illegal combination of drugs. They still plan to go ahead with the execution, perhaps
as soon as this summer, despite new evidence exonerating him.
I could go on. There are hundreds of similar cases. In Florida alone, 29 death row prisoners
have been exonerated so far.
Far from being rare, wrongful murder convictions are very common. Police are under pressure
to solve a crime that has gotten a lot of attention. When they find a suspect, they want to
believe he's guilty, and ignore or even destroy evidence suggesting otherwise. District attorneys
want to be seen as effective and tough on crime, and in order to win convictions are willing to
manipulate witnesses and withhold evidence. Court-appointed defense attorneys are
overworked and often incompetent. There's a ready supply of criminals willing to give false
testimony in return for a lighter sentence, suggestible witnesses who can be made to say
whatever police want, and bogus "experts" eager to claim that science proves the defendant is
guilty. And juries want to believe them, since otherwise some terrible crime remains unsolved.
This circus of incompetence and dishonesty is the real issue with the death penalty. We don't
even reach the point where theoretical questions about the moral justification or effectiveness of
capital punishment start to matter, because so many of the people sentenced to death are
actually innocent. Whatever it means in theory, in practice capital punishment means killing
innocent people.
Thanks to Trevor Blackwell, Jessica Livingston, and Don Knight for reading drafts of this.
Related:
How People Get Rich Now - # 200
April 2021
Every year since 1982, Forbes magazine has published a list of the richest Americans. If we
compare the 100 richest people in 1982 to the 100 richest in 2020, we notice some big
differences.
In 1982 the most common source of wealth was inheritance. Of the 100 richest people, 60
inherited from an ancestor. There were 10 du Pont heirs alone. By 2020 the number of heirs
had been cut in half, accounting for only 27 of the biggest 100 fortunes.
Why would the percentage of heirs decrease? Not because inheritance taxes increased. In fact,
they decreased significantly during this period. The reason the percentage of heirs has
decreased is not that fewer people are inheriting great fortunes, but that more people are
making them.
How are people making these new fortunes? Roughly 3/4 by starting companies and 1/4 by
investing. Of the 73 new fortunes in 2020, 56 derive from founders' or early employees' equity
(52 founders, 2 early employees, and 2 wives of founders), and 17 from managing investment
funds.
There were no fund managers among the 100 richest Americans in 1982. Hedge funds and
private equity firms existed in 1982, but none of their founders were rich enough yet to make it
into the top 100. Two things changed: fund managers discovered new ways to generate high
returns, and more investors were willing to trust them with their money. [1]
But the main source of new fortunes now is starting companies, and when you look at the data,
you see big changes there too. People get richer from starting companies now than they did in
1982, because the companies do different things.
In 1982, there were two dominant sources of new wealth: oil and real estate. Of the 40 new
fortunes in 1982, at least 24 were due primarily to oil or real estate. Now only a small number
are: of the 73 new fortunes in 2020, 4 were due to real estate and only 2 to oil.
By 2020 the biggest source of new wealth was what are sometimes called "tech" companies. Of
the 73 new fortunes, about 30 derive from such companies. These are particularly common
among the richest of the rich: 8 of the top 10 fortunes in 2020 were new fortunes of this type.
Arguably it's slightly misleading to treat tech as a category. Isn't Amazon really a retailer, and
Tesla a car maker? Yes and no. Maybe in 50 years, when what we call tech is taken for granted,
it won't seem right to put these two businesses in the same category. But at the moment at
least, there is definitely something they share in common that distinguishes them. What retailer
starts AWS? What car maker is run by someone who also has a rocket company?
The tech companies behind the top 100 fortunes also form a well-differentiated group in the
sense that they're all companies that venture capitalists would readily invest in, and the others
mostly not. And there's a reason why: these are mostly companies that win by having better
technology, rather than just a CEO who's really driven and good at making deals.
To that extent, the rise of the tech companies represents a qualitative change. The oil and real
estate magnates of the 1982 Forbes 400 didn't win by making better technology. They won by
being really driven and good at making deals. [2] And indeed, that way of getting rich is so old
that it predates the Industrial Revolution. The courtiers who got rich in the (nominal) service of
European royal houses in the 16th and 17th centuries were also, as a rule, really driven and
good at making deals.
People who don't look any deeper than the Gini coefficient look back on the world of 1982 as
the good old days, because those who got rich then didn't get as rich. But if you dig into how
they got rich, the old days don't look so good. In 1982, 84% of the richest 100 people got rich by
inheritance, extracting natural resources, or doing real estate deals. Is that really better than a
world in which the richest people get rich by starting tech companies?
Why are people starting so many more new companies than they used to, and why are they
getting so rich from it? The answer to the first question, curiously enough, is that it's
misphrased. We shouldn't be asking why people are starting companies, but why they're
starting companies again. [3]
In 1892, the New York Herald Tribune compiled a list of all the millionaires in America. They
found 4047 of them. How many had inherited their wealth then? Only about 20%, which is less
than the proportion of heirs today. And when you investigate the sources of the new fortunes,
1892 looks even more like today. Hugh Rockoff found that "many of the richest ... gained their
initial edge from the new technology of mass production." [4]
So it's not 2020 that's the anomaly here, but 1982. The real question is why so few people had
gotten rich from starting companies in 1982. And the answer is that even as the Herald
Tribune's list was being compiled, a wave of consolidation was sweeping through the American
economy. In the late 19th and early 20th centuries, financiers like J. P. Morgan combined
thousands of smaller companies into a few hundred giant ones with commanding economies of
scale. By the end of World War II, as Michael Lind writes, "the major sectors of the economy
were either organized as government-backed cartels or dominated by a few oligopolistic
corporations." [5]
In 1960, most of the people who start startups today would have gone to work for one of them.
You could get rich from starting your own company in 1890 and in 2020, but in 1960 it was not
really a viable option. You couldn't break through the oligopolies to get at the markets. So the
prestigious route in 1960 was not to start your own company, but to work your way up the
corporate ladder at an existing one. [6]
Making everyone a corporate employee decreased economic inequality (and every other kind of
variation), but if your model of normal is the mid 20th century, you have a very misleading
model in that respect. J. P. Morgan's economy turned out to be just a phase, and starting in the
1970s, it began to break up.
Why did it break up? Partly senescence. The big companies that seemed models of scale and
efficiency in 1930 had by 1970 become slack and bloated. By 1970 the rigid structure of the
economy was full of cosy nests that various groups had built to insulate themselves from
market forces. During the Carter administration the federal government realized something was
amiss and began, in a process they called "deregulation," to roll back the policies that propped
up the oligopolies.
But it wasn't just decay from within that broke up J. P. Morgan's economy. There was also
pressure from without, in the form of new technology, and particularly microelectronics. The
best way to envision what happened is to imagine a pond with a crust of ice on top. Initially the
only way from the bottom to the surface is around the edges. But as the ice crust weakens, you
start to be able to punch right through the middle.
The edges of the pond were pure tech: companies that actually described themselves as being
in the electronics or software business. When you used the word "startup" in 1990, that was
what you meant. But now startups are punching right through the middle of the ice crust and
displacing incumbents like retailers and TV networks and car companies. [7]
But though the breakup of J. P. Morgan's economy created a new world in the technological
sense, it was a reversion to the norm in the social sense. If you only look back as far as the mid
20th century, it seems like people getting rich by starting their own companies is a recent
phenomenon. But if you look back further, you realize it's actually the default. So what we
should expect in the future is more of the same. Indeed, we should expect both the number and
wealth of founders to grow, because every decade it gets easier to start a startup.
Part of the reason it's getting easier to start a startup is social. Society is (re)assimilating the
concept. If you start one now, your parents won't freak out the way they would have a
generation ago, and knowledge about how to do it is much more widespread. But the main
reason it's easier to start a startup now is that it's cheaper. Technology has driven down the
cost of both building products and acquiring customers.
The decreasing cost of starting a startup has in turn changed the balance of power between
founders and investors. Back when starting a startup meant building a factory, you needed
investors' permission to do it at all. But now investors need founders more than founders need
investors, and that, combined with the increasing amount of venture capital available, has
driven up valuations. [8]
So the decreasing cost of starting a startup increases the number of rich people in two ways: it
means that more people start them, and that those who do can raise money on better terms.
But there's also a third factor at work: the companies themselves are more valuable, because
newly founded companies grow faster than they used to. Technology hasn't just made it
cheaper to build and distribute things, but faster too.
This trend has been running for a long time. IBM, founded in 1896, took 45 years to reach a
billion 2020 dollars in revenue. Hewlett-Packard, founded in 1939, took 25 years. Microsoft,
founded in 1975, took 13 years. Now the norm for fast-growing companies is 7 or 8 years. [9]
Fast growth has a double effect on the value of founders' stock. The value of a company is a
function of its revenue and its growth rate. So if a company grows faster, you not only get to a
billion dollars in revenue sooner, but the company is more valuable when it reaches that point
than it would be if it were growing slower.
That's why founders sometimes get so rich so young now. The low initial cost of starting a
startup means founders can start young, and the fast growth of companies today means that if
they succeed they could be surprisingly rich just a few years later.
It's easier now to start and grow a company than it has ever been. That means more people
start them, that those who do get better terms from investors, and that the resulting companies
become more valuable. Once you understand how these mechanisms work, and that startups
were suppressed for most of the 20th century, you don't have to resort to some vague right turn
the country took under Reagan to explain why America's Gini coefficient is increasing. Of
course the Gini coefficient is increasing. With more people starting more valuable companies,
how could it not be?
Notes:
[1] Investment firms grew rapidly after a regulatory change by the Labor Department in 1978 allowed pension funds
to invest in them, but the effects of this growth were not yet visible in the top 100 fortunes in 1982.
[2] George Mitchell deserves mention as an exception. Though really driven and good at making deals, he was also
the first to figure out how to use fracking to get natural gas out of shale.
[3] When I say people are starting more companies, I mean the type of company meant to grow very big. There has
actually been a decrease in the last couple decades in the overall number of new companies. But the vast majority of
companies are small retail and service businesses. So what the statistics about the decreasing number of new
businesses mean is that people are starting fewer shoe stores and barber shops.
People sometimes get confused when they see a graph labelled "startups" that's going down, because there are two
senses of the word "startup": (1) the founding of a company, and (2) a particular type of company designed to grow
big fast. The statistics mean startup in sense (1), not sense (2).
[4] Rockoff, Hugh. "Great Fortunes of the Gilded Age." NBER Working Paper 14555, 2008.
[5] Lind, Michael. Land of Promise. HarperCollins, 2012.
It's also likely that the high tax rates in the mid 20th century deterred people from starting their own companies.
Starting one's own company is risky, and when risk isn't rewarded, people opt for safety instead.
But it wasn't simply cause and effect. The oligopolies and high tax rates of the mid 20th century were all of a piece.
Lower taxes are not just a cause of entrepreneurship, but an effect as well: the people getting rich in the mid 20th
century from real estate and oil exploration lobbied for and got huge tax loopholes that made their effective tax rate
much lower, and presumably if it had been more common to grow big companies by building new technology, the
people doing that would have lobbied for their own loopholes as well.
[6] That's why the people who did get rich in the mid 20th century so often got rich from oil exploration or real estate.
Those were the two big areas of the economy that weren't susceptible to consolidation.
[7] The pure tech companies used to be called "high technology" startups. But now that startups can punch through
the middle of the ice crust, we don't need a separate name for the edges, and the term "high-tech" has a decidedly
retro sound.
[8] Higher valuations mean you either sell less stock to get a given amount of money, or get more money for a given
amount of stock. The typical startup does some of each. Obviously you end up richer if you keep more stock, but you
should also end up richer if you raise more money, because (a) it should make the company more successful, and
(b) you should be able to last longer before the next round, or not even need one. Notice all those shoulds though. In
practice a lot of money slips through them.
It might seem that the huge rounds raised by startups nowadays contradict the claim that it has become cheaper to
start one. But there's no contradiction here; the startups that raise the most are the ones doing it by choice, in order
to grow faster, not the ones doing it because they need the money to survive. There's nothing like not needing money
to make people offer it to you.
You would think, after having been on the side of labor in its fight with capital for almost two centuries, that the far left
would be happy that labor has finally prevailed. But none of them seem to be. You can almost hear them saying "No,
no, not that way."
[9] IBM was created in 1911 by merging three companies, the most important of which was Herman Hollerith's
Tabulating Machine Company, founded in 1896. In 1941 its revenues were $60 million.
Hewlett-Packard's revenues in 1964 were $125 million.
Microsoft's revenues in 1988 were $590 million.
Thanks to Trevor Blackwell, Jessica Livingston, Bob Lesko, Robert Morris, Russ Roberts, and Alex Tabarrok for
reading drafts of this, and to Jon Erlichman for growth data.
Write Simply - # 199
March 2021
I try to write using ordinary words and simple sentences.
That kind of writing is easier to read, and the easier something is to read, the more deeply
readers will engage with it. The less energy they expend on your prose, the more they'll have
left for your ideas.
And the further they'll read. Most readers' energy tends to flag part way through an article or
essay. If the friction of reading is low enough, more keep going till the end.
There's an Italian dish called saltimbocca, which means "leap into the mouth." My goal when
writing might be called saltintesta: the ideas leap into your head and you barely notice the
words that got them there.
It's too much to hope that writing could ever be pure ideas. You might not even want it to be. But
for most writers, most of the time, that's the goal to aim for. The gap between most writing and
pure ideas is not filled with poetry.
Plus it's more considerate to write simply. When you write in a fancy way to impress people,
you're making them do extra work just so you can seem cool. It's like trailing a long train behind
you that readers have to carry.
And remember, if you're writing in English, that a lot of your readers won't be native English
speakers. Their understanding of ideas may be way ahead of their understanding of English. So
you can't assume that writing about a difficult topic means you can use difficult words.
Of course, fancy writing doesn't just conceal ideas. It can also conceal the lack of them. That's
why some people write that way, to conceal the fact that they have nothing to say. Whereas
writing simply keeps you honest. If you say nothing simply, it will be obvious to everyone,
including you.
Simple writing also lasts better. People reading your stuff in the future will be in much the same
position as people from other countries reading it today. The culture and the language will have
changed. It's not vain to care about that, any more than it's vain for a woodworker to build a
chair to last.
Indeed, lasting is not merely an accidental quality of chairs, or writing. It's a sign you did a good
job.
But although these are all real advantages of writing simply, none of them are why I do it. The
main reason I write simply is that it offends me not to. When I write a sentence that seems too
complicated, or that uses unnecessarily intellectual words, it doesn't seem fancy to me. It
seems clumsy.
There are of course times when you want to use a complicated sentence or fancy word for
effect. But you should never do it by accident.
The other reason my writing ends up being simple is the way I do it. I write the first draft fast,
then spend days editing it, trying to get everything just right. Much of this editing is cutting, and
that makes simple writing even simpler.
Donate Unrestricted - # 198
March 2021
The secret curse of the nonprofit world is restricted donations. If you haven't been involved with
nonprofits, you may never have heard this phrase before. But if you have been, it probably
made you wince.
Restricted donations mean donations where the donor limits what can be done with the money.
This is common with big donations, perhaps the default. And yet it's usually a bad idea. Usually
the way the donor wants the money spent is not the way the nonprofit would have chosen.
Otherwise there would have been no need to restrict the donation. But who has a better
understanding of where money needs to be spent, the nonprofit or the donor?
If a nonprofit doesn't understand better than its donors where money needs to be spent, then
it's incompetent and you shouldn't be donating to it at all.
Which means a restricted donation is inherently suboptimal. It's either a donation to a bad
nonprofit, or a donation for the wrong things.
There are a couple exceptions to this principle. One is when the nonprofit is an umbrella
organization. It's reasonable to make a restricted donation to a university, for example, because
a university is only nominally a single nonprofit. Another exception is when the donor actually
does know as much as the nonprofit about where money needs to be spent. The Gates
Foundation, for example, has specific goals and often makes restricted donations to individual
nonprofits to accomplish them. But unless you're a domain expert yourself or donating to an
umbrella organization, your donation would do more good if it were unrestricted.
If restricted donations do less good than unrestricted ones, why do donors so often make
them? Partly because doing good isn't donors' only motive. They often have other motives as
well — to make a mark, or to generate good publicity [1], or to comply with regulations or
corporate policies. Many donors may simply never have considered the distinction between
restricted and unrestricted donations. They may believe that donating money for some specific
purpose is just how donation works. And to be fair, nonprofits don't try very hard to discourage
such illusions. They can't afford to. People running nonprofits are almost always anxious about
money. They can't afford to talk back to big donors.
You can't expect candor in a relationship so asymmetric. So I'll tell you what nonprofits wish
they could tell you. If you want to donate to a nonprofit, donate unrestricted. If you trust them to
spend your money, trust them to decide how.
Notes:
[1] Unfortunately restricted donations tend to generate more publicity than unrestricted ones. "X donates money to
build a school in Africa" is not only more interesting than "X donates money to Y nonprofit to spend as Y chooses,"
but also focuses more attention on X.
Thanks to Chase Adam, Ingrid Bassett, Trevor Blackwell, and Edith Elliot for reading drafts of this.
What I Worked On - # 197
February 2021
Before college the two main things I worked on, outside of school, were writing and
programming. I didn't write essays. I wrote what beginning writers were supposed to write then,
and probably still are: short stories. My stories were awful. They had hardly any plot, just
characters with strong feelings, which I imagined made them deep.
The first programs I tried writing were on the IBM 1401 that our school district used for what
was then called "data processing." This was in 9th grade, so I was 13 or 14. The school
district's 1401 happened to be in the basement of our junior high school, and my friend Rich
Draves and I got permission to use it. It was like a mini Bond villain's lair down there, with all
these alien-looking machines ÿý CPU, disk drives, printer, card reader ÿý sitting up on a raised floor
under bright fluorescent lights.
The language we used was an early version of Fortran. You had to type programs on punch
cards, then stack them in the card reader and press a button to load the program into memory
and run it. The result would ordinarily be to print something on the spectacularly loud printer.
I was puzzled by the 1401. I couldn't figure out what to do with it. And in retrospect there's not
much I could have done with it. The only form of input to programs was data stored on punched
cards, and I didn't have any data stored on punched cards. The only other option was to do
things that didn't rely on any input, like calculate approximations of pi, but I didn't know enough
math to do anything interesting of that type. So I'm not surprised I can't remember any
programs I wrote, because they can't have done much. My clearest memory is of the moment I
learned it was possible for programs not to terminate, when one of mine didn't. On a machine
without time-sharing, this was a social as well as a technical error, as the data center
manager's expression made clear.
With microcomputers, everything changed. Now you could have a computer sitting right in front
of you, on a desk, that could respond to your keystrokes as it was running instead of just
churning through a stack of punch cards and then stopping. [1]
The first of my friends to get a microcomputer built it himself. It was sold as a kit by Heathkit. I
remember vividly how impressed and envious I felt watching him sitting in front of it, typing
programs right into the computer.
Computers were expensive in those days and it took me years of nagging before I convinced
my father to buy one, a TRS-80, in about 1980. The gold standard then was the Apple II, but a
TRS-80 was good enough. This was when I really started programming. I wrote simple games,
a program to predict how high my model rockets would fly, and a word processor that my father
used to write at least one book. There was only room in memory for about 2 pages of text, so
he'd write 2 pages at a time and then print them out, but it was a lot better than a typewriter.
Though I liked programming, I didn't plan to study it in college. In college I was going to study
philosophy, which sounded much more powerful. It seemed, to my naive high school self, to be
the study of the ultimate truths, compared to which the things studied in other fields would be
mere domain knowledge. What I discovered when I got to college was that the other fields took
up so much of the space of ideas that there wasn't much left for these supposed ultimate truths.
All that seemed left for philosophy were edge cases that people in other fields felt could safely
be ignored.
I couldn't have put this into words when I was 18. All I knew at the time was that I kept taking
philosophy courses and they kept being boring. So I decided to switch to AI.
AI was in the air in the mid 1980s, but there were two things especially that made me want to
work on it: a novel by Heinlein called The Moon is a Harsh Mistress, which featured an
intelligent computer called Mike, and a PBS documentary that showed Terry Winograd using
SHRDLU. I haven't tried rereading The Moon is a Harsh Mistress, so I don't know how well it
has aged, but when I read it I was drawn entirely into its world. It seemed only a matter of time
before we'd have Mike, and when I saw Winograd using SHRDLU, it seemed like that time
would be a few years at most. All you had to do was teach SHRDLU more words.
There weren't any classes in AI at Cornell then, not even graduate classes, so I started trying to
teach myself. Which meant learning Lisp, since in those days Lisp was regarded as the
language of AI. The commonly used programming languages then were pretty primitive, and
programmers' ideas correspondingly so. The default language at Cornell was a Pascal-like
language called PL/I, and the situation was similar elsewhere. Learning Lisp expanded my
concept of a program so fast that it was years before I started to have a sense of where the
new limits were. This was more like it; this was what I had expected college to do. It wasn't
happening in a class, like it was supposed to, but that was ok. For the next couple years I was
on a roll. I knew what I was going to do.
For my undergraduate thesis, I reverse-engineered SHRDLU. My God did I love working on that
program. It was a pleasing bit of code, but what made it even more exciting was my belief ÿý hard
to imagine now, but not unique in 1985 ÿý that it was already climbing the lower slopes of
intelligence.
I had gotten into a program at Cornell that didn't make you choose a major. You could take
whatever classes you liked, and choose whatever you liked to put on your degree. I of course
chose "Artificial Intelligence." When I got the actual physical diploma, I was dismayed to find
that the quotes had been included, which made them read as scare-quotes. At the time this
bothered me, but now it seems amusingly accurate, for reasons I was about to discover.
I applied to 3 grad schools: MIT and Yale, which were renowned for AI at the time, and Harvard,
which I'd visited because Rich Draves went there, and was also home to Bill Woods, who'd
invented the type of parser I used in my SHRDLU clone. Only Harvard accepted me, so that
was where I went.
I don't remember the moment it happened, or if there even was a specific moment, but during
the first year of grad school I realized that AI, as practiced at the time, was a hoax. By which I
mean the sort of AI in which a program that's told "the dog is sitting on the chair" translates this
into some formal representation and adds it to the list of things it knows.
What these programs really showed was that there's a subset of natural language that's a
formal language. But a very proper subset. It was clear that there was an unbridgeable gap
between what they could do and actually understanding natural language. It was not, in fact,
simply a matter of teaching SHRDLU more words. That whole way of doing AI, with explicit data
structures representing concepts, was not going to work. Its brokenness did, as so often
happens, generate a lot of opportunities to write papers about various band-aids that could be
applied to it, but it was never going to get us Mike.
So I looked around to see what I could salvage from the wreckage of my plans, and there was
Lisp. I knew from experience that Lisp was interesting for its own sake and not just for its
association with AI, even though that was the main reason people cared about it at the time. So
I decided to focus on Lisp. In fact, I decided to write a book about Lisp hacking. It's scary to
think how little I knew about Lisp hacking when I started writing that book. But there's nothing
like writing a book about something to help you learn it. The book, On Lisp, wasn't published till
1993, but I wrote much of it in grad school.
Computer Science is an uneasy alliance between two halves, theory and systems. The theory
people prove things, and the systems people build things. I wanted to build things. I had plenty
of respect for theory ÿý indeed, a sneaking suspicion that it was the more admirable of the two
halves ÿý but building things seemed so much more exciting.
The problem with systems work, though, was that it didn't last. Any program you wrote today, no
matter how good, would be obsolete in a couple decades at best. People might mention your
software in footnotes, but no one would actually use it. And indeed, it would seem very feeble
work. Only people with a sense of the history of the field would even realize that, in its time, it
had been good.
There were some surplus Xerox Dandelions floating around the computer lab at one point.
Anyone who wanted one to play around with could have one. I was briefly tempted, but they
were so slow by present standards; what was the point? No one else wanted one either, so off
they went. That was what happened to systems work.
I wanted not just to build things, but to build things that would last.
In this dissatisfied state I went in 1988 to visit Rich Draves at CMU, where he was in grad
school. One day I went to visit the Carnegie Institute, where I'd spent a lot of time as a kid.
While looking at a painting there I realized something that might seem obvious, but was a big
surprise to me. There, right on the wall, was something you could make that would last.
Paintings didn't become obsolete. Some of the best ones were hundreds of years old.
And moreover this was something you could make a living doing. Not as easily as you could by
writing software, of course, but I thought if you were really industrious and lived really cheaply, it
had to be possible to make enough to survive. And as an artist you could be truly independent.
You wouldn't have a boss, or even need to get research funding.
I had always liked looking at paintings. Could I make them? I had no idea. I'd never imagined it
was even possible. I knew intellectually that people made art ÿý that it didn't just appear
spontaneously ÿý but it was as if the people who made it were a different species. They either
lived long ago or were mysterious geniuses doing strange things in profiles in Life magazine.
The idea of actually being able to make art, to put that verb before that noun, seemed almost
miraculous.
That fall I started taking art classes at Harvard. Grad students could take classes in any
department, and my advisor, Tom Cheatham, was very easy going. If he even knew about the
strange classes I was taking, he never said anything.
So now I was in a PhD program in computer science, yet planning to be an artist, yet also
genuinely in love with Lisp hacking and working away at On Lisp. In other words, like many a
grad student, I was working energetically on multiple projects that were not my thesis.
I didn't see a way out of this situation. I didn't want to drop out of grad school, but how else was
I going to get out? I remember when my friend Robert Morris got kicked out of Cornell for
writing the internet worm of 1988, I was envious that he'd found such a spectacular way to get
out of grad school.
Then one day in April 1990 a crack appeared in the wall. I ran into professor Cheatham and he
asked if I was far enough along to graduate that June. I didn't have a word of my dissertation
written, but in what must have been the quickest bit of thinking in my life, I decided to take a
shot at writing one in the 5 weeks or so that remained before the deadline, reusing parts of On
Lisp where I could, and I was able to respond, with no perceptible delay "Yes, I think so. I'll give
you something to read in a few days."
I picked applications of continuations as the topic. In retrospect I should have written about
macros and embedded languages. There's a whole world there that's barely been explored. But
all I wanted was to get out of grad school, and my rapidly written dissertation sufficed, just
barely.
Meanwhile I was applying to art schools. I applied to two: RISD in the US, and the Accademia
di Belli Arti in Florence, which, because it was the oldest art school, I imagined would be good.
RISD accepted me, and I never heard back from the Accademia, so off to Providence I went.
I'd applied for the BFA program at RISD, which meant in effect that I had to go to college again.
This was not as strange as it sounds, because I was only 25, and art schools are full of people
of different ages. RISD counted me as a transfer sophomore and said I had to do the foundation
that summer. The foundation means the classes that everyone has to take in fundamental
subjects like drawing, color, and design.
Toward the end of the summer I got a big surprise: a letter from the Accademia, which had
been delayed because they'd sent it to Cambridge England instead of Cambridge
Massachusetts, inviting me to take the entrance exam in Florence that fall. This was now only
weeks away. My nice landlady let me leave my stuff in her attic. I had some money saved from
consulting work I'd done in grad school; there was probably enough to last a year if I lived
cheaply. Now all I had to do was learn Italian.
Only stranieri (foreigners) had to take this entrance exam. In retrospect it may well have been a
way of excluding them, because there were so many stranieri attracted by the idea of studying
art in Florence that the Italian students would otherwise have been outnumbered. I was in
decent shape at painting and drawing from the RISD foundation that summer, but I still don't
know how I managed to pass the written exam. I remember that I answered the essay question
by writing about Cezanne, and that I cranked up the intellectual level as high as I could to make
the most of my limited vocabulary. [2]
I'm only up to age 25 and already there are such conspicuous patterns. Here I was, yet again
about to attend some august institution in the hopes of learning about some prestigious subject,
and yet again about to be disappointed. The students and faculty in the painting department at
the Accademia were the nicest people you could imagine, but they had long since arrived at an
arrangement whereby the students wouldn't require the faculty to teach anything, and in return
the faculty wouldn't require the students to learn anything. And at the same time all involved
would adhere outwardly to the conventions of a 19th century atelier. We actually had one of
those little stoves, fed with kindling, that you see in 19th century studio paintings, and a nude
model sitting as close to it as possible without getting burned. Except hardly anyone else
painted her besides me. The rest of the students spent their time chatting or occasionally trying
to imitate things they'd seen in American art magazines.
Our model turned out to live just down the street from me. She made a living from a
combination of modelling and making fakes for a local antique dealer. She'd copy an obscure
old painting out of a book, and then he'd take the copy and maltreat it to make it look old. [3]
While I was a student at the Accademia I started painting still lives in my bedroom at night.
These paintings were tiny, because the room was, and because I painted them on leftover
scraps of canvas, which was all I could afford at the time. Painting still lives is different from
painting people, because the subject, as its name suggests, can't move. People can't sit for
more than about 15 minutes at a time, and when they do they don't sit very still. So the
traditional m.o. for painting people is to know how to paint a generic person, which you then
modify to match the specific person you're painting. Whereas a still life you can, if you want,
copy pixel by pixel from what you're seeing. You don't want to stop there, of course, or you get
merely photographic accuracy, and what makes a still life interesting is that it's been through a
head. You want to emphasize the visual cues that tell you, for example, that the reason the color
changes suddenly at a certain point is that it's the edge of an object. By subtly emphasizing
such things you can make paintings that are more realistic than photographs not just in some
metaphorical sense, but in the strict information-theoretic sense. [4]
I liked painting still lives because I was curious about what I was seeing. In everyday life, we
aren't consciously aware of much we're seeing. Most visual perception is handled by low-level
processes that merely tell your brain "that's a water droplet" without telling you details like
where the lightest and darkest points are, or "that's a bush" without telling you the shape and
position of every leaf. This is a feature of brains, not a bug. In everyday life it would be
distracting to notice every leaf on every bush. But when you have to paint something, you have
to look more closely, and when you do there's a lot to see. You can still be noticing new things
after days of trying to paint something people usually take for granted, just as you can after
days of trying to write an essay about something people usually take for granted.
This is not the only way to paint. I'm not 100% sure it's even a good way to paint. But it seemed
a good enough bet to be worth trying.
Our teacher, professor Ulivi, was a nice guy. He could see I worked hard, and gave me a good
grade, which he wrote down in a sort of passport each student had. But the Accademia wasn't
teaching me anything except Italian, and my money was running out, so at the end of the first
year I went back to the US.
I wanted to go back to RISD, but I was now broke and RISD was very expensive, so I decided
to get a job for a year and then return to RISD the next fall. I got one at a company called
Interleaf, which made software for creating documents. You mean like Microsoft Word? Exactly.
That was how I learned that low end software tends to eat high end software. But Interleaf still
had a few years to live yet. [5]
Interleaf had done something pretty bold. Inspired by Emacs, they'd added a scripting
language, and even made the scripting language a dialect of Lisp. Now they wanted a Lisp
hacker to write things in it. This was the closest thing I've had to a normal job, and I hereby
apologize to my boss and coworkers, because I was a bad employee. Their Lisp was the
thinnest icing on a giant C cake, and since I didn't know C and didn't want to learn it, I never
understood most of the software. Plus I was terribly irresponsible. This was back when a
programming job meant showing up every day during certain working hours. That seemed
unnatural to me, and on this point the rest of the world is coming around to my way of thinking,
but at the time it caused a lot of friction. Toward the end of the year I spent much of my time
surreptitiously working on On Lisp, which I had by this time gotten a contract to publish.
The good part was that I got paid huge amounts of money, especially by art student standards.
In Florence, after paying my part of the rent, my budget for everything else had been $7 a day.
Now I was getting paid more than 4 times that every hour, even when I was just sitting in a
meeting. By living cheaply I not only managed to save enough to go back to RISD, but also paid
off my college loans.
I learned some useful things at Interleaf, though they were mostly about what not to do. I
learned that it's better for technology companies to be run by product people than sales people
(though sales is a real skill and people who are good at it are really good at it), that it leads to
bugs when code is edited by too many people, that cheap office space is no bargain if it's
depressing, that planned meetings are inferior to corridor conversations, that big, bureaucratic
customers are a dangerous source of money, and that there's not much overlap between
conventional office hours and the optimal time for hacking, or conventional offices and the
optimal place for it.
But the most important thing I learned, and which I used in both Viaweb and Y Combinator, is
that the low end eats the high end: that it's good to be the "entry level" option, even though that
will be less prestigious, because if you're not, someone else will be, and will squash you against
the ceiling. Which in turn means that prestige is a danger sign.
When I left to go back to RISD the next fall, I arranged to do freelance work for the group that
did projects for customers, and this was how I survived for the next several years. When I came
back to visit for a project later on, someone told me about a new thing called HTML, which was,
as he described it, a derivative of SGML. Markup language enthusiasts were an occupational
hazard at Interleaf and I ignored him, but this HTML thing later became a big part of my life.
In the fall of 1992 I moved back to Providence to continue at RISD. The foundation had merely
been intro stuff, and the Accademia had been a (very civilized) joke. Now I was going to see
what real art school was like. But alas it was more like the Accademia than not. Better
organized, certainly, and a lot more expensive, but it was now becoming clear that art school
did not bear the same relationship to art that medical school bore to medicine. At least not the
painting department. The textile department, which my next door neighbor belonged to, seemed
to be pretty rigorous. No doubt illustration and architecture were too. But painting was postrigorous. Painting students were supposed to express themselves, which to the more worldly
ones meant to try to cook up some sort of distinctive signature style.
A signature style is the visual equivalent of what in show business is known as a "schtick":
something that immediately identifies the work as yours and no one else's. For example, when
you see a painting that looks like a certain kind of cartoon, you know it's by Roy Lichtenstein.
So if you see a big painting of this type hanging in the apartment of a hedge fund manager, you
know he paid millions of dollars for it. That's not always why artists have a signature style, but
it's usually why buyers pay a lot for such work. [6]
There were plenty of earnest students too: kids who "could draw" in high school, and now had
come to what was supposed to be the best art school in the country, to learn to draw even
better. They tended to be confused and demoralized by what they found at RISD, but they kept
going, because painting was what they did. I was not one of the kids who could draw in high
school, but at RISD I was definitely closer to their tribe than the tribe of signature style seekers.
I learned a lot in the color class I took at RISD, but otherwise I was basically teaching myself to
paint, and I could do that for free. So in 1993 I dropped out. I hung around Providence for a bit,
and then my college friend Nancy Parmet did me a big favor. A rent-controlled apartment in a
building her mother owned in New York was becoming vacant. Did I want it? It wasn't much
more than my current place, and New York was supposed to be where the artists were. So yes,
I wanted it! [7]
Asterix comics begin by zooming in on a tiny corner of Roman Gaul that turns out not to be
controlled by the Romans. You can do something similar on a map of New York City: if you
zoom in on the Upper East Side, there's a tiny corner that's not rich, or at least wasn't in 1993.
It's called Yorkville, and that was my new home. Now I was a New York artist ÿý in the strictly
technical sense of making paintings and living in New York.
I was nervous about money, because I could sense that Interleaf was on the way down.
Freelance Lisp hacking work was very rare, and I didn't want to have to program in another
language, which in those days would have meant C++ if I was lucky. So with my unerring nose
for financial opportunity, I decided to write another book on Lisp. This would be a popular book,
the sort of book that could be used as a textbook. I imagined myself living frugally off the
royalties and spending all my time painting. (The painting on the cover of this book, ANSI
Common Lisp, is one that I painted around this time.)
The best thing about New York for me was the presence of Idelle and Julian Weber. Idelle
Weber was a painter, one of the early photorealists, and I'd taken her painting class at Harvard.
I've never known a teacher more beloved by her students. Large numbers of former students
kept in touch with her, including me. After I moved to New York I became her de facto studio
assistant.
She liked to paint on big, square canvases, 4 to 5 feet on a side. One day in late 1994 as I was
stretching one of these monsters there was something on the radio about a famous fund
manager. He wasn't that much older than me, and was super rich. The thought suddenly
occurred to me: why don't I become rich? Then I'll be able to work on whatever I want.
Meanwhile I'd been hearing more and more about this new thing called the World Wide Web.
Robert Morris showed it to me when I visited him in Cambridge, where he was now in grad
school at Harvard. It seemed to me that the web would be a big deal. I'd seen what graphical
user interfaces had done for the popularity of microcomputers. It seemed like the web would do
the same for the internet.
If I wanted to get rich, here was the next train leaving the station. I was right about that part.
What I got wrong was the idea. I decided we should start a company to put art galleries online. I
can't honestly say, after reading so many Y Combinator applications, that this was the worst
startup idea ever, but it was up there. Art galleries didn't want to be online, and still don't, not
the fancy ones. That's not how they sell. I wrote some software to generate web sites for
galleries, and Robert wrote some to resize images and set up an http server to serve the
pages. Then we tried to sign up galleries. To call this a difficult sale would be an
understatement. It was difficult to give away. A few galleries let us make sites for them for free,
but none paid us.
Then some online stores started to appear, and I realized that except for the order buttons they
were identical to the sites we'd been generating for galleries. This impressive-sounding thing
called an "internet storefront" was something we already knew how to build.
So in the summer of 1995, after I submitted the camera-ready copy of ANSI Common Lisp to
the publishers, we started trying to write software to build online stores. At first this was going to
be normal desktop software, which in those days meant Windows software. That was an
alarming prospect, because neither of us knew how to write Windows software or wanted to
learn. We lived in the Unix world. But we decided we'd at least try writing a prototype store
builder on Unix. Robert wrote a shopping cart, and I wrote a new site generator for stores ÿý in
Lisp, of course.
We were working out of Robert's apartment in Cambridge. His roommate was away for big
chunks of time, during which I got to sleep in his room. For some reason there was no bed
frame or sheets, just a mattress on the floor. One morning as I was lying on this mattress I had
an idea that made me sit up like a capital L. What if we ran the software on the server, and let
users control it by clicking on links? Then we'd never have to write anything to run on users'
computers. We could generate the sites on the same server we'd serve them from. Users
wouldn't need anything more than a browser.
This kind of software, known as a web app, is common now, but at the time it wasn't clear that it
was even possible. To find out, we decided to try making a version of our store builder that you
could control through the browser. A couple days later, on August 12, we had one that worked.
The UI was horrible, but it proved you could build a whole store through the browser, without
any client software or typing anything into the command line on the server.
Now we felt like we were really onto something. I had visions of a whole new generation of
software working this way. You wouldn't need versions, or ports, or any of that crap. At Interleaf
there had been a whole group called Release Engineering that seemed to be at least as big as
the group that actually wrote the software. Now you could just update the software right on the
server.
We started a new company we called Viaweb, after the fact that our software worked via the
web, and we got $10,000 in seed funding from Idelle's husband Julian. In return for that and
doing the initial legal work and giving us business advice, we gave him 10% of the company.
Ten years later this deal became the model for Y Combinator's. We knew founders needed
something like this, because we'd needed it ourselves.
At this stage I had a negative net worth, because the thousand dollars or so I had in the bank
was more than counterbalanced by what I owed the government in taxes. (Had I diligently set
aside the proper proportion of the money I'd made consulting for Interleaf? No, I had not.) So
although Robert had his graduate student stipend, I needed that seed funding to live on.
We originally hoped to launch in September, but we got more ambitious about the software as
we worked on it. Eventually we managed to build a WYSIWYG site builder, in the sense that as
you were creating pages, they looked exactly like the static ones that would be generated later,
except that instead of leading to static pages, the links all referred to closures stored in a hash
table on the server.
It helped to have studied art, because the main goal of an online store builder is to make users
look legit, and the key to looking legit is high production values. If you get page layouts and
fonts and colors right, you can make a guy running a store out of his bedroom look more legit
than a big company.
(If you're curious why my site looks so old-fashioned, it's because it's still made with this
software. It may look clunky today, but in 1996 it was the last word in slick.)
In September, Robert rebelled. "We've been working on this for a month," he said, "and it's still
not done." This is funny in retrospect, because he would still be working on it almost 3 years
later. But I decided it might be prudent to recruit more programmers, and I asked Robert who
else in grad school with him was really good. He recommended Trevor Blackwell, which
surprised me at first, because at that point I knew Trevor mainly for his plan to reduce
everything in his life to a stack of notecards, which he carried around with him. But Rtm was
right, as usual. Trevor turned out to be a frighteningly effective hacker.
It was a lot of fun working with Robert and Trevor. They're the two most independent-minded
people I know, and in completely different ways. If you could see inside Rtm's brain it would look
like a colonial New England church, and if you could see inside Trevor's it would look like the
worst excesses of Austrian Rococo.
We opened for business, with 6 stores, in January 1996. It was just as well we waited a few
months, because although we worried we were late, we were actually almost fatally early. There
was a lot of talk in the press then about ecommerce, but not many people actually wanted
online stores. [8]
There were three main parts to the software: the editor, which people used to build sites and
which I wrote, the shopping cart, which Robert wrote, and the manager, which kept track of
orders and statistics, and which Trevor wrote. In its time, the editor was one of the best generalpurpose site builders. I kept the code tight and didn't have to integrate with any other software
except Robert's and Trevor's, so it was quite fun to work on. If all I'd had to do was work on this
software, the next 3 years would have been the easiest of my life. Unfortunately I had to do a lot
more, all of it stuff I was worse at than programming, and the next 3 years were instead the
most stressful.
There were a lot of startups making ecommerce software in the second half of the 90s. We
were determined to be the Microsoft Word, not the Interleaf. Which meant being easy to use
and inexpensive. It was lucky for us that we were poor, because that caused us to make Viaweb
even more inexpensive than we realized. We charged $100 a month for a small store and $300
a month for a big one. This low price was a big attraction, and a constant thorn in the sides of
competitors, but it wasn't because of some clever insight that we set the price low. We had no
idea what businesses paid for things. $300 a month seemed like a lot of money to us.
We did a lot of things right by accident like that. For example, we did what's now called "doing
things that don't scale," although at the time we would have described it as "being so lame that
we're driven to the most desperate measures to get users." The most common of which was
building stores for them. This seemed particularly humiliating, since the whole raison d'etre of
our software was that people could use it to make their own stores. But anything to get users.
We learned a lot more about retail than we wanted to know. For example, that if you could only
have a small image of a man's shirt (and all images were small then by present standards), it
was better to have a closeup of the collar than a picture of the whole shirt. The reason I
remember learning this was that it meant I had to rescan about 30 images of men's shirts. My
first set of scans were so beautiful too.
Though this felt wrong, it was exactly the right thing to be doing. Building stores for users taught
us about retail, and about how it felt to use our software. I was initially both mystified and
repelled by "business" and thought we needed a "business person" to be in charge of it, but
once we started to get users, I was converted, in much the same way I was converted to
fatherhood once I had kids. Whatever users wanted, I was all theirs. Maybe one day we'd have
so many users that I couldn't scan their images for them, but in the meantime there was nothing
more important to do.
Another thing I didn't get at the time is that growth rate is the ultimate test of a startup. Our
growth rate was fine. We had about 70 stores at the end of 1996 and about 500 at the end of
1997. I mistakenly thought the thing that mattered was the absolute number of users. And that
is the thing that matters in the sense that that's how much money you're making, and if you're
not making enough, you might go out of business. But in the long term the growth rate takes
care of the absolute number. If we'd been a startup I was advising at Y Combinator, I would
have said: Stop being so stressed out, because you're doing fine. You're growing 7x a year. Just
don't hire too many more people and you'll soon be profitable, and then you'll control your own
destiny.
Alas I hired lots more people, partly because our investors wanted me to, and partly because
that's what startups did during the Internet Bubble. A company with just a handful of employees
would have seemed amateurish. So we didn't reach breakeven until about when Yahoo bought
us in the summer of 1998. Which in turn meant we were at the mercy of investors for the entire
life of the company. And since both we and our investors were noobs at startups, the result was
a mess even by startup standards.
It was a huge relief when Yahoo bought us. In principle our Viaweb stock was valuable. It was a
share in a business that was profitable and growing rapidly. But it didn't feel very valuable to me;
I had no idea how to value a business, but I was all too keenly aware of the near-death
experiences we seemed to have every few months. Nor had I changed my grad student lifestyle
significantly since we started. So when Yahoo bought us it felt like going from rags to riches.
Since we were going to California, I bought a car, a yellow 1998 VW GTI. I remember thinking
that its leather seats alone were by far the most luxurious thing I owned.
The next year, from the summer of 1998 to the summer of 1999, must have been the least
productive of my life. I didn't realize it at the time, but I was worn out from the effort and stress
of running Viaweb. For a while after I got to California I tried to continue my usual m.o. of
programming till 3 in the morning, but fatigue combined with Yahoo's prematurely aged culture
and grim cube farm in Santa Clara gradually dragged me down. After a few months it felt
disconcertingly like working at Interleaf.
Yahoo had given us a lot of options when they bought us. At the time I thought Yahoo was so
overvalued that they'd never be worth anything, but to my astonishment the stock went up 5x in
the next year. I hung on till the first chunk of options vested, then in the summer of 1999 I left. It
had been so long since I'd painted anything that I'd half forgotten why I was doing this. My brain
had been entirely full of software and men's shirts for 4 years. But I had done this to get rich so
I could paint, I reminded myself, and now I was rich, so I should go paint.
When I said I was leaving, my boss at Yahoo had a long conversation with me about my plans. I
told him all about the kinds of pictures I wanted to paint. At the time I was touched that he took
such an interest in me. Now I realize it was because he thought I was lying. My options at that
point were worth about $2 million a month. If I was leaving that kind of money on the table, it
could only be to go and start some new startup, and if I did, I might take people with me. This
was the height of the Internet Bubble, and Yahoo was ground zero of it. My boss was at that
moment a billionaire. Leaving then to start a new startup must have seemed to him an insanely,
and yet also plausibly, ambitious plan.
But I really was quitting to paint, and I started immediately. There was no time to lose. I'd
already burned 4 years getting rich. Now when I talk to founders who are leaving after selling
their companies, my advice is always the same: take a vacation. That's what I should have
done, just gone off somewhere and done nothing for a month or two, but the idea never
occurred to me.
So I tried to paint, but I just didn't seem to have any energy or ambition. Part of the problem was
that I didn't know many people in California. I'd compounded this problem by buying a house up
in the Santa Cruz Mountains, with a beautiful view but miles from anywhere. I stuck it out for a
few more months, then in desperation I went back to New York, where unless you understand
about rent control you'll be surprised to hear I still had my apartment, sealed up like a tomb of
my old life. Idelle was in New York at least, and there were other people trying to paint there,
even though I didn't know any of them.
When I got back to New York I resumed my old life, except now I was rich. It was as weird as it
sounds. I resumed all my old patterns, except now there were doors where there hadn't been.
Now when I was tired of walking, all I had to do was raise my hand, and (unless it was raining)
a taxi would stop to pick me up. Now when I walked past charming little restaurants I could go in
and order lunch. It was exciting for a while. Painting started to go better. I experimented with a
new kind of still life where I'd paint one painting in the old way, then photograph it and print it,
blown up, on canvas, and then use that as the underpainting for a second still life, painted from
the same objects (which hopefully hadn't rotted yet).
Meanwhile I looked for an apartment to buy. Now I could actually choose what neighborhood to
live in. Where, I asked myself and various real estate agents, is the Cambridge of New York?
Aided by occasional visits to actual Cambridge, I gradually realized there wasn't one. Huh.
Around this time, in the spring of 2000, I had an idea. It was clear from our experience with
Viaweb that web apps were the future. Why not build a web app for making web apps? Why not
let people edit code on our server through the browser, and then host the resulting applications
for them? [9] You could run all sorts of services on the servers that these applications could use
just by making an API call: making and receiving phone calls, manipulating images, taking
credit card payments, etc.
I got so excited about this idea that I couldn't think about anything else. It seemed obvious that
this was the future. I didn't particularly want to start another company, but it was clear that this
idea would have to be embodied as one, so I decided to move to Cambridge and start it. I
hoped to lure Robert into working on it with me, but there I ran into a hitch. Robert was now a
postdoc at MIT, and though he'd made a lot of money the last time I'd lured him into working on
one of my schemes, it had also been a huge time sink. So while he agreed that it sounded like
a plausible idea, he firmly refused to work on it.
Hmph. Well, I'd do it myself then. I recruited Dan Giffin, who had worked for Viaweb, and two
undergrads who wanted summer jobs, and we got to work trying to build what it's now clear is
about twenty companies and several open source projects worth of software. The language for
defining applications would of course be a dialect of Lisp. But I wasn't so naive as to assume I
could spring an overt Lisp on a general audience; we'd hide the parentheses, like Dylan did.
By then there was a name for the kind of company Viaweb was, an "application service
provider," or ASP. This name didn't last long before it was replaced by "software as a service,"
but it was current for long enough that I named this new company after it: it was going to be
called Aspra.
I started working on the application builder, Dan worked on network infrastructure, and the two
undergrads worked on the first two services (images and phone calls). But about halfway
through the summer I realized I really didn't want to run a company ÿý especially not a big one,
which it was looking like this would have to be. I'd only started Viaweb because I needed the
money. Now that I didn't need money anymore, why was I doing this? If this vision had to be
realized as a company, then screw the vision. I'd build a subset that could be done as an open
source project.
Much to my surprise, the time I spent working on this stuff was not wasted after all. After we
started Y Combinator, I would often encounter startups working on parts of this new
architecture, and it was very useful to have spent so much time thinking about it and even trying
to write some of it.
The subset I would build as an open source project was the new Lisp, whose parentheses I
now wouldn't even have to hide. A lot of Lisp hackers dream of building a new Lisp, partly
because one of the distinctive features of the language is that it has dialects, and partly, I think,
because we have in our minds a Platonic form of Lisp that all existing dialects fall short of. I
certainly did. So at the end of the summer Dan and I switched to working on this new dialect of
Lisp, which I called Arc, in a house I bought in Cambridge.
The following spring, lightning struck. I was invited to give a talk at a Lisp conference, so I gave
one about how we'd used Lisp at Viaweb. Afterward I put a postscript file of this talk online, on
paulgraham.com, which I'd created years before using Viaweb but had never used for anything.
In one day it got 30,000 page views. What on earth had happened? The referring urls showed
that someone had posted it on Slashdot. [10]
Wow, I thought, there's an audience. If I write something and put it on the web, anyone can read
it. That may seem obvious now, but it was surprising then. In the print era there was a narrow
channel to readers, guarded by fierce monsters known as editors. The only way to get an
audience for anything you wrote was to get it published as a book, or in a newspaper or
magazine. Now anyone could publish anything.
This had been possible in principle since 1993, but not many people had realized it yet. I had
been intimately involved with building the infrastructure of the web for most of that time, and a
writer as well, and it had taken me 8 years to realize it. Even then it took me several years to
understand the implications. It meant there would be a whole new generation of essays. [11]
In the print era, the channel for publishing essays had been vanishingly small. Except for a few
officially anointed thinkers who went to the right parties in New York, the only people allowed to
publish essays were specialists writing about their specialties. There were so many essays that
had never been written, because there had been no way to publish them. Now they could be,
and I was going to write them. [12]
I've worked on several different things, but to the extent there was a turning point where I
figured out what to work on, it was when I started publishing essays online. From then on I
knew that whatever else I did, I'd always write essays too.
I knew that online essays would be a marginal medium at first. Socially they'd seem more like
rants posted by nutjobs on their GeoCities sites than the genteel and beautifully typeset
compositions published in The New Yorker. But by this point I knew enough to find that
encouraging instead of discouraging.
One of the most conspicuous patterns I've noticed in my life is how well it has worked, for me at
least, to work on things that weren't prestigious. Still life has always been the least prestigious
form of painting. Viaweb and Y Combinator both seemed lame when we started them. I still get
the glassy eye from strangers when they ask what I'm writing, and I explain that it's an essay
I'm going to publish on my web site. Even Lisp, though prestigious intellectually in something
like the way Latin is, also seems about as hip.
It's not that unprestigious types of work are good per se. But when you find yourself drawn to
some kind of work despite its current lack of prestige, it's a sign both that there's something real
to be discovered there, and that you have the right kind of motives. Impure motives are a big
danger for the ambitious. If anything is going to lead you astray, it will be the desire to impress
people. So while working on things that aren't prestigious doesn't guarantee you're on the right
track, it at least guarantees you're not on the most common type of wrong one.
Over the next several years I wrote lots of essays about all kinds of different topics. O'Reilly
reprinted a collection of them as a book, called Hackers & Painters after one of the essays in it.
I also worked on spam filters, and did some more painting. I used to have dinners for a group of
friends every thursday night, which taught me how to cook for groups. And I bought another
building in Cambridge, a former candy factory (and later, twas said, porn studio), to use as an
office.
One night in October 2003 there was a big party at my house. It was a clever idea of my friend
Maria Daniels, who was one of the thursday diners. Three separate hosts would all invite their
friends to one party. So for every guest, two thirds of the other guests would be people they
didn't know but would probably like. One of the guests was someone I didn't know but would
turn out to like a lot: a woman called Jessica Livingston. A couple days later I asked her out.
Jessica was in charge of marketing at a Boston investment bank. This bank thought it
understood startups, but over the next year, as she met friends of mine from the startup world,
she was surprised how different reality was. And how colorful their stories were. So she decided
to compile a book of interviews with startup founders.
When the bank had financial problems and she had to fire half her staff, she started looking for
a new job. In early 2005 she interviewed for a marketing job at a Boston VC firm. It took them
weeks to make up their minds, and during this time I started telling her about all the things that
needed to be fixed about venture capital. They should make a larger number of smaller
investments instead of a handful of giant ones, they should be funding younger, more technical
founders instead of MBAs, they should let the founders remain as CEO, and so on.
One of my tricks for writing essays had always been to give talks. The prospect of having to
stand up in front of a group of people and tell them something that won't waste their time is a
great spur to the imagination. When the Harvard Computer Society, the undergrad computer
club, asked me to give a talk, I decided I would tell them how to start a startup. Maybe they'd be
able to avoid the worst of the mistakes we'd made.
So I gave this talk, in the course of which I told them that the best sources of seed funding were
successful startup founders, because then they'd be sources of advice too. Whereupon it
seemed they were all looking expectantly at me. Horrified at the prospect of having my inbox
flooded by business plans (if I'd only known), I blurted out "But not me!" and went on with the
talk. But afterward it occurred to me that I should really stop procrastinating about angel
investing. I'd been meaning to since Yahoo bought us, and now it was 7 years later and I still
hadn't done one angel investment.
Meanwhile I had been scheming with Robert and Trevor about projects we could work on
together. I missed working with them, and it seemed like there had to be something we could
collaborate on.
As Jessica and I were walking home from dinner on March 11, at the corner of Garden and
Walker streets, these three threads converged. Screw the VCs who were taking so long to
make up their minds. We'd start our own investment firm and actually implement the ideas we'd
been talking about. I'd fund it, and Jessica could quit her job and work for it, and we'd get
Robert and Trevor as partners too. [13]
Once again, ignorance worked in our favor. We had no idea how to be angel investors, and in
Boston in 2005 there were no Ron Conways to learn from. So we just made what seemed like
the obvious choices, and some of the things we did turned out to be novel.
There are multiple components to Y Combinator, and we didn't figure them all out at once. The
part we got first was to be an angel firm. In those days, those two words didn't go together.
There were VC firms, which were organized companies with people whose job it was to make
investments, but they only did big, million dollar investments. And there were angels, who did
smaller investments, but these were individuals who were usually focused on other things and
made investments on the side. And neither of them helped founders enough in the beginning.
We knew how helpless founders were in some respects, because we remembered how
helpless we'd been. For example, one thing Julian had done for us that seemed to us like magic
was to get us set up as a company. We were fine writing fairly difficult software, but actually
getting incorporated, with bylaws and stock and all that stuff, how on earth did you do that? Our
plan was not only to make seed investments, but to do for startups everything Julian had done
for us.
YC was not organized as a fund. It was cheap enough to run that we funded it with our own
money. That went right by 99% of readers, but professional investors are thinking "Wow, that
means they got all the returns." But once again, this was not due to any particular insight on our
part. We didn't know how VC firms were organized. It never occurred to us to try to raise a fund,
and if it had, we wouldn't have known where to start. [14]
The most distinctive thing about YC is the batch model: to fund a bunch of startups all at once,
twice a year, and then to spend three months focusing intensively on trying to help them. That
part we discovered by accident, not merely implicitly but explicitly due to our ignorance about
investing. We needed to get experience as investors. What better way, we thought, than to fund
a whole bunch of startups at once? We knew undergrads got temporary jobs at tech companies
during the summer. Why not organize a summer program where they'd start startups instead?
We wouldn't feel guilty for being in a sense fake investors, because they would in a similar
sense be fake founders. So while we probably wouldn't make much money out of it, we'd at
least get to practice being investors on them, and they for their part would probably have a
more interesting summer than they would working at Microsoft.
We'd use the building I owned in Cambridge as our headquarters. We'd all have dinner there
once a week ÿý on tuesdays, since I was already cooking for the thursday diners on thursdays ÿý
and after dinner we'd bring in experts on startups to give talks.
We knew undergrads were deciding then about summer jobs, so in a matter of days we cooked
up something we called the Summer Founders Program, and I posted an announcement on my
site, inviting undergrads to apply. I had never imagined that writing essays would be a way to
get "deal flow," as investors call it, but it turned out to be the perfect source. [15] We got 225
applications for the Summer Founders Program, and we were surprised to find that a lot of
them were from people who'd already graduated, or were about to that spring. Already this SFP
thing was starting to feel more serious than we'd intended.
We invited about 20 of the 225 groups to interview in person, and from those we picked 8 to
fund. They were an impressive group. That first batch included reddit, Justin Kan and Emmett
Shear, who went on to found Twitch, Aaron Swartz, who had already helped write the RSS spec
and would a few years later become a martyr for open access, and Sam Altman, who would
later become the second president of YC. I don't think it was entirely luck that the first batch
was so good. You had to be pretty bold to sign up for a weird thing like the Summer Founders
Program instead of a summer job at a legit place like Microsoft or Goldman Sachs.
The deal for startups was based on a combination of the deal we did with Julian ($10k for 10%)
and what Robert said MIT grad students got for the summer ($6k). We invested $6k per
founder, which in the typical two-founder case was $12k, in return for 6%. That had to be fair,
because it was twice as good as the deal we ourselves had taken. Plus that first summer, which
was really hot, Jessica brought the founders free air conditioners. [16]
Fairly quickly I realized that we had stumbled upon the way to scale startup funding. Funding
startups in batches was more convenient for us, because it meant we could do things for a lot of
startups at once, but being part of a batch was better for the startups too. It solved one of the
biggest problems faced by founders: the isolation. Now you not only had colleagues, but
colleagues who understood the problems you were facing and could tell you how they were
solving them.
As YC grew, we started to notice other advantages of scale. The alumni became a tight
community, dedicated to helping one another, and especially the current batch, whose shoes
they remembered being in. We also noticed that the startups were becoming one another's
customers. We used to refer jokingly to the "YC GDP," but as YC grows this becomes less and
less of a joke. Now lots of startups get their initial set of customers almost entirely from among
their batchmates.
I had not originally intended YC to be a full-time job. I was going to do three things: hack, write
essays, and work on YC. As YC grew, and I grew more excited about it, it started to take up a
lot more than a third of my attention. But for the first few years I was still able to work on other
things.
In the summer of 2006, Robert and I started working on a new version of Arc. This one was
reasonably fast, because it was compiled into Scheme. To test this new Arc, I wrote Hacker
News in it. It was originally meant to be a news aggregator for startup founders and was called
Startup News, but after a few months I got tired of reading about nothing but startups. Plus it
wasn't startup founders we wanted to reach. It was future startup founders. So I changed the
name to Hacker News and the topic to whatever engaged one's intellectual curiosity.
HN was no doubt good for YC, but it was also by far the biggest source of stress for me. If all I'd
had to do was select and help founders, life would have been so easy. And that implies that HN
was a mistake. Surely the biggest source of stress in one's work should at least be something
close to the core of the work. Whereas I was like someone who was in pain while running a
marathon not from the exertion of running, but because I had a blister from an ill-fitting shoe.
When I was dealing with some urgent problem during YC, there was about a 60% chance it had
to do with HN, and a 40% chance it had do with everything else combined. [17]
As well as HN, I wrote all of YC's internal software in Arc. But while I continued to work a good
deal in Arc, I gradually stopped working on Arc, partly because I didn't have time to, and partly
because it was a lot less attractive to mess around with the language now that we had all this
infrastructure depending on it. So now my three projects were reduced to two: writing essays
and working on YC.
YC was different from other kinds of work I've done. Instead of deciding for myself what to work
on, the problems came to me. Every 6 months there was a new batch of startups, and their
problems, whatever they were, became our problems. It was very engaging work, because their
problems were quite varied, and the good founders were very effective. If you were trying to
learn the most you could about startups in the shortest possible time, you couldn't have picked
a better way to do it.
There were parts of the job I didn't like. Disputes between cofounders, figuring out when people
were lying to us, fighting with people who maltreated the startups, and so on. But I worked hard
even at the parts I didn't like. I was haunted by something Kevin Hale once said about
companies: "No one works harder than the boss." He meant it both descriptively and
prescriptively, and it was the second part that scared me. I wanted YC to be good, so if how
hard I worked set the upper bound on how hard everyone else worked, I'd better work very hard.
One day in 2010, when he was visiting California for interviews, Robert Morris did something
astonishing: he offered me unsolicited advice. I can only remember him doing that once before.
One day at Viaweb, when I was bent over double from a kidney stone, he suggested that it
would be a good idea for him to take me to the hospital. That was what it took for Rtm to offer
unsolicited advice. So I remember his exact words very clearly. "You know," he said, "you should
make sure Y Combinator isn't the last cool thing you do."
At the time I didn't understand what he meant, but gradually it dawned on me that he was
saying I should quit. This seemed strange advice, because YC was doing great. But if there was
one thing rarer than Rtm offering advice, it was Rtm being wrong. So this set me thinking. It was
true that on my current trajectory, YC would be the last thing I did, because it was only taking
up more of my attention. It had already eaten Arc, and was in the process of eating essays too.
Either YC was my life's work or I'd have to leave eventually. And it wasn't, so I would.
In the summer of 2012 my mother had a stroke, and the cause turned out to be a blood clot
caused by colon cancer. The stroke destroyed her balance, and she was put in a nursing home,
but she really wanted to get out of it and back to her house, and my sister and I were
determined to help her do it. I used to fly up to Oregon to visit her regularly, and I had a lot of
time to think on those flights. On one of them I realized I was ready to hand YC over to
someone else.
I asked Jessica if she wanted to be president, but she didn't, so we decided we'd try to recruit
Sam Altman. We talked to Robert and Trevor and we agreed to make it a complete changing of
the guard. Up till that point YC had been controlled by the original LLC we four had started. But
we wanted YC to last for a long time, and to do that it couldn't be controlled by the founders. So
if Sam said yes, we'd let him reorganize YC. Robert and I would retire, and Jessica and Trevor
would become ordinary partners.
When we asked Sam if he wanted to be president of YC, initially he said no. He wanted to start
a startup to make nuclear reactors. But I kept at it, and in October 2013 he finally agreed. We
decided he'd take over starting with the winter 2014 batch. For the rest of 2013 I left running YC
more and more to Sam, partly so he could learn the job, and partly because I was focused on
my mother, whose cancer had returned.
She died on January 15, 2014. We knew this was coming, but it was still hard when it did.
I kept working on YC till March, to help get that batch of startups through Demo Day, then I
checked out pretty completely. (I still talk to alumni and to new startups working on things I'm
interested in, but that only takes a few hours a week.)
What should I do next? Rtm's advice hadn't included anything about that. I wanted to do
something completely different, so I decided I'd paint. I wanted to see how good I could get if I
really focused on it. So the day after I stopped working on YC, I started painting. I was rusty and
it took a while to get back into shape, but it was at least completely engaging. [18]
I spent most of the rest of 2014 painting. I'd never been able to work so uninterruptedly before,
and I got to be better than I had been. Not good enough, but better. Then in November, right in
the middle of a painting, I ran out of steam. Up till that point I'd always been curious to see how
the painting I was working on would turn out, but suddenly finishing this one seemed like a
chore. So I stopped working on it and cleaned my brushes and haven't painted since. So far
anyway.
I realize that sounds rather wimpy. But attention is a zero sum game. If you can choose what to
work on, and you choose a project that's not the best one (or at least a good one) for you, then
it's getting in the way of another project that is. And at 50 there was some opportunity cost to
screwing around.
I started writing essays again, and wrote a bunch of new ones over the next few months. I even
wrote a couple that weren't about startups. Then in March 2015 I started working on Lisp again.
The distinctive thing about Lisp is that its core is a language defined by writing an interpreter in
itself. It wasn't originally intended as a programming language in the ordinary sense. It was
meant to be a formal model of computation, an alternative to the Turing machine. If you want to
write an interpreter for a language in itself, what's the minimum set of predefined operators you
need? The Lisp that John McCarthy invented, or more accurately discovered, is an answer to
that question. [19]
McCarthy didn't realize this Lisp could even be used to program computers till his grad student
Steve Russell suggested it. Russell translated McCarthy's interpreter into IBM 704 machine
language, and from that point Lisp started also to be a programming language in the ordinary
sense. But its origins as a model of computation gave it a power and elegance that other
languages couldn't match. It was this that attracted me in college, though I didn't understand
why at the time.
McCarthy's 1960 Lisp did nothing more than interpret Lisp expressions. It was missing a lot of
things you'd want in a programming language. So these had to be added, and when they were,
they weren't defined using McCarthy's original axiomatic approach. That wouldn't have been
feasible at the time. McCarthy tested his interpreter by hand-simulating the execution of
programs. But it was already getting close to the limit of interpreters you could test that way ÿý
indeed, there was a bug in it that McCarthy had overlooked. To test a more complicated
interpreter, you'd have had to run it, and computers then weren't powerful enough.
Now they are, though. Now you could continue using McCarthy's axiomatic approach till you'd
defined a complete programming language. And as long as every change you made to
McCarthy's Lisp was a discoveredness-preserving transformation, you could, in principle, end
up with a complete language that had this quality. Harder to do than to talk about, of course, but
if it was possible in principle, why not try? So I decided to take a shot at it. It took 4 years, from
March 26, 2015 to October 12, 2019. It was fortunate that I had a precisely defined goal, or it
would have been hard to keep at it for so long.
I wrote this new Lisp, called Bel, in itself in Arc. That may sound like a contradiction, but it's an
indication of the sort of trickery I had to engage in to make this work. By means of an egregious
collection of hacks I managed to make something close enough to an interpreter written in itself
that could actually run. Not fast, but fast enough to test.
I had to ban myself from writing essays during most of this time, or I'd never have finished. In
late 2015 I spent 3 months writing essays, and when I went back to working on Bel I could
barely understand the code. Not so much because it was badly written as because the problem
is so convoluted. When you're working on an interpreter written in itself, it's hard to keep track of
what's happening at what level, and errors can be practically encrypted by the time you get
them.
So I said no more essays till Bel was done. But I told few people about Bel while I was working
on it. So for years it must have seemed that I was doing nothing, when in fact I was working
harder than I'd ever worked on anything. Occasionally after wrestling for hours with some
gruesome bug I'd check Twitter or HN and see someone asking "Does Paul Graham still code?"
Working on Bel was hard but satisfying. I worked on it so intensively that at any given time I had
a decent chunk of the code in my head and could write more there. I remember taking the boys
to the coast on a sunny day in 2015 and figuring out how to deal with some problem involving
continuations while I watched them play in the tide pools. It felt like I was doing life right. I
remember that because I was slightly dismayed at how novel it felt. The good news is that I had
more moments like this over the next few years.
In the summer of 2016 we moved to England. We wanted our kids to see what it was like living
in another country, and since I was a British citizen by birth, that seemed the obvious choice.
We only meant to stay for a year, but we liked it so much that we still live there. So most of Bel
was written in England.
In the fall of 2019, Bel was finally finished. Like McCarthy's original Lisp, it's a spec rather than
an implementation, although like McCarthy's Lisp it's a spec expressed as code.
Now that I could write essays again, I wrote a bunch about topics I'd had stacked up. I kept
writing essays through 2020, but I also started to think about other things I could work on. How
should I choose what to do? Well, how had I chosen what to work on in the past? I wrote an
essay for myself to answer that question, and I was surprised how long and messy the answer
turned out to be. If this surprised me, who'd lived it, then I thought perhaps it would be
interesting to other people, and encouraging to those with similarly messy lives. So I wrote a
more detailed version for others to read, and this is the last sentence of it.
Notes:
[1] My experience skipped a step in the evolution of computers: time-sharing machines with interactive OSes. I went
straight from batch processing to microcomputers, which made microcomputers seem all the more exciting.
[2] Italian words for abstract concepts can nearly always be predicted from their English cognates (except for
occasional traps like polluzione). It's the everyday words that differ. So if you string together a lot of abstract concepts
with a few simple verbs, you can make a little Italian go a long way.
[3] I lived at Piazza San Felice 4, so my walk to the Accademia went straight down the spine of old Florence: past the
Pitti, across the bridge, past Orsanmichele, between the Duomo and the Baptistery, and then up Via Ricasoli to
Piazza San Marco. I saw Florence at street level in every possible condition, from empty dark winter evenings to
sweltering summer days when the streets were packed with tourists.
[4] You can of course paint people like still lives if you want to, and they're willing. That sort of portrait is arguably the
apex of still life painting, though the long sitting does tend to produce pained expressions in the sitters.
[5] Interleaf was one of many companies that had smart people and built impressive technology, and yet got crushed
by Moore's Law. In the 1990s the exponential growth in the power of commodity (i.e. Intel) processors rolled up highend, special-purpose hardware and software companies like a bulldozer.
[6] The signature style seekers at RISD weren't specifically mercenary. In the art world, money and coolness are
tightly coupled. Anything expensive comes to be seen as cool, and anything seen as cool will soon become equally
expensive.
[7] Technically the apartment wasn't rent-controlled but rent-stabilized, but this is a refinement only New Yorkers
would know or care about. The point is that it was really cheap, less than half market price.
[8] Most software you can launch as soon as it's done. But when the software is an online store builder and you're
hosting the stores, if you don't have any users yet, that fact will be painfully obvious. So before we could launch
publicly we had to launch privately, in the sense of recruiting an initial set of users and making sure they had decentlooking stores.
[9] We'd had a code editor in Viaweb for users to define their own page styles. They didn't know it, but they were
editing Lisp expressions underneath. But this wasn't an app editor, because the code ran when the merchants' sites
were generated, not when shoppers visited them.
[10] This was the first instance of what is now a familiar experience, and so was what happened next, when I read
the comments and found they were full of angry people. How could I claim that Lisp was better than other
languages? Weren't they all Turing complete? People who see the responses to essays I write sometimes tell me
how sorry they feel for me, but I'm not exaggerating when I reply that it has always been like this, since the very
beginning. It comes with the territory. An essay must tell readers things they don't already know, and some people
dislike being told such things.
[11] People put plenty of stuff on the internet in the 90s of course, but putting something online is not the same as
publishing it online. Publishing online means you treat the online version as the (or at least a) primary version.
[12] There is a general lesson here that our experience with Y Combinator also teaches: Customs continue to
constrain you long after the restrictions that caused them have disappeared. Customary VC practice had once, like
the customs about publishing essays, been based on real constraints. Startups had once been much more expensive
to start, and proportionally rare. Now they could be cheap and common, but the VCs' customs still reflected the old
world, just as customs about writing essays still reflected the constraints of the print era.
Which in turn implies that people who are independent-minded (i.e. less influenced by custom) will have an
advantage in fields affected by rapid change (where customs are more likely to be obsolete).
Here's an interesting point, though: you can't always predict which fields will be affected by rapid change. Obviously
software and venture capital will be, but who would have predicted that essay writing would be?
[13] Y Combinator was not the original name. At first we were called Cambridge Seed. But we didn't want a regional
name, in case someone copied us in Silicon Valley, so we renamed ourselves after one of the coolest tricks in the
lambda calculus, the Y combinator.
I picked orange as our color partly because it's the warmest, and partly because no VC used it. In 2005 all the VCs
used staid colors like maroon, navy blue, and forest green, because they were trying to appeal to LPs, not founders.
The YC logo itself is an inside joke: the Viaweb logo had been a white V on a red circle, so I made the YC logo a
white Y on an orange square.
[14] YC did become a fund for a couple years starting in 2009, because it was getting so big I could no longer afford
to fund it personally. But after Heroku got bought we had enough money to go back to being self-funded.
[15] I've never liked the term "deal flow," because it implies that the number of new startups at any given time is fixed.
This is not only false, but it's the purpose of YC to falsify it, by causing startups to be founded that would not
otherwise have existed.
[16] She reports that they were all different shapes and sizes, because there was a run on air conditioners and she
had to get whatever she could, but that they were all heavier than she could carry now.
[17] Another problem with HN was a bizarre edge case that occurs when you both write essays and run a forum.
When you run a forum, you're assumed to see if not every conversation, at least every conversation involving you.
And when you write essays, people post highly imaginative misinterpretations of them on forums. Individually these
two phenomena are tedious but bearable, but the combination is disastrous. You actually have to respond to the
misinterpretations, because the assumption that you're present in the conversation means that not responding to any
sufficiently upvoted misinterpretation reads as a tacit admission that it's correct. But that in turn encourages more;
anyone who wants to pick a fight with you senses that now is their chance.
[18] The worst thing about leaving YC was not working with Jessica anymore. We'd been working on YC almost the
whole time we'd known each other, and we'd neither tried nor wanted to separate it from our personal lives, so
leaving was like pulling up a deeply rooted tree.
[19] One way to get more precise about the concept of invented vs discovered is to talk about space aliens. Any
sufficiently advanced alien civilization would certainly know about the Pythagorean theorem, for example. I believe,
though with less certainty, that they would also know about the Lisp in McCarthy's 1960 paper.
But if so there's no reason to suppose that this is the limit of the language that might be known to them. Presumably
aliens need numbers and errors and I/O too. So it seems likely there exists at least one path out of McCarthy's Lisp
along which discoveredness is preserved.
Thanks to Trevor Blackwell, John Collison, Patrick Collison, Daniel Gackle, Ralph Hazell, Jessica Livingston, Robert
Morris, and Harj Taggar for reading drafts of this.
Earnestness - # 196
December 2020
Jessica and I have certain words that have special significance when we're talking about
startups. The highest compliment we can pay to founders is to describe them as "earnest." This
is not by itself a guarantee of success. You could be earnest but incapable. But when founders
are both formidable (another of our words) and earnest, they're as close to unstoppable as you
get.
Earnestness sounds like a boring, even Victorian virtue. It seems a bit of an anachronism that
people in Silicon Valley would care about it. Why does this matter so much?
When you call someone earnest, you're making a statement about their motives. It means both
that they're doing something for the right reasons, and that they're trying as hard as they can. If
we imagine motives as vectors, it means both the direction and the magnitude are right. Though
these are of course related: when people are doing something for the right reasons, they try
harder. [1]
The reason motives matter so much in Silicon Valley is that so many people there have the
wrong ones. Starting a successful startup makes you rich and famous. So a lot of the people
trying to start them are doing it for those reasons. Instead of what? Instead of interest in the
problem for its own sake. That is the root of earnestness. [2]
It's also the hallmark of a nerd. Indeed, when people describe themselves as "x nerds," what
they mean is that they're interested in x for its own sake, and not because it's cool to be
interested in x, or because of what they can get from it. They're saying they care so much about
x that they're willing to sacrifice seeming cool for its sake.
A genuine interest in something is a very powerful motivator ÿý for some people, the most
powerful motivator of all. [3] Which is why it's what Jessica and I look for in founders. But as well
as being a source of strength, it's also a source of vulnerability. Caring constrains you. The
earnest can't easily reply in kind to mocking banter, or put on a cool facade of nihil admirari.
They care too much. They are doomed to be the straight man. That's a real disadvantage in
your teenage years, when mocking banter and nihil admirari often have the upper hand. But it
becomes an advantage later.
It's a commonplace now that the kids who were nerds in high school become the cool kids'
bosses later on. But people misunderstand why this happens. It's not just because the nerds
are smarter, but also because they're more earnest. When the problems get harder than the
fake ones you're given in high school, caring about them starts to matter.
Does it always matter? Do the earnest always win? Not always. It probably doesn't matter much
in politics, or in crime, or in certain types of business that are similar to crime, like gambling,
personal injury law, patent trolling, and so on. Nor does it matter in academic fields at the more
bogus end of the spectrum. And though I don't know enough to say for sure, it may not matter in
some kinds of humor: it may be possible to be completely cynical and still be very funny. [4]
Looking at the list of fields I mentioned, there's an obvious pattern. Except possibly for humor,
these are all types of work I'd avoid like the plague. So that could be a useful heuristic for
deciding which fields to work in: how much does earnestness matter? Which can in turn
presumably be inferred from the prevalence of nerds at the top.
Along with "nerd," another word that tends to be associated with earnestness is "naive." The
earnest often seem naive. It's not just that they don't have the motives other people have. They
often don't fully grasp that such motives exist. Or they may know intellectually that they do, but
because they don't feel them, they forget about them. [5]
It works to be slightly naive not just about motives but also, believe it or not, about the problems
you're working on. Naive optimism can compensate for the bit rot that rapid change causes in
established beliefs. You plunge into some problem saying "How hard can it be?", and then after
solving it you learn that it was till recently insoluble.
Naivete is an obstacle for anyone who wants to seem sophisticated, and this is one reason
would-be intellectuals find it so difficult to understand Silicon Valley. It hasn't been safe for such
people to use the word "earnest" outside scare quotes since Oscar Wilde wrote "The
Importance of Being Earnest" in 1895. And yet when you zoom in on Silicon Valley, right into
Jessica Livingston's brain, that's what her x-ray vision is seeking out in founders. Earnestness!
Who'd have guessed? Reporters literally can't believe it when founders making piles of money
say that they started their companies to make the world better. The situation seems made for
mockery. How can these founders be so naive as not to realize how implausible they sound?
Though those asking this question don't realize it, that's not a rhetorical question.
A lot of founders are faking it, of course, particularly the smaller fry, and the soon to be smaller
fry. But not all of them. There are a significant number of founders who really are interested in
the problem they're solving mainly for its own sake.
Why shouldn't there be? We have no difficulty believing that people would be interested in
history or math or even old bus tickets for their own sake. Why can't there be people interested
in self-driving cars or social networks for their own sake? When you look at the question from
this side, it seems obvious there would be. And isn't it likely that having a deep interest in
something would be a source of great energy and resilience? It is in every other field.
The question really is why we have a blind spot about business. And the answer to that is
obvious if you know enough history. For most of history, making large amounts of money has
not been very intellectually interesting. In preindustrial times it was never far from robbery, and
some areas of business still retain that character, except using lawyers instead of soldiers.
But there are other areas of business where the work is genuinely interesting. Henry Ford got to
spend much of his time working on interesting technical problems, and for the last several
decades the trend in that direction has been accelerating. It's much easier now to make a lot of
money by working on something you're interested in than it was 50 years ago. And that, rather
than how fast they grow, may be the most important change that startups represent. Though
indeed, the fact that the work is genuinely interesting is a big part of why it gets done so fast. [6]
Can you imagine a more important change than one in the relationship between intellectual
curiosity and money? These are two of the most powerful forces in the world, and in my lifetime
they've become significantly more aligned. How could you not be fascinated to watch something
like this happening in real time?
I meant this essay to be about earnestness generally, and now I've gone and talked about
startups again. But I suppose at least it serves as an example of an x nerd in the wild.
Notes:
[1] It's interesting how many different ways there are not to be earnest: to be cleverly cynical, to be superficially
brilliant, to be conspicuously virtuous, to be cool, to be sophisticated, to be orthodox, to be a snob, to bully, to pander,
to be on the make. This pattern suggests that earnestness is not one end of a continuum, but a target one can fall
short of in multiple dimensions.
Another thing I notice about this list is that it sounds like a list of the ways people behave on Twitter. Whatever else
social media is, it's a vivid catalogue of ways not to be earnest.
[2] People's motives are as mixed in Silicon Valley as anywhere else. Even the founders motivated mostly by money
tend to be at least somewhat interested in the problem they're solving, and even the founders most interested in the
problem they're solving also like the idea of getting rich. But there's great variation in the relative proportions of
different founders' motivations.
And when I talk about "wrong" motives, I don't mean morally wrong. There's nothing morally wrong with starting a
startup to make money. I just mean that those startups don't do as well.
[3] The most powerful motivator for most people is probably family. But there are some for whom intellectual curiosity
comes first. In his (wonderful) autobiography, Paul Halmos says explicitly that for a mathematician, math must come
before anything else, including family. Which at least implies that it did for him.
[4] Interestingly, just as the word "nerd" implies earnestness even when used as a metaphor, the word "politics"
implies the opposite. It's not only in actual politics that earnestness seems to be a handicap, but also in office politics
and academic politics.
[5] It's a bigger social error to seem naive in most European countries than it is in America, and this may be one of
subtler reasons startups are less common there. Founder culture is completely at odds with sophisticated cynicism.
The most earnest part of Europe is Scandinavia, and not surprisingly this is also the region with the highest number
of successful startups per capita.
[6] Much of business is schleps, and probably always will be. But even being a professor is largely schleps. It would
be interesting to collect statistics about the schlep ratios of different jobs, but I suspect they'd rarely be less than 30%.
Thanks to Trevor Blackwell, Patrick Collison, Suhail Doshi, Jessica Livingston, Mattias Ljungman, Harj Taggar, and
Kyle Vogt for reading drafts of this.
Billionaires Build - # 195
December 2020
As I was deciding what to write about next, I was surprised to find that two separate essays I'd
been planning to write were actually the same.
The first is about how to ace your Y Combinator interview. There has been so much nonsense
written about this topic that I've been meaning for years to write something telling founders the
truth.
The second is about something politicians sometimes say ÿý that the only way to become a
billionaire is by exploiting people ÿý and why this is mistaken.
Keep reading, and you'll learn both simultaneously.
I know the politicians are mistaken because it was my job to predict which people will become
billionaires. I think I can truthfully say that I know as much about how to do this as anyone. If the
key to becoming a billionaire ÿý the defining feature of billionaires ÿý was to exploit people, then I,
as a professional billionaire scout, would surely realize this and look for people who would be
good at it, just as an NFL scout looks for speed in wide receivers.
But aptitude for exploiting people is not what Y Combinator looks for at all. In fact, it's the
opposite of what they look for. I'll tell you what they do look for, by explaining how to convince Y
Combinator to fund you, and you can see for yourself.
What YC looks for, above all, is founders who understand some group of users and can make
what they want. This is so important that it's YC's motto: "Make something people want."
A big company can to some extent force unsuitable products on unwilling customers, but a
startup doesn't have the power to do that. A startup must sing for its supper, by making things
that genuinely delight its customers. Otherwise it will never get off the ground.
Here's where things get difficult, both for you as a founder and for the YC partners trying to
decide whether to fund you. In a market economy, it's hard to make something people want that
they don't already have. That's the great thing about market economies. If other people both
knew about this need and were able to satisfy it, they already would be, and there would be no
room for your startup.
Which means the conversation during your YC interview will have to be about something new:
either a new need, or a new way to satisfy one. And not just new, but uncertain. If it were certain
that the need existed and that you could satisfy it, that certainty would be reflected in large and
rapidly growing revenues, and you wouldn't be seeking seed funding.
So the YC partners have to guess both whether you've discovered a real need, and whether
you'll be able to satisfy it. That's what they are, at least in this part of their job: professional
guessers. They have 1001 heuristics for doing this, and I'm not going to tell you all of them, but
I'm happy to tell you the most important ones, because these can't be faked; the only way to
"hack" them would be to do what you should be doing anyway as a founder.
The first thing the partners will try to figure out, usually, is whether what you're making will ever
be something a lot of people want. It doesn't have to be something a lot of people want now.
The product and the market will both evolve, and will influence each other's evolution. But in the
end there has to be something with a huge market. That's what the partners will be trying to
figure out: is there a path to a huge market? [1]
Sometimes it's obvious there will be a huge market. If Boom manages to ship an airliner at all,
international airlines will have to buy it. But usually it's not obvious. Usually the path to a huge
market is by growing a small market. This idea is important enough that it's worth coining a
phrase for, so let's call one of these small but growable markets a "larval market."
The perfect example of a larval market might be Apple's market when they were founded in
1976. In 1976, not many people wanted their own computer. But more and more started to want
one, till now every 10 year old on the planet wants a computer (but calls it a "phone").
The ideal combination is the group of founders who are "living in the future" in the sense of
being at the leading edge of some kind of change, and who are building something they
themselves want. Most super-successful startups are of this type. Steve Wozniak wanted a
computer. Mark Zuckerberg wanted to engage online with his college friends. Larry and Sergey
wanted to find things on the web. All these founders were building things they and their peers
wanted, and the fact that they were at the leading edge of change meant that more people
would want these things in the future.
But although the ideal larval market is oneself and one's peers, that's not the only kind. A larval
market might also be regional, for example. You build something to serve one location, and then
expand to others.
The crucial feature of the initial market is that it exist. That may seem like an obvious point, but
the lack of it is the biggest flaw in most startup ideas. There have to be some people who want
what you're building right now, and want it so urgently that they're willing to use it, bugs and all,
even though you're a small company they've never heard of. There don't have to be many, but
there have to be some. As long as you have some users, there are straightforward ways to get
more: build new features they want, seek out more people like them, get them to refer you to
their friends, and so on. But these techniques all require some initial seed group of users.
So this is one thing the YC partners will almost certainly dig into during your interview. Who are
your first users going to be, and how do you know they want this? If I had to decide whether to
fund startups based on a single question, it would be "How do you know people want this?"
The most convincing answer is "Because we and our friends want it." It's even better when this
is followed by the news that you've already built a prototype, and even though it's very crude,
your friends are using it, and it's spreading by word of mouth. If you can say that and you're not
lying, the partners will switch from default no to default yes. Meaning you're in unless there's
some other disqualifying flaw.
That is a hard standard to meet, though. Airbnb didn't meet it. They had the first part. They had
made something they themselves wanted. But it wasn't spreading. So don't feel bad if you don't
hit this gold standard of convincingness. If Airbnb didn't hit it, it must be too high.
In practice, the YC partners will be satisfied if they feel that you have a deep understanding of
your users' needs. And the Airbnbs did have that. They were able to tell us all about what
motivated hosts and guests. They knew from first-hand experience, because they'd been the
first hosts. We couldn't ask them a question they didn't know the answer to. We ourselves were
not very excited about the idea as users, but we knew this didn't prove anything, because there
were lots of successful startups we hadn't been excited about as users. We were able to say to
ourselves "They seem to know what they're talking about. Maybe they're onto something. It's
not growing yet, but maybe they can figure out how to make it grow during YC." Which they did,
about three weeks into the batch.
The best thing you can do in a YC interview is to teach the partners about your users. So if you
want to prepare for your interview, one of the best ways to do it is to go talk to your users and
find out exactly what they're thinking. Which is what you should be doing anyway.
This may sound strangely credulous, but the YC partners want to rely on the founders to tell
them about the market. Think about how VCs typically judge the potential market for an idea.
They're not ordinarily domain experts themselves, so they forward the idea to someone who is,
and ask for their opinion. YC doesn't have time to do this, but if the YC partners can convince
themselves that the founders both (a) know what they're talking about and (b) aren't lying, they
don't need outside domain experts. They can use the founders themselves as domain experts
when evaluating their own idea.
This is why YC interviews aren't pitches. To give as many founders as possible a chance to get
funded, we made interviews as short as we could: 10 minutes. That is not enough time for the
partners to figure out, through the indirect evidence in a pitch, whether you know what you're
talking about and aren't lying. They need to dig in and ask you questions. There's not enough
time for sequential access. They need random access. [2]
The worst advice I ever heard about how to succeed in a YC interview is that you should take
control of the interview and make sure to deliver the message you want to. In other words, turn
the interview into a pitch. 'èelaborate expletive'é. It is so annoying when people try to do that. You
ask them a question, and instead of answering it, they deliver some obviously prefabricated
blob of pitch. It eats up 10 minutes really fast.
There is no one who can give you accurate advice about what to do in a YC interview except a
current or former YC partner. People who've merely been interviewed, even successfully, have
no idea of this, but interviews take all sorts of different forms depending on what the partners
want to know about most. Sometimes they're all about the founders, other times they're all
about the idea. Sometimes some very narrow aspect of the idea. Founders sometimes walk
away from interviews complaining that they didn't get to explain their idea completely. True, but
they explained enough.
Since a YC interview consists of questions, the way to do it well is to answer them well. Part of
that is answering them candidly. The partners don't expect you to know everything. But if you
don't know the answer to a question, don't try to bullshit your way out of it. The partners, like
most experienced investors, are professional bullshit detectors, and you are (hopefully) an
amateur bullshitter. And if you try to bullshit them and fail, they may not even tell you that you
failed. So it's better to be honest than to try to sell them. If you don't know the answer to a
question, say you don't, and tell them how you'd go about finding it, or tell them the answer to
some related question.
If you're asked, for example, what could go wrong, the worst possible answer is "nothing."
Instead of convincing them that your idea is bullet-proof, this will convince them that you're a
fool or a liar. Far better to go into gruesome detail. That's what experts do when you ask what
could go wrong. The partners know that your idea is risky. That's what a good bet looks like at
this stage: a tiny probability of a huge outcome.
Ditto if they ask about competitors. Competitors are rarely what kills startups. Poor execution
does. But you should know who your competitors are, and tell the YC partners candidly what
your relative strengths and weaknesses are. Because the YC partners know that competitors
don't kill startups, they won't hold competitors against you too much. They will, however, hold it
against you if you seem either to be unaware of competitors, or to be minimizing the threat they
pose. They may not be sure whether you're clueless or lying, but they don't need to be.
The partners don't expect your idea to be perfect. This is seed investing. At this stage, all they
can expect are promising hypotheses. But they do expect you to be thoughtful and honest. So if
trying to make your idea seem perfect causes you to come off as glib or clueless, you've
sacrificed something you needed for something you didn't.
If the partners are sufficiently convinced that there's a path to a big market, the next question is
whether you'll be able to find it. That in turn depends on three things: the general qualities of the
founders, their specific expertise in this domain, and the relationship between them. How
determined are the founders? Are they good at building things? Are they resilient enough to
keep going when things go wrong? How strong is their friendship?
Though the Airbnbs only did ok in the idea department, they did spectacularly well in this
department. The story of how they'd funded themselves by making Obama- and McCainthemed breakfast cereal was the single most important factor in our decision to fund them. They
didn't realize it at the time, but what seemed to them an irrelevant story was in fact fabulously
good evidence of their qualities as founders. It showed they were resourceful and determined,
and could work together.
It wasn't just the cereal story that showed that, though. The whole interview showed that they
cared. They weren't doing this just for the money, or because startups were cool. The reason
they were working so hard on this company was because it was their project. They had
discovered an interesting new idea, and they just couldn't let it go.
Mundane as it sounds, that's the most powerful motivator of all, not just in startups, but in most
ambitious undertakings: to be genuinely interested in what you're building. This is what really
drives billionaires, or at least the ones who become billionaires from starting companies. The
company is their project.
One thing few people realize about billionaires is that all of them could have stopped sooner.
They could have gotten acquired, or found someone else to run the company. Many founders
do. The ones who become really rich are the ones who keep working. And what makes them
keep working is not just money. What keeps them working is the same thing that keeps anyone
else working when they could stop if they wanted to: that there's nothing else they'd rather do.
That, not exploiting people, is the defining quality of people who become billionaires from
starting companies. So that's what YC looks for in founders: authenticity. People's motives for
starting startups are usually mixed. They're usually doing it from some combination of the
desire to make money, the desire to seem cool, genuine interest in the problem, and
unwillingness to work for someone else. The last two are more powerful motivators than the first
two. It's ok for founders to want to make money or to seem cool. Most do. But if the founders
seem like they're doing it just to make money or just to seem cool, they're not likely to succeed
on a big scale. The founders who are doing it for the money will take the first sufficiently large
acquisition offer, and the ones who are doing it to seem cool will rapidly discover that there are
much less painful ways of seeming cool. [3]
Y Combinator certainly sees founders whose m.o. is to exploit people. YC is a magnet for them,
because they want the YC brand. But when the YC partners detect someone like that, they
reject them. If bad people made good founders, the YC partners would face a moral dilemma.
Fortunately they don't, because bad people make bad founders. This exploitative type of
founder is not going to succeed on a large scale, and in fact probably won't even succeed on a
small one, because they're always going to be taking shortcuts. They see YC itself as a
shortcut.
Their exploitation usually begins with their own cofounders, which is disastrous, since the
cofounders' relationship is the foundation of the company. Then it moves on to the users, which
is also disastrous, because the sort of early adopters a successful startup wants as its initial
users are the hardest to fool. The best this kind of founder can hope for is to keep the edifice of
deception tottering along until some acquirer can be tricked into buying it. But that kind of
acquisition is never very big. [4]
If professional billionaire scouts know that exploiting people is not the skill to look for, why do
some politicians think this is the defining quality of billionaires?
I think they start from the feeling that it's wrong that one person could have so much more
money than another. It's understandable where that feeling comes from. It's in our DNA, and
even in the DNA of other species.
If they limited themselves to saying that it made them feel bad when one person had so much
more money than other people, who would disagree? It makes me feel bad too, and I think
people who make a lot of money have a moral obligation to use it for the common good. The
mistake they make is to jump from feeling bad that some people are much richer than others to
the conclusion that there's no legitimate way to make a very large amount of money. Now we're
getting into statements that are not only falsifiable, but false.
There are certainly some people who become rich by doing bad things. But there are also
plenty of people who behave badly and don't make that much from it. There is no correlation ÿý in
fact, probably an inverse correlation ÿý between how badly you behave and how much money you
make.
The greatest danger of this nonsense may not even be that it sends policy astray, but that it
misleads ambitious people. Can you imagine a better way to destroy social mobility than by
telling poor kids that the way to get rich is by exploiting people, while the rich kids know, from
having watched the preceding generation do it, how it's really done?
I'll tell you how it's really done, so you can at least tell your own kids the truth. It's all about
users. The most reliable way to become a billionaire is to start a company that grows fast, and
the way to grow fast is to make what users want. Newly started startups have no choice but to
delight users, or they'll never even get rolling. But this never stops being the lodestar, and
bigger companies take their eye off it at their peril. Stop delighting users, and eventually
someone else will.
Users are what the partners want to know about in YC interviews, and what I want to know
about when I talk to founders that we funded ten years ago and who are billionaires now. What
do users want? What new things could you build for them? Founders who've become
billionaires are always eager to talk about that topic. That's how they became billionaires.
Notes:
[1] The YC partners have so much practice doing this that they sometimes see paths that the founders themselves
haven't seen yet. The partners don't try to seem skeptical, as buyers in transactions often do to increase their
leverage. Although the founders feel their job is to convince the partners of the potential of their idea, these roles are
not infrequently reversed, and the founders leave the interview feeling their idea has more potential than they
realized.
[2] In practice, 7 minutes would be enough. You rarely change your mind at minute 8. But 10 minutes is socially
convenient.
[3] I myself took the first sufficiently large acquisition offer in my first startup, so I don't blame founders for doing this.
There's nothing wrong with starting a startup to make money. You need to make money somehow, and for some
people startups are the most efficient way to do it. I'm just saying that these are not the startups that get really big.
[4] Not these days, anyway. There were some big ones during the Internet Bubble, and indeed some big IPOs.
Thanks to Trevor Blackwell, Jessica Livingston, Robert Morris, Geoff Ralston, and Harj Taggar for reading drafts of
this.
The Airbnbs - # 194
December 2020
To celebrate Airbnb's IPO and to help future founders, I thought it might be useful to explain
what was special about Airbnb.
What was special about the Airbnbs was how earnest they were. They did nothing half-way, and
we could sense this even in the interview. Sometimes after we interviewed a startup we'd be
uncertain what to do, and have to talk it over. Other times we'd just look at one another and
smile. The Airbnbs' interview was that kind. We didn't even like the idea that much. Nor did
users, at that stage; they had no growth. But the founders seemed so full of energy that it was
impossible not to like them.
That first impression was not misleading. During the batch our nickname for Brian Chesky was
The Tasmanian Devil, because like the cartoon character he seemed a tornado of energy. All
three of them were like that. No one ever worked harder during YC than the Airbnbs did. When
you talked to the Airbnbs, they took notes. If you suggested an idea to them in office hours, the
next time you talked to them they'd not only have implemented it, but also implemented two new
ideas they had in the process. "They probably have the best attitude of any startup we've
funded" I wrote to Mike Arrington during the batch.
They're still like that. Jessica and I had dinner with Brian in the summer of 2018, just the three
of us. By this point the company is ten years old. He took a page of notes about ideas for new
things Airbnb could do.
What we didn't realize when we first met Brian and Joe and Nate was that Airbnb was on its
last legs. After working on the company for a year and getting no growth, they'd agreed to give it
one last shot. They'd try this Y Combinator thing, and if the company still didn't take off, they'd
give up.
Any normal person would have given up already. They'd been funding the company with credit
cards. They had a binder full of credit cards they'd maxed out. Investors didn't think much of the
idea. One investor they met in a cafe walked out in the middle of meeting with them. They
thought he was going to the bathroom, but he never came back. "He didn't even finish his
smoothie," Brian said. And now, in late 2008, it was the worst recession in decades. The stock
market was in free fall and wouldn't hit bottom for another four months.
Why hadn't they given up? This is a useful question to ask. People, like matter, reveal their
nature under extreme conditions. One thing that's clear is that they weren't doing this just for the
money. As a money-making scheme, this was pretty lousy: a year's work and all they had to
show for it was a binder full of maxed-out credit cards. So why were they still working on this
startup? Because of the experience they'd had as the first hosts.
When they first tried renting out airbeds on their floor during a design convention, all they were
hoping for was to make enough money to pay their rent that month. But something surprising
happened: they enjoyed having those first three guests staying with them. And the guests
enjoyed it too. Both they and the guests had done it because they were in a sense forced to,
and yet they'd all had a great experience. Clearly there was something new here: for hosts, a
new way to make money that had literally been right under their noses, and for guests, a new
way to travel that was in many ways better than hotels.
That experience was why the Airbnbs didn't give up. They knew they'd discovered something.
They'd seen a glimpse of the future, and they couldn't let it go.
They knew that once people tried staying in what is now called "an airbnb," they would also
realize that this was the future. But only if they tried it, and they weren't. That was the problem
during Y Combinator: to get growth started.
Airbnb's goal during YC was to reach what we call ramen profitability, which means making
enough money that the company can pay the founders' living expenses, if they live on ramen
noodles. Ramen profitability is not, obviously, the end goal of any startup, but it's the most
important threshold on the way, because this is the point where you're airborne. This is the point
where you no longer need investors' permission to continue existing. For the Airbnbs, ramen
profitability was $4000 a month: $3500 for rent, and $500 for food. They taped this goal to the
mirror in the bathroom of their apartment.
The way to get growth started in something like Airbnb is to focus on the hottest subset of the
market. If you can get growth started there, it will spread to the rest. When I asked the Airbnbs
where there was most demand, they knew from searches: New York City. So they focused on
New York. They went there in person to visit their hosts and help them make their listings more
attractive. A big part of that was better pictures. So Joe and Brian rented a professional camera
and took pictures of the hosts' places themselves.
This didn't just make the listings better. It also taught them about their hosts. When they came
back from their first trip to New York, I asked what they'd noticed about hosts that surprised
them, and they said the biggest surprise was how many of the hosts were in the same position
they'd been in: they needed this money to pay their rent. This was, remember, the worst
recession in decades, and it had hit New York first. It definitely added to the Airbnbs' sense of
mission to feel that people needed them.
In late January 2009, about three weeks into Y Combinator, their efforts started to show results,
and their numbers crept upward. But it was hard to say for sure whether it was growth or just
random fluctuation. By February it was clear that it was real growth. They made $460 in fees in
the first week of February, $897 in the second, and $1428 in the third. That was it: they were
airborne. Brian sent me an email on February 22 announcing that they were ramen profitable
and giving the last three weeks' numbers.
"I assume you know what you've now set yourself up for next week," I responded.
Brian's reply was seven words: "We are not going to slow down."
How to Think for Yourself - # 193
November 2020
There are some kinds of work that you can't do well without thinking differently from your peers.
To be a successful scientist, for example, it's not enough just to be correct. Your ideas have to
be both correct and novel. You can't publish papers saying things other people already know.
You need to say things no one else has realized yet.
The same is true for investors. It's not enough for a public market investor to predict correctly
how a company will do. If a lot of other people make the same prediction, the stock price will
already reflect it, and there's no room to make money. The only valuable insights are the ones
most other investors don't share.
You see this pattern with startup founders too. You don't want to start a startup to do something
that everyone agrees is a good idea, or there will already be other companies doing it. You have
to do something that sounds to most other people like a bad idea, but that you know isn't ÿý like
writing software for a tiny computer used by a few thousand hobbyists, or starting a site to let
people rent airbeds on strangers' floors.
Ditto for essayists. An essay that told people things they already knew would be boring. You
have to tell them something new.
But this pattern isn't universal. In fact, it doesn't hold for most kinds of work. In most kinds of
work ÿý to be an administrator, for example ÿý all you need is the first half. All you need is to be
right. It's not essential that everyone else be wrong.
There's room for a little novelty in most kinds of work, but in practice there's a fairly sharp
distinction between the kinds of work where it's essential to be independent-minded, and the
kinds where it's not.
I wish someone had told me about this distinction when I was a kid, because it's one of the
most important things to think about when you're deciding what kind of work you want to do. Do
you want to do the kind of work where you can only win by thinking differently from everyone
else? I suspect most people's unconscious mind will answer that question before their
conscious mind has a chance to. I know mine does.
Independent-mindedness seems to be more a matter of nature than nurture. Which means if
you pick the wrong type of work, you're going to be unhappy. If you're naturally independentminded, you're going to find it frustrating to be a middle manager. And if you're naturally
conventional-minded, you're going to be sailing into a headwind if you try to do original
research.
One difficulty here, though, is that people are often mistaken about where they fall on the
spectrum from conventional- to independent-minded. Conventional-minded people don't like to
think of themselves as conventional-minded. And in any case, it genuinely feels to them as if
they make up their own minds about everything. It's just a coincidence that their beliefs are
identical to their peers'. And the independent-minded, meanwhile, are often unaware how
different their ideas are from conventional ones, at least till they state them publicly. [1]
By the time they reach adulthood, most people know roughly how smart they are (in the narrow
sense of ability to solve pre-set problems), because they're constantly being tested and ranked
according to it. But schools generally ignore independent-mindedness, except to the extent they
try to suppress it. So we don't get anything like the same kind of feedback about how
independent-minded we are.
There may even be a phenomenon like Dunning-Kruger at work, where the most conventionalminded people are confident that they're independent-minded, while the genuinely independentminded worry they might not be independent-minded enough.
___________
Can you make yourself more independent-minded? I think so. This quality may be largely
inborn, but there seem to be ways to magnify it, or at least not to suppress it.
One of the most effective techniques is one practiced unintentionally by most nerds: simply to
be less aware what conventional beliefs are. It's hard to be a conformist if you don't know what
you're supposed to conform to. Though again, it may be that such people already are
independent-minded. A conventional-minded person would probably feel anxious not knowing
what other people thought, and make more effort to find out.
It matters a lot who you surround yourself with. If you're surrounded by conventional-minded
people, it will constrain which ideas you can express, and that in turn will constrain which ideas
you have. But if you surround yourself with independent-minded people, you'll have the opposite
experience: hearing other people say surprising things will encourage you to, and to think of
more.
Because the independent-minded find it uncomfortable to be surrounded by conventionalminded people, they tend to self-segregate once they have a chance to. The problem with high
school is that they haven't yet had a chance to. Plus high school tends to be an inward-looking
little world whose inhabitants lack confidence, both of which magnify the forces of conformism.
So high school is often a bad time for the independent-minded. But there is some advantage
even here: it teaches you what to avoid. If you later find yourself in a situation that makes you
think "this is like high school," you know you should get out. [2]
Another place where the independent- and conventional-minded are thrown together is in
successful startups. The founders and early employees are almost always independent-minded;
otherwise the startup wouldn't be successful. But conventional-minded people greatly
outnumber independent-minded ones, so as the company grows, the original spirit of
independent-mindedness is inevitably diluted. This causes all kinds of problems besides the
obvious one that the company starts to suck. One of the strangest is that the founders find
themselves able to speak more freely with founders of other companies than with their own
employees. [3]
Fortunately you don't have to spend all your time with independent-minded people. It's enough
to have one or two you can talk to regularly. And once you find them, they're usually as eager to
talk as you are; they need you too. Although universities no longer have the kind of monopoly
they used to have on education, good universities are still an excellent way to meet
independent-minded people. Most students will still be conventional-minded, but you'll at least
find clumps of independent-minded ones, rather than the near zero you may have found in high
school.
It also works to go in the other direction: as well as cultivating a small collection of independentminded friends, to try to meet as many different types of people as you can. It will decrease the
influence of your immediate peers if you have several other groups of peers. Plus if you're part
of several different worlds, you can often import ideas from one to another.
But by different types of people, I don't mean demographically different. For this technique to
work, they have to think differently. So while it's an excellent idea to go and visit other countries,
you can probably find people who think differently right around the corner. When I meet
someone who knows a lot about something unusual (which includes practically everyone, if you
dig deep enough), I try to learn what they know that other people don't. There are almost
always surprises here. It's a good way to make conversation when you meet strangers, but I
don't do it to make conversation. I really want to know.
You can expand the source of influences in time as well as space, by reading history. When I
read history I do it not just to learn what happened, but to try to get inside the heads of people
who lived in the past. How did things look to them? This is hard to do, but worth the effort for the
same reason it's worth travelling far to triangulate a point.
You can also take more explicit measures to prevent yourself from automatically adopting
conventional opinions. The most general is to cultivate an attitude of skepticism. When you hear
someone say something, stop and ask yourself "Is that true?" Don't say it out loud. I'm not
suggesting that you impose on everyone who talks to you the burden of proving what they say,
but rather that you take upon yourself the burden of evaluating what they say.
Treat it as a puzzle. You know that some accepted ideas will later turn out to be wrong. See if
you can guess which. The end goal is not to find flaws in the things you're told, but to find the
new ideas that had been concealed by the broken ones. So this game should be an exciting
quest for novelty, not a boring protocol for intellectual hygiene. And you'll be surprised, when
you start asking "Is this true?", how often the answer is not an immediate yes. If you have any
imagination, you're more likely to have too many leads to follow than too few.
More generally your goal should be not to let anything into your head unexamined, and things
don't always enter your head in the form of statements. Some of the most powerful influences
are implicit. How do you even notice these? By standing back and watching how other people
get their ideas.
When you stand back at a sufficient distance, you can see ideas spreading through groups of
people like waves. The most obvious are in fashion: you notice a few people wearing a certain
kind of shirt, and then more and more, until half the people around you are wearing the same
shirt. You may not care much what you wear, but there are intellectual fashions too, and you
definitely don't want to participate in those. Not just because you want sovereignty over your
own thoughts, but because unfashionable ideas are disproportionately likely to lead somewhere
interesting. The best place to find undiscovered ideas is where no one else is looking. [4]
___________
To go beyond this general advice, we need to look at the internal structure of independentmindedness ÿý at the individual muscles we need to exercise, as it were. It seems to me that it
has three components: fastidiousness about truth, resistance to being told what to think, and
curiosity.
Fastidiousness about truth means more than just not believing things that are false. It means
being careful about degree of belief. For most people, degree of belief rushes unexamined
toward the extremes: the unlikely becomes impossible, and the probable becomes certain. [5]
To the independent-minded, this seems unpardonably sloppy. They're willing to have anything in
their heads, from highly speculative hypotheses to (apparent) tautologies, but on subjects they
care about, everything has to be labelled with a carefully considered degree of belief. [6]
The independent-minded thus have a horror of ideologies, which require one to accept a whole
collection of beliefs at once, and to treat them as articles of faith. To an independent-minded
person that would seem revolting, just as it would seem to someone fastidious about food to
take a bite of a submarine sandwich filled with a large variety of ingredients of indeterminate
age and provenance.
Without this fastidiousness about truth, you can't be truly independent-minded. It's not enough
just to have resistance to being told what to think. Those kind of people reject conventional
ideas only to replace them with the most random conspiracy theories. And since these
conspiracy theories have often been manufactured to capture them, they end up being less
independent-minded than ordinary people, because they're subject to a much more exacting
master than mere convention. [7]
Can you increase your fastidiousness about truth? I would think so. In my experience, merely
thinking about something you're fastidious about causes that fastidiousness to grow. If so, this is
one of those rare virtues we can have more of merely by wanting it. And if it's like other forms of
fastidiousness, it should also be possible to encourage in children. I certainly got a strong dose
of it from my father. [8]
The second component of independent-mindedness, resistance to being told what to think, is
the most visible of the three. But even this is often misunderstood. The big mistake people
make about it is to think of it as a merely negative quality. The language we use reinforces that
idea. You're unconventional. You don't care what other people think. But it's not just a kind of
immunity. In the most independent-minded people, the desire not to be told what to think is a
positive force. It's not mere skepticism, but an active delight in ideas that subvert the
conventional wisdom, the more counterintuitive the better.
Some of the most novel ideas seemed at the time almost like practical jokes. Think how often
your reaction to a novel idea is to laugh. I don't think it's because novel ideas are funny per se,
but because novelty and humor share a certain kind of surprisingness. But while not identical,
the two are close enough that there is a definite correlation between having a sense of humor
and being independent-minded ÿý just as there is between being humorless and being
conventional-minded. [9]
I don't think we can significantly increase our resistance to being told what to think. It seems the
most innate of the three components of independent-mindedness; people who have this quality
as adults usually showed all too visible signs of it as children. But if we can't increase our
resistance to being told what to think, we can at least shore it up, by surrounding ourselves with
other independent-minded people.
The third component of independent-mindedness, curiosity, may be the most interesting. To the
extent that we can give a brief answer to the question of where novel ideas come from, it's
curiosity. That's what people are usually feeling before having them.
In my experience, independent-mindedness and curiosity predict one another perfectly.
Everyone I know who's independent-minded is deeply curious, and everyone I know who's
conventional-minded isn't. Except, curiously, children. All small children are curious. Perhaps
the reason is that even the conventional-minded have to be curious in the beginning, in order to
learn what the conventions are. Whereas the independent-minded are the gluttons of curiosity,
who keep eating even after they're full. [10]
The three components of independent-mindedness work in concert: fastidiousness about truth
and resistance to being told what to think leave space in your brain, and curiosity finds new
ideas to fill it.
Interestingly, the three components can substitute for one another in much the same way
muscles can. If you're sufficiently fastidious about truth, you don't need to be as resistant to
being told what to think, because fastidiousness alone will create sufficient gaps in your
knowledge. And either one can compensate for curiosity, because if you create enough space
in your brain, your discomfort at the resulting vacuum will add force to your curiosity. Or
curiosity can compensate for them: if you're sufficiently curious, you don't need to clear space in
your brain, because the new ideas you discover will push out the conventional ones you
acquired by default.
Because the components of independent-mindedness are so interchangeable, you can have
them to varying degrees and still get the same result. So there is not just a single model of
independent-mindedness. Some independent-minded people are openly subversive, and others
are quietly curious. They all know the secret handshake though.
Is there a way to cultivate curiosity? To start with, you want to avoid situations that suppress it.
How much does the work you're currently doing engage your curiosity? If the answer is "not
much," maybe you should change something.
The most important active step you can take to cultivate your curiosity is probably to seek out
the topics that engage it. Few adults are equally curious about everything, and it doesn't seem
as if you can choose which topics interest you. So it's up to you to find them. Or invent them, if
necessary.
Another way to increase your curiosity is to indulge it, by investigating things you're interested
in. Curiosity is unlike most other appetites in this respect: indulging it tends to increase rather
than to sate it. Questions lead to more questions.
Curiosity seems to be more individual than fastidiousness about truth or resistance to being told
what to think. To the degree people have the latter two, they're usually pretty general, whereas
different people can be curious about very different things. So perhaps curiosity is the compass
here. Perhaps, if your goal is to discover novel ideas, your motto should not be "do what you
love" so much as "do what you're curious about."
Notes:
[1] One convenient consequence of the fact that no one identifies as conventional-minded is that you can say what
you like about conventional-minded people without getting in too much trouble. When I wrote "The Four Quadrants of
Conformism" I expected a firestorm of rage from the aggressively conventional-minded, but in fact it was quite muted.
They sensed that there was something about the essay that they disliked intensely, but they had a hard time finding a
specific passage to pin it on.
[2] When I ask myself what in my life is like high school, the answer is Twitter. It's not just full of conventional-minded
people, as anything its size will inevitably be, but subject to violent storms of conventional-mindedness that remind
me of descriptions of Jupiter. But while it probably is a net loss to spend time there, it has at least made me think
more about the distinction between independent- and conventional-mindedness, which I probably wouldn't have done
otherwise.
[3] The decrease in independent-mindedness in growing startups is still an open problem, but there may be solutions.
Founders can delay the problem by making a conscious effort only to hire independent-minded people. Which of
course also has the ancillary benefit that they have better ideas.
Another possible solution is to create policies that somehow disrupt the force of conformism, much as control rods
slow chain reactions, so that the conventional-minded aren't as dangerous. The physical separation of Lockheed's
Skunk Works may have had this as a side benefit. Recent examples suggest employee forums like Slack may not be
an unmitigated good.
The most radical solution would be to grow revenues without growing the company. You think hiring that junior PR
person will be cheap, compared to a programmer, but what will be the effect on the average level of independentmindedness in your company? (The growth in staff relative to faculty seems to have had a similar effect on
universities.) Perhaps the rule about outsourcing work that's not your "core competency" should be augmented by
one about outsourcing work done by people who'd ruin your culture as employees.
Some investment firms already seem to be able to grow revenues without growing the number of employees.
Automation plus the ever increasing articulation of the "tech stack" suggest this may one day be possible for product
companies.
[4] There are intellectual fashions in every field, but their influence varies. One of the reasons politics, for example,
tends to be boring is that it's so extremely subject to them. The threshold for having opinions about politics is much
lower than the one for having opinions about set theory. So while there are some ideas in politics, in practice they
tend to be swamped by waves of intellectual fashion.
[5] The conventional-minded are often fooled by the strength of their opinions into believing that they're independentminded. But strong convictions are not a sign of independent-mindedness. Rather the opposite.
[6] Fastidiousness about truth doesn't imply that an independent-minded person won't be dishonest, but that he won't
be deluded. It's sort of like the definition of a gentleman as someone who is never unintentionally rude.
[7] You see this especially among political extremists. They think themselves nonconformists, but actually they're
niche conformists. Their opinions may be different from the average person's, but they are often more influenced by
their peers' opinions than the average person's are.
[8] If we broaden the concept of fastidiousness about truth so that it excludes pandering, bogusness, and pomposity
as well as falsehood in the strict sense, our model of independent-mindedness can expand further into the arts.
[9] This correlation is far from perfect, though. Gÿýdel and Dirac don't seem to have been very strong in the humor
department. But someone who is both "neurotypical" and humorless is very likely to be conventional-minded.
[10] Exception: gossip. Almost everyone is curious about gossip.
Thanks to Trevor Blackwell, Paul Buchheit, Patrick Collison, Jessica Livingston, Robert Morris, Harj Taggar, and Peter
Thiel for reading drafts of this.
Early Work - # 192
October 2020
One of the biggest things holding people back from doing great work is the fear of making
something lame. And this fear is not an irrational one. Many great projects go through a stage
early on where they don't seem very impressive, even to their creators. You have to push
through this stage to reach the great work that lies beyond. But many people don't. Most people
don't even reach the stage of making something they're embarrassed by, let alone continue
past it. They're too frightened even to start.
Imagine if we could turn off the fear of making something lame. Imagine how much more we'd
do.
Is there any hope of turning it off? I think so. I think the habits at work here are not very deeply
rooted.
Making new things is itself a new thing for us as a species. It has always happened, but till the
last few centuries it happened so slowly as to be invisible to individual humans. And since we
didn't need customs for dealing with new ideas, we didn't develop any.
We just don't have enough experience with early versions of ambitious projects to know how to
respond to them. We judge them as we would judge more finished work, or less ambitious
projects. We don't realize they're a special case.
Or at least, most of us don't. One reason I'm confident we can do better is that it's already
starting to happen. There are already a few places that are living in the future in this respect.
Silicon Valley is one of them: an unknown person working on a strange-sounding idea won't
automatically be dismissed the way they would back home. In Silicon Valley, people have
learned how dangerous that is.
The right way to deal with new ideas is to treat them as a challenge to your imagination ÿý not just
to have lower standards, but to switch polarity entirely, from listing the reasons an idea won't
work to trying to think of ways it could. That's what I do when I meet people with new ideas. I've
become quite good at it, but I've had a lot of practice. Being a partner at Y Combinator means
being practically immersed in strange-sounding ideas proposed by unknown people. Every six
months you get thousands of new ones thrown at you and have to sort through them, knowing
that in a world with a power-law distribution of outcomes, it will be painfully obvious if you miss
the needle in this haystack. Optimism becomes urgent.
But I'm hopeful that, with time, this kind of optimism can become widespread enough that it
becomes a social custom, not just a trick used by a few specialists. It is after all an extremely
lucrative trick, and those tend to spread quickly.
Of course, inexperience is not the only reason people are too harsh on early versions of
ambitious projects. They also do it to seem clever. And in a field where the new ideas are risky,
like startups, those who dismiss them are in fact more likely to be right. Just not when their
predictions are weighted by outcome.
But there is another more sinister reason people dismiss new ideas. If you try something
ambitious, many of those around you will hope, consciously or unconsciously, that you'll fail.
They worry that if you try something ambitious and succeed, it will put you above them. In some
countries this is not just an individual failing but part of the national culture.
I wouldn't claim that people in Silicon Valley overcome these impulses because they're morally
better. [1] The reason many hope you'll succeed is that they hope to rise with you. For investors
this incentive is particularly explicit. They want you to succeed because they hope you'll make
them rich in the process. But many other people you meet can hope to benefit in some way
from your success. At the very least they'll be able to say, when you're famous, that they've
known you since way back.
But even if Silicon Valley's encouraging attitude is rooted in self-interest, it has over time
actually grown into a sort of benevolence. Encouraging startups has been practiced for so long
that it has become a custom. Now it just seems that that's what one does with startups.
Maybe Silicon Valley is too optimistic. Maybe it's too easily fooled by impostors. Many less
optimistic journalists want to believe that. But the lists of impostors they cite are suspiciously
short, and plagued with asterisks. [2] If you use revenue as the test, Silicon Valley's optimism
seems better tuned than the rest of the world's. And because it works, it will spread.
There's a lot more to new ideas than new startup ideas, of course. The fear of making
something lame holds people back in every field. But Silicon Valley shows how quickly customs
can evolve to support new ideas. And that in turn proves that dismissing new ideas is not so
deeply rooted in human nature that it can't be unlearnt.
___________
Unfortunately, if you want to do new things, you'll face a force more powerful than other people's
skepticism: your own skepticism. You too will judge your early work too harshly. How do you
avoid that?
This is a difficult problem, because you don't want to completely eliminate your horror of making
something lame. That's what steers you toward doing good work. You just want to turn it off
temporarily, the way a painkiller temporarily turns off pain.
People have already discovered several techniques that work. Hardy mentions two in A
Mathematician's Apology: Good work is not done by "humble" men. It is one of the first duties of
a professor, for example, in any subject, to exaggerate a little both the importance of his subject
and his importance in it. If you overestimate the importance of what you're working on, that will
compensate for your mistakenly harsh judgment of your initial results. If you look at something
that's 20% of the way to a goal worth 100 and conclude that it's 10% of the way to a goal worth
200, your estimate of its expected value is correct even though both components are wrong.
It also helps, as Hardy suggests, to be slightly overconfident. I've noticed in many fields that the
most successful people are slightly overconfident. On the face of it this seems implausible.
Surely it would be optimal to have exactly the right estimate of one's abilities. How could it be
an advantage to be mistaken? Because this error compensates for other sources of error in the
opposite direction: being slightly overconfident armors you against both other people's
skepticism and your own.
Ignorance has a similar effect. It's safe to make the mistake of judging early work as finished
work if you're a sufficiently lax judge of finished work. I doubt it's possible to cultivate this kind of
ignorance, but empirically it's a real advantage, especially for the young.
Another way to get through the lame phase of ambitious projects is to surround yourself with
the right people ÿý to create an eddy in the social headwind. But it's not enough to collect people
who are always encouraging. You'd learn to discount that. You need colleagues who can
actually tell an ugly duckling from a baby swan. The people best able to do this are those
working on similar projects of their own, which is why university departments and research labs
work so well. You don't need institutions to collect colleagues. They naturally coalesce, given
the chance. But it's very much worth accelerating this process by seeking out other people
trying to do new things.
Teachers are in effect a special case of colleagues. It's a teacher's job both to see the promise
of early work and to encourage you to continue. But teachers who are good at this are
unfortunately quite rare, so if you have the opportunity to learn from one, take it. [3]
For some it might work to rely on sheer discipline: to tell yourself that you just have to press on
through the initial crap phase and not get discouraged. But like a lot of "just tell yourself" advice,
this is harder than it sounds. And it gets still harder as you get older, because your standards
rise. The old do have one compensating advantage though: they've been through this before.
It can help if you focus less on where you are and more on the rate of change. You won't worry
so much about doing bad work if you can see it improving. Obviously the faster it improves, the
easier this is. So when you start something new, it's good if you can spend a lot of time on it.
That's another advantage of being young: you tend to have bigger blocks of time.
Another common trick is to start by considering new work to be of a different, less exacting
type. To start a painting saying that it's just a sketch, or a new piece of software saying that it's
just a quick hack. Then you judge your initial results by a lower standard. Once the project is
rolling you can sneakily convert it to something more. [4]
This will be easier if you use a medium that lets you work fast and doesn't require too much
commitment up front. It's easier to convince yourself that something is just a sketch when you're
drawing in a notebook than when you're carving stone. Plus you get initial results faster. [5] [6]
It will be easier to try out a risky project if you think of it as a way to learn and not just as a way
to make something. Then even if the project truly is a failure, you'll still have gained by it. If the
problem is sharply enough defined, failure itself is knowledge: if the theorem you're trying to
prove turns out to be false, or you use a structural member of a certain size and it fails under
stress, you've learned something, even if it isn't what you wanted to learn. [7]
One motivation that works particularly well for me is curiosity. I like to try new things just to see
how they'll turn out. We started Y Combinator in this spirit, and it was one of main things that
kept me going while I was working on Bel. Having worked for so long with various dialects of
Lisp, I was very curious to see what its inherent shape was: what you'd end up with if you
followed the axiomatic approach all the way.
But it's a bit strange that you have to play mind games with yourself to avoid being discouraged
by lame-looking early efforts. The thing you're trying to trick yourself into believing is in fact the
truth. A lame-looking early version of an ambitious project truly is more valuable than it seems.
So the ultimate solution may be to teach yourself that.
One way to do it is to study the histories of people who've done great work. What were they
thinking early on? What was the very first thing they did? It can sometimes be hard to get an
accurate answer to this question, because people are often embarrassed by their earliest work
and make little effort to publish it. (They too misjudge it.) But when you can get an accurate
picture of the first steps someone made on the path to some great work, they're often pretty
feeble. [8]
Perhaps if you study enough such cases, you can teach yourself to be a better judge of early
work. Then you'll be immune both to other people's skepticism and your own fear of making
something lame. You'll see early work for what it is.
Curiously enough, the solution to the problem of judging early work too harshly is to realize that
our attitudes toward it are themselves early work. Holding everything to the same standard is a
crude version 1. We're already evolving better customs, and we can already see signs of how
big the payoff will be.
Notes:
[1] This assumption may be too conservative. There is some evidence that historically the Bay Area has attracted a
different sort of person than, say, New York City.
[2] One of their great favorites is Theranos. But the most conspicuous feature of Theranos's cap table is the absence
of Silicon Valley firms. Journalists were fooled by Theranos, but Silicon Valley investors weren't.
[3] I made two mistakes about teachers when I was younger. I cared more about professors' research than their
reputations as teachers, and I was also wrong about what it meant to be a good teacher. I thought it simply meant to
be good at explaining things.
[4] Patrick Collison points out that you can go past treating something as a hack in the sense of a prototype and
onward to the sense of the word that means something closer to a practical joke: I think there may be something
related to being a hack that can be powerful ÿý the idea of making the tenuousness and implausibility a feature. "Yes,
it's a bit ridiculous, right? I'm just trying to see how far such a naive approach can get." YC seemed to me to have
this characteristic. [5] Much of the advantage of switching from physical to digital media is not the software per se but
that it lets you start something new with little upfront commitment.
[6] John Carmack adds: The value of a medium without a vast gulf between the early work and the final work is
exemplified in game mods. The original Quake game was a golden age for mods, because everything was very
flexible, but so crude due to technical limitations, that quick hacks to try out a gameplay idea weren't all that far from
the official game. Many careers were born from that, but as the commercial game quality improved over the years, it
became almost a full time job to make a successful mod that would be appreciated by the community. This was
dramatically reversed with Minecraft and later Roblox, where the entire esthetic of the experience was so explicitly
crude that innovative gameplay concepts became the overriding value. These "crude" game mods by single authors
are now often bigger deals than massive professional teams' work. [7] Lisa Randall suggests that we treat new things
as experiments. That way there's no such thing as failing, since you learn something no matter what. You treat it like
an experiment in the sense that if it really rules something out, you give up and move on, but if there's some way to
vary it to make it work better, go ahead and do that [8] Michael Nielsen points out that the internet has made this
easier, because you can see programmers' first commits, musicians' first videos, and so on.
Thanks to Trevor Blackwell, John Carmack, Patrick Collison, Jessica Livingston, Michael Nielsen, and Lisa Randall
for reading drafts of this.
Modeling a Wealth Tax - # 191
August 2020
Some politicians are proposing to introduce wealth taxes in addition to income and capital gains
taxes. Let's try modeling the effects of various levels of wealth tax to see what they would mean
in practice for a startup founder.
Suppose you start a successful startup in your twenties, and then live for another 60 years. How
much of your stock will a wealth tax consume?
If the wealth tax applies to all your assets, it's easy to calculate its effect. A wealth tax of 1%
means you get to keep 99% of your stock each year. After 60 years the proportion of stock you'll
have left will be .99^60, or .547. So a straight 1% wealth tax means the government will over
the course of your life take 45% of your stock.
(Losing shares does not, obviously, mean becoming net poorer unless the value per share is
increasing by less than the wealth tax rate.)
Here's how much stock the government would take over 60 years at various levels of wealth tax:
wealth taxgovernment takes 0.1%6%0.5%26% 1.0%45% 2.0%70% 3.0%84%
4.0%91%5.0%95% A wealth tax will usually have a threshold at which it starts. How much
difference would a high threshold make? To model that, we need to make some assumptions
about the initial value of your stock and the growth rate.
Suppose your stock is initially worth $2 million, and the company's trajectory is as follows: the
value of your stock grows 3x for 2 years, then 2x for 2 years, then 50% for 2 years, after which
you just get a typical public company growth rate, which we'll call 8%. [1] Suppose the wealth
tax threshold is $50 million. How much stock does the government take now? wealth
taxgovernment takes 0.1%5%0.5%23% 1.0%41% 2.0%65% 3.0%79% 4.0%88%5.0%93% It
may at first seem surprising that such apparently small tax rates produce such dramatic effects.
A 2% wealth tax with a $50 million threshold takes about two thirds of a successful founder's
stock.
The reason wealth taxes have such dramatic effects is that they're applied over and over to the
same money. Income tax happens every year, but only to that year's income. Whereas if you
live for 60 years after acquiring some asset, a wealth tax will tax that same asset 60 times. A
wealth tax compounds.
Notes:
[1] In practice, eventually some of this 8% would come in the form of dividends, which are taxed as income at issue,
so this model actually represents the most optimistic case for the founder.
The Four Quadrants of Conformism - # 190
July 2020
One of the most revealing ways to classify people is by the degree and aggressiveness of their
conformism. Imagine a Cartesian coordinate system whose horizontal axis runs from
conventional-minded on the left to independent-minded on the right, and whose vertical axis
runs from passive at the bottom to aggressive at the top. The resulting four quadrants define
four types of people. Starting in the upper left and going counter-clockwise: aggressively
conventional-minded, passively conventional-minded, passively independent-minded, and
aggressively independent-minded.
I think that you'll find all four types in most societies, and that which quadrant people fall into
depends more on their own personality than the beliefs prevalent in their society. [1]
Young children offer some of the best evidence for both points. Anyone who's been to primary
school has seen the four types, and the fact that school rules are so arbitrary is strong evidence
that which quadrant people fall into depends more on them than the rules.
The kids in the upper left quadrant, the aggressively conventional-minded ones, are the
tattletales. They believe not only that rules must be obeyed, but that those who disobey them
must be punished.
The kids in the lower left quadrant, the passively conventional-minded, are the sheep. They're
careful to obey the rules, but when other kids break them, their impulse is to worry that those
kids will be punished, not to ensure that they will.
The kids in the lower right quadrant, the passively independent-minded, are the dreamy ones.
They don't care much about rules and probably aren't 100% sure what the rules even are.
And the kids in the upper right quadrant, the aggressively independent-minded, are the naughty
ones. When they see a rule, their first impulse is to question it. Merely being told what to do
makes them inclined to do the opposite.
When measuring conformism, of course, you have to say with respect to what, and this
changes as kids get older. For younger kids it's the rules set by adults. But as kids get older, the
source of rules becomes their peers. So a pack of teenagers who all flout school rules in the
same way are not independent-minded; rather the opposite.
In adulthood we can recognize the four types by their distinctive calls, much as you could
recognize four species of birds. The call of the aggressively conventional-minded is "Crush
<outgroup>!" (It's rather alarming to see an exclamation point after a variable, but that's the
whole problem with the aggressively conventional-minded.) The call of the passively
conventional-minded is "What will the neighbors think?" The call of the passively independentminded is "To each his own." And the call of the aggressively independent-minded is "Eppur si
muove."
The four types are not equally common. There are more passive people than aggressive ones,
and far more conventional-minded people than independent-minded ones. So the passively
conventional-minded are the largest group, and the aggressively independent-minded the
smallest.
Since one's quadrant depends more on one's personality than the nature of the rules, most
people would occupy the same quadrant even if they'd grown up in a quite different society.
Princeton professor Robert George recently wrote: I sometimes ask students what their position
on slavery would have been had they been white and living in the South before abolition. Guess
what? They all would have been abolitionists! They all would have bravely spoken out against
slavery, and worked tirelessly against it. He's too polite to say so, but of course they wouldn't.
And indeed, our default assumption should not merely be that his students would, on average,
have behaved the same way people did at the time, but that the ones who are aggressively
conventional-minded today would have been aggressively conventional-minded then too. In
other words, that they'd not only not have fought against slavery, but that they'd have been
among its staunchest defenders.
I'm biased, I admit, but it seems to me that aggressively conventional-minded people are
responsible for a disproportionate amount of the trouble in the world, and that a lot of the
customs we've evolved since the Enlightenment have been designed to protect the rest of us
from them. In particular, the retirement of the concept of heresy and its replacement by the
principle of freely debating all sorts of different ideas, even ones that are currently considered
unacceptable, without any punishment for those who try them out to see if they work. [2]
Why do the independent-minded need to be protected, though? Because they have all the new
ideas. To be a successful scientist, for example, it's not enough just to be right. You have to be
right when everyone else is wrong. Conventional-minded people can't do that. For similar
reasons, all successful startup CEOs are not merely independent-minded, but aggressively so.
So it's no coincidence that societies prosper only to the extent that they have customs for
keeping the conventional-minded at bay. [3]
In the last few years, many of us have noticed that the customs protecting free inquiry have
been weakened. Some say we're overreacting ÿý that they haven't been weakened very much, or
that they've been weakened in the service of a greater good. The latter I'll dispose of
immediately. When the conventional-minded get the upper hand, they always say it's in the
service of a greater good. It just happens to be a different, incompatible greater good each time.
As for the former worry, that the independent-minded are being oversensitive, and that free
inquiry hasn't been shut down that much, you can't judge that unless you are yourself
independent-minded. You can't know how much of the space of ideas is being lopped off unless
you have them, and only the independent-minded have the ones at the edges. Precisely
because of this, they tend to be very sensitive to changes in how freely one can explore ideas.
They're the canaries in this coalmine.
The conventional-minded say, as they always do, that they don't want to shut down the
discussion of all ideas, just the bad ones.
You'd think it would be obvious just from that sentence what a dangerous game they're playing.
But I'll spell it out. There are two reasons why we need to be able to discuss even "bad" ideas.
The first is that any process for deciding which ideas to ban is bound to make mistakes. All the
more so because no one intelligent wants to undertake that kind of work, so it ends up being
done by the stupid. And when a process makes a lot of mistakes, you need to leave a margin
for error. Which in this case means you need to ban fewer ideas than you'd like to. But that's
hard for the aggressively conventional-minded to do, partly because they enjoy seeing people
punished, as they have since they were children, and partly because they compete with one
another. Enforcers of orthodoxy can't allow a borderline idea to exist, because that gives other
enforcers an opportunity to one-up them in the moral purity department, and perhaps even to
turn enforcer upon them. So instead of getting the margin for error we need, we get the
opposite: a race to the bottom in which any idea that seems at all bannable ends up being
banned. [4]
The second reason it's dangerous to ban the discussion of ideas is that ideas are more closely
related than they look. Which means if you restrict the discussion of some topics, it doesn't only
affect those topics. The restrictions propagate back into any topic that yields implications in the
forbidden ones. And that is not an edge case. The best ideas do exactly that: they have
consequences in fields far removed from their origins. Having ideas in a world where some
ideas are banned is like playing soccer on a pitch that has a minefield in one corner. You don't
just play the same game you would have, but on a different shaped pitch. You play a much more
subdued game even on the ground that's safe.
In the past, the way the independent-minded protected themselves was to congregate in a
handful of places ÿý first in courts, and later in universities ÿý where they could to some extent make
their own rules. Places where people work with ideas tend to have customs protecting free
inquiry, for the same reason wafer fabs have powerful air filters, or recording studios good
sound insulation. For the last couple centuries at least, when the aggressively conventionalminded were on the rampage for whatever reason, universities were the safest places to be.
That may not work this time though, due to the unfortunate fact that the latest wave of
intolerance began in universities. It began in the mid 1980s, and by 2000 seemed to have died
down, but it has recently flared up again with the arrival of social media. This seems,
unfortunately, to have been an own goal by Silicon Valley. Though the people who run Silicon
Valley are almost all independent-minded, they've handed the aggressively conventionalminded a tool such as they could only have dreamed of.
On the other hand, perhaps the decline in the spirit of free inquiry within universities is as much
the symptom of the departure of the independent-minded as the cause. People who would have
become professors 50 years ago have other options now. Now they can become quants or start
startups. You have to be independent-minded to succeed at either of those. If these people had
been professors, they'd have put up a stiffer resistance on behalf of academic freedom. So
perhaps the picture of the independent-minded fleeing declining universities is too gloomy.
Perhaps the universities are declining because so many have already left. [5]
Though I've spent a lot of time thinking about this situation, I can't predict how it plays out.
Could some universities reverse the current trend and remain places where the independentminded want to congregate? Or will the independent-minded gradually abandon them? I worry
a lot about what we might lose if that happened.
But I'm hopeful long term. The independent-minded are good at protecting themselves. If
existing institutions are compromised, they'll create new ones. That may require some
imagination. But imagination is, after all, their specialty.
Notes:
[1] I realize of course that if people's personalities vary in any two ways, you can use them as axes and call the
resulting four quadrants personality types. So what I'm really claiming is that the axes are orthogonal and that there's
significant variation in both.
[2] The aggressively conventional-minded aren't responsible for all the trouble in the world. Another big source of
trouble is the sort of charismatic leader who gains power by appealing to them. They become much more dangerous
when such leaders emerge.
[3] I never worried about writing things that offended the conventional-minded when I was running Y Combinator. If
YC were a cookie company, I'd have faced a difficult moral choice. Conventional-minded people eat cookies too. But
they don't start successful startups. So if I deterred them from applying to YC, the only effect was to save us work
reading applications.
[4] There has been progress in one area: the punishments for talking about banned ideas are less severe than in the
past. There's little danger of being killed, at least in richer countries. The aggressively conventional-minded are
mostly satisfied with getting people fired.
[5] Many professors are independent-minded ÿý especially in math, the hard sciences, and engineering, where you
have to be to succeed. But students are more representative of the general population, and thus mostly conventionalminded. So when professors and students are in conflict, it's not just a conflict between generations but also between
different types of people.
Thanks to Sam Altman, Trevor Blackwell, Nicholas Christakis, Patrick Collison, Sam Gichuru, Jessica Livingston,
Patrick McKenzie, Geoff Ralston, and Harj Taggar for reading drafts of this.
Orthodox Privilege - # 189
July 2020
"Few people are capable of expressing with equanimity opinions which differ from the
prejudices of their social environment. Most people are even incapable of forming such
opinions."
ÿý Einstein
There has been a lot of talk about privilege lately. Although the concept is overused, there is
something to it, and in particular to the idea that privilege makes you blind ÿý that you can't see
things that are visible to someone whose life is very different from yours.
But one of the most pervasive examples of this kind of blindness is one that I haven't seen
mentioned explicitly. I'm going to call it orthodox privilege: The more conventional-minded
someone is, the more it seems to them that it's safe for everyone to express their opinions.
It's safe for them to express their opinions, because the source of their opinions is whatever it's
currently acceptable to believe. So it seems to them that it must be safe for everyone. They
literally can't imagine a true statement that would get you in trouble.
And yet at every point in history, there were true things that would get you in trouble to say. Is
ours the first where this isn't so? What an amazing coincidence that would be.
Surely it should at least be the default assumption that our time is not unique, and that there are
true things you can't say now, just as there have always been. You would think. But even in the
face of such overwhelming historical evidence, most people will go with their gut on this one.
In the most extreme cases, people suffering from orthodox privilege will not only deny that
there's anything true that you can't say, but will accuse you of heresy merely for saying there is.
Though if there's more than one heresy current in your time, these accusations will be weirdly
non-deterministic: you must either be an xist or a yist.
Frustrating as it is to deal with these people, it's important to realize that they're in earnest.
They're not pretending they think it's impossible for an idea to be both unorthodox and true. The
world really looks that way to them.
Indeed, this is a uniquely tenacious form of privilege. People can overcome the blindness
induced by most forms of privilege by learning more about whatever they're not. But they can't
overcome orthodox privilege just by learning more. They'd have to become more independentminded. If that happens at all, it doesn't happen on the time scale of one conversation.
It may be possible to convince some people that orthodox privilege must exist even though they
can't sense it, just as one can with, say, dark matter. There may be some who could be
convinced, for example, that it's very unlikely that this is the first point in history at which there's
nothing true you can't say, even if they can't imagine specific examples.
But in general I don't think it will work to say "check your privilege" about this type of privilege,
because those in its demographic don't realize they're in it. It doesn't seem to conventional-
minded people that they're conventional-minded. It just seems to them that they're right. Indeed,
they tend to be particularly sure of it.
Perhaps the solution is to appeal to politeness. If someone says they can hear a high-pitched
noise that you can't, it's only polite to take them at their word, instead of demanding evidence
that's impossible to produce, or simply denying that they hear anything. Imagine how rude that
would seem. Similarly, if someone says they can think of things that are true but that cannot be
said, it's only polite to take them at their word, even if you can't think of any yourself.
Thanks to Sam Altman, Trevor Blackwell, Patrick Collison, Antonio Garcia-Martinez, Jessica
Livingston, Robert Morris, Michael Nielsen, Geoff Ralston, Max Roser, and Harj Taggar for
reading drafts of this.
Coronavirus and Credibility - # 188
April 2020
I recently saw a video of TV journalists and politicians confidently saying that the coronavirus
would be no worse than the flu. What struck me about it was not just how mistaken they
seemed, but how daring. How could they feel safe saying such things?
The answer, I realized, is that they didn't think they could get caught. They didn't realize there
was any danger in making false predictions. These people constantly make false predictions,
and get away with it, because the things they make predictions about either have mushy
enough outcomes that they can bluster their way out of trouble, or happen so far in the future
that few remember what they said.
An epidemic is different. It falsifies your predictions rapidly and unequivocally.
But epidemics are rare enough that these people clearly didn't realize this was even a
possibility. Instead they just continued to use their ordinary m.o., which, as the epidemic has
made clear, is to talk confidently about things they don't understand.
An event like this is thus a uniquely powerful way of taking people's measure. As Warren Buffett
said, "It's only when the tide goes out that you learn who's been swimming naked." And the tide
has just gone out like never before.
Now that we've seen the results, let's remember what we saw, because this is the most
accurate test of credibility we're ever likely to have. I hope.
How to Write Usefully - # 187
February 2020
What should an essay be? Many people would say persuasive. That's what a lot of us were
taught essays should be. But I think we can aim for something more ambitious: that an essay
should be useful.
To start with, that means it should be correct. But it's not enough merely to be correct. It's easy
to make a statement correct by making it vague. That's a common flaw in academic writing, for
example. If you know nothing at all about an issue, you can't go wrong by saying that the issue
is a complex one, that there are many factors to be considered, that it's a mistake to take too
simplistic a view of it, and so on.
Though no doubt correct, such statements tell the reader nothing. Useful writing makes claims
that are as strong as they can be made without becoming false.
For example, it's more useful to say that Pike's Peak is near the middle of Colorado than merely
somewhere in Colorado. But if I say it's in the exact middle of Colorado, I've now gone too far,
because it's a bit east of the middle.
Precision and correctness are like opposing forces. It's easy to satisfy one if you ignore the
other. The converse of vaporous academic writing is the bold, but false, rhetoric of
demagogues. Useful writing is bold, but true.
It's also two other things: it tells people something important, and that at least some of them
didn't already know.
Telling people something they didn't know doesn't always mean surprising them. Sometimes it
means telling them something they knew unconsciously but had never put into words. In fact
those may be the more valuable insights, because they tend to be more fundamental.
Let's put them all together. Useful writing tells people something true and important that they
didn't already know, and tells them as unequivocally as possible.
Notice these are all a matter of degree. For example, you can't expect an idea to be novel to
everyone. Any insight that you have will probably have already been had by at least one of the
world's 7 billion people. But it's sufficient if an idea is novel to a lot of readers.
Ditto for correctness, importance, and strength. In effect the four components are like numbers
you can multiply together to get a score for usefulness. Which I realize is almost awkwardly
reductive, but nonetheless true.
_____
How can you ensure that the things you say are true and novel and important? Believe it or not,
there is a trick for doing this. I learned it from my friend Robert Morris, who has a horror of
saying anything dumb. His trick is not to say anything unless he's sure it's worth hearing. This
makes it hard to get opinions out of him, but when you do, they're usually right.
Translated into essay writing, what this means is that if you write a bad sentence, you don't
publish it. You delete it and try again. Often you abandon whole branches of four or five
paragraphs. Sometimes a whole essay.
You can't ensure that every idea you have is good, but you can ensure that every one you
publish is, by simply not publishing the ones that aren't.
In the sciences, this is called publication bias, and is considered bad. When some hypothesis
you're exploring gets inconclusive results, you're supposed to tell people about that too. But with
essay writing, publication bias is the way to go.
My strategy is loose, then tight. I write the first draft of an essay fast, trying out all kinds of
ideas. Then I spend days rewriting it very carefully.
I've never tried to count how many times I proofread essays, but I'm sure there are sentences
I've read 100 times before publishing them. When I proofread an essay, there are usually
passages that stick out in an annoying way, sometimes because they're clumsily written, and
sometimes because I'm not sure they're true. The annoyance starts out unconscious, but after
the tenth reading or so I'm saying "Ugh, that part" each time I hit it. They become like briars that
catch your sleeve as you walk past. Usually I won't publish an essay till they're all gone ÿý till I can
read through the whole thing without the feeling of anything catching.
I'll sometimes let through a sentence that seems clumsy, if I can't think of a way to rephrase it,
but I will never knowingly let through one that doesn't seem correct. You never have to. If a
sentence doesn't seem right, all you have to do is ask why it doesn't, and you've usually got the
replacement right there in your head.
This is where essayists have an advantage over journalists. You don't have a deadline. You can
work for as long on an essay as you need to get it right. You don't have to publish the essay at
all, if you can't get it right. Mistakes seem to lose courage in the face of an enemy with unlimited
resources. Or that's what it feels like. What's really going on is that you have different
expectations for yourself. You're like a parent saying to a child "we can sit here all night till you
eat your vegetables." Except you're the child too.
I'm not saying no mistake gets through. For example, I added condition (c) in "A Way to Detect
Bias" after readers pointed out that I'd omitted it. But in practice you can catch nearly all of them.
There's a trick for getting importance too. It's like the trick I suggest to young founders for
getting startup ideas: to make something you yourself want. You can use yourself as a proxy for
the reader. The reader is not completely unlike you, so if you write about topics that seem
important to you, they'll probably seem important to a significant number of readers as well.
Importance has two factors. It's the number of people something matters to, times how much it
matters to them. Which means of course that it's not a rectangle, but a sort of ragged comb, like
a Riemann sum.
The way to get novelty is to write about topics you've thought about a lot. Then you can use
yourself as a proxy for the reader in this department too. Anything you notice that surprises you,
who've thought about the topic a lot, will probably also surprise a significant number of readers.
And here, as with correctness and importance, you can use the Morris technique to ensure that
you will. If you don't learn anything from writing an essay, don't publish it.
You need humility to measure novelty, because acknowledging the novelty of an idea means
acknowledging your previous ignorance of it. Confidence and humility are often seen as
opposites, but in this case, as in many others, confidence helps you to be humble. If you know
you're an expert on some topic, you can freely admit when you learn something you didn't
know, because you can be confident that most other people wouldn't know it either.
The fourth component of useful writing, strength, comes from two things: thinking well, and the
skillful use of qualification. These two counterbalance each other, like the accelerator and clutch
in a car with a manual transmission. As you try to refine the expression of an idea, you adjust
the qualification accordingly. Something you're sure of, you can state baldly with no qualification
at all, as I did the four components of useful writing. Whereas points that seem dubious have to
be held at arm's length with perhapses.
As you refine an idea, you're pushing in the direction of less qualification. But you can rarely get
it down to zero. Sometimes you don't even want to, if it's a side point and a fully refined version
would be too long.
Some say that qualifications weaken writing. For example, that you should never begin a
sentence in an essay with "I think," because if you're saying it, then of course you think it. And
it's true that "I think x" is a weaker statement than simply "x." Which is exactly why you need "I
think." You need it to express your degree of certainty.
But qualifications are not scalars. They're not just experimental error. There must be 50 things
they can express: how broadly something applies, how you know it, how happy you are it's so,
even how it could be falsified. I'm not going to try to explore the structure of qualification here.
It's probably more complex than the whole topic of writing usefully. Instead I'll just give you a
practical tip: Don't underestimate qualification. It's an important skill in its own right, not just a
sort of tax you have to pay in order to avoid saying things that are false. So learn and use its full
range. It may not be fully half of having good ideas, but it's part of having them.
There's one other quality I aim for in essays: to say things as simply as possible. But I don't
think this is a component of usefulness. It's more a matter of consideration for the reader. And
it's a practical aid in getting things right; a mistake is more obvious when expressed in simple
language. But I'll admit that the main reason I write simply is not for the reader's sake or
because it helps get things right, but because it bothers me to use more or fancier words than I
need to. It seems inelegant, like a program that's too long.
I realize florid writing works for some people. But unless you're sure you're one of them, the
best advice is to write as simply as you can.
_____
I believe the formula I've given you, importance + novelty + correctness + strength, is the recipe
for a good essay. But I should warn you that it's also a recipe for making people mad.
The root of the problem is novelty. When you tell people something they didn't know, they don't
always thank you for it. Sometimes the reason people don't know something is because they
don't want to know it. Usually because it contradicts some cherished belief. And indeed, if you're
looking for novel ideas, popular but mistaken beliefs are a good place to find them. Every
popular mistaken belief creates a dead zone of ideas around it that are relatively unexplored
because they contradict it.
The strength component just makes things worse. If there's anything that annoys people more
than having their cherished assumptions contradicted, it's having them flatly contradicted.
Plus if you've used the Morris technique, your writing will seem quite confident. Perhaps
offensively confident, to people who disagree with you. The reason you'll seem confident is that
you are confident: you've cheated, by only publishing the things you're sure of. It will seem to
people who try to disagree with you that you never admit you're wrong. In fact you constantly
admit you're wrong. You just do it before publishing instead of after.
And if your writing is as simple as possible, that just makes things worse. Brevity is the diction
of command. If you watch someone delivering unwelcome news from a position of inferiority,
you'll notice they tend to use lots of words, to soften the blow. Whereas to be short with
someone is more or less to be rude to them.
It can sometimes work to deliberately phrase statements more weakly than you mean. To put
"perhaps" in front of something you're actually quite sure of. But you'll notice that when writers
do this, they usually do it with a wink.
I don't like to do this too much. It's cheesy to adopt an ironic tone for a whole essay. I think we
just have to face the fact that elegance and curtness are two names for the same thing.
You might think that if you work sufficiently hard to ensure that an essay is correct, it will be
invulnerable to attack. That's sort of true. It will be invulnerable to valid attacks. But in practice
that's little consolation.
In fact, the strength component of useful writing will make you particularly vulnerable to
misrepresentation. If you've stated an idea as strongly as you could without making it false, all
anyone has to do is to exaggerate slightly what you said, and now it is false.
Much of the time they're not even doing it deliberately. One of the most surprising things you'll
discover, if you start writing essays, is that people who disagree with you rarely disagree with
what you've actually written. Instead they make up something you said and disagree with that.
For what it's worth, the countermove is to ask someone who does this to quote a specific
sentence or passage you wrote that they believe is false, and explain why. I say "for what it's
worth" because they never do. So although it might seem that this could get a broken
discussion back on track, the truth is that it was never on track in the first place.
Should you explicitly forestall likely misinterpretations? Yes, if they're misinterpretations a
reasonably smart and well-intentioned person might make. In fact it's sometimes better to say
something slightly misleading and then add the correction than to try to get an idea right in one
shot. That can be more efficient, and can also model the way such an idea would be discovered.
But I don't think you should explicitly forestall intentional misinterpretations in the body of an
essay. An essay is a place to meet honest readers. You don't want to spoil your house by
putting bars on the windows to protect against dishonest ones. The place to protect against
intentional misinterpretations is in end-notes. But don't think you can predict them all. People
are as ingenious at misrepresenting you when you say something they don't want to hear as
they are at coming up with rationalizations for things they want to do but know they shouldn't. I
suspect it's the same skill.
_____
As with most other things, the way to get better at writing essays is to practice. But how do you
start? Now that we've examined the structure of useful writing, we can rephrase that question
more precisely. Which constraint do you relax initially? The answer is, the first component of
importance: the number of people who care about what you write.
If you narrow the topic sufficiently, you can probably find something you're an expert on. Write
about that to start with. If you only have ten readers who care, that's fine. You're helping them,
and you're writing. Later you can expand the breadth of topics you write about.
The other constraint you can relax is a little surprising: publication. Writing essays doesn't have
to mean publishing them. That may seem strange now that the trend is to publish every random
thought, but it worked for me. I wrote what amounted to essays in notebooks for about 15 years.
I never published any of them and never expected to. I wrote them as a way of figuring things
out. But when the web came along I'd had a lot of practice.
Incidentally, Steve Wozniak did the same thing. In high school he designed computers on paper
for fun. He couldn't build them because he couldn't afford the components. But when Intel
launched 4K DRAMs in 1975, he was ready.
_____
How many essays are there left to write though? The answer to that question is probably the
most exciting thing I've learned about essay writing. Nearly all of them are left to write.
Although the essay is an old form, it hasn't been assiduously cultivated. In the print era,
publication was expensive, and there wasn't enough demand for essays to publish that many.
You could publish essays if you were already well known for writing something else, like novels.
Or you could write book reviews that you took over to express your own ideas. But there was
not really a direct path to becoming an essayist. Which meant few essays got written, and those
that did tended to be about a narrow range of subjects.
Now, thanks to the internet, there's a path. Anyone can publish essays online. You start in
obscurity, perhaps, but at least you can start. You don't need anyone's permission.
It sometimes happens that an area of knowledge sits quietly for years, till some change makes
it explode. Cryptography did this to number theory. The internet is doing it to the essay.
The exciting thing is not that there's a lot left to write, but that there's a lot left to discover.
There's a certain kind of idea that's best discovered by writing essays. If most essays are still
unwritten, most such ideas are still undiscovered.
Notes:
[1] Put railings on the balconies, but don't put bars on the windows.
[2] Even now I sometimes write essays that are not meant for publication. I wrote several to figure out what Y
Combinator should do, and they were really helpful.
Thanks to Trevor Blackwell, Daniel Gackle, Jessica Livingston, and Robert Morris for reading drafts of this.
Being a Noob - # 186
January 2020
When I was young, I thought old people had everything figured out. Now that I'm old, I know this
isn't true.
I constantly feel like a noob. It seems like I'm always talking to some startup working in a new
field I know nothing about, or reading a book about a topic I don't understand well enough, or
visiting some new country where I don't know how things work.
It's not pleasant to feel like a noob. And the word "noob" is certainly not a compliment. And yet
today I realized something encouraging about being a noob: the more of a noob you are locally,
the less of a noob you are globally.
For example, if you stay in your home country, you'll feel less of a noob than if you move to
Farawavia, where everything works differently. And yet you'll know more if you move. So the
feeling of being a noob is inversely correlated with actual ignorance.
But if the feeling of being a noob is good for us, why do we dislike it? What evolutionary
purpose could such an aversion serve?
I think the answer is that there are two sources of feeling like a noob: being stupid, and doing
something novel. Our dislike of feeling like a noob is our brain telling us "Come on, come on,
figure this out." Which was the right thing to be thinking for most of human history. The life of
hunter-gatherers was complex, but it didn't change as much as life does now. They didn't
suddenly have to figure out what to do about cryptocurrency. So it made sense to be biased
toward competence at existing problems over the discovery of new ones. It made sense for
humans to dislike the feeling of being a noob, just as, in a world where food was scarce, it made
sense for them to dislike the feeling of being hungry.
Now that too much food is more of a problem than too little, our dislike of feeling hungry leads
us astray. And I think our dislike of feeling like a noob does too.
Though it feels unpleasant, and people will sometimes ridicule you for it, the more you feel like
a noob, the better.
Haters - # 185
January 2020
(I originally intended this for startup founders, who are often surprised by the attention they get
as their companies grow, but it applies equally to anyone who becomes famous.)
If you become sufficiently famous, you'll acquire some fans who like you too much. These
people are sometimes called "fanboys," and though I dislike that term, I'm going to have to use
it here. We need some word for them, because this is a distinct phenomenon from someone
simply liking your work.
A fanboy is obsessive and uncritical. Liking you becomes part of their identity, and they create
an image of you in their own head that is much better than reality. Everything you do is good,
because you do it. If you do something bad, they find a way to see it as good. And their love for
you is not, usually, a quiet, private one. They want everyone to know how great you are.
Well, you may be thinking, I could do without this kind of obsessive fan, but I know there are all
kinds of people in the world, and if this is the worst consequence of fame, that's not so bad.
Unfortunately this is not the worst consequence of fame. As well as fanboys, you'll have haters.
A hater is obsessive and uncritical. Disliking you becomes part of their identity, and they create
an image of you in their own head that is much worse than reality. Everything you do is bad,
because you do it. If you do something good, they find a way to see it as bad. And their dislike
for you is not, usually, a quiet, private one. They want everyone to know how awful you are.
If you're thinking of checking, I'll save you the trouble. The second and fifth paragraphs are
identical except for "good" being switched to "bad" and so on.
I spent years puzzling about haters. What are they, and where do they come from? Then one
day it dawned on me. Haters are just fanboys with the sign switched.
Note that by haters, I don't simply mean trolls. I'm not talking about people who say bad things
about you and then move on. I'm talking about the much smaller group of people for whom this
becomes a kind of obsession and who do it repeatedly over a long period.
Like fans, haters seem to be an automatic consequence of fame. Anyone sufficiently famous
will have them. And like fans, haters are energized by the fame of whoever they hate. They hear
a song by some pop singer. They don't like it much. If the singer were an obscure one, they'd
just forget about it. But instead they keep hearing her name, and this seems to drive some
people crazy. Everyone's always going on about this singer, but she's no good! She's a fraud!
That word "fraud" is an important one. It's the spectral signature of a hater to regard the object
of their hatred as a fraud. They can't deny their fame. Indeed, their fame is if anything
exaggerated in the hater's mind. They notice every mention of the singer's name, because
every mention makes them angrier. In their own minds they exaggerate both the singer's fame
and her lack of talent, and the only way to reconcile those two ideas is to conclude that she has
tricked everyone.
What sort of people become haters? Can anyone become one? I'm not sure about this, but I've
noticed some patterns. Haters are generally losers in a very specific sense: although they are
occasionally talented, they have never achieved much. And indeed, anyone successful enough
to have achieved significant fame would be unlikely to regard another famous person as a fraud
on that account, because anyone famous knows how random fame is.
But haters are not always complete losers. They are not always the proverbial guy living in his
mom's basement. Many are, but some have some amount of talent. In fact I suspect that a
sense of frustrated talent is what drives some people to become haters. They're not just saying
"It's unfair that so-and-so is famous," but "It's unfair that so-and-so is famous, and not me."
Could a hater be cured if they achieved something impressive? My guess is that's a moot point,
because they never will. I've been able to observe for long enough that I'm fairly confident the
pattern works both ways: not only do people who do great work never become haters, haters
never do great work. Although I dislike the word "fanboy," it's evocative of something important
about both haters and fanboys. It implies that the fanboy is so slavishly predictable in his
admiration that he's diminished as a result, that he's less than a man.
Haters seem even more diminished. I can imagine being a fanboy. I can think of people whose
work I admire so much that I could abase myself before them out of sheer gratitude. If P. G.
Wodehouse were still alive, I could see myself being a Wodehouse fanboy. But I could not
imagine being a hater.
Knowing that haters are just fanboys with the sign bit flipped makes it much easier to deal with
them. We don't need a separate theory of haters. We can just use existing techniques for
dealing with obsessive fans.
The most important of which is simply not to think much about them. If you're like most people
who become famous enough to acquire haters, your initial reaction will be one of mystification.
Why does this guy seem to have it in for me? Where does his obsessive energy come from,
and what makes him so appallingly nasty? What did I do to set him off? Is it something I can fix?
The mistake here is to think of the hater as someone you have a dispute with. When you have a
dispute with someone, it's usually a good idea to try to understand why they're upset and then
fix things if you can. Disputes are distracting. But it's a false analogy to think of a hater as
someone you have a dispute with. It's an understandable mistake, if you've never encountered
haters before. But when you realize that you're dealing with a hater, and what a hater is, it's
clear that it's a waste of time even to think about them. If you have obsessive fans, do you
spend any time wondering what makes them love you so much? No, you just think "some
people are kind of crazy," and that's the end of it.
Since haters are equivalent to fanboys, that's the way to deal with them too. There may have
been something that set them off. But it's not something that would have set off a normal
person, so there's no reason to spend any time thinking about it. It's not you, it's them.
Notes:
[1] There are of course some people who are genuine frauds. How can you distinguish between x calling y a fraud
because x is a hater, and because y is a fraud? Look at neutral opinion. Actual frauds are usually pretty conspicuous.
Thoughtful people are rarely taken in by them. So if there are some thoughtful people who like y, you can usually
assume y is not a fraud.
[2] I would make an exception for teenagers, who sometimes act in such extreme ways that they are literally not
themselves. I can imagine a teenage kid being a hater and then growing out of it. But not anyone over 25.
[3] I have a much worse memory for misdeeds than my wife Jessica, who is a connoisseur of character, but I don't
wish it were better. Most disputes are a waste of time even if you're in the right, and it's easy to bury the hatchet with
someone if you can't remember why you were mad at them.
[4] A competent hater will not merely attack you individually but will try to get mobs after you. In some cases you may
want to refute whatever bogus claim they made in order to do so. But err on the side of not, because ultimately it
probably won't matter.
Thanks to Austen Allred, Trevor Blackwell, Patrick Collison, Christine Ford, Daniel Gackle, Jessica Livingston, Robert
Morris, Elon Musk, Harj Taggar, and Peter Thiel for reading drafts of this.
The Two Kinds of Moderate - # 184
December 2019
There are two distinct ways to be politically moderate: on purpose and by accident. Intentional
moderates are trimmers, deliberately choosing a position mid-way between the extremes of
right and left. Accidental moderates end up in the middle, on average, because they make up
their own minds about each question, and the far right and far left are roughly equally wrong.
You can distinguish intentional from accidental moderates by the distribution of their opinions. If
the far left opinion on some matter is 0 and the far right opinion 100, an intentional moderate's
opinion on every question will be near 50. Whereas an accidental moderate's opinions will be
scattered over a broad range, but will, like those of the intentional moderate, average to about
50.
Intentional moderates are similar to those on the far left and the far right in that their opinions
are, in a sense, not their own. The defining quality of an ideologue, whether on the left or the
right, is to acquire one's opinions in bulk. You don't get to pick and choose. Your opinions about
taxation can be predicted from your opinions about sex. And although intentional moderates
might seem to be the opposite of ideologues, their beliefs (though in their case the word
"positions" might be more accurate) are also acquired in bulk. If the median opinion shifts to the
right or left, the intentional moderate must shift with it. Otherwise they stop being moderate.
Accidental moderates, on the other hand, not only choose their own answers, but choose their
own questions. They may not care at all about questions that the left and right both think are
terribly important. So you can only even measure the politics of an accidental moderate from
the intersection of the questions they care about and those the left and right care about, and
this can sometimes be vanishingly small.
It is not merely a manipulative rhetorical trick to say "if you're not with us, you're against us," but
often simply false.
Moderates are sometimes derided as cowards, particularly by the extreme left. But while it may
be accurate to call intentional moderates cowards, openly being an accidental moderate
requires the most courage of all, because you get attacked from both right and left, and you
don't have the comfort of being an orthodox member of a large group to sustain you.
Nearly all the most impressive people I know are accidental moderates. If I knew a lot of
professional athletes, or people in the entertainment business, that might be different. Being on
the far left or far right doesn't affect how fast you run or how well you sing. But someone who
works with ideas has to be independent-minded to do it well.
Or more precisely, you have to be independent-minded about the ideas you work with. You
could be mindlessly doctrinaire in your politics and still be a good mathematician. In the 20th
century, a lot of very smart people were Marxists ÿý just no one who was smart about the
subjects Marxism involves. But if the ideas you use in your work intersect with the politics of
your time, you have two choices: be an accidental moderate, or be mediocre.
Notes:
[1] It's possible in theory for one side to be entirely right and the other to be entirely wrong. Indeed, ideologues must
always believe this is the case. But historically it rarely has been.
[2] For some reason the far right tend to ignore moderates rather than despise them as backsliders. I'm not sure why.
Perhaps it means that the far right is less ideological than the far left. Or perhaps that they are more confident, or
more resigned, or simply more disorganized. I just don't know.
[3] Having heretical opinions doesn't mean you have to express them openly. It may be easier to have them if you
don't.
Thanks to Austen Allred, Trevor Blackwell, Patrick Collison, Jessica Livingston, Amjad Masad, Ryan Petersen, and
Harj Taggar for reading drafts of this.
Fashionable Problems - # 183
December 2019
I've seen the same pattern in many different fields: even though lots of people have worked
hard in the field, only a small fraction of the space of possibilities has been explored, because
they've all worked on similar things.
Even the smartest, most imaginative people are surprisingly conservative when deciding what
to work on. People who would never dream of being fashionable in any other way get sucked
into working on fashionable problems.
If you want to try working on unfashionable problems, one of the best places to look is in fields
that people think have already been fully explored: essays, Lisp, venture funding ÿý you may
notice a pattern here. If you can find a new approach into a big but apparently played out field,
the value of whatever you discover will be multiplied by its enormous surface area.
The best protection against getting drawn into working on the same things as everyone else
may be to genuinely love what you're doing. Then you'll continue to work on it even if you make
the same mistake as other people and think that it's too marginal to matter.
Having Kids - # 182
December 2019
Before I had kids, I was afraid of having kids. Up to that point I felt about kids the way the young
Augustine felt about living virtuously. I'd have been sad to think I'd never have children. But did I
want them now? No.
If I had kids, I'd become a parent, and parents, as I'd known since I was a kid, were uncool.
They were dull and responsible and had no fun. And while it's not surprising that kids would
believe that, to be honest I hadn't seen much as an adult to change my mind. Whenever I'd
noticed parents with kids, the kids seemed to be terrors, and the parents pathetic harried
creatures, even when they prevailed.
When people had babies, I congratulated them enthusiastically, because that seemed to be
what one did. But I didn't feel it at all. "Better you than me," I was thinking.
Now when people have babies I congratulate them enthusiastically and I mean it. Especially the
first one. I feel like they just got the best gift in the world.
What changed, of course, is that I had kids. Something I dreaded turned out to be wonderful.
Partly, and I won't deny it, this is because of serious chemical changes that happened almost
instantly when our first child was born. It was like someone flipped a switch. I suddenly felt
protective not just toward our child, but toward all children. As I was driving my wife and new
son home from the hospital, I approached a crosswalk full of pedestrians, and I found myself
thinking "I have to be really careful of all these people. Every one of them is someone's child!"
So to some extent you can't trust me when I say having kids is great. To some extent I'm like a
religious cultist telling you that you'll be happy if you join the cult too ÿý but only because joining
the cult will alter your mind in a way that will make you happy to be a cult member.
But not entirely. There were some things about having kids that I clearly got wrong before I had
them.
For example, there was a huge amount of selection bias in my observations of parents and
children. Some parents may have noticed that I wrote "Whenever I'd noticed parents with kids."
Of course the times I noticed kids were when things were going wrong. I only noticed them
when they made noise. And where was I when I noticed them? Ordinarily I never went to places
with kids, so the only times I encountered them were in shared bottlenecks like airplanes.
Which is not exactly a representative sample. Flying with a toddler is something very few
parents enjoy.
What I didn't notice, because they tend to be much quieter, were all the great moments parents
had with kids. People don't talk about these much ÿý the magic is hard to put into words, and all
other parents know about them anyway ÿý but one of the great things about having kids is that
there are so many times when you feel there is nowhere else you'd rather be, and nothing else
you'd rather be doing. You don't have to be doing anything special. You could just be going
somewhere together, or putting them to bed, or pushing them on the swings at the park. But
you wouldn't trade these moments for anything. One doesn't tend to associate kids with peace,
but that's what you feel. You don't need to look any further than where you are right now.
Before I had kids, I had moments of this kind of peace, but they were rarer. With kids it can
happen several times a day.
My other source of data about kids was my own childhood, and that was similarly misleading. I
was pretty bad, and was always in trouble for something or other. So it seemed to me that
parenthood was essentially law enforcement. I didn't realize there were good times too.
I remember my mother telling me once when I was about 30 that she'd really enjoyed having
me and my sister. My god, I thought, this woman is a saint. She not only endured all the pain we
subjected her to, but actually enjoyed it? Now I realize she was simply telling the truth.
She said that one reason she liked having us was that we'd been interesting to talk to. That took
me by surprise when I had kids. You don't just love them. They become your friends too. They're
really interesting. And while I admit small children are disastrously fond of repetition (anything
worth doing once is worth doing fifty times) it's often genuinely fun to play with them. That
surprised me too. Playing with a 2 year old was fun when I was 2 and definitely not fun when I
was 6. Why would it become fun again later? But it does.
There are of course times that are pure drudgery. Or worse still, terror. Having kids is one of
those intense types of experience that are hard to imagine unless you've had them. But it is not,
as I implicitly believed before having kids, simply your DNA heading for the lifeboats.
Some of my worries about having kids were right, though. They definitely make you less
productive. I know having kids makes some people get their act together, but if your act was
already together, you're going to have less time to do it in. In particular, you're going to have to
work to a schedule. Kids have schedules. I'm not sure if it's because that's how kids are, or
because it's the only way to integrate their lives with adults', but once you have kids, you tend to
have to work on their schedule.
You will have chunks of time to work. But you can't let work spill promiscuously through your
whole life, like I used to before I had kids. You're going to have to work at the same time every
day, whether inspiration is flowing or not, and there are going to be times when you have to
stop, even if it is.
I've been able to adapt to working this way. Work, like love, finds a way. If there are only certain
times it can happen, it happens at those times. So while I don't get as much done as before I
had kids, I get enough done.
I hate to say this, because being ambitious has always been a part of my identity, but having
kids may make one less ambitious. It hurts to see that sentence written down. I squirm to avoid
it. But if there weren't something real there, why would I squirm? The fact is, once you have
kids, you're probably going to care more about them than you do about yourself. And attention
is a zero-sum game. Only one idea at a time can be the top idea in your mind. Once you have
kids, it will often be your kids, and that means it will less often be some project you're working
on.
I have some hacks for sailing close to this wind. For example, when I write essays, I think about
what I'd want my kids to know. That drives me to get things right. And when I was writing Bel, I
told my kids that once I finished it I'd take them to Africa. When you say that sort of thing to a
little kid, they treat it as a promise. Which meant I had to finish or I'd be taking away their trip to
Africa. Maybe if I'm really lucky such tricks could put me net ahead. But the wind is there, no
question.
On the other hand, what kind of wimpy ambition do you have if it won't survive having kids? Do
you have so little to spare?
And while having kids may be warping my present judgement, it hasn't overwritten my memory.
I remember perfectly well what life was like before. Well enough to miss some things a lot, like
the ability to take off for some other country at a moment's notice. That was so great. Why did I
never do that?
See what I did there? The fact is, most of the freedom I had before kids, I never used. I paid for
it in loneliness, but I never used it.
I had plenty of happy times before I had kids. But if I count up happy moments, not just potential
happiness but actual happy moments, there are more after kids than before. Now I practically
have it on tap, almost any bedtime.
People's experiences as parents vary a lot, and I know I've been lucky. But I think the worries I
had before having kids must be pretty common, and judging by other parents' faces when they
see their kids, so must the happiness that kids bring.
Notes:
[1] Adults are sophisticated enough to see 2 year olds for the fascinatingly complex characters they are, whereas to
most 6 year olds, 2 year olds are just defective 6 year olds.
Thanks to Trevor Blackwell, Jessica Livingston, and Robert Morris for reading drafts of this.
The Lesson to Unlearn - # 181
December 2019
The most damaging thing you learned in school wasn't something you learned in any specific
class. It was learning to get good grades.
When I was in college, a particularly earnest philosophy grad student once told me that he
never cared what grade he got in a class, only what he learned in it. This stuck in my mind
because it was the only time I ever heard anyone say such a thing.
For me, as for most students, the measurement of what I was learning completely dominated
actual learning in college. I was fairly earnest; I was genuinely interested in most of the classes
I took, and I worked hard. And yet I worked by far the hardest when I was studying for a test.
In theory, tests are merely what their name implies: tests of what you've learned in the class. In
theory you shouldn't have to prepare for a test in a class any more than you have to prepare for
a blood test. In theory you learn from taking the class, from going to the lectures and doing the
reading and/or assignments, and the test that comes afterward merely measures how well you
learned.
In practice, as almost everyone reading this will know, things are so different that hearing this
explanation of how classes and tests are meant to work is like hearing the etymology of a word
whose meaning has changed completely. In practice, the phrase "studying for a test" was
almost redundant, because that was when one really studied. The difference between diligent
and slack students was that the former studied hard for tests and the latter didn't. No one was
pulling all-nighters two weeks into the semester.
Even though I was a diligent student, almost all the work I did in school was aimed at getting a
good grade on something.
To many people, it would seem strange that the preceding sentence has a "though" in it. Aren't I
merely stating a tautology? Isn't that what a diligent student is, a straight-A student? That's how
deeply the conflation of learning with grades has infused our culture.
Is it so bad if learning is conflated with grades? Yes, it is bad. And it wasn't till decades after
college, when I was running Y Combinator, that I realized how bad it is.
I knew of course when I was a student that studying for a test is far from identical with actual
learning. At the very least, you don't retain knowledge you cram into your head the night before
an exam. But the problem is worse than that. The real problem is that most tests don't come
close to measuring what they're supposed to.
If tests truly were tests of learning, things wouldn't be so bad. Getting good grades and learning
would converge, just a little late. The problem is that nearly all tests given to students are
terribly hackable. Most people who've gotten good grades know this, and know it so well they've
ceased even to question it. You'll see when you realize how naive it sounds to act otherwise.
Suppose you're taking a class on medieval history and the final exam is coming up. The final
exam is supposed to be a test of your knowledge of medieval history, right? So if you have a
couple days between now and the exam, surely the best way to spend the time, if you want to
do well on the exam, is to read the best books you can find about medieval history. Then you'll
know a lot about it, and do well on the exam.
No, no, no, experienced students are saying to themselves. If you merely read good books on
medieval history, most of the stuff you learned wouldn't be on the test. It's not good books you
want to read, but the lecture notes and assigned reading in this class. And even most of that
you can ignore, because you only have to worry about the sort of thing that could turn up as a
test question. You're looking for sharply-defined chunks of information. If one of the assigned
readings has an interesting digression on some subtle point, you can safely ignore that,
because it's not the sort of thing that could be turned into a test question. But if the professor
tells you that there were three underlying causes of the Schism of 1378, or three main
consequences of the Black Death, you'd better know them. And whether they were in fact the
causes or consequences is beside the point. For the purposes of this class they are.
At a university there are often copies of old exams floating around, and these narrow still further
what you have to learn. As well as learning what kind of questions this professor asks, you'll
often get actual exam questions. Many professors re-use them. After teaching a class for 10
years, it would be hard not to, at least inadvertently.
In some classes, your professor will have had some sort of political axe to grind, and if so you'll
have to grind it too. The need for this varies. In classes in math or the hard sciences or
engineering it's rarely necessary, but at the other end of the spectrum there are classes where
you couldn't get a good grade without it.
Getting a good grade in a class on x is so different from learning a lot about x that you have to
choose one or the other, and you can't blame students if they choose grades. Everyone judges
them by their grades ÿý graduate programs, employers, scholarships, even their own parents.
I liked learning, and I really enjoyed some of the papers and programs I wrote in college. But
did I ever, after turning in a paper in some class, sit down and write another just for fun? Of
course not. I had things due in other classes. If it ever came to a choice of learning or grades, I
chose grades. I hadn't come to college to do badly.
Anyone who cares about getting good grades has to play this game, or they'll be surpassed by
those who do. And at elite universities, that means nearly everyone, since someone who didn't
care about getting good grades probably wouldn't be there in the first place. The result is that
students compete to maximize the difference between learning and getting good grades.
Why are tests so bad? More precisely, why are they so hackable? Any experienced
programmer could answer that. How hackable is software whose author hasn't paid any
attention to preventing it from being hacked? Usually it's as porous as a colander.
Hackable is the default for any test imposed by an authority. The reason the tests you're given
are so consistently bad ÿý so consistently far from measuring what they're supposed to measure ÿý
is simply that the people creating them haven't made much effort to prevent them from being
hacked.
But you can't blame teachers if their tests are hackable. Their job is to teach, not to create
unhackable tests. The real problem is grades, or more precisely, that grades have been
overloaded. If grades were merely a way for teachers to tell students what they were doing right
and wrong, like a coach giving advice to an athlete, students wouldn't be tempted to hack tests.
But unfortunately after a certain age grades become more than advice. After a certain age,
whenever you're being taught, you're usually also being judged.
I've used college tests as an example, but those are actually the least hackable. All the tests
most students take their whole lives are at least as bad, including, most spectacularly of all, the
test that gets them into college. If getting into college were merely a matter of having the quality
of one's mind measured by admissions officers the way scientists measure the mass of an
object, we could tell teenage kids "learn a lot" and leave it at that. You can tell how bad college
admissions are, as a test, from how unlike high school that sounds. In practice, the freakishly
specific nature of the stuff ambitious kids have to do in high school is directly proportionate to
the hackability of college admissions. The classes you don't care about that are mostly
memorization, the random "extracurricular activities" you have to participate in to show you're
"well-rounded," the standardized tests as artificial as chess, the "essay" you have to write that's
presumably meant to hit some very specific target, but you're not told what.
As well as being bad in what it does to kids, this test is also bad in the sense of being very
hackable. So hackable that whole industries have grown up to hack it. This is the explicit
purpose of test-prep companies and admissions counsellors, but it's also a significant part of
the function of private schools.
Why is this particular test so hackable? I think because of what it's measuring. Although the
popular story is that the way to get into a good college is to be really smart, admissions officers
at elite colleges neither are, nor claim to be, looking only for that. What are they looking for?
They're looking for people who are not simply smart, but admirable in some more general
sense. And how is this more general admirableness measured? The admissions officers feel it.
In other words, they accept who they like.
So what college admissions is a test of is whether you suit the taste of some group of people.
Well, of course a test like that is going to be hackable. And because it's both very hackable and
there's (thought to be) a lot at stake, it's hacked like nothing else. That's why it distorts your life
so much for so long.
It's no wonder high school students often feel alienated. The shape of their lives is completely
artificial.
But wasting your time is not the worst thing the educational system does to you. The worst thing
it does is to train you that the way to win is by hacking bad tests. This is a much subtler problem
that I didn't recognize until I saw it happening to other people.
When I started advising startup founders at Y Combinator, especially young ones, I was
puzzled by the way they always seemed to make things overcomplicated. How, they would ask,
do you raise money? What's the trick for making venture capitalists want to invest in you? The
best way to make VCs want to invest in you, I would explain, is to actually be a good
investment. Even if you could trick VCs into investing in a bad startup, you'd be tricking
yourselves too. You're investing time in the same company you're asking them to invest money
in. If it's not a good investment, why are you even doing it?
Oh, they'd say, and then after a pause to digest this revelation, they'd ask: What makes a
startup a good investment?
So I would explain that what makes a startup promising, not just in the eyes of investors but in
fact, is growth. Ideally in revenue, but failing that in usage. What they needed to do was get lots
of users.
How does one get lots of users? They had all kinds of ideas about that. They needed to do a
big launch that would get them "exposure." They needed influential people to talk about them.
They even knew they needed to launch on a tuesday, because that's when one gets the most
attention.
No, I would explain, that is not how to get lots of users. The way you get lots of users is to make
the product really great. Then people will not only use it but recommend it to their friends, so
your growth will be exponential once you get it started.
At this point I've told the founders something you'd think would be completely obvious: that they
should make a good company by making a good product. And yet their reaction would be
something like the reaction many physicists must have had when they first heard about the
theory of relativity: a mixture of astonishment at its apparent genius, combined with a suspicion
that anything so weird couldn't possibly be right. Ok, they would say, dutifully. And could you
introduce us to such-and-such influential person? And remember, we want to launch on
Tuesday.
It would sometimes take founders years to grasp these simple lessons. And not because they
were lazy or stupid. They just seemed blind to what was right in front of them.
Why, I would ask myself, do they always make things so complicated? And then one day I
realized this was not a rhetorical question.
Why did founders tie themselves in knots doing the wrong things when the answer was right in
front of them? Because that was what they'd been trained to do. Their education had taught
them that the way to win was to hack the test. And without even telling them they were being
trained to do this. The younger ones, the recent graduates, had never faced a non-artificial test.
They thought this was just how the world worked: that the first thing you did, when facing any
kind of challenge, was to figure out what the trick was for hacking the test. That's why the
conversation would always start with how to raise money, because that read as the test. It came
at the end of YC. It had numbers attached to it, and higher numbers seemed to be better. It
must be the test.
There are certainly big chunks of the world where the way to win is to hack the test. This
phenomenon isn't limited to schools. And some people, either due to ideology or ignorance,
claim that this is true of startups too. But it isn't. In fact, one of the most striking things about
startups is the degree to which you win by simply doing good work. There are edge cases, as
there are in anything, but in general you win by getting users, and what users care about is
whether the product does what they want.
Why did it take me so long to understand why founders made startups overcomplicated?
Because I hadn't realized explicitly that schools train us to win by hacking bad tests. And not
just them, but me! I'd been trained to hack bad tests too, and hadn't realized it till decades later.
I had lived as if I realized it, but without knowing why. For example, I had avoided working for big
companies. But if you'd asked why, I'd have said it was because they were bogus, or
bureaucratic. Or just yuck. I never understood how much of my dislike of big companies was
due to the fact that you win by hacking bad tests.
Similarly, the fact that the tests were unhackable was a lot of what attracted me to startups. But
again, I hadn't realized that explicitly.
I had in effect achieved by successive approximations something that may have a closed-form
solution. I had gradually undone my training in hacking bad tests without knowing I was doing it.
Could someone coming out of school banish this demon just by knowing its name, and saying
begone? It seems worth trying.
Merely talking explicitly about this phenomenon is likely to make things better, because much of
its power comes from the fact that we take it for granted. After you've noticed it, it seems the
elephant in the room, but it's a pretty well camouflaged elephant. The phenomenon is so old,
and so pervasive. And it's simply the result of neglect. No one meant things to be this way. This
is just what happens when you combine learning with grades, competition, and the naive
assumption of unhackability.
It was mind-blowing to realize that two of the things I'd puzzled about the most ÿý the bogusness
of high school, and the difficulty of getting founders to see the obvious ÿý both had the same
cause. It's rare for such a big block to slide into place so late.
Usually when that happens it has implications in a lot of different areas, and this case seems no
exception. For example, it suggests both that education could be done better, and how you
might fix it. But it also suggests a potential answer to the question all big companies seem to
have: how can we be more like a startup? I'm not going to chase down all the implications now.
What I want to focus on here is what it means for individuals.
To start with, it means that most ambitious kids graduating from college have something they
may want to unlearn. But it also changes how you look at the world. Instead of looking at all the
different kinds of work people do and thinking of them vaguely as more or less appealing, you
can now ask a very specific question that will sort them in an interesting way: to what extent do
you win at this kind of work by hacking bad tests?
It would help if there was a way to recognize bad tests quickly. Is there a pattern here? It turns
out there is.
Tests can be divided into two kinds: those that are imposed by authorities, and those that aren't.
Tests that aren't imposed by authorities are inherently unhackable, in the sense that no one is
claiming they're tests of anything more than they actually test. A football match, for example, is
simply a test of who wins, not which team is better. You can tell that from the fact that
commentators sometimes say afterward that the better team won. Whereas tests imposed by
authorities are usually proxies for something else. A test in a class is supposed to measure not
just how well you did on that particular test, but how much you learned in the class. While tests
that aren't imposed by authorities are inherently unhackable, those imposed by authorities have
to be made unhackable. Usually they aren't. So as a first approximation, bad tests are roughly
equivalent to tests imposed by authorities.
You might actually like to win by hacking bad tests. Presumably some people do. But I bet most
people who find themselves doing this kind of work don't like it. They just take it for granted that
this is how the world works, unless you want to drop out and be some kind of hippie artisan.
I suspect many people implicitly assume that working in a field with bad tests is the price of
making lots of money. But that, I can tell you, is false. It used to be true. In the mid-twentieth
century, when the economy was composed of oligopolies, the only way to the top was by
playing their game. But it's not true now. There are now ways to get rich by doing good work,
and that's part of the reason people are so much more excited about getting rich than they used
to be. When I was a kid, you could either become an engineer and make cool things, or make
lots of money by becoming an "executive." Now you can make lots of money by making cool
things.
Hacking bad tests is becoming less important as the link between work and authority erodes.
The erosion of that link is one of the most important trends happening now, and we see its
effects in almost every kind of work people do. Startups are one of the most visible examples,
but we see much the same thing in writing. Writers no longer have to submit to publishers and
editors to reach readers; now they can go direct.
The more I think about this question, the more optimistic I get. This seems one of those
situations where we don't realize how much something was holding us back until it's eliminated.
And I can foresee the whole bogus edifice crumbling. Imagine what happens as more and more
people start to ask themselves if they want to win by hacking bad tests, and decide that they
don't. The kinds of work where you win by hacking bad tests will be starved of talent, and the
kinds where you win by doing good work will see an influx of the most ambitious people. And as
hacking bad tests shrinks in importance, education will evolve to stop training us to do it.
Imagine what the world could look like if that happened.
This is not just a lesson for individuals to unlearn, but one for society to unlearn, and we'll be
amazed at the energy that's liberated when we do.
Notes:
[1] If using tests only to measure learning sounds impossibly utopian, that is already the way things work at Lambda
School. Lambda School doesn't have grades. You either graduate or you don't. The only purpose of tests is to decide
at each stage of the curriculum whether you can continue to the next. So in effect the whole school is pass/fail.
[2] If the final exam consisted of a long conversation with the professor, you could prepare for it by reading good
books on medieval history. A lot of the hackability of tests in schools is due to the fact that the same test has to be
given to large numbers of students.
[3] Learning is the naive algorithm for getting good grades.
[4] Hacking has multiple senses. There's a narrow sense in which it means to compromise something. That's the
sense in which one hacks a bad test. But there's another, more general sense, meaning to find a surprising solution
to a problem, often by thinking differently about it. Hacking in this sense is a wonderful thing. And indeed, some of the
hacks people use on bad tests are impressively ingenious; the problem is not so much the hacking as that, because
the tests are hackable, they don't test what they're meant to.
[5] The people who pick startups at Y Combinator are similar to admissions officers, except that instead of being
arbitrary, their acceptance criteria are trained by a very tight feedback loop. If you accept a bad startup or reject a
good one, you will usually know it within a year or two at the latest, and often within a month.
[6] I'm sure admissions officers are tired of reading applications from kids who seem to have no personality beyond
being willing to seem however they're supposed to seem to get accepted. What they don't realize is that they are, in a
sense, looking in a mirror. The lack of authenticity in the applicants is a reflection of the arbitrariness of the
application process. A dictator might just as well complain about the lack of authenticity in the people around him.
[7] By good work, I don't mean morally good, but good in the sense in which a good craftsman does good work.
[8] There are borderline cases where it's hard to say which category a test falls in. For example, is raising venture
capital like college admissions, or is it like selling to a customer?
[9] Note that a good test is merely one that's unhackable. Good here doesn't mean morally good, but good in the
sense of working well. The difference between fields with bad tests and good ones is not that the former are bad and
the latter are good, but that the former are bogus and the latter aren't. But those two measures are not unrelated. As
Tara Ploughman said, the path from good to evil goes through bogus.
[10] People who think the recent increase in economic inequality is due to changes in tax policy seem very naive to
anyone with experience in startups. Different people are getting rich now than used to, and they're getting much
richer than mere tax savings could make them.
[11] Note to tiger parents: you may think you're training your kids to win, but if you're training them to win by hacking
bad tests, you are, as parents so often do, training them to fight the last war.
Thanks to Austen Allred, Trevor Blackwell, Patrick Collison, Jessica Livingston, Robert Morris, and Harj Taggar for
reading drafts of this.
Novelty and Heresy - # 180
November 2019
If you discover something new, there's a significant chance you'll be accused of some form of
heresy.
To discover new things, you have to work on ideas that are good but non-obvious; if an idea is
obviously good, other people are probably already working on it. One common way for a good
idea to be non-obvious is for it to be hidden in the shadow of some mistaken assumption that
people are very attached to. But anything you discover from working on such an idea will tend
to contradict the mistaken assumption that was concealing it. And you will thus get a lot of heat
from people attached to the mistaken assumption. Galileo and Darwin are famous examples of
this phenomenon, but it's probably always an ingredient in the resistance to new ideas.
So it's particularly dangerous for an organization or society to have a culture of pouncing on
heresy. When you suppress heresies, you don't just prevent people from contradicting the
mistaken assumption you're trying to protect. You also suppress any idea that implies indirectly
that it's false.
Every cherished mistaken assumption has a dead zone of unexplored ideas around it. And the
more preposterous the assumption, the bigger the dead zone it creates.
There is a positive side to this phenomenon though. If you're looking for new ideas, one way to
find them is by looking for heresies. When you look at the question this way, the depressingly
large dead zones around mistaken assumptions become excitingly large mines of new ideas.
The Bus Ticket Theory of Genius - # 179
November 2019
Everyone knows that to do great work you need both natural ability and determination. But
there's a third ingredient that's not as well understood: an obsessive interest in a particular topic.
To explain this point I need to burn my reputation with some group of people, and I'm going to
choose bus ticket collectors. There are people who collect old bus tickets. Like many collectors,
they have an obsessive interest in the minutiae of what they collect. They can keep track of
distinctions between different types of bus tickets that would be hard for the rest of us to
remember. Because we don't care enough. What's the point of spending so much time thinking
about old bus tickets?
Which leads us to the second feature of this kind of obsession: there is no point. A bus ticket
collector's love is disinterested. They're not doing it to impress us or to make themselves rich,
but for its own sake.
When you look at the lives of people who've done great work, you see a consistent pattern.
They often begin with a bus ticket collector's obsessive interest in something that would have
seemed pointless to most of their contemporaries. One of the most striking features of Darwin's
book about his voyage on the Beagle is the sheer depth of his interest in natural history. His
curiosity seems infinite. Ditto for Ramanujan, sitting by the hour working out on his slate what
happens to series.
It's a mistake to think they were "laying the groundwork" for the discoveries they made later.
There's too much intention in that metaphor. Like bus ticket collectors, they were doing it
because they liked it.
But there is a difference between Ramanujan and a bus ticket collector. Series matter, and bus
tickets don't.
If I had to put the recipe for genius into one sentence, that might be it: to have a disinterested
obsession with something that matters.
Aren't I forgetting about the other two ingredients? Less than you might think. An obsessive
interest in a topic is both a proxy for ability and a substitute for determination. Unless you have
sufficient mathematical aptitude, you won't find series interesting. And when you're obsessively
interested in something, you don't need as much determination: you don't need to push yourself
as hard when curiosity is pulling you.
An obsessive interest will even bring you luck, to the extent anything can. Chance, as Pasteur
said, favors the prepared mind, and if there's one thing an obsessed mind is, it's prepared.
The disinterestedness of this kind of obsession is its most important feature. Not just because
it's a filter for earnestness, but because it helps you discover new ideas.
The paths that lead to new ideas tend to look unpromising. If they looked promising, other
people would already have explored them. How do the people who do great work discover
these paths that others overlook? The popular story is that they simply have better vision:
because they're so talented, they see paths that others miss. But if you look at the way great
discoveries are made, that's not what happens. Darwin didn't pay closer attention to individual
species than other people because he saw that this would lead to great discoveries, and they
didn't. He was just really, really interested in such things.
Darwin couldn't turn it off. Neither could Ramanujan. They didn't discover the hidden paths that
they did because they seemed promising, but because they couldn't help it. That's what allowed
them to follow paths that someone who was merely ambitious would have ignored.
What rational person would decide that the way to write great novels was to begin by spending
several years creating an imaginary elvish language, like Tolkien, or visiting every household in
southwestern Britain, like Trollope? No one, including Tolkien and Trollope.
The bus ticket theory is similar to Carlyle's famous definition of genius as an infinite capacity for
taking pains. But there are two differences. The bus ticket theory makes it clear that the source
of this infinite capacity for taking pains is not infinite diligence, as Carlyle seems to have meant,
but the sort of infinite interest that collectors have. It also adds an important qualification: an
infinite capacity for taking pains about something that matters.
So what matters? You can never be sure. It's precisely because no one can tell in advance
which paths are promising that you can discover new ideas by working on what you're
interested in.
But there are some heuristics you can use to guess whether an obsession might be one that
matters. For example, it's more promising if you're creating something, rather than just
consuming something someone else creates. It's more promising if something you're interested
in is difficult, especially if it's more difficult for other people than it is for you. And the obsessions
of talented people are more likely to be promising. When talented people become interested in
random things, they're not truly random.
But you can never be sure. In fact, here's an interesting idea that's also rather alarming if it's
true: it may be that to do great work, you also have to waste a lot of time.
In many different areas, reward is proportionate to risk. If that rule holds here, then the way to
find paths that lead to truly great work is to be willing to expend a lot of effort on things that turn
out to be every bit as unpromising as they seem.
I'm not sure if this is true. On one hand, it seems surprisingly difficult to waste your time so long
as you're working hard on something interesting. So much of what you do ends up being useful.
But on the other hand, the rule about the relationship between risk and reward is so powerful
that it seems to hold wherever risk occurs. Newton's case, at least, suggests that the risk/
reward rule holds here. He's famous for one particular obsession of his that turned out to be
unprecedentedly fruitful: using math to describe the world. But he had two other obsessions,
alchemy and theology, that seem to have been complete wastes of time. He ended up net
ahead. His bet on what we now call physics paid off so well that it more than compensated for
the other two. But were the other two necessary, in the sense that he had to take big risks to
make such big discoveries? I don't know.
Here's an even more alarming idea: might one make all bad bets? It probably happens quite
often. But we don't know how often, because these people don't become famous.
It's not merely that the returns from following a path are hard to predict. They change
dramatically over time. 1830 was a really good time to be obsessively interested in natural
history. If Darwin had been born in 1709 instead of 1809, we might never have heard of him.
What can one do in the face of such uncertainty? One solution is to hedge your bets, which in
this case means to follow the obviously promising paths instead of your own private obsessions.
But as with any hedge, you're decreasing reward when you decrease risk. If you forgo working
on what you like in order to follow some more conventionally ambitious path, you might miss
something wonderful that you'd otherwise have discovered. That too must happen all the time,
perhaps even more often than the genius whose bets all fail.
The other solution is to let yourself be interested in lots of different things. You don't decrease
your upside if you switch between equally genuine interests based on which seems to be
working so far. But there is a danger here too: if you work on too many different projects, you
might not get deeply enough into any of them.
One interesting thing about the bus ticket theory is that it may help explain why different types
of people excel at different kinds of work. Interest is much more unevenly distributed than ability.
If natural ability is all you need to do great work, and natural ability is evenly distributed, you
have to invent elaborate theories to explain the skewed distributions we see among those who
actually do great work in various fields. But it may be that much of the skew has a simpler
explanation: different people are interested in different things.
The bus ticket theory also explains why people are less likely to do great work after they have
children. Here interest has to compete not just with external obstacles, but with another interest,
and one that for most people is extremely powerful. It's harder to find time for work after you
have kids, but that's the easy part. The real change is that you don't want to.
But the most exciting implication of the bus ticket theory is that it suggests ways to encourage
great work. If the recipe for genius is simply natural ability plus hard work, all we can do is hope
we have a lot of ability, and work as hard as we can. But if interest is a critical ingredient in
genius, we may be able, by cultivating interest, to cultivate genius.
For example, for the very ambitious, the bus ticket theory suggests that the way to do great
work is to relax a little. Instead of gritting your teeth and diligently pursuing what all your peers
agree is the most promising line of research, maybe you should try doing something just for fun.
And if you're stuck, that may be the vector along which to break out.
I've always liked Hamming's famous double-barrelled question: what are the most important
problems in your field, and why aren't you working on one of them? It's a great way to shake
yourself up. But it may be overfitting a bit. It might be at least as useful to ask yourself: if you
could take a year off to work on something that probably wouldn't be important but would be
really interesting, what would it be?
The bus ticket theory also suggests a way to avoid slowing down as you get older. Perhaps the
reason people have fewer new ideas as they get older is not simply that they're losing their
edge. It may also be because once you become established, you can no longer mess about
with irresponsible side projects the way you could when you were young and no one cared what
you did.
The solution to that is obvious: remain irresponsible. It will be hard, though, because the
apparently random projects you take up to stave off decline will read to outsiders as evidence of
it. And you yourself won't know for sure that they're wrong. But it will at least be more fun to
work on what you want.
It may even be that we can cultivate a habit of intellectual bus ticket collecting in kids. The usual
plan in education is to start with a broad, shallow focus, then gradually become more
specialized. But I've done the opposite with my kids. I know I can count on their school to
handle the broad, shallow part, so I take them deep.
When they get interested in something, however random, I encourage them to go
preposterously, bus ticket collectorly, deep. I don't do this because of the bus ticket theory. I do it
because I want them to feel the joy of learning, and they're never going to feel that about
something I'm making them learn. It has to be something they're interested in. I'm just following
the path of least resistance; depth is a byproduct. But if in trying to show them the joy of
learning I also end up training them to go deep, so much the better.
Will it have any effect? I have no idea. But that uncertainty may be the most interesting point of
all. There is so much more to learn about how to do great work. As old as human civilization
feels, it's really still very young if we haven't nailed something so basic. It's exciting to think
there are still discoveries to make about discovery. If that's the sort of thing you're interested in.
Notes:
[1] There are other types of collecting that illustrate this point better than bus tickets, but they're also more popular. It
seemed just as well to use an inferior example rather than offend more people by telling them their hobby doesn't
matter.
[2] I worried a little about using the word "disinterested," since some people mistakenly believe it means not
interested. But anyone who expects to be a genius will have to know the meaning of such a basic word, so I figure
they may as well start now.
[3] Think how often genius must have been nipped in the bud by people being told, or telling themselves, to stop
messing about and be responsible. Ramanujan's mother was a huge enabler. Imagine if she hadn't been. Imagine if
his parents had made him go out and get a job instead of sitting around at home doing math.
On the other hand, anyone quoting the preceding paragraph to justify not getting a job is probably mistaken.
[4] 1709 Darwin is to time what the Milanese Leonardo is to space.
[5] "An infinite capacity for taking pains" is a paraphrase of what Carlyle wrote. What he wrote, in his History of
Frederick the Great, was "... it is the fruit of 'genius' (which means transcendent capacity of taking trouble, first of
all)...." Since the paraphrase seems the name of the idea at this point, I kept it.
Carlyle's History was published in 1858. In 1785 Hÿýrault de Sÿýchelles quoted Buffon as saying "Le gÿýnie n'est qu'une
plus grande aptitude ÿý la patience." (Genius is only a greater aptitude for patience.)
[6] Trollope was establishing the system of postal routes. He himself sensed the obsessiveness with which he
pursued this goal. It is amusing to watch how a passion will grow upon a man. During those two years it was the
ambition of my life to cover the country with rural letter-carriers. Even Newton occasionally sensed the degree of his
obsessiveness. After computing pi to 15 digits, he wrote in a letter to a friend: I am ashamed to tell you to how many
figures I carried these computations, having no other business at the time. Incidentally, Ramanujan was also a
compulsive calculator. As Kanigel writes in his excellent biography: One Ramanujan scholar, B. M. Wilson, later told
how Ramanujan's research into number theory was often "preceded by a table of numerical results, carried usually to
a length from which most of us would shrink." [7] Working to understand the natural world counts as creating rather
than consuming.
Newton tripped over this distinction when he chose to work on theology. His beliefs did not allow him to see it, but
chasing down paradoxes in nature is fruitful in a way that chasing down paradoxes in sacred texts is not.
[8] How much of people's propensity to become interested in a topic is inborn? My experience so far suggests the
answer is: most of it. Different kids get interested in different things, and it's hard to make a child interested in
something they wouldn't otherwise be. Not in a way that sticks. The most you can do on behalf of a topic is to make
sure it gets a fair showing ÿý to make it clear to them, for example, that there's more to math than the dull drills they do
in school. After that it's up to the child.
Thanks to Marc Andreessen, Trevor Blackwell, Patrick Collison, Kevin Lacker, Jessica Livingston, Jackie
McDonough, Robert Morris, Lisa Randall, Zak Stone, and my 7 year old for reading drafts of this.
General and Surprising - # 178
September 2017
The most valuable insights are both general and surprising. F = ma for example. But general
and surprising is a hard combination to achieve. That territory tends to be picked clean,
precisely because those insights are so valuable.
Ordinarily, the best that people can do is one without the other: either surprising without being
general (e.g. gossip), or general without being surprising (e.g. platitudes).
Where things get interesting is the moderately valuable insights. You get those from small
additions of whichever quality was missing. The more common case is a small addition of
generality: a piece of gossip that's more than just gossip, because it teaches something
interesting about the world. But another less common approach is to focus on the most general
ideas and see if you can find something new to say about them. Because these start out so
general, you only need a small delta of novelty to produce a useful insight.
A small delta of novelty is all you'll be able to get most of the time. Which means if you take this
route, your ideas will seem a lot like ones that already exist. Sometimes you'll find you've merely
rediscovered an idea that did already exist. But don't be discouraged. Remember the huge
multiplier that kicks in when you do manage to think of something even a little new.
Corollary: the more general the ideas you're talking about, the less you should worry about
repeating yourself. If you write enough, it's inevitable you will. Your brain is much the same from
year to year and so are the stimuli that hit it. I feel slightly bad when I find I've said something
close to what I've said before, as if I were plagiarizing myself. But rationally one shouldn't. You
won't say something exactly the same way the second time, and that variation increases the
chance you'll get that tiny but critical delta of novelty.
And of course, ideas beget ideas. (That sounds familiar.) An idea with a small amount of novelty
could lead to one with more. But only if you keep going. So it's doubly important not to let
yourself be discouraged by people who say there's not much new about something you've
discovered. "Not much new" is a real achievement when you're talking about the most general
ideas.
It's not true that there's nothing new under the sun. There are some domains where there's
almost nothing new. But there's a big difference between nothing and almost nothing, when it's
multiplied by the area under the sun.
Thanks to Sam Altman, Patrick Collison, and Jessica Livingston for reading drafts of this.
Charisma - Power - # 177
January 2017
People who are powerful but uncharismatic will tend to be disliked. Their power makes them a
target for criticism that they don't have the charisma to disarm. That was Hillary Clinton's
problem. It also tends to be a problem for any CEO who is more of a builder than a schmoozer.
And yet the builder-type CEO is (like Hillary) probably the best person for the job.
I don't think there is any solution to this problem. It's human nature. The best we can do is to
recognize that it's happening, and to understand that being a magnet for criticism is sometimes
a sign not that someone is the wrong person for a job, but that they're the right one.
The Risk of Discovery - # 176
January 2017
Because biographies of famous scientists tend to edit out their mistakes, we underestimate the
degree of risk they were willing to take. And because anything a famous scientist did that wasn't
a mistake has probably now become the conventional wisdom, those choices don't seem risky
either.
Biographies of Newton, for example, understandably focus more on physics than alchemy or
theology. The impression we get is that his unerring judgment led him straight to truths no one
else had noticed. How to explain all the time he spent on alchemy and theology? Well, smart
people are often kind of crazy.
But maybe there is a simpler explanation. Maybe the smartness and the craziness were not as
separate as we think. Physics seems to us a promising thing to work on, and alchemy and
theology obvious wastes of time. But that's because we know how things turned out. In
Newton's day the three problems seemed roughly equally promising. No one knew yet what the
payoff would be for inventing what we now call physics; if they had, more people would have
been working on it. And alchemy and theology were still then in the category Marc Andreessen
would describe as "huge, if true."
Newton made three bets. One of them worked. But they were all risky.
How to Make Pittsburgh a Startup Hub - # 175
April 2016
(This is a talk I gave at an event called Opt412 in Pittsburgh. Much of it will apply to other towns.
But not all, because as I say in the talk, Pittsburgh has some important advantages over most
would-be startup hubs.)
What would it take to make Pittsburgh into a startup hub, like Silicon Valley? I understand
Pittsburgh pretty well, because I grew up here, in Monroeville. And I understand Silicon Valley
pretty well because that's where I live now. Could you get that kind of startup ecosystem going
here?
When I agreed to speak here, I didn't think I'd be able to give a very optimistic talk. I thought I'd
be talking about what Pittsburgh could do to become a startup hub, very much in the
subjunctive. Instead I'm going to talk about what Pittsburgh can do.
What changed my mind was an article I read in, of all places, the New York Times food section.
The title was "Pittsburgh's Youth-Driven Food Boom." To most people that might not even sound
interesting, let alone something related to startups. But it was electrifying to me to read that title.
I don't think I could pick a more promising one if I tried. And when I read the article I got even
more excited. It said "people ages 25 to 29 now make up 7.6 percent of all residents, up from 7
percent about a decade ago." Wow, I thought, Pittsburgh could be the next Portland. It could
become the cool place all the people in their twenties want to go live.
When I got here a couple days ago, I could feel the difference. I lived here from 1968 to 1984. I
didn't realize it at the time, but during that whole period the city was in free fall. On top of the
flight to the suburbs that happened everywhere, the steel and nuclear businesses were both
dying. Boy are things different now. It's not just that downtown seems a lot more prosperous.
There is an energy here that was not here when I was a kid.
When I was a kid, this was a place young people left. Now it's a place that attracts them.
What does that have to do with startups? Startups are made of people, and the average age of
the people in a typical startup is right in that 25 to 29 bracket.
I've seen how powerful it is for a city to have those people. Five years ago they shifted the
center of gravity of Silicon Valley from the peninsula to San Francisco. Google and Facebook
are on the peninsula, but the next generation of big winners are all in SF. The reason the center
of gravity shifted was the talent war, for programmers especially. Most 25 to 29 year olds want
to live in the city, not down in the boring suburbs. So whether they like it or not, founders know
they have to be in the city. I know multiple founders who would have preferred to live down in
the Valley proper, but who made themselves move to SF because they knew otherwise they'd
lose the talent war.
So being a magnet for people in their twenties is a very promising thing to be. It's hard to
imagine a place becoming a startup hub without also being that. When I read that statistic
about the increasing percentage of 25 to 29 year olds, I had exactly the same feeling of
excitement I get when I see a startup's graphs start to creep upward off the x axis.
Nationally the percentage of 25 to 29 year olds is 6.8%. That means you're .8% ahead. The
population is 306,000, so we're talking about a surplus of about 2500 people. That's the
population of a small town, and that's just the surplus. So you have a toehold. Now you just
have to expand it.
And though "youth-driven food boom" may sound frivolous, it is anything but. Restaurants and
cafes are a big part of the personality of a city. Imagine walking down a street in Paris. What are
you walking past? Little restaurants and cafes. Imagine driving through some depressing
random exurb. What are you driving past? Starbucks and McDonalds and Pizza Hut. As
Gertrude Stein said, there is no there there. You could be anywhere.
These independent restaurants and cafes are not just feeding people. They're making there be
a there here.
So here is my first concrete recommendation for turning Pittsburgh into the next Silicon Valley:
do everything you can to encourage this youth-driven food boom. What could the city do? Treat
the people starting these little restaurants and cafes as your users, and go ask them what they
want. I can guess at least one thing they might want: a fast permit process. San Francisco has
left you a huge amount of room to beat them in that department.
I know restaurants aren't the prime mover though. The prime mover, as the Times article said,
is cheap housing. That's a big advantage. But that phrase "cheap housing" is a bit misleading.
There are plenty of places that are cheaper. What's special about Pittsburgh is not that it's
cheap, but that it's a cheap place you'd actually want to live.
Part of that is the buildings themselves. I realized a long time ago, back when I was a poor
twenty-something myself, that the best deals were places that had once been rich, and then
became poor. If a place has always been rich, it's nice but too expensive. If a place has always
been poor, it's cheap but grim. But if a place was once rich and then got poor, you can find
palaces for cheap. And that's what's bringing people here. When Pittsburgh was rich, a hundred
years ago, the people who lived here built big solid buildings. Not always in the best taste, but
definitely solid. So here is another piece of advice for becoming a startup hub: don't destroy the
buildings that are bringing people here. When cities are on the way back up, like Pittsburgh is
now, developers race to tear down the old buildings. Don't let that happen. Focus on historic
preservation. Big real estate development projects are not what's bringing the twentysomethings here. They're the opposite of the new restaurants and cafes; they subtract
personality from the city.
The empirical evidence suggests you cannot be too strict about historic preservation. The
tougher cities are about it, the better they seem to do.
But the appeal of Pittsburgh is not just the buildings themselves. It's the neighborhoods they're
in. Like San Francisco and New York, Pittsburgh is fortunate in being a pre-car city. It's not too
spread out. Because those 25 to 29 year olds do not like driving. They prefer walking, or
bicycling, or taking public transport. If you've been to San Francisco recently you can't help
noticing the huge number of bicyclists. And this is not just a fad that the twenty-somethings
have adopted. In this respect they have discovered a better way to live. The beards will go, but
not the bikes. Cities where you can get around without driving are just better period. So I would
suggest you do everything you can to capitalize on this. As with historic preservation, it seems
impossible to go too far.
Why not make Pittsburgh the most bicycle and pedestrian friendly city in the country? See if
you can go so far that you make San Francisco seem backward by comparison. If you do, it's
very unlikely you'll regret it. The city will seem like a paradise to the young people you want to
attract. If they do leave to get jobs elsewhere, it will be with regret at leaving behind such a
place. And what's the downside? Can you imagine a headline "City ruined by becoming too
bicycle-friendly?" It just doesn't happen.
So suppose cool old neighborhoods and cool little restaurants make this the next Portland. Will
that be enough? It will put you in a way better position than Portland itself, because Pittsburgh
has something Portland lacks: a first-rate research university. CMU plus little cafes means you
have more than hipsters drinking lattes. It means you have hipsters drinking lattes while talking
about distributed systems. Now you're getting really close to San Francisco.
In fact you're better off than San Francisco in one way, because CMU is downtown, but Stanford
and Berkeley are out in the suburbs.
What can CMU do to help Pittsburgh become a startup hub? Be an even better research
university. CMU is one of the best universities in the world, but imagine what things would be
like if it were the very best, and everyone knew it. There are a lot of ambitious people who must
go to the best place, wherever it is. If CMU were it, they would all come here. There would be
kids in Kazakhstan dreaming of one day living in Pittsburgh.
Being that kind of talent magnet is the most important contribution universities can make toward
making their city a startup hub. In fact it is practically the only contribution they can make.
But wait, shouldn't universities be setting up programs with words like "innovation" and
"entrepreneurship" in their names? No, they should not. These kind of things almost always turn
out to be disappointments. They're pursuing the wrong targets. The way to get innovation is not
to aim for innovation but to aim for something more specific, like better batteries or better 3D
printing. And the way to learn about entrepreneurship is to do it, which you can't in school.
I know it may disappoint some administrators to hear that the best thing a university can do to
encourage startups is to be a great university. It's like telling people who want to lose weight
that the way to do it is to eat less.
But if you want to know where startups come from, look at the empirical evidence. Look at the
histories of the most successful startups, and you'll find they grow organically out of a couple of
founders building something that starts as an interesting side project. Universities are great at
bringing together founders, but beyond that the best thing they can do is get out of the way. For
example, by not claiming ownership of "intellectual property" that students and faculty develop,
and by having liberal rules about deferred admission and leaves of absence.
In fact, one of the most effective things a university could do to encourage startups is an
elaborate form of getting out of the way invented by Harvard. Harvard used to have exams for
the fall semester after Christmas. At the beginning of January they had something called
"Reading Period" when you were supposed to be studying for exams. And Microsoft and
Facebook have something in common that few people realize: they were both started during
Reading Period. It's the perfect situation for producing the sort of side projects that turn into
startups. The students are all on campus, but they don't have to do anything because they're
supposed to be studying for exams.
Harvard may have closed this window, because a few years ago they moved exams before
Christmas and shortened reading period from 11 days to 7. But if a university really wanted to
help its students start startups, the empirical evidence, weighted by market cap, suggests the
best thing they can do is literally nothing.
The culture of Pittsburgh is another of its strengths. It seems like a city has to be socially liberal
to be a startup hub, and it's pretty clear why. A city has to tolerate strangeness to be a home for
startups, because startups are so strange. And you can't choose to allow just the forms of
strangeness that will turn into big startups, because they're all intermingled. You have to
tolerate all strangeness.
That immediately rules out big chunks of the US. I'm optimistic it doesn't rule out Pittsburgh.
One of the things I remember from growing up here, though I didn't realize at the time that there
was anything unusual about it, is how well people got along. I'm still not sure why. Maybe one
reason was that everyone felt like an immigrant. When I was a kid in Monroeville, people didn't
call themselves American. They called themselves Italian or Serbian or Ukranian. Just imagine
what it must have been like here a hundred years ago, when people were pouring in from
twenty different countries. Tolerance was the only option.
What I remember about the culture of Pittsburgh is that it was both tolerant and pragmatic.
That's how I'd describe the culture of Silicon Valley too. And it's not a coincidence, because
Pittsburgh was the Silicon Valley of its time. This was a city where people built new things. And
while the things people build have changed, the spirit you need to do that kind of work is the
same.
So although an influx of latte-swilling hipsters may be annoying in some ways, I would go out of
my way to encourage them. And more generally to tolerate strangeness, even unto the degree
wacko Californians do. For Pittsburgh that is a conservative choice: it's a return to the city's
roots.
Unfortunately I saved the toughest part for last. There is one more thing you need to be a
startup hub, and Pittsburgh hasn't got it: investors. Silicon Valley has a big investor community
because it's had 50 years to grow one. New York has a big investor community because it's full
of people who like money a lot and are quick to notice new ways to get it. But Pittsburgh has
neither of these. And the cheap housing that draws other people here has no effect on investors.
If an investor community grows up here, it will happen the same way it did in Silicon Valley:
slowly and organically. So I would not bet on having a big investor community in the short term.
But fortunately there are three trends that make that less necessary than it used to be. One is
that startups are increasingly cheap to start, so you just don't need as much outside money as
you used to. The second is that thanks to things like Kickstarter, a startup can get to revenue
faster. You can put something on Kickstarter from anywhere. The third is programs like Y
Combinator. A startup from anywhere in the world can go to YC for 3 months, pick up funding,
and then return home if they want.
My advice is to make Pittsburgh a great place for startups, and gradually more of them will stick.
Some of those will succeed; some of their founders will become investors; and still more
startups will stick.
This is not a fast path to becoming a startup hub. But it is at least a path, which is something
few other cities have. And it's not as if you have to make painful sacrifices in the meantime.
Think about what I've suggested you should do. Encourage local restaurants, save old
buildings, take advantage of density, make CMU the best, promote tolerance. These are the
things that make Pittsburgh good to live in now. All I'm saying is that you should do even more
of them.
And that's an encouraging thought. If Pittsburgh's path to becoming a startup hub is to be even
more itself, then it has a good chance of succeeding. In fact it probably has the best chance of
any city its size. It will take some effort, and a lot of time, but if any city can do it, Pittsburgh can.
Thanks to Charlie Cheever and Jessica Livingston for reading drafts of this, and to Meg
Cheever for organizing Opt412 and inviting me to speak.
Life is Short - # 174
January 2016
Life is short, as everyone knows. When I was a kid I used to wonder about this. Is life actually
short, or are we really complaining about its finiteness? Would we be just as likely to feel life
was short if we lived 10 times as long?
Since there didn't seem any way to answer this question, I stopped wondering about it. Then I
had kids. That gave me a way to answer the question, and the answer is that life actually is
short.
Having kids showed me how to convert a continuous quantity, time, into discrete quantities. You
only get 52 weekends with your 2 year old. If Christmas-as-magic lasts from say ages 3 to 10,
you only get to watch your child experience it 8 times. And while it's impossible to say what is a
lot or a little of a continuous quantity like time, 8 is not a lot of something. If you had a handful of
8 peanuts, or a shelf of 8 books to choose from, the quantity would definitely seem limited, no
matter what your lifespan was.
Ok, so life actually is short. Does it make any difference to know that?
It has for me. It means arguments of the form "Life is too short for x" have great force. It's not
just a figure of speech to say that life is too short for something. It's not just a synonym for
annoying. If you find yourself thinking that life is too short for something, you should try to
eliminate it if you can.
When I ask myself what I've found life is too short for, the word that pops into my head is
"bullshit." I realize that answer is somewhat tautological. It's almost the definition of bullshit that
it's the stuff that life is too short for. And yet bullshit does have a distinctive character. There's
something fake about it. It's the junk food of experience. [1]
If you ask yourself what you spend your time on that's bullshit, you probably already know the
answer. Unnecessary meetings, pointless disputes, bureaucracy, posturing, dealing with other
people's mistakes, traffic jams, addictive but unrewarding pastimes.
There are two ways this kind of thing gets into your life: it's either forced on you, or it tricks you.
To some extent you have to put up with the bullshit forced on you by circumstances. You need
to make money, and making money consists mostly of errands. Indeed, the law of supply and
demand ensures that: the more rewarding some kind of work is, the cheaper people will do it. It
may be that less bullshit is forced on you than you think, though. There has always been a
stream of people who opt out of the default grind and go live somewhere where opportunities
are fewer in the conventional sense, but life feels more authentic. This could become more
common.
You can do it on a smaller scale without moving. The amount of time you have to spend on
bullshit varies between employers. Most large organizations (and many small ones) are steeped
in it. But if you consciously prioritize bullshit avoidance over other factors like money and
prestige, you can probably find employers that will waste less of your time.
If you're a freelancer or a small company, you can do this at the level of individual customers. If
you fire or avoid toxic customers, you can decrease the amount of bullshit in your life by more
than you decrease your income.
But while some amount of bullshit is inevitably forced on you, the bullshit that sneaks into your
life by tricking you is no one's fault but your own. And yet the bullshit you choose may be harder
to eliminate than the bullshit that's forced on you. Things that lure you into wasting your time
have to be really good at tricking you. An example that will be familiar to a lot of people is
arguing online. When someone contradicts you, they're in a sense attacking you. Sometimes
pretty overtly. Your instinct when attacked is to defend yourself. But like a lot of instincts, this
one wasn't designed for the world we now live in. Counterintuitive as it feels, it's better most of
the time not to defend yourself. Otherwise these people are literally taking your life. [2]
Arguing online is only incidentally addictive. There are more dangerous things than that. As I've
written before, one byproduct of technical progress is that things we like tend to become more
addictive. Which means we will increasingly have to make a conscious effort to avoid addictions
ÿý to stand outside ourselves and ask "is this how I want to be spending my time?"
As well as avoiding bullshit, one should actively seek out things that matter. But different things
matter to different people, and most have to learn what matters to them. A few are lucky and
realize early on that they love math or taking care of animals or writing, and then figure out a
way to spend a lot of time doing it. But most people start out with a life that's a mix of things that
matter and things that don't, and only gradually learn to distinguish between them.
For the young especially, much of this confusion is induced by the artificial situations they find
themselves in. In middle school and high school, what the other kids think of you seems the
most important thing in the world. But when you ask adults what they got wrong at that age,
nearly all say they cared too much what other kids thought of them.
One heuristic for distinguishing stuff that matters is to ask yourself whether you'll care about it in
the future. Fake stuff that matters usually has a sharp peak of seeming to matter. That's how it
tricks you. The area under the curve is small, but its shape jabs into your consciousness like a
pin.
The things that matter aren't necessarily the ones people would call "important." Having coffee
with a friend matters. You won't feel later like that was a waste of time.
One great thing about having small children is that they make you spend time on things that
matter: them. They grab your sleeve as you're staring at your phone and say "will you play with
me?" And odds are that is in fact the bullshit-minimizing option.
If life is short, we should expect its shortness to take us by surprise. And that is just what tends
to happen. You take things for granted, and then they're gone. You think you can always write
that book, or climb that mountain, or whatever, and then you realize the window has closed. The
saddest windows close when other people die. Their lives are short too. After my mother died, I
wished I'd spent more time with her. I lived as if she'd always be there. And in her typical quiet
way she encouraged that illusion. But an illusion it was. I think a lot of people make the same
mistake I did.
The usual way to avoid being taken by surprise by something is to be consciously aware of it.
Back when life was more precarious, people used to be aware of death to a degree that would
now seem a bit morbid. I'm not sure why, but it doesn't seem the right answer to be constantly
reminding oneself of the grim reaper hovering at everyone's shoulder. Perhaps a better solution
is to look at the problem from the other end. Cultivate a habit of impatience about the things you
most want to do. Don't wait before climbing that mountain or writing that book or visiting your
mother. You don't need to be constantly reminding yourself why you shouldn't wait. Just don't
wait.
I can think of two more things one does when one doesn't have much of something: try to get
more of it, and savor what one has. Both make sense here.
How you live affects how long you live. Most people could do better. Me among them.
But you can probably get even more effect by paying closer attention to the time you have. It's
easy to let the days rush by. The "flow" that imaginative people love so much has a darker
cousin that prevents you from pausing to savor life amid the daily slurry of errands and alarms.
One of the most striking things I've read was not in a book, but the title of one: James Salter's
Burning the Days.
It is possible to slow time somewhat. I've gotten better at it. Kids help. When you have small
children, there are a lot of moments so perfect that you can't help noticing.
It does help too to feel that you've squeezed everything out of some experience. The reason I'm
sad about my mother is not just that I miss her but that I think of all the things we could have
done that we didn't. My oldest son will be 7 soon. And while I miss the 3 year old version of him,
I at least don't have any regrets over what might have been. We had the best time a daddy and
a 3 year old ever had.
Relentlessly prune bullshit, don't wait to do things that matter, and savor the time you have.
That's what you do when life is short.
Notes:
[1] At first I didn't like it that the word that came to mind was one that had other meanings. But then I realized the
other meanings are fairly closely related. Bullshit in the sense of things you waste your time on is a lot like intellectual
bullshit.
[2] I chose this example deliberately as a note to self. I get attacked a lot online. People tell the craziest lies about me.
And I have so far done a pretty mediocre job of suppressing the natural human inclination to say "Hey, that's not true!"
Thanks to Jessica Livingston and Geoff Ralston for reading drafts of this.
Economic Inequality - # 173
--> January 2016
Since the 1970s, economic inequality in the US has increased dramatically. And in particular,
the rich have gotten a lot richer. Nearly everyone who writes about the topic says that economic
inequality should be decreased.
I'm interested in this question because I was one of the founders of a company called Y
Combinator that helps people start startups. Almost by definition, if a startup succeeds, its
founders become rich. Which means by helping startup founders I've been helping to increase
economic inequality. If economic inequality should be decreased, I shouldn't be helping
founders. No one should be.
But that doesn't sound right. What's going on here? What's going on is that while economic
inequality is a single measure (or more precisely, two: variation in income, and variation in
wealth), it has multiple causes. Many of these causes are bad, like tax loopholes and drug
addiction. But some are good, like Larry Page and Sergey Brin starting the company you use to
find things online.
If you want to understand economic inequality — and more importantly, if you actually want to
fix the bad aspects of it — you have to tease apart the components. And yet the trend in nearly
everything written about the subject is to do the opposite: to squash together all the aspects of
economic inequality as if it were a single phenomenon.
Sometimes this is done for ideological reasons. Sometimes it's because the writer only has very
high-level data and so draws conclusions from that, like the proverbial drunk who looks for his
keys under the lamppost, instead of where he dropped them, because the light is better there.
Sometimes it's because the writer doesn't understand critical aspects of inequality, like the role
of technology in wealth creation. Much of the time, perhaps most of the time, writing about
economic inequality combines all three.
___
The most common mistake people make about economic inequality is to treat it as a single
phenomenon. The most naive version of which is the one based on the pie fallacy: that the rich
get rich by taking money from the poor.
Usually this is an assumption people start from rather than a conclusion they arrive at by
examining the evidence. Sometimes the pie fallacy is stated explicitly: ...those at the top are
grabbing an increasing fraction of the nation's income — so much of a larger share that what's
left over for the rest is diminished.... [1] Other times it's more unconscious. But the unconscious
form is very widespread. I think because we grow up in a world where the pie fallacy is actually
true. To kids, wealth is a fixed pie that's shared out, and if one person gets more, it's at the
expense of another. It takes a conscious effort to remind oneself that the real world doesn't
work that way.
In the real world you can create wealth as well as taking it from others. A woodworker creates
wealth. He makes a chair, and you willingly give him money in return for it. A high-frequency
trader does not. He makes a dollar only when someone on the other end of a trade loses a
dollar.
If the rich people in a society got that way by taking wealth from the poor, then you have the
degenerate case of economic inequality, where the cause of poverty is the same as the cause
of wealth. But instances of inequality don't have to be instances of the degenerate case. If one
woodworker makes 5 chairs and another makes none, the second woodworker will have less
money, but not because anyone took anything from him.
Even people sophisticated enough to know about the pie fallacy are led toward it by the custom
of describing economic inequality as a ratio of one quantile's income or wealth to another's. It's
so easy to slip from talking about income shifting from one quantile to another, as a figure of
speech, into believing that is literally what's happening.
Except in the degenerate case, economic inequality can't be described by a ratio or even a
curve. In the general case it consists of multiple ways people become poor, and multiple ways
people become rich. Which means to understand economic inequality in a country, you have to
go find individual people who are poor or rich and figure out why. [2]
If you want to understand change in economic inequality, you should ask what those people
would have done when it was different. This is one way I know the rich aren't all getting richer
simply from some new system for transferring wealth to them from everyone else. When you
use the would-have method with startup founders, you find what most would have done back in
1960, when economic inequality was lower, was to join big companies or become professors.
Before Mark Zuckerberg started Facebook, his default expectation was that he'd end up
working at Microsoft. The reason he and most other startup founders are richer than they would
have been in the mid 20th century is not because of some right turn the country took during the
Reagan administration, but because progress in technology has made it much easier to start a
new company that grows fast.
Traditional economists seem strangely averse to studying individual humans. It seems to be a
rule with them that everything has to start with statistics. So they give you very precise numbers
about variation in wealth and income, then follow it with the most naive speculation about the
underlying causes.
But while there are a lot of people who get rich through rent-seeking of various forms, and a lot
who get rich by playing zero-sum games, there are also a significant number who get rich by
creating wealth. And creating wealth, as a source of economic inequality, is different from taking
it — not just morally, but also practically, in the sense that it is harder to eradicate. One reason
is that variation in productivity is accelerating. The rate at which individuals can create wealth
depends on the technology available to them, and that grows exponentially. The other reason
creating wealth is such a tenacious source of inequality is that it can expand to accommodate a
lot of people.
___
I'm all for shutting down the crooked ways to get rich. But that won't eliminate great variations in
wealth, because as long as you leave open the option of getting rich by creating wealth, people
who want to get rich will do that instead.
Most people who get rich tend to be fairly driven. Whatever their other flaws, laziness is usually
not one of them. Suppose new policies make it hard to make a fortune in finance. Does it seem
plausible that the people who currently go into finance to make their fortunes will continue to do
so, but be content to work for ordinary salaries? The reason they go into finance is not because
they love finance but because they want to get rich. If the only way left to get rich is to start
startups, they'll start startups. They'll do well at it too, because determination is the main factor
in the success of a startup. [3] And while it would probably be a good thing for the world if
people who wanted to get rich switched from playing zero-sum games to creating wealth, that
would not only not eliminate great variations in wealth, but might even exacerbate them. In a
zero-sum game there is at least a limit to the upside. Plus a lot of the new startups would create
new technology that further accelerated variation in productivity.
Variation in productivity is far from the only source of economic inequality, but it is the
irreducible core of it, in the sense that you'll have that left when you eliminate all other sources.
And if you do, that core will be big, because it will have expanded to include the efforts of all the
refugees. Plus it will have a large Baumol penumbra around it: anyone who could get rich by
creating wealth on their own account will have to be paid enough to prevent them from doing it.
You can't prevent great variations in wealth without preventing people from getting rich, and you
can't do that without preventing them from starting startups.
So let's be clear about that. Eliminating great variations in wealth would mean eliminating
startups. And that doesn't seem a wise move. Especially since it would only mean you
eliminated startups in your own country. Ambitious people already move halfway around the
world to further their careers, and startups can operate from anywhere nowadays. So if you
made it impossible to get rich by creating wealth in your country, people who wanted to do that
would just leave and do it somewhere else. Which would certainly get you a lower Gini
coefficient, along with a lesson in being careful what you ask for. [4]
I think rising economic inequality is the inevitable fate of countries that don't choose something
worse. We had a 40 year stretch in the middle of the 20th century that convinced some people
otherwise. But as I explained in The Refragmentation, that was an anomaly — a unique
combination of circumstances that compressed American society not just economically but
culturally too. [5]
And while some of the growth in economic inequality we've seen since then has been due to
bad behavior of various kinds, there has simultaneously been a huge increase in individuals'
ability to create wealth. Startups are almost entirely a product of this period. And even within the
startup world, there has been a qualitative change in the last 10 years. Technology has
decreased the cost of starting a startup so much that founders now have the upper hand over
investors. Founders get less diluted, and it is now common for them to retain board control as
well. Both further increase economic inequality, the former because founders own more stock,
and the latter because, as investors have learned, founders tend to be better at running their
companies than investors.
While the surface manifestations change, the underlying forces are very, very old. The
acceleration of productivity we see in Silicon Valley has been happening for thousands of years.
If you look at the history of stone tools, technology was already accelerating in the Mesolithic.
The acceleration would have been too slow to perceive in one lifetime. Such is the nature of the
leftmost part of an exponential curve. But it was the same curve.
You do not want to design your society in a way that's incompatible with this curve. The
evolution of technology is one of the most powerful forces in history.
Louis Brandeis said "We may have democracy, or we may have wealth concentrated in the
hands of a few, but we can't have both." That sounds plausible. But if I have to choose between
ignoring him and ignoring an exponential curve that has been operating for thousands of years,
I'll bet on the curve. Ignoring any trend that has been operating for thousands of years is
dangerous. But exponential growth, especially, tends to bite you.
___
If accelerating variation in productivity is always going to produce some baseline growth in
economic inequality, it would be a good idea to spend some time thinking about that future. Can
you have a healthy society with great variation in wealth? What would it look like?
Notice how novel it feels to think about that. The public conversation so far has been exclusively
about the need to decrease economic inequality. We've barely given a thought to how to live
with it.
I'm hopeful we'll be able to. Brandeis was a product of the Gilded Age, and things have changed
since then. It's harder to hide wrongdoing now. And to get rich now you don't have to buy
politicians the way railroad or oil magnates did. [6] The great concentrations of wealth I see
around me in Silicon Valley don't seem to be destroying democracy.
There are lots of things wrong with the US that have economic inequality as a symptom. We
should fix those things. In the process we may decrease economic inequality. But we can't start
from the symptom and hope to fix the underlying causes. [7]
The most obvious is poverty. I'm sure most of those who want to decrease economic inequality
want to do it mainly to help the poor, not to hurt the rich. [8] Indeed, a good number are merely
being sloppy by speaking of decreasing economic inequality when what they mean is
decreasing poverty. But this is a situation where it would be good to be precise about what we
want. Poverty and economic inequality are not identical. When the city is turning off your water
because you can't pay the bill, it doesn't make any difference what Larry Page's net worth is
compared to yours. He might only be a few times richer than you, and it would still be just as
much of a problem that your water was getting turned off.
Closely related to poverty is lack of social mobility. I've seen this myself: you don't have to grow
up rich or even upper middle class to get rich as a startup founder, but few successful founders
grew up desperately poor. But again, the problem here is not simply economic inequality. There
is an enormous difference in wealth between the household Larry Page grew up in and that of a
successful startup founder, but that didn't prevent him from joining their ranks. It's not economic
inequality per se that's blocking social mobility, but some specific combination of things that go
wrong when kids grow up sufficiently poor.
One of the most important principles in Silicon Valley is that "you make what you measure." It
means that if you pick some number to focus on, it will tend to improve, but that you have to
choose the right number, because only the one you choose will improve; another that seems
conceptually adjacent might not. For example, if you're a university president and you decide to
focus on graduation rates, then you'll improve graduation rates. But only graduation rates, not
how much students learn. Students could learn less, if to improve graduation rates you made
classes easier.
Economic inequality is sufficiently far from identical with the various problems that have it as a
symptom that we'll probably only hit whichever of the two we aim at. If we aim at economic
inequality, we won't fix these problems. So I say let's aim at the problems.
For example, let's attack poverty, and if necessary damage wealth in the process. That's much
more likely to work than attacking wealth in the hope that you will thereby fix poverty. [9] And if
there are people getting rich by tricking consumers or lobbying the government for anticompetitive regulations or tax loopholes, then let's stop them. Not because it's causing
economic inequality, but because it's stealing. [10]
If all you have is statistics, it seems like that's what you need to fix. But behind a broad
statistical measure like economic inequality there are some things that are good and some that
are bad, some that are historical trends with immense momentum and others that are random
accidents. If we want to fix the world behind the statistics, we have to understand it, and focus
our efforts where they'll do the most good.
Notes:
[1] Stiglitz, Joseph. The Price of Inequality. Norton, 2012. p. 32.
[2] Particularly since economic inequality is a matter of outliers, and outliers are disproportionately likely to have
gotten where they are by ways that have little do with the sort of things economists usually think about, like wages
and productivity, but rather by, say, ending up on the wrong side of the "War on Drugs."
[3] Determination is the most important factor in deciding between success and failure, which in startups tend to be
sharply differentiated. But it takes more than determination to create one of the hugely successful startups. Though
most founders start out excited about the idea of getting rich, purely mercenary founders will usually take one of the
big acquisition offers most successful startups get on the way up. The founders who go on to the next stage tend to
be driven by a sense of mission. They have the same attachment to their companies that an artist or writer has to
their work. But it is very hard to predict at the outset which founders will do that. It's not simply a function of their
initial attitude. Starting a company changes people.
[4] After reading a draft of this essay, Richard Florida told me how he had once talked to a group of Europeans "who
said they wanted to make Europe more entrepreneurial and more like Silicon Valley. I said by definition this will give
you more inequality. They thought I was insane — they could not process it."
[5] Economic inequality has been decreasing globally. But this is mainly due to the erosion of the kleptocracies that
formerly dominated all the poorer countries. Once the playing field is leveler politically, we'll see economic inequality
start to rise again. The US is the bellwether. The situation we face here, the rest of the world will sooner or later.
[6] Some people still get rich by buying politicians. My point is that it's no longer a precondition.
[7] As well as problems that have economic inequality as a symptom, there are those that have it as a cause. But in
most if not all, economic inequality is not the primary cause. There is usually some injustice that is allowing economic
inequality to turn into other forms of inequality, and that injustice is what we need to fix. For example, the police in the
US treat the poor worse than the rich. But the solution is not to make people richer. It's to make the police treat
people more equitably. Otherwise they'll continue to maltreat people who are weak in other ways.
[8] Some who read this essay will say that I'm clueless or even being deliberately misleading by focusing so much on
the richer end of economic inequality — that economic inequality is really about poverty. But that is exactly the point
I'm making, though sloppier language than I'd use to make it. The real problem is poverty, not economic inequality.
And if you conflate them you're aiming at the wrong target.
Others will say I'm clueless or being misleading by focusing on people who get rich by creating wealth — that
startups aren't the problem, but corrupt practices in finance, healthcare, and so on. Once again, that is exactly my
point. The problem is not economic inequality, but those specific abuses.
It's a strange task to write an essay about why something isn't the problem, but that's the situation you find yourself in
when so many people mistakenly think it is.
[9] Particularly since many causes of poverty are only partially driven by people trying to make money from them. For
example, America's abnormally high incarceration rate is a major cause of poverty. But although for-profit prison
companies and prison guard unions both spend a lot lobbying for harsh sentencing laws, they are not the original
source of them.
[10] Incidentally, tax loopholes are definitely not a product of some power shift due to recent increases in economic
inequality. The golden age of economic equality in the mid 20th century was also the golden age of tax avoidance.
Indeed, it was so widespread and so effective that I'm skeptical whether economic inequality was really so low then
as we think. In a period when people are trying to hide wealth from the government, it will tend to be hidden from
statistics too. One sign of the potential magnitude of the problem is the discrepancy between government receipts as
a percentage of GDP, which have remained more or less constant during the entire period from the end of World War
II to the present, and tax rates, which have varied dramatically.
Thanks to Sam Altman, Tiffani Ashley Bell, Patrick Collison, Ron Conway, Richard Florida, Ben Horowitz, Jessica
Livingston, Robert Morris, Tim O'Reilly, Max Roser, and Alexia Tsotsis for reading drafts of this.
Note: This is a new version from which I removed a pair of metaphors that made a lot of people mad, essentially by
macroexpanding them. If anyone wants to see the old version, I put it here.
Related:
The Refragmentation - # 172
January 2016
One advantage of being old is that you can see change happen in your lifetime. A lot of the
change I've seen is fragmentation. US politics is much more polarized than it used to be.
Culturally we have ever less common ground. The creative class flocks to a handful of happy
cities, abandoning the rest. And increasing economic inequality means the spread between rich
and poor is growing too. I'd like to propose a hypothesis: that all these trends are instances of
the same phenomenon. And moreover, that the cause is not some force that's pulling us apart,
but rather the erosion of forces that had been pushing us together.
Worse still, for those who worry about these trends, the forces that were pushing us together
were an anomaly, a one-time combination of circumstances that's unlikely to be repeated —
and indeed, that we would not want to repeat.
The two forces were war (above all World War II), and the rise of large corporations.
The effects of World War II were both economic and social. Economically, it decreased variation
in income. Like all modern armed forces, America's were socialist economically. From each
according to his ability, to each according to his need. More or less. Higher ranking members of
the military got more (as higher ranking members of socialist societies always do), but what
they got was fixed according to their rank. And the flattening effect wasn't limited to those under
arms, because the US economy was conscripted too. Between 1942 and 1945 all wages were
set by the National War Labor Board. Like the military, they defaulted to flatness. And this
national standardization of wages was so pervasive that its effects could still be seen years
after the war ended. [1]
Business owners weren't supposed to be making money either. FDR said "not a single war
millionaire" would be permitted. To ensure that, any increase in a company's profits over prewar
levels was taxed at 85%. And when what was left after corporate taxes reached individuals, it
was taxed again at a marginal rate of 93%. [2]
Socially too the war tended to decrease variation. Over 16 million men and women from all
sorts of different backgrounds were brought together in a way of life that was literally uniform.
Service rates for men born in the early 1920s approached 80%. And working toward a common
goal, often under stress, brought them still closer together.
Though strictly speaking World War II lasted less than 4 years for the US, its effects lasted
longer. Wars make central governments more powerful, and World War II was an extreme case
of this. In the US, as in all the other Allied countries, the federal government was slow to give up
the new powers it had acquired. Indeed, in some respects the war didn't end in 1945; the
enemy just switched to the Soviet Union. In tax rates, federal power, defense spending,
conscription, and nationalism, the decades after the war looked more like wartime than prewar
peacetime. [3] And the social effects lasted too. The kid pulled into the army from behind a mule
team in West Virginia didn't simply go back to the farm afterward. Something else was waiting
for him, something that looked a lot like the army.
If total war was the big political story of the 20th century, the big economic story was the rise of
a new kind of company. And this too tended to produce both social and economic cohesion. [4]
The 20th century was the century of the big, national corporation. General Electric, General
Foods, General Motors. Developments in finance, communications, transportation, and
manufacturing enabled a new type of company whose goal was above all scale. Version 1 of
this world was low-res: a Duplo world of a few giant companies dominating each big market. [5]
The late 19th and early 20th centuries had been a time of consolidation, led especially by J. P.
Morgan. Thousands of companies run by their founders were merged into a couple hundred
giant ones run by professional managers. Economies of scale ruled the day. It seemed to
people at the time that this was the final state of things. John D. Rockefeller said in 1880 The
day of combination is here to stay. Individualism has gone, never to return. He turned out to be
mistaken, but he seemed right for the next hundred years.
The consolidation that began in the late 19th century continued for most of the 20th. By the end
of World War II, as Michael Lind writes, "the major sectors of the economy were either
organized as government-backed cartels or dominated by a few oligopolistic corporations."
For consumers this new world meant the same choices everywhere, but only a few of them.
When I grew up there were only 2 or 3 of most things, and since they were all aiming at the
middle of the market there wasn't much to differentiate them.
One of the most important instances of this phenomenon was in TV. Here there were 3 choices:
NBC, CBS, and ABC. Plus public TV for eggheads and communists. The programs that the 3
networks offered were indistinguishable. In fact, here there was a triple pressure toward the
center. If one show did try something daring, local affiliates in conservative markets would make
them stop. Plus since TVs were expensive, whole families watched the same shows together,
so they had to be suitable for everyone.
And not only did everyone get the same thing, they got it at the same time. It's difficult to
imagine now, but every night tens of millions of families would sit down together in front of their
TV set watching the same show, at the same time, as their next door neighbors. What happens
now with the Super Bowl used to happen every night. We were literally in sync. [6]
In a way mid-century TV culture was good. The view it gave of the world was like you'd find in a
children's book, and it probably had something of the effect that (parents hope) children's books
have in making people behave better. But, like children's books, TV was also misleading.
Dangerously misleading, for adults. In his autobiography, Robert MacNeil talks of seeing
gruesome images that had just come in from Vietnam and thinking, we can't show these to
families while they're having dinner.
I know how pervasive the common culture was, because I tried to opt out of it, and it was
practically impossible to find alternatives. When I was 13 I realized, more from internal evidence
than any outside source, that the ideas we were being fed on TV were crap, and I stopped
watching it. [7] But it wasn't just TV. It seemed like everything around me was crap. The
politicians all saying the same things, the consumer brands making almost identical products
with different labels stuck on to indicate how prestigious they were meant to be, the balloonframe houses with fake "colonial" skins, the cars with several feet of gratuitous metal on each
end that started to fall apart after a couple years, the "red delicious" apples that were red but
only nominally apples. And in retrospect, it was crap. [8]
But when I went looking for alternatives to fill this void, I found practically nothing. There was no
Internet then. The only place to look was in the chain bookstore in our local shopping mall. [9]
There I found a copy of The Atlantic. I wish I could say it became a gateway into a wider world,
but in fact I found it boring and incomprehensible. Like a kid tasting whisky for the first time and
pretending to like it, I preserved that magazine as carefully as if it had been a book. I'm sure I
still have it somewhere. But though it was evidence that there was, somewhere, a world that
wasn't red delicious, I didn't find it till college.
It wasn't just as consumers that the big companies made us similar. They did as employers too.
Within companies there were powerful forces pushing people toward a single model of how to
look and act. IBM was particularly notorious for this, but they were only a little more extreme
than other big companies. And the models of how to look and act varied little between
companies. Meaning everyone within this world was expected to seem more or less the same.
And not just those in the corporate world, but also everyone who aspired to it — which in the
middle of the 20th century meant most people who weren't already in it. For most of the 20th
century, working-class people tried hard to look middle class. You can see it in old photos. Few
adults aspired to look dangerous in 1950.
But the rise of national corporations didn't just compress us culturally. It compressed us
economically too, and on both ends.
Along with giant national corporations, we got giant national labor unions. And in the mid 20th
century the corporations cut deals with the unions where they paid over market price for labor.
Partly because the unions were monopolies. [10] Partly because, as components of oligopolies
themselves, the corporations knew they could safely pass the cost on to their customers,
because their competitors would have to as well. And partly because in mid-century most of the
giant companies were still focused on finding new ways to milk economies of scale. Just as
startups rightly pay AWS a premium over the cost of running their own servers so they can
focus on growth, many of the big national corporations were willing to pay a premium for labor.
[11]
As well as pushing incomes up from the bottom, by overpaying unions, the big companies of
the 20th century also pushed incomes down at the top, by underpaying their top management.
Economist J. K. Galbraith wrote in 1967 that "There are few corporations in which it would be
suggested that executive salaries are at a maximum." [12]
To some extent this was an illusion. Much of the de facto pay of executives never showed up on
their income tax returns, because it took the form of perks. The higher the rate of income tax,
the more pressure there was to pay employees upstream of it. (In the UK, where taxes were
even higher than in the US, companies would even pay their kids' private school tuitions.) One
of the most valuable things the big companies of the mid 20th century gave their employees
was job security, and this too didn't show up in tax returns or income statistics. So the nature of
employment in these organizations tended to yield falsely low numbers about economic
inequality. But even accounting for that, the big companies paid their best people less than
market price. There was no market; the expectation was that you'd work for the same company
for decades if not your whole career. [13]
Your work was so illiquid there was little chance of getting market price. But that same illiquidity
also encouraged you not to seek it. If the company promised to employ you till you retired and
give you a pension afterward, you didn't want to extract as much from it this year as you could.
You needed to take care of the company so it could take care of you. Especially when you'd
been working with the same group of people for decades. If you tried to squeeze the company
for more money, you were squeezing the organization that was going to take care of them. Plus
if you didn't put the company first you wouldn't be promoted, and if you couldn't switch ladders,
promotion on this one was the only way up. [14]
To someone who'd spent several formative years in the armed forces, this situation didn't seem
as strange as it does to us now. From their point of view, as big company executives, they were
high-ranking officers. They got paid a lot more than privates. They got to have expense account
lunches at the best restaurants and fly around on the company's Gulfstreams. It probably didn't
occur to most of them to ask if they were being paid market price.
The ultimate way to get market price is to work for yourself, by starting your own company. That
seems obvious to any ambitious person now. But in the mid 20th century it was an alien
concept. Not because starting one's own company seemed too ambitious, but because it didn't
seem ambitious enough. Even as late as the 1970s, when I grew up, the ambitious plan was to
get lots of education at prestigious institutions, and then join some other prestigious institution
and work one's way up the hierarchy. Your prestige was the prestige of the institution you
belonged to. People did start their own businesses of course, but educated people rarely did,
because in those days there was practically zero concept of starting what we now call a startup:
a business that starts small and grows big. That was much harder to do in the mid 20th century.
Starting one's own business meant starting a business that would start small and stay small.
Which in those days of big companies often meant scurrying around trying to avoid being
trampled by elephants. It was more prestigious to be one of the executive class riding the
elephant.
By the 1970s, no one stopped to wonder where the big prestigious companies had come from
in the first place. It seemed like they'd always been there, like the chemical elements. And
indeed, there was a double wall between ambitious kids in the 20th century and the origins of
the big companies. Many of the big companies were roll-ups that didn't have clear founders.
And when they did, the founders didn't seem like us. Nearly all of them had been uneducated,
in the sense of not having been to college. They were what Shakespeare called rude
mechanicals. College trained one to be a member of the professional classes. Its graduates
didn't expect to do the sort of grubby menial work that Andrew Carnegie or Henry Ford started
out doing. [15]
And in the 20th century there were more and more college graduates. They increased from
about 2% of the population in 1900 to about 25% in 2000. In the middle of the century our two
big forces intersect, in the form of the GI Bill, which sent 2.2 million World War II veterans to
college. Few thought of it in these terms, but the result of making college the canonical path for
the ambitious was a world in which it was socially acceptable to work for Henry Ford, but not to
be Henry Ford. [16]
I remember this world well. I came of age just as it was starting to break up. In my childhood it
was still dominant. Not quite so dominant as it had been. We could see from old TV shows and
yearbooks and the way adults acted that people in the 1950s and 60s had been even more
conformist than us. The mid-century model was already starting to get old. But that was not how
we saw it at the time. We would at most have said that one could be a bit more daring in 1975
than 1965. And indeed, things hadn't changed much yet.
But change was coming soon. And when the Duplo economy started to disintegrate, it
disintegrated in several different ways at once. Vertically integrated companies literally disintegrated because it was more efficient to. Incumbents faced new competitors as (a) markets
went global and (b) technical innovation started to trump economies of scale, turning size from
an asset into a liability. Smaller companies were increasingly able to survive as formerly narrow
channels to consumers broadened. Markets themselves started to change faster, as whole new
categories of products appeared. And last but not least, the federal government, which had
previously smiled upon J. P. Morgan's world as the natural state of things, began to realize it
wasn't the last word after all.
What J. P. Morgan was to the horizontal axis, Henry Ford was to the vertical. He wanted to do
everything himself. The giant plant he built at River Rouge between 1917 and 1928 literally took
in iron ore at one end and sent cars out the other. 100,000 people worked there. At the time it
seemed the future. But that is not how car companies operate today. Now much of the design
and manufacturing happens in a long supply chain, whose products the car companies
ultimately assemble and sell. The reason car companies operate this way is that it works better.
Each company in the supply chain focuses on what they know best. And they each have to do it
well or they can be swapped out for another supplier.
Why didn't Henry Ford realize that networks of cooperating companies work better than a single
big company? One reason is that supplier networks take a while to evolve. In 1917, doing
everything himself seemed to Ford the only way to get the scale he needed. And the second
reason is that if you want to solve a problem using a network of cooperating companies, you
have to be able to coordinate their efforts, and you can do that much better with computers.
Computers reduce the transaction costs that Coase argued are the raison d'etre of
corporations. That is a fundamental change.
In the early 20th century, big companies were synonymous with efficiency. In the late 20th
century they were synonymous with inefficiency. To some extent this was because the
companies themselves had become sclerotic. But it was also because our standards were
higher.
It wasn't just within existing industries that change occurred. The industries themselves
changed. It became possible to make lots of new things, and sometimes the existing companies
weren't the ones who did it best.
Microcomputers are a classic example. The market was pioneered by upstarts like Apple. When
it got big enough, IBM decided it was worth paying attention to. At the time IBM completely
dominated the computer industry. They assumed that all they had to do, now that this market
was ripe, was to reach out and pick it. Most people at the time would have agreed with them.
But what happened next illustrated how much more complicated the world had become. IBM
did launch a microcomputer. Though quite successful, it did not crush Apple. But even more
importantly, IBM itself ended up being supplanted by a supplier coming in from the side — from
software, which didn't even seem to be the same business. IBM's big mistake was to accept a
non-exclusive license for DOS. It must have seemed a safe move at the time. No other
computer manufacturer had ever been able to outsell them. What difference did it make if other
manufacturers could offer DOS too? The result of that miscalculation was an explosion of
inexpensive PC clones. Microsoft now owned the PC standard, and the customer. And the
microcomputer business ended up being Apple vs Microsoft.
Basically, Apple bumped IBM and then Microsoft stole its wallet. That sort of thing did not
happen to big companies in mid-century. But it was going to happen increasingly often in the
future.
Change happened mostly by itself in the computer business. In other industries, legal obstacles
had to be removed first. Many of the mid-century oligopolies had been anointed by the federal
government with policies (and in wartime, large orders) that kept out competitors. This didn't
seem as dubious to government officials at the time as it sounds to us. They felt a two-party
system ensured sufficient competition in politics. It ought to work for business too.
Gradually the government realized that anti-competitive policies were doing more harm than
good, and during the Carter administration it started to remove them. The word used for this
process was misleadingly narrow: deregulation. What was really happening was deoligopolization. It happened to one industry after another. Two of the most visible to consumers
were air travel and long-distance phone service, which both became dramatically cheaper after
deregulation.
Deregulation also contributed to the wave of hostile takeovers in the 1980s. In the old days the
only limit on the inefficiency of companies, short of actual bankruptcy, was the inefficiency of
their competitors. Now companies had to face absolute rather than relative standards. Any
public company that didn't generate sufficient returns on its assets risked having its
management replaced with one that would. Often the new managers did this by breaking
companies up into components that were more valuable separately. [17]
Version 1 of the national economy consisted of a few big blocks whose relationships were
negotiated in back rooms by a handful of executives, politicians, regulators, and labor leaders.
Version 2 was higher resolution: there were more companies, of more different sizes, making
more different things, and their relationships changed faster. In this world there were still plenty
of back room negotiations, but more was left to market forces. Which further accelerated the
fragmentation.
It's a little misleading to talk of versions when describing a gradual process, but not as
misleading as it might seem. There was a lot of change in a few decades, and what we ended
up with was qualitatively different. The companies in the S&P 500 in 1958 had been there an
average of 61 years. By 2012 that number was 18 years. [18]
The breakup of the Duplo economy happened simultaneously with the spread of computing
power. To what extent were computers a precondition? It would take a book to answer that.
Obviously the spread of computing power was a precondition for the rise of startups. I suspect it
was for most of what happened in finance too. But was it a precondition for globalization or the
LBO wave? I don't know, but I wouldn't discount the possibility. It may be that the
refragmentation was driven by computers in the way the industrial revolution was driven by
steam engines. Whether or not computers were a precondition, they have certainly accelerated
it.
The new fluidity of companies changed people's relationships with their employers. Why climb a
corporate ladder that might be yanked out from under you? Ambitious people started to think of
a career less as climbing a single ladder than as a series of jobs that might be at different
companies. More movement (or even potential movement) between companies introduced
more competition in salaries. Plus as companies became smaller it became easier to estimate
how much an employee contributed to the company's revenue. Both changes drove salaries
toward market price. And since people vary dramatically in productivity, paying market price
meant salaries started to diverge.
By no coincidence it was in the early 1980s that the term "yuppie" was coined. That word is not
much used now, because the phenomenon it describes is so taken for granted, but at the time it
was a label for something novel. Yuppies were young professionals who made lots of money. To
someone in their twenties today, this wouldn't seem worth naming. Why wouldn't young
professionals make lots of money? But until the 1980s, being underpaid early in your career
was part of what it meant to be a professional. Young professionals were paying their dues,
working their way up the ladder. The rewards would come later. What was novel about yuppies
was that they wanted market price for the work they were doing now.
The first yuppies did not work for startups. That was still in the future. Nor did they work for big
companies. They were professionals working in fields like law, finance, and consulting. But their
example rapidly inspired their peers. Once they saw that new BMW 325i, they wanted one too.
Underpaying people at the beginning of their career only works if everyone does it. Once some
employer breaks ranks, everyone else has to, or they can't get good people. And once started
this process spreads through the whole economy, because at the beginnings of people's
careers they can easily switch not merely employers but industries.
But not all young professionals benefitted. You had to produce to get paid a lot. It was no
coincidence that the first yuppies worked in fields where it was easy to measure that.
More generally, an idea was returning whose name sounds old-fashioned precisely because it
was so rare for so long: that you could make your fortune. As in the past there were multiple
ways to do it. Some made their fortunes by creating wealth, and others by playing zero-sum
games. But once it became possible to make one's fortune, the ambitious had to decide
whether or not to. A physicist who chose physics over Wall Street in 1990 was making a
sacrifice that a physicist in 1960 didn't have to think about.
The idea even flowed back into big companies. CEOs of big companies make more now than
they used to, and I think much of the reason is prestige. In 1960, corporate CEOs had immense
prestige. They were the winners of the only economic game in town. But if they made as little
now as they did then, in real dollar terms, they'd seem like small fry compared to professional
athletes and whiz kids making millions from startups and hedge funds. They don't like that idea,
so now they try to get as much as they can, which is more than they had been getting. [19]
Meanwhile a similar fragmentation was happening at the other end of the economic scale. As
big companies' oligopolies became less secure, they were less able to pass costs on to
customers and thus less willing to overpay for labor. And as the Duplo world of a few big blocks
fragmented into many companies of different sizes — some of them overseas — it became
harder for unions to enforce their monopolies. As a result workers' wages also tended toward
market price. Which (inevitably, if unions had been doing their job) tended to be lower. Perhaps
dramatically so, if automation had decreased the need for some kind of work.
And just as the mid-century model induced social as well as economic cohesion, its breakup
brought social as well as economic fragmentation. People started to dress and act differently.
Those who would later be called the "creative class" became more mobile. People who didn't
care much for religion felt less pressure to go to church for appearances' sake, while those who
liked it a lot opted for increasingly colorful forms. Some switched from meat loaf to tofu, and
others to Hot Pockets. Some switched from driving Ford sedans to driving small imported cars,
and others to driving SUVs. Kids who went to private schools or wished they did started to
dress "preppy," and kids who wanted to seem rebellious made a conscious effort to look
disreputable. In a hundred ways people spread apart. [20]
Almost four decades later, fragmentation is still increasing. Has it been net good or bad? I don't
know; the question may be unanswerable. Not entirely bad though. We take for granted the
forms of fragmentation we like, and worry only about the ones we don't. But as someone who
caught the tail end of mid-century conformism, I can tell you it was no utopia. [21]
My goal here is not to say whether fragmentation has been good or bad, just to explain why it's
happening. With the centripetal forces of total war and 20th century oligopoly mostly gone, what
will happen next? And more specifically, is it possible to reverse some of the fragmentation
we've seen?
If it is, it will have to happen piecemeal. You can't reproduce mid-century cohesion the way it
was originally produced. It would be insane to go to war just to induce more national unity. And
once you understand the degree to which the economic history of the 20th century was a lowres version 1, it's clear you can't reproduce that either.
20th century cohesion was something that happened at least in a sense naturally. The war was
due mostly to external forces, and the Duplo economy was an evolutionary phase. If you want
cohesion now, you'd have to induce it deliberately. And it's not obvious how. I suspect the best
we'll be able to do is address the symptoms of fragmentation. But that may be enough.
The form of fragmentation people worry most about lately is economic inequality, and if you
want to eliminate that you're up against a truly formidable headwind that has been in operation
since the stone age. Technology.
Technology is a lever. It magnifies work. And the lever not only grows increasingly long, but the
rate at which it grows is itself increasing.
Which in turn means the variation in the amount of wealth people can create has not only been
increasing, but accelerating. The unusual conditions that prevailed in the mid 20th century
masked this underlying trend. The ambitious had little choice but to join large organizations that
made them march in step with lots of other people — literally in the case of the armed forces,
figuratively in the case of big corporations. Even if the big corporations had wanted to pay
people proportionate to their value, they couldn't have figured out how. But that constraint has
gone now. Ever since it started to erode in the 1970s, we've seen the underlying forces at work
again. [22]
Not everyone who gets rich now does it by creating wealth, certainly. But a significant number
do, and the Baumol Effect means all their peers get dragged along too. [23] And as long as it's
possible to get rich by creating wealth, the default tendency will be for economic inequality to
increase. Even if you eliminate all the other ways to get rich. You can mitigate this with
subsidies at the bottom and taxes at the top, but unless taxes are high enough to discourage
people from creating wealth, you're always going to be fighting a losing battle against
increasing variation in productivity. [24]
That form of fragmentation, like the others, is here to stay. Or rather, back to stay. Nothing is
forever, but the tendency toward fragmentation should be more forever than most things,
precisely because it's not due to any particular cause. It's simply a reversion to the mean. When
Rockefeller said individualism was gone, he was right for a hundred years. It's back now, and
that's likely to be true for longer.
I worry that if we don't acknowledge this, we're headed for trouble. If we think 20th century
cohesion disappeared because of few policy tweaks, we'll be deluded into thinking we can get it
back (minus the bad parts, somehow) with a few countertweaks. And then we'll waste our time
trying to eliminate fragmentation, when we'd be better off thinking about how to mitigate its
consequences.
Notes:
[1] Lester Thurow, writing in 1975, said the wage differentials prevailing at the end of World War II had become so
embedded that they "were regarded as 'just' even after the egalitarian pressures of World War II had disappeared.
Basically, the same differentials exist to this day, thirty years later." But Goldin and Margo think market forces in the
postwar period also helped preserve the wartime compression of wages — specifically increased demand for
unskilled workers, and oversupply of educated ones.
(Oddly enough, the American custom of having employers pay for health insurance derives from efforts by
businesses to circumvent NWLB wage controls in order to attract workers.)
[2] As always, tax rates don't tell the whole story. There were lots of exemptions, especially for individuals. And in
World War II the tax codes were so new that the government had little acquired immunity to tax avoidance. If the rich
paid high taxes during the war it was more because they wanted to than because they had to.
After the war, federal tax receipts as a percentage of GDP were about the same as they are now. In fact, for the
entire period since the war, tax receipts have stayed close to 18% of GDP, despite dramatic changes in tax rates. The
lowest point occurred when marginal income tax rates were highest: 14.1% in 1950. Looking at the data, it's hard to
avoid the conclusion that tax rates have had little effect on what people actually paid.
[3] Though in fact the decade preceding the war had been a time of unprecedented federal power, in response to the
Depression. Which is not entirely a coincidence, because the Depression was one of the causes of the war. In many
ways the New Deal was a sort of dress rehearsal for the measures the federal government took during wartime. The
wartime versions were much more drastic and more pervasive though. As Anthony Badger wrote, "for many
Americans the decisive change in their experiences came not with the New Deal but with World War II."
[4] I don't know enough about the origins of the world wars to say, but it's not inconceivable they were connected to
the rise of big corporations. If that were the case, 20th century cohesion would have a single cause.
[5] More precisely, there was a bimodal economy consisting, in Galbraith's words, of "the world of the technically
dynamic, massively capitalized and highly organized corporations on the one hand and the hundreds of thousands of
small and traditional proprietors on the other." Money, prestige, and power were concentrated in the former, and there
was near zero crossover.
[6] I wonder how much of the decline in families eating together was due to the decline in families watching TV
together afterward.
[7] I know when this happened because it was the season Dallas premiered. Everyone else was talking about what
was happening on Dallas, and I had no idea what they meant.
[8] I didn't realize it till I started doing research for this essay, but the meretriciousness of the products I grew up with
is a well-known byproduct of oligopoly. When companies can't compete on price, they compete on tailfins.
[9] Monroeville Mall was at the time of its completion in 1969 the largest in the country. In the late 1970s the movie
Dawn of the Dead was shot there. Apparently the mall was not just the location of the movie, but its inspiration; the
crowds of shoppers drifting through this huge mall reminded George Romero of zombies. My first job was scooping
ice cream in the Baskin-Robbins.
[10] Labor unions were exempted from antitrust laws by the Clayton Antitrust Act in 1914 on the grounds that a
person's work is not "a commodity or article of commerce." I wonder if that means service companies are also
exempt.
[11] The relationships between unions and unionized companies can even be symbiotic, because unions will exert
political pressure to protect their hosts. According to Michael Lind, when politicians tried to attack the A&P
supermarket chain because it was putting local grocery stores out of business, "A&P successfully defended itself by
allowing the unionization of its workforce in 1938, thereby gaining organized labor as a constituency." I've seen this
phenomenon myself: hotel unions are responsible for more of the political pressure against Airbnb than hotel
companies.
[12] Galbraith was clearly puzzled that corporate executives would work so hard to make money for other people (the
shareholders) instead of themselves. He devoted much of The New Industrial State to trying to figure this out.
His theory was that professionalism had replaced money as a motive, and that modern corporate executives were,
like (good) scientists, motivated less by financial rewards than by the desire to do good work and thereby earn the
respect of their peers. There is something in this, though I think lack of movement between companies combined with
self-interest explains much of observed behavior.
[13] Galbraith (p. 94) says a 1952 study of the 800 highest paid executives at 300 big corporations found that three
quarters of them had been with their company for more than 20 years.
[14] It seems likely that in the first third of the 20th century executive salaries were low partly because companies
then were more dependent on banks, who would have disapproved if executives got too much. This was certainly
true in the beginning. The first big company CEOs were J. P. Morgan's hired hands.
Companies didn't start to finance themselves with retained earnings till the 1920s. Till then they had to pay out their
earnings in dividends, and so depended on banks for capital for expansion. Bankers continued to sit on corporate
boards till the Glass-Steagall act in 1933.
By mid-century big companies funded 3/4 of their growth from earnings. But the early years of bank dependence,
reinforced by the financial controls of World War II, must have had a big effect on social conventions about executive
salaries. So it may be that the lack of movement between companies was as much the effect of low salaries as the
cause.
Incidentally, the switch in the 1920s to financing growth with retained earnings was one cause of the 1929 crash. The
banks now had to find someone else to lend to, so they made more margin loans.
[15] Even now it's hard to get them to. One of the things I find hardest to get into the heads of would-be startup
founders is how important it is to do certain kinds of menial work early in the life of a company. Doing things that don't
scale is to how Henry Ford got started as a high-fiber diet is to the traditional peasant's diet: they had no choice but
to do the right thing, while we have to make a conscious effort.
[16] Founders weren't celebrated in the press when I was a kid. "Our founder" meant a photograph of a severelooking man with a walrus mustache and a wing collar who had died decades ago. The thing to be when I was a kid
was an executive. If you weren't around then it's hard to grasp the cachet that term had. The fancy version of
everything was called the "executive" model.
[17] The wave of hostile takeovers in the 1980s was enabled by a combination of circumstances: court decisions
striking down state anti-takeover laws, starting with the Supreme Court's 1982 decision in Edgar v. MITE Corp.; the
Reagan administration's comparatively sympathetic attitude toward takeovers; the Depository Institutions Act of
1982, which allowed banks and savings and loans to buy corporate bonds; a new SEC rule issued in 1982 (rule 415)
that made it possible to bring corporate bonds to market faster; the creation of the junk bond business by Michael
Milken; a vogue for conglomerates in the preceding period that caused many companies to be combined that never
should have been; a decade of inflation that left many public companies trading below the value of their assets; and
not least, the increasing complacency of managements.
[18] Foster, Richard. "Creative Destruction Whips through Corporate America." Innosight, February 2012.
[19] CEOs of big companies may be overpaid. I don't know enough about big companies to say. But it is certainly not
impossible for a CEO to make 200x as much difference to a company's revenues as the average employee. Look at
what Steve Jobs did for Apple when he came back as CEO. It would have been a good deal for the board to give him
95% of the company. Apple's market cap the day Steve came back in July 1997 was 1.73 billion. 5% of Apple now
(January 2016) would be worth about 30 billion. And it would not be if Steve hadn't come back; Apple probably
wouldn't even exist anymore.
Merely including Steve in the sample might be enough to answer the question of whether public company CEOs in
the aggregate are overpaid. And that is not as facile a trick as it might seem, because the broader your holdings, the
more the aggregate is what you care about.
[20] The late 1960s were famous for social upheaval. But that was more rebellion (which can happen in any era if
people are provoked sufficiently) than fragmentation. You're not seeing fragmentation unless you see people
breaking off to both left and right.
[21] Globally the trend has been in the other direction. While the US is becoming more fragmented, the world as a
whole is becoming less fragmented, and mostly in good ways.
[22] There were a handful of ways to make a fortune in the mid 20th century. The main one was drilling for oil, which
was open to newcomers because it was not something big companies could dominate through economies of scale.
How did individuals accumulate large fortunes in an era of such high taxes? Giant tax loopholes defended by two of
the most powerful men in Congress, Sam Rayburn and Lyndon Johnson.
But becoming a Texas oilman was not in 1950 something one could aspire to the way starting a startup or going to
work on Wall Street were in 2000, because (a) there was a strong local component and (b) success depended so
much on luck.
[23] The Baumol Effect induced by startups is very visible in Silicon Valley. Google will pay people millions of dollars a
year to keep them from leaving to start or join startups.
[24] I'm not claiming variation in productivity is the only cause of economic inequality in the US. But it's a significant
cause, and it will become as big a cause as it needs to, in the sense that if you ban other ways to get rich, people
who want to get rich will use this route instead.
Thanks to Sam Altman, Trevor Blackwell, Paul Buchheit, Patrick Collison, Ron Conway, Chris Dixon, Benedict Evans,
Richard Florida, Ben Horowitz, Jessica Livingston, Robert Morris, Tim O'Reilly, Geoff Ralston, Max Roser, Alexia
Tsotsis, and Qasar Younis for reading drafts of this. Max also told me about several valuable sources.
Bibliography
Allen, Frederick Lewis. The Big Change. Harper, 1952.
Averitt, Robert. The Dual Economy. Norton, 1968.
Badger, Anthony. The New Deal. Hill and Wang, 1989.
Bainbridge, John. The Super-Americans. Doubleday, 1961.
Beatty, Jack. Collossus. Broadway, 2001.
Brinkley, Douglas. Wheels for the World. Viking, 2003.
Brownleee, W. Elliot. Federal Taxation in America. Cambridge, 1996.
Chandler, Alfred. The Visible Hand. Harvard, 1977.
Chernow, Ron. The House of Morgan. Simon & Schuster, 1990.
Chernow, Ron. Titan: The Life of John D. Rockefeller. Random House, 1998.
Galbraith, John. The New Industrial State. Houghton Mifflin, 1967.
Goldin, Claudia and Robert A. Margo. "The Great Compression: The Wage Structure in the United States at MidCentury." NBER Working Paper 3817, 1991.
Gordon, John. An Empire of Wealth. HarperCollins, 2004.
Klein, Maury. The Genesis of Industrial America, 1870-1920. Cambridge, 2007.
Lind, Michael. Land of Promise. HarperCollins, 2012.
Mickelthwaite, John, and Adrian Wooldridge. The Company. Modern Library, 2003.
Nasaw, David. Andrew Carnegie. Penguin, 2006.
Sobel, Robert. The Age of Giant Corporations. Praeger, 1993.
Thurow, Lester. Generating Inequality: Mechanisms of Distribution. Basic Books, 1975.
Witte, John. The Politics and Development of the Federal Income Tax. Wisconsin, 1985.
Related:
Jessica Livingston - # 171
November 2015
A few months ago an article about Y Combinator said that early on it had been a "one-man
show." It's sadly common to read that sort of thing. But the problem with that description is not
just that it's unfair. It's also misleading. Much of what's most novel about YC is due to Jessica
Livingston. If you don't understand her, you don't understand YC. So let me tell you a little about
Jessica.
YC had 4 founders. Jessica and I decided one night to start it, and the next day we recruited my
friends Robert Morris and Trevor Blackwell. Jessica and I ran YC day to day, and Robert and
Trevor read applications and did interviews with us.
Jessica and I were already dating when we started YC. At first we tried to act "professional"
about this, meaning we tried to conceal it. In retrospect that seems ridiculous, and we soon
dropped the pretense. And the fact that Jessica and I were a couple is a big part of what made
YC what it was. YC felt like a family. The founders early on were mostly young. We all had
dinner together once a week, cooked for the first couple years by me. Our first building had
been a private home. The overall atmosphere was shockingly different from a VC's office on
Sand Hill Road, in a way that was entirely for the better. There was an authenticity that
everyone who walked in could sense. And that didn't just mean that people trusted us. It was
the perfect quality to instill in startups. Authenticity is one of the most important things YC looks
for in founders, not just because fakers and opportunists are annoying, but because authenticity
is one of the main things that separates the most successful startups from the rest.
Early YC was a family, and Jessica was its mom. And the culture she defined was one of YC's
most important innovations. Culture is important in any organization, but at YC culture wasn't
just how we behaved when we built the product. At YC, the culture was the product.
Jessica was also the mom in another sense: she had the last word. Everything we did as an
organization went through her first — who to fund, what to say to the public, how to deal with
other companies, who to hire, everything.
Before we had kids, YC was more or less our life. There was no real distinction between
working hours and not. We talked about YC all the time. And while there might be some
businesses that it would be tedious to let infect your private life, we liked it. We'd started YC
because it was something we were interested in. And some of the problems we were trying to
solve were endlessly difficult. How do you recognize good founders? You could talk about that
for years, and we did; we still do.
I'm better at some things than Jessica, and she's better at some things than me. One of the
things she's best at is judging people. She's one of those rare individuals with x-ray vision for
character. She can see through any kind of faker almost immediately. Her nickname within YC
was the Social Radar, and this special power of hers was critical in making YC what it is. The
earlier you pick startups, the more you're picking the founders. Later stage investors get to try
products and look at growth numbers. At the stage where YC invests, there is often neither a
product nor any numbers.
Others thought YC had some special insight about the future of technology. Mostly we had the
same sort of insight Socrates claimed: we at least knew we knew nothing. What made YC
successful was being able to pick good founders. We thought Airbnb was a bad idea. We
funded it because we liked the founders.
During interviews, Robert and Trevor and I would pepper the applicants with technical
questions. Jessica would mostly watch. A lot of the applicants probably read her as some kind
of secretary, especially early on, because she was the one who'd go out and get each new
group and she didn't ask many questions. She was ok with that. It was easier for her to watch
people if they didn't notice her. But after the interview, the three of us would turn to Jessica and
ask "What does the Social Radar say?" [1]
Having the Social Radar at interviews wasn't just how we picked founders who'd be successful.
It was also how we picked founders who were good people. At first we did this because we
couldn't help it. Imagine what it would feel like to have x-ray vision for character. Being around
bad people would be intolerable. So we'd refuse to fund founders whose characters we had
doubts about even if we thought they'd be successful.
Though we initially did this out of self-indulgence, it turned out to be very valuable to YC. We
didn't realize it in the beginning, but the people we were picking would become the YC alumni
network. And once we picked them, unless they did something really egregious, they were
going to be part of it for life. Some now think YC's alumni network is its most valuable feature. I
personally think YC's advice is pretty good too, but the alumni network is certainly among the
most valuable features. The level of trust and helpfulness is remarkable for a group of such size.
And Jessica is the main reason why.
(As we later learned, it probably cost us little to reject people whose characters we had doubts
about, because how good founders are and how well they do are not orthogonal. If bad
founders succeed at all, they tend to sell early. The most successful founders are almost all
good.)
If Jessica was so important to YC, why don't more people realize it? Partly because I'm a writer,
and writers always get disproportionate attention. YC's brand was initially my brand, and our
applicants were people who'd read my essays. But there is another reason: Jessica hates
attention. Talking to reporters makes her nervous. The thought of giving a talk paralyzes her.
She was even uncomfortable at our wedding, because the bride is always the center of
attention. [2]
It's not just because she's shy that she hates attention, but because it throws off the Social
Radar. She can't be herself. You can't watch people when everyone is watching you.
Another reason attention worries her is that she hates bragging. In anything she does that's
publicly visible, her biggest fear (after the obvious fear that it will be bad) is that it will seem
ostentatious. She says being too modest is a common problem for women. But in her case it
goes beyond that. She has a horror of ostentation so visceral it's almost a phobia.
She also hates fighting. She can't do it; she just shuts down. And unfortunately there is a good
deal of fighting in being the public face of an organization.
So although Jessica more than anyone made YC unique, the very qualities that enabled her to
do it mean she tends to get written out of YC's history. Everyone buys this story that PG started
YC and his wife just kind of helped. Even YC's haters buy it. A couple years ago when people
were attacking us for not funding more female founders (than exist), they all treated YC as
identical with PG. It would have spoiled the narrative to acknowledge Jessica's central role at
YC.
Jessica was boiling mad that people were accusing her company of sexism. I've never seen her
angrier about anything. But she did not contradict them. Not publicly. In private there was a
great deal of profanity. And she wrote three separate essays about the question of female
founders. But she could never bring herself to publish any of them. She'd seen the level of vitriol
in this debate, and she shrank from engaging. [3]
It wasn't just because she disliked fighting. She's so sensitive to character that it repels her
even to fight with dishonest people. The idea of mixing it up with linkbait journalists or Twitter
trolls would seem to her not merely frightening, but disgusting.
But Jessica knew her example as a successful female founder would encourage more women
to start companies, so last year she did something YC had never done before and hired a PR
firm to get her some interviews. At one of the first she did, the reporter brushed aside her
insights about startups and turned it into a sensationalistic story about how some guy had tried
to chat her up as she was waiting outside the bar where they had arranged to meet. Jessica
was mortified, partly because the guy had done nothing wrong, but more because the story
treated her as a victim significant only for being a woman, rather than one of the most
knowledgeable investors in the Valley.
After that she told the PR firm to stop.
You're not going to be hearing in the press about what Jessica has achieved. So let me tell you
what Jessica has achieved. Y Combinator is fundamentally a nexus of people, like a university.
It doesn't make a product. What defines it is the people. Jessica more than anyone curated and
nurtured that collection of people. In that sense she literally made YC.
Jessica knows more about the qualities of startup founders than anyone else ever has. Her
immense data set and x-ray vision are the perfect storm in that respect. The qualities of the
founders are the best predictor of how a startup will do. And startups are in turn the most
important source of growth in mature economies.
The person who knows the most about the most important factor in the growth of mature
economies — that is who Jessica Livingston is. Doesn't that sound like someone who should be
better known?
Notes:
[1] Harj Taggar reminded me that while Jessica didn't ask many questions, they tended to be important ones:
"She was always good at sniffing out any red flags about the team or their determination and disarmingly asking the
right question, which usually revealed more than the founders realized."
[2] Or more precisely, while she likes getting attention in the sense of getting credit for what she has done, she
doesn't like getting attention in the sense of being watched in real time. Unfortunately, not just for her but for a lot of
people, how much you get of the former depends a lot on how much you get of the latter.
Incidentally, if you saw Jessica at a public event, you would never guess she hates attention, because (a) she is very
polite and (b) when she's nervous, she expresses it by smiling more.
[3] The existence of people like Jessica is not just something the mainstream media needs to learn to acknowledge,
but something feminists need to learn to acknowledge as well. There are successful women who don't like to fight.
Which means if the public conversation about women consists of fighting, their voices will be silenced.
There's a sort of Gresham's Law of conversations. If a conversation reaches a certain level of incivility, the more
thoughtful people start to leave. No one understands female founders better than Jessica. But it's unlikely anyone will
ever hear her speak candidly about the topic. She ventured a toe in that water a while ago, and the reaction was so
violent that she decided "never again."
Thanks to Sam Altman, Paul Buchheit, Patrick Collison, Daniel Gackle, Carolynn Levy, Jon Levy, Kirsty Nathoo,
Robert Morris, Geoff Ralston, and Harj Taggar for reading drafts of this. And yes, Jessica Livingston, who made me
cut surprisingly little.
A Way to Detect Bias - # 170
October 2015
This will come as a surprise to a lot of people, but in some cases it's possible to detect bias in a
selection process without knowing anything about the applicant pool. Which is exciting because
among other things it means third parties can use this technique to detect bias whether those
doing the selecting want them to or not.
You can use this technique whenever (a) you have at least a random sample of the applicants
that were selected, (b) their subsequent performance is measured, and (c) the groups of
applicants you're comparing have roughly equal distribution of ability.
How does it work? Think about what it means to be biased. What it means for a selection
process to be biased against applicants of type x is that it's harder for them to make it through.
Which means applicants of type x have to be better to get selected than applicants not of type
x. [1] Which means applicants of type x who do make it through the selection process will
outperform other successful applicants. And if the performance of all the successful applicants
is measured, you'll know if they do.
Of course, the test you use to measure performance must be a valid one. And in particular it
must not be invalidated by the bias you're trying to measure. But there are some domains
where performance can be measured, and in those detecting bias is straightforward. Want to
know if the selection process was biased against some type of applicant? Check whether they
outperform the others. This is not just a heuristic for detecting bias. It's what bias means.
For example, many suspect that venture capital firms are biased against female founders. This
would be easy to detect: among their portfolio companies, do startups with female founders
outperform those without? A couple months ago, one VC firm (almost certainly unintentionally)
published a study showing bias of this type. First Round Capital found that among its portfolio
companies, startups with female founders outperformed those without by 63%. [2]
The reason I began by saying that this technique would come as a surprise to many people is
that we so rarely see analyses of this type. I'm sure it will come as a surprise to First Round
that they performed one. I doubt anyone there realized that by limiting their sample to their own
portfolio, they were producing a study not of startup trends but of their own biases when
selecting companies.
I predict we'll see this technique used more in the future. The information needed to conduct
such studies is increasingly available. Data about who applies for things is usually closely
guarded by the organizations selecting them, but nowadays data about who gets selected is
often publicly available to anyone who takes the trouble to aggregate it.
Notes:
[1] This technique wouldn't work if the selection process looked for different things from different types of applicants—
for example, if an employer hired men based on their ability but women based on their appearance.
[2] As Paul Buchheit points out, First Round excluded their most successful investment, Uber, from the study. And
while it makes sense to exclude outliers from some types of studies, studies of returns from startup investing, which
is all about hitting outliers, are not one of them.
Thanks to Sam Altman, Jessica Livingston, and Geoff Ralston for reading drafts of this.
Write Like You Talk - # 169
October 2015
Here's a simple trick for getting more people to read what you write: write in spoken language.
Something comes over most people when they start writing. They write in a different language
than they'd use if they were talking to a friend. The sentence structure and even the words are
different. No one uses "pen" as a verb in spoken English. You'd feel like an idiot using "pen"
instead of "write" in a conversation with a friend.
The last straw for me was a sentence I read a couple days ago: The mercurial Spaniard himself
declared: "After Altamira, all is decadence." It's from Neil Oliver's A History of Ancient Britain. I
feel bad making an example of this book, because it's no worse than lots of others. But just
imagine calling Picasso "the mercurial Spaniard" when talking to a friend. Even one sentence of
this would raise eyebrows in conversation. And yet people write whole books of it.
Ok, so written and spoken language are different. Does that make written language worse?
If you want people to read and understand what you write, yes. Written language is more
complex, which makes it more work to read. It's also more formal and distant, which gives the
reader's attention permission to drift. But perhaps worst of all, the complex sentences and fancy
words give you, the writer, the false impression that you're saying more than you actually are.
You don't need complex sentences to express complex ideas. When specialists in some
abstruse topic talk to one another about ideas in their field, they don't use sentences any more
complex than they do when talking about what to have for lunch. They use different words,
certainly. But even those they use no more than necessary. And in my experience, the harder
the subject, the more informally experts speak. Partly, I think, because they have less to prove,
and partly because the harder the ideas you're talking about, the less you can afford to let
language get in the way.
Informal language is the athletic clothing of ideas.
I'm not saying spoken language always works best. Poetry is as much music as text, so you can
say things you wouldn't say in conversation. And there are a handful of writers who can get
away with using fancy language in prose. And then of course there are cases where writers
don't want to make it easy to understand what they're saying—in corporate announcements of
bad news, for example, or at the more bogus end of the humanities. But for nearly everyone
else, spoken language is better.
It seems to be hard for most people to write in spoken language. So perhaps the best solution
is to write your first draft the way you usually would, then afterward look at each sentence and
ask "Is this the way I'd say this if I were talking to a friend?" If it isn't, imagine what you would
say, and use that instead. After a while this filter will start to operate as you write. When you
write something you wouldn't say, you'll hear the clank as it hits the page.
Before I publish a new essay, I read it out loud and fix everything that doesn't sound like
conversation. I even fix bits that are phonetically awkward; I don't know if that's necessary, but it
doesn't cost much.
This trick may not always be enough. I've seen writing so far removed from spoken language
that it couldn't be fixed sentence by sentence. For cases like that there's a more drastic solution.
After writing the first draft, try explaining to a friend what you just wrote. Then replace the draft
with what you said to your friend.
People often tell me how much my essays sound like me talking. The fact that this seems
worthy of comment shows how rarely people manage to write in spoken language. Otherwise
everyone's writing would sound like them talking.
If you simply manage to write in spoken language, you'll be ahead of 95% of writers. And it's so
easy to do: just don't let a sentence through unless it's the way you'd say it to a friend.
Thanks to Patrick Collison and Jessica Livingston for reading drafts of this.
Default Alive or Default Dead- - # 168
October 2015
When I talk to a startup that's been operating for more than 8 or 9 months, the first thing I want
to know is almost always the same. Assuming their expenses remain constant and their
revenue growth is what it has been over the last several months, do they make it to profitability
on the money they have left? Or to put it more dramatically, by default do they live or die?
The startling thing is how often the founders themselves don't know. Half the founders I talk to
don't know whether they're default alive or default dead.
If you're among that number, Trevor Blackwell has made a handy calculator you can use to find
out.
The reason I want to know first whether a startup is default alive or default dead is that the rest
of the conversation depends on the answer. If the company is default alive, we can talk about
ambitious new things they could do. If it's default dead, we probably need to talk about how to
save it. We know the current trajectory ends badly. How can they get off that trajectory?
Why do so few founders know whether they're default alive or default dead? Mainly, I think,
because they're not used to asking that. It's not a question that makes sense to ask early on,
any more than it makes sense to ask a 3 year old how he plans to support himself. But as the
company grows older, the question switches from meaningless to critical. That kind of switch
often takes people by surprise.
I propose the following solution: instead of starting to ask too late whether you're default alive or
default dead, start asking too early. It's hard to say precisely when the question switches
polarity. But it's probably not that dangerous to start worrying too early that you're default dead,
whereas it's very dangerous to start worrying too late.
The reason is a phenomenon I wrote about earlier: the fatal pinch. The fatal pinch is default
dead + slow growth + not enough time to fix it. And the way founders end up in it is by not
realizing that's where they're headed.
There is another reason founders don't ask themselves whether they're default alive or default
dead: they assume it will be easy to raise more money. But that assumption is often false, and
worse still, the more you depend on it, the falser it becomes.
Maybe it will help to separate facts from hopes. Instead of thinking of the future with vague
optimism, explicitly separate the components. Say "We're default dead, but we're counting on
investors to save us." Maybe as you say that, it will set off the same alarms in your head that it
does in mine. And if you set off the alarms sufficiently early, you may be able to avoid the fatal
pinch.
It would be safe to be default dead if you could count on investors saving you. As a rule their
interest is a function of growth. If you have steep revenue growth, say over 5x a year, you can
start to count on investors being interested even if you're not profitable. [1] But investors are so
fickle that you can never do more than start to count on them. Sometimes something about your
business will spook investors even if your growth is great. So no matter how good your growth
is, you can never safely treat fundraising as more than a plan A. You should always have a plan
B as well: you should know (as in write down) precisely what you'll need to do to survive if you
can't raise more money, and precisely when you'll have to switch to plan B if plan A isn't working.
In any case, growing fast versus operating cheaply is far from the sharp dichotomy many
founders assume it to be. In practice there is surprisingly little connection between how much a
startup spends and how fast it grows. When a startup grows fast, it's usually because the
product hits a nerve, in the sense of hitting some big need straight on. When a startup spends a
lot, it's usually because the product is expensive to develop or sell, or simply because they're
wasteful.
If you're paying attention, you'll be asking at this point not just how to avoid the fatal pinch, but
how to avoid being default dead. That one is easy: don't hire too fast. Hiring too fast is by far the
biggest killer of startups that raise money. [2]
Founders tell themselves they need to hire in order to grow. But most err on the side of
overestimating this need rather than underestimating it. Why? Partly because there's so much
work to do. Naive founders think that if they can just hire enough people, it will all get done.
Partly because successful startups have lots of employees, so it seems like that's what one
does in order to be successful. In fact the large staffs of successful startups are probably more
the effect of growth than the cause. And partly because when founders have slow growth they
don't want to face what is usually the real reason: the product is not appealing enough.
Plus founders who've just raised money are often encouraged to overhire by the VCs who
funded them. Kill-or-cure strategies are optimal for VCs because they're protected by the
portfolio effect. VCs want to blow you up, in one sense of the phrase or the other. But as a
founder your incentives are different. You want above all to survive. [3]
Here's a common way startups die. They make something moderately appealing and have
decent initial growth. They raise their first round fairly easily, because the founders seem smart
and the idea sounds plausible. But because the product is only moderately appealing, growth is
ok but not great. The founders convince themselves that hiring a bunch of people is the way to
boost growth. Their investors agree. But (because the product is only moderately appealing) the
growth never comes. Now they're rapidly running out of runway. They hope further investment
will save them. But because they have high expenses and slow growth, they're now
unappealing to investors. They're unable to raise more, and the company dies.
What the company should have done is address the fundamental problem: that the product is
only moderately appealing. Hiring people is rarely the way to fix that. More often than not it
makes it harder. At this early stage, the product needs to evolve more than to be "built out," and
that's usually easier with fewer people. [4]
Asking whether you're default alive or default dead may save you from this. Maybe the alarm
bells it sets off will counteract the forces that push you to overhire. Instead you'll be compelled
to seek growth in other ways. For example, by doing things that don't scale, or by redesigning
the product in the way only founders can. And for many if not most startups, these paths to
growth will be the ones that actually work.
Airbnb waited 4 months after raising money at the end of Y Combinator before they hired their
first employee. In the meantime the founders were terribly overworked. But they were
overworked evolving Airbnb into the astonishingly successful organism it is now.
Notes:
[1] Steep usage growth will also interest investors. Revenue will ultimately be a constant multiple of usage, so x%
usage growth predicts x% revenue growth. But in practice investors discount merely predicted revenue, so if you're
measuring usage you need a higher growth rate to impress investors.
[2] Startups that don't raise money are saved from hiring too fast because they can't afford to. But that doesn't mean
you should avoid raising money in order to avoid this problem, any more than that total abstinence is the only way to
avoid becoming an alcoholic.
[3] I would not be surprised if VCs' tendency to push founders to overhire is not even in their own interest. They don't
know how many of the companies that get killed by overspending might have done well if they'd survived. My guess
is a significant number.
[4] After reading a draft, Sam Altman wrote:
"I think you should make the hiring point more strongly. I think it's roughly correct to say that YC's most successful
companies have never been the fastest to hire, and one of the marks of a great founder is being able to resist this
urge."
Paul Buchheit adds:
"A related problem that I see a lot is premature scaling—founders take a small business that isn't really working (bad
unit economics, typically) and then scale it up because they want impressive growth numbers. This is similar to overhiring in that it makes the business much harder to fix once it's big, plus they are bleeding cash really fast."
Thanks to Sam Altman, Paul Buchheit, Joe Gebbia, Jessica Livingston, and Geoff Ralston for reading drafts of this.
Why It-s Safe for Founders to Be Nice - # 167
August 2015
I recently got an email from a founder that helped me understand something important: why it's
safe for startup founders to be nice people.
I grew up with a cartoon idea of a very successful businessman (in the cartoon it was always a
man): a rapacious, cigar-smoking, table-thumping guy in his fifties who wins by exercising
power, and isn't too fussy about how. As I've written before, one of the things that has surprised
me most about startups is how few of the most successful founders are like that. Maybe
successful people in other industries are; I don't know; but not startup founders. [1]
I knew this empirically, but I never saw the math of why till I got this founder's email. In it he said
he worried that he was fundamentally soft-hearted and tended to give away too much for free.
He thought perhaps he needed "a little dose of sociopath-ness."
I told him not to worry about it, because so long as he built something good enough to spread
by word of mouth, he'd have a superlinear growth curve. If he was bad at extracting money from
people, at worst this curve would be some constant multiple less than 1 of what it might have
been. But a constant multiple of any curve is exactly the same shape. The numbers on the Y
axis are smaller, but the curve is just as steep, and when anything grows at the rate of a
successful startup, the Y axis will take care of itself.
Some examples will make this clear. Suppose your company is making $1000 a month now,
and you've made something so great that it's growing at 5% a week. Two years from now, you'll
be making about $160k a month.
Now suppose you're so un-rapacious that you only extract half as much from your users as you
could. That means two years later you'll be making $80k a month instead of $160k. How far
behind are you? How long will it take to catch up with where you'd have been if you were
extracting every penny? A mere 15 weeks. After two years, the un-rapacious founder is only 3.5
months behind the rapacious one. [2]
If you're going to optimize a number, the one to choose is your growth rate. Suppose as before
that you only extract half as much from users as you could, but that you're able to grow 6% a
week instead of 5%. Now how are you doing compared to the rapacious founder after two
years? You're already ahead—$214k a month versus $160k—and pulling away fast. In another
year you'll be making $4.4 million a month to the rapacious founder's $2 million.
Obviously one case where it would help to be rapacious is when growth depends on that. What
makes startups different is that usually it doesn't. Startups usually win by making something so
great that people recommend it to their friends. And being rapacious not only doesn't help you
do that, but probably hurts. [3]
The reason startup founders can safely be nice is that making great things is compounded, and
rapacity isn't.
So if you're a founder, here's a deal you can make with yourself that will both make you happy
and make your company successful. Tell yourself you can be as nice as you want, so long as
you work hard on your growth rate to compensate. Most successful startups make that tradeoff
unconsciously. Maybe if you do it consciously you'll do it even better.
Notes:
[1] Many think successful startup founders are driven by money. In fact the secret weapon of the most successful
founders is that they aren't. If they were, they'd have taken one of the acquisition offers that every fast-growing
startup gets on the way up. What drives the most successful founders is the same thing that drives most people who
make things: the company is their project.
[2] In fact since 2 "H 1.05 ^ 15, the un-rapacious founder is always 15 weeks behind the rapacious one.
[3] The other reason it might help to be good at squeezing money out of customers is that startups usually lose
money at first, and making more per customer makes it easier to get to profitability before your initial funding runs
out. But while it is very common for startups to die from running through their initial funding and then being unable to
raise more, the underlying cause is usually slow growth or excessive spending rather than insufficient effort to extract
money from existing customers.
Thanks to Sam Altman, Harj Taggar, Jessica Livingston, and Geoff Ralston for reading drafts of this, and to Randall
Bennett for being such a nice guy.
Change Your Name - # 166
August 2015
If you have a US startup called X and you don't have x.com, you should probably change your
name.
The reason is not just that people can't find you. For companies with mobile apps, especially,
having the right domain name is not as critical as it used to be for getting users. The problem
with not having the .com of your name is that it signals weakness. Unless you're so big that your
reputation precedes you, a marginal domain suggests you're a marginal company. Whereas (as
Stripe shows) having x.com signals strength even if it has no relation to what you do.
Even good founders can be in denial about this. Their denial derives from two very powerful
forces: identity, and lack of imagination.
X is what we are, founders think. There's no other name as good. Both of which are false.
You can fix the first by stepping back from the problem. Imagine you'd called your company
something else. If you had, surely you'd be just as attached to that name as you are to your
current one. The idea of switching to your current name would seem repellent. [1]
There's nothing intrinsically great about your current name. Nearly all your attachment to it
comes from it being attached to you. [2]
The way to neutralize the second source of denial, your inability to think of other potential
names, is to acknowledge that you're bad at naming. Naming is a completely separate skill from
those you need to be a good founder. You can be a great startup founder but hopeless at
thinking of names for your company.
Once you acknowledge that, you stop believing there is nothing else you could be called. There
are lots of other potential names that are as good or better; you just can't think of them.
How do you find them? One answer is the default way to solve problems you're bad at: find
someone else who can think of names. But with company names there is another possible
approach. It turns out almost any word or word pair that is not an obviously bad name is a
sufficiently good one, and the number of such domains is so large that you can find plenty that
are cheap or even untaken. So make a list and try to buy some. That's what Stripe did. (Their
search also turned up parse.com, which their friends at Parse took.)
The reason I know that naming companies is a distinct skill orthogonal to the others you need
in a startup is that I happen to have it. Back when I was running YC and did more office hours
with startups, I would often help them find new names. 80% of the time we could find at least
one good name in a 20 minute office hour slot.
Now when I do office hours I have to focus on more important questions, like what the company
is doing. I tell them when they need to change their name. But I know the power of the forces
that have them in their grip, so I know most won't listen. [3]
There are of course examples of startups that have succeeded without having the .com of their
name. There are startups that have succeeded despite any number of different mistakes. But
this mistake is less excusable than most. It's something that can be fixed in a couple days if you
have sufficient discipline to acknowledge the problem.
100% of the top 20 YC companies by valuation have the .com of their name. 94% of the top 50
do. But only 66% of companies in the current batch have the .com of their name. Which
suggests there are lessons ahead for most of the rest, one way or another.
Notes:
[1] Incidentally, this thought experiment works for nationality and religion too.
[2] The liking you have for a name that has become part of your identity manifests itself not directly, which would be
easy to discount, but as a collection of specious beliefs about its intrinsic qualities. (This too is true of nationality and
religion as well.)
[3] Sometimes founders know it's a problem that they don't have the .com of their name, but delusion strikes a step
later in the belief that they'll be able to buy it despite having no evidence it's for sale. Don't believe a domain is for
sale unless the owner has already told you an asking price.
Thanks to Sam Altman, Jessica Livingston, and Geoff Ralston for reading drafts of this.
What Microsoft Is this the Altair Basic of- - # 165
February 2015
One of the most valuable exercises you can try if you want to understand startups is to look at
the most successful companies and explain why they were not as lame as they seemed when
they first launched. Because they practically all seemed lame at first. Not just small, lame. Not
just the first step up a big mountain. More like the first step into a swamp.
A Basic interpreter for the Altair? How could that ever grow into a giant company? People
sleeping on airbeds in strangers' apartments? A web site for college students to stalk one
another? A wimpy little single-board computer for hobbyists that used a TV as a monitor? A
new search engine, when there were already about 10, and they were all trying to deemphasize search? These ideas didn't just seem small. They seemed wrong. They were the
kind of ideas you could not merely ignore, but ridicule.
Often the founders themselves didn't know why their ideas were promising. They were attracted
to these ideas by instinct, because they were living in the future and they sensed that
something was missing. But they could not have put into words exactly how their ugly ducklings
were going to grow into big, beautiful swans.
Most people's first impulse when they hear about a lame-sounding new startup idea is to make
fun of it. Even a lot of people who should know better.
When I encounter a startup with a lame-sounding idea, I ask "What Microsoft is this the Altair
Basic of?" Now it's a puzzle, and the burden is on me to solve it. Sometimes I can't think of an
answer, especially when the idea is a made-up one. But it's remarkable how often there does
turn out to be an answer. Often it's one the founders themselves hadn't seen yet.
Intriguingly, there are sometimes multiple answers. I talked to a startup a few days ago that
could grow into 3 distinct Microsofts. They'd probably vary in size by orders of magnitude. But
you can never predict how big a Microsoft is going to be, so in cases like that I encourage
founders to follow whichever path is most immediately exciting to them. Their instincts got them
this far. Why stop now?
The Ronco Principle - # 164
January 2015
No one, VC or angel, has invested in more of the top startups than Ron Conway. He knows
what happened in every deal in the Valley, half the time because he arranged it.
And yet he's a super nice guy. In fact, nice is not the word. Ronco is good. I know of zero
instances in which he has behaved badly. It's hard even to imagine.
When I first came to Silicon Valley I thought "How lucky that someone so powerful is so
benevolent." But gradually I realized it wasn't luck. It was by being benevolent that Ronco
became so powerful. All the deals he gets to invest in come to him through referrals. Google
did. Facebook did. Twitter was a referral from Evan Williams himself. And the reason so many
people refer deals to him is that he's proven himself to be a good guy.
Good does not mean being a pushover. I would not want to face an angry Ronco. But if Ron's
angry at you, it's because you did something wrong. Ron is so old school he's Old Testament.
He will smite you in his just wrath, but there's no malice in it.
In almost every domain there are advantages to seeming good. It makes people trust you. But
actually being good is an expensive way to seem good. To an amoral person it might seem to
be overkill.
In some fields it might be, but apparently not in the startup world. Though plenty of investors are
jerks, there is a clear trend among them: the most successful investors are also the most
upstanding. [1]
It was not always this way. I would not feel confident saying that about investors twenty years
ago.
What changed? The startup world became more transparent and more unpredictable. Both
make it harder to seem good without actually being good.
It's obvious why transparency has that effect. When an investor maltreats a founder now, it gets
out. Maybe not all the way to the press, but other founders hear about it, and that investor starts
to lose deals. [2]
The effect of unpredictability is more subtle. It increases the work of being inconsistent. If you're
going to be two-faced, you have to know who you should be nice to and who you can get away
with being nasty to. In the startup world, things change so rapidly that you can't tell. The random
college kid you talk to today might in a couple years be the CEO of the hottest startup in the
Valley. If you can't tell who to be nice to, you have to be nice to everyone. And probably the only
people who can manage that are the people who are genuinely good.
In a sufficiently connected and unpredictable world, you can't seem good without being good.
As often happens, Ron discovered how to be the investor of the future by accident. He didn't
foresee the future of startup investing, realize it would pay to be upstanding, and force himself
to behave that way. It would feel unnatural to him to behave any other way. He was already
living in the future.
Fortunately that future is not limited to the startup world. The startup world is more transparent
and unpredictable than most, but almost everywhere the trend is in that direction.
Notes:
[1] I'm not saying that if you sort investors by benevolence you've also sorted them by returns, but rather that if you
do a scatterplot with benevolence on the x axis and returns on the y, you'd see a clear upward trend.
[2] Y Combinator in particular, because it aggregates data from so many startups, has a pretty comprehensive view
of investor behavior.
Thanks to Sam Altman and Jessica Livingston for reading drafts of this.
What Doesn-t Seem Like Work- - # 163
January 2015
My father is a mathematician. For most of my childhood he worked for Westinghouse, modelling
nuclear reactors.
He was one of those lucky people who know early on what they want to do. When you talk to
him about his childhood, there's a clear watershed at about age 12, when he "got interested in
maths."
He grew up in the small Welsh seacoast town of Pwllheli. As we retraced his walk to school on
Google Street View, he said that it had been nice growing up in the country.
"Didn't it get boring when you got to be about 15?" I asked.
"No," he said, "by then I was interested in maths."
In another conversation he told me that what he really liked was solving problems. To me the
exercises at the end of each chapter in a math textbook represent work, or at best a way to
reinforce what you learned in that chapter. To him the problems were the reward. The text of
each chapter was just some advice about solving them. He said that as soon as he got a new
textbook he'd immediately work out all the problems — to the slight annoyance of his teacher,
since the class was supposed to work through the book gradually.
Few people know so early or so certainly what they want to work on. But talking to my father
reminded me of a heuristic the rest of us can use. If something that seems like work to other
people doesn't seem like work to you, that's something you're well suited for. For example, a lot
of programmers I know, including me, actually like debugging. It's not something people tend to
volunteer; one likes it the way one likes popping zits. But you may have to like debugging to like
programming, considering the degree to which programming consists of it.
The stranger your tastes seem to other people, the stronger evidence they probably are of what
you should do. When I was in college I used to write papers for my friends. It was quite
interesting to write a paper for a class I wasn't taking. Plus they were always so relieved.
It seemed curious that the same task could be painful to one person and pleasant to another,
but I didn't realize at the time what this imbalance implied, because I wasn't looking for it. I didn't
realize how hard it can be to decide what you should work on, and that you sometimes have to
figure it out from subtle clues, like a detective solving a case in a mystery novel. So I bet it
would help a lot of people to ask themselves about this explicitly. What seems like work to other
people that doesn't seem like work to you?
Thanks to Sam Altman, Trevor Blackwell, Jessica Livingston, Robert Morris, and my father for
reading drafts of this.
Don-t Talk to Corp Dev - # 162
January 2015
Corporate Development, aka corp dev, is the group within companies that buys other
companies. If you're talking to someone from corp dev, that's why, whether you realize it yet or
not.
It's usually a mistake to talk to corp dev unless (a) you want to sell your company right now and
(b) you're sufficiently likely to get an offer at an acceptable price. In practice that means startups
should only talk to corp dev when they're either doing really well or really badly. If you're doing
really badly, meaning the company is about to die, you may as well talk to them, because you
have nothing to lose. And if you're doing really well, you can safely talk to them, because you
both know the price will have to be high, and if they show the slightest sign of wasting your
time, you'll be confident enough to tell them to get lost.
The danger is to companies in the middle. Particularly to young companies that are growing
fast, but haven't been doing it for long enough to have grown big yet. It's usually a mistake for a
promising company less than a year old even to talk to corp dev.
But it's a mistake founders constantly make. When someone from corp dev wants to meet, the
founders tell themselves they should at least find out what they want. Besides, they don't want
to offend Big Company by refusing to meet.
Well, I'll tell you what they want. They want to talk about buying you. That's what the title "corp
dev" means. So before agreeing to meet with someone from corp dev, ask yourselves, "Do we
want to sell the company right now?" And if the answer is no, tell them "Sorry, but we're
focusing on growing the company." They won't be offended. And certainly the founders of Big
Company won't be offended. If anything they'll think more highly of you. You'll remind them of
themselves. They didn't sell either; that's why they're in a position now to buy other companies.
[1]
Most founders who get contacted by corp dev already know what it means. And yet even when
they know what corp dev does and know they don't want to sell, they take the meeting. Why do
they do it? The same mix of denial and wishful thinking that underlies most mistakes founders
make. It's flattering to talk to someone who wants to buy you. And who knows, maybe their offer
will be surprisingly high. You should at least see what it is, right?
No. If they were going to send you an offer immediately by email, sure, you might as well open
it. But that is not how conversations with corp dev work. If you get an offer at all, it will be at the
end of a long and unbelievably distracting process. And if the offer is surprising, it will be
surprisingly low.
Distractions are the thing you can least afford in a startup. And conversations with corp dev are
the worst sort of distraction, because as well as consuming your attention they undermine your
morale. One of the tricks to surviving a grueling process is not to stop and think how tired you
are. Instead you get into a sort of flow. [2] Imagine what it would do to you if at mile 20 of a
marathon, someone ran up beside you and said "You must feel really tired. Would you like to
stop and take a rest?" Conversations with corp dev are like that but worse, because the
suggestion of stopping gets combined in your mind with the imaginary high price you think
they'll offer.
And then you're really in trouble. If they can, corp dev people like to turn the tables on you. They
like to get you to the point where you're trying to convince them to buy instead of them trying to
convince you to sell. And surprisingly often they succeed.
This is a very slippery slope, greased with some of the most powerful forces that can work on
founders' minds, and attended by an experienced professional whose full time job is to push
you down it.
Their tactics in pushing you down that slope are usually fairly brutal. Corp dev people's whole
job is to buy companies, and they don't even get to choose which. The only way their
performance is measured is by how cheaply they can buy you, and the more ambitious ones
will stop at nothing to achieve that. For example, they'll almost always start with a lowball offer,
just to see if you'll take it. Even if you don't, a low initial offer will demoralize you and make you
easier to manipulate.
And that is the most innocent of their tactics. Just wait till you've agreed on a price and think you
have a done deal, and then they come back and say their boss has vetoed the deal and won't
do it for more than half the agreed upon price. Happens all the time. If you think investors can
behave badly, it's nothing compared to what corp dev people can do. Even corp dev people at
companies that are otherwise benevolent.
I remember once complaining to a friend at Google about some nasty trick their corp dev
people had pulled on a YC startup.
"What happened to Don't be Evil?" I asked.
"I don't think corp dev got the memo," he replied.
The tactics you encounter in M&A conversations can be like nothing you've experienced in the
otherwise comparatively upstanding world of Silicon Valley. It's as if a chunk of genetic material
from the old-fashioned robber baron business world got incorporated into the startup world. [3]
The simplest way to protect yourself is to use the trick that John D. Rockefeller, whose
grandfather was an alcoholic, used to protect himself from becoming one. He once told a
Sunday school class Boys, do you know why I never became a drunkard? Because I never took
the first drink. Do you want to sell your company right now? Not eventually, right now. If not, just
don't take the first meeting. They won't be offended. And you in turn will be guaranteed to be
spared one of the worst experiences that can happen to a startup.
If you do want to sell, there's another set of techniques for doing that. But the biggest mistake
founders make in dealing with corp dev is not doing a bad job of talking to them when they're
ready to, but talking to them before they are. So if you remember only the title of this essay, you
already know most of what you need to know about M&A in the first year.
Notes:
[1] I'm not saying you should never sell. I'm saying you should be clear in your own mind about whether you want to
sell or not, and not be led by manipulation or wishful thinking into trying to sell earlier than you otherwise would have.
[2] In a startup, as in most competitive sports, the task at hand almost does this for you; you're too busy to feel tired.
But when you lose that protection, e.g. at the final whistle, the fatigue hits you like a wave. To talk to corp dev is to let
yourself feel it mid-game.
[3] To be fair, the apparent misdeeds of corp dev people are magnified by the fact that they function as the face of a
large organization that often doesn't know its own mind. Acquirers can be surprisingly indecisive about acquisitions,
and their flakiness is indistinguishable from dishonesty by the time it filters down to you.
Thanks to Marc Andreessen, Jessica Livingston, Geoff Ralston, and Qasar Younis for reading drafts of this.
Let the Other 95- of Great Programmers In - # 161
December 2014
American technology companies want the government to make immigration easier because
they say they can't find enough programmers in the US. Anti-immigration people say that
instead of letting foreigners take these jobs, we should train more Americans to be
programmers. Who's right?
The technology companies are right. What the anti-immigration people don't understand is that
there is a huge variation in ability between competent programmers and exceptional ones, and
while you can train people to be competent, you can't train them to be exceptional. Exceptional
programmers have an aptitude for and interest in programming that is not merely the product of
training. [1]
The US has less than 5% of the world's population. Which means if the qualities that make
someone a great programmer are evenly distributed, 95% of great programmers are born
outside the US.
The anti-immigration people have to invent some explanation to account for all the effort
technology companies have expended trying to make immigration easier. So they claim it's
because they want to drive down salaries. But if you talk to startups, you find practically every
one over a certain size has gone through legal contortions to get programmers into the US,
where they then paid them the same as they'd have paid an American. Why would they go to
extra trouble to get programmers for the same price? The only explanation is that they're telling
the truth: there are just not enough great programmers to go around. [2]
I asked the CEO of a startup with about 70 programmers how many more he'd hire if he could
get all the great programmers he wanted. He said "We'd hire 30 tomorrow morning." And this is
one of the hot startups that always win recruiting battles. It's the same all over Silicon Valley.
Startups are that constrained for talent.
It would be great if more Americans were trained as programmers, but no amount of training
can flip a ratio as overwhelming as 95 to 5. Especially since programmers are being trained in
other countries too. Barring some cataclysm, it will always be true that most great programmers
are born outside the US. It will always be true that most people who are great at anything are
born outside the US. [3]
Exceptional performance implies immigration. A country with only a few percent of the world's
population will be exceptional in some field only if there are a lot of immigrants working in it.
But this whole discussion has taken something for granted: that if we let more great
programmers into the US, they'll want to come. That's true now, and we don't realize how lucky
we are that it is. If we want to keep this option open, the best way to do it is to take advantage of
it: the more of the world's great programmers are here, the more the rest will want to come here.
And if we don't, the US could be seriously fucked. I realize that's strong language, but the
people dithering about this don't seem to realize the power of the forces at work here.
Technology gives the best programmers huge leverage. The world market in programmers
seems to be becoming dramatically more liquid. And since good people like good colleagues,
that means the best programmers could collect in just a few hubs. Maybe mostly in one hub.
What if most of the great programmers collected in one hub, and it wasn't here? That scenario
may seem unlikely now, but it won't be if things change as much in the next 50 years as they did
in the last 50.
We have the potential to ensure that the US remains a technology superpower just by letting in
a few thousand great programmers a year. What a colossal mistake it would be to let that
opportunity slip. It could easily be the defining mistake this generation of American politicians
later become famous for. And unlike other potential mistakes on that scale, it costs nothing to fix.
So please, get on with it.
Notes:
[1] How much better is a great programmer than an ordinary one? So much better that you can't even measure the
difference directly. A great programmer doesn't merely do the same work faster. A great programmer will invent things
an ordinary programmer would never even think of. This doesn't mean a great programmer is infinitely more valuable,
because any invention has a finite market value. But it's easy to imagine cases where a great programmer might
invent things worth 100x or even 1000x an average programmer's salary.
[2] There are a handful of consulting firms that rent out big pools of foreign programmers they bring in on H1-B visas.
By all means crack down on these. It should be easy to write legislation that distinguishes them, because they are so
different from technology companies. But it is dishonest of the anti-immigration people to claim that companies like
Google and Facebook are driven by the same motives. An influx of inexpensive but mediocre programmers is the last
thing they'd want; it would destroy them.
[3] Though this essay talks about programmers, the group of people we need to import is broader, ranging from
designers to programmers to electrical engineers. The best one could do as a general term might be "digital talent." It
seemed better to make the argument a little too narrow than to confuse everyone with a neologism.
Thanks to Sam Altman, John Collison, Patrick Collison, Jessica Livingston, Geoff Ralston, Fred Wilson, and Qasar
Younis for reading drafts of this.
How to Be an Expert in a Changing World - # 160
December 2014
If the world were static, we could have monotonically increasing confidence in our beliefs. The
more (and more varied) experience a belief survived, the less likely it would be false. Most
people implicitly believe something like this about their opinions. And they're justified in doing so
with opinions about things that don't change much, like human nature. But you can't trust your
opinions in the same way about things that change, which could include practically everything
else.
When experts are wrong, it's often because they're experts on an earlier version of the world.
Is it possible to avoid that? Can you protect yourself against obsolete beliefs? To some extent,
yes. I spent almost a decade investing in early stage startups, and curiously enough protecting
yourself against obsolete beliefs is exactly what you have to do to succeed as a startup
investor. Most really good startup ideas look like bad ideas at first, and many of those look bad
specifically because some change in the world just switched them from bad to good. I spent a
lot of time learning to recognize such ideas, and the techniques I used may be applicable to
ideas in general.
The first step is to have an explicit belief in change. People who fall victim to a monotonically
increasing confidence in their opinions are implicitly concluding the world is static. If you
consciously remind yourself it isn't, you start to look for change.
Where should one look for it? Beyond the moderately useful generalization that human nature
doesn't change much, the unfortunate fact is that change is hard to predict. This is largely a
tautology but worth remembering all the same: change that matters usually comes from an
unforeseen quarter.
So I don't even try to predict it. When I get asked in interviews to predict the future, I always
have to struggle to come up with something plausible-sounding on the fly, like a student who
hasn't prepared for an exam. [1] But it's not out of laziness that I haven't prepared. It seems to
me that beliefs about the future are so rarely correct that they usually aren't worth the extra
rigidity they impose, and that the best strategy is simply to be aggressively open-minded.
Instead of trying to point yourself in the right direction, admit you have no idea what the right
direction is, and try instead to be super sensitive to the winds of change.
It's ok to have working hypotheses, even though they may constrain you a bit, because they
also motivate you. It's exciting to chase things and exciting to try to guess answers. But you
have to be disciplined about not letting your hypotheses harden into anything more. [2]
I believe this passive m.o. works not just for evaluating new ideas but also for having them. The
way to come up with new ideas is not to try explicitly to, but to try to solve problems and simply
not discount weird hunches you have in the process.
The winds of change originate in the unconscious minds of domain experts. If you're sufficiently
expert in a field, any weird idea or apparently irrelevant question that occurs to you is ipso facto
worth exploring. [3] Within Y Combinator, when an idea is described as crazy, it's a compliment
—in fact, on average probably a higher compliment than when an idea is described as good.
Startup investors have extraordinary incentives for correcting obsolete beliefs. If they can
realize before other investors that some apparently unpromising startup isn't, they can make a
huge amount of money. But the incentives are more than just financial. Investors' opinions are
explicitly tested: startups come to them and they have to say yes or no, and then, fairly quickly,
they learn whether they guessed right. The investors who say no to a Google (and there were
several) will remember it for the rest of their lives.
Anyone who must in some sense bet on ideas rather than merely commenting on them has
similar incentives. Which means anyone who wants such incentives can have them, by turning
their comments into bets: if you write about a topic in some fairly durable and public form, you'll
find you worry much more about getting things right than most people would in a casual
conversation. [4]
Another trick I've found to protect myself against obsolete beliefs is to focus initially on people
rather than ideas. Though the nature of future discoveries is hard to predict, I've found I can
predict quite well what sort of people will make them. Good new ideas come from earnest,
energetic, independent-minded people.
Betting on people over ideas saved me countless times as an investor. We thought Airbnb was
a bad idea, for example. But we could tell the founders were earnest, energetic, and
independent-minded. (Indeed, almost pathologically so.) So we suspended disbelief and funded
them.
This too seems a technique that should be generally applicable. Surround yourself with the sort
of people new ideas come from. If you want to notice quickly when your beliefs become
obsolete, you can't do better than to be friends with the people whose discoveries will make
them so.
It's hard enough already not to become the prisoner of your own expertise, but it will only get
harder, because change is accelerating. That's not a recent trend; change has been
accelerating since the paleolithic era. Ideas beget ideas. I don't expect that to change. But I
could be wrong.
Notes:
[1] My usual trick is to talk about aspects of the present that most people haven't noticed yet.
[2] Especially if they become well enough known that people start to identify them with you. You have to be extra
skeptical about things you want to believe, and once a hypothesis starts to be identified with you, it will almost
certainly start to be in that category.
[3] In practice "sufficiently expert" doesn't require one to be recognized as an expert—which is a trailing indicator in
any case. In many fields a year of focused work plus caring a lot would be enough.
[4] Though they are public and persist indefinitely, comments on e.g. forums and places like Twitter seem empirically
to work like casual conversation. The threshold may be whether what you write has a title.
Thanks to Sam Altman, Patrick Collison, and Robert Morris for reading drafts of this.
How You Know - # 159
December 2014
I've read Villehardouin's chronicle of the Fourth Crusade at least two times, maybe three. And
yet if I had to write down everything I remember from it, I doubt it would amount to much more
than a page. Multiply this times several hundred, and I get an uneasy feeling when I look at my
bookshelves. What use is it to read all these books if I remember so little from them?
A few months ago, as I was reading Constance Reid's excellent biography of Hilbert, I figured
out if not the answer to this question, at least something that made me feel better about it. She
writes: Hilbert had no patience with mathematical lectures which filled the students with facts
but did not teach them how to frame a problem and solve it. He often used to tell them that "a
perfect formulation of a problem is already half its solution." That has always seemed to me an
important point, and I was even more convinced of it after hearing it confirmed by Hilbert.
But how had I come to believe in this idea in the first place? A combination of my own
experience and other things I'd read. None of which I could at that moment remember! And
eventually I'd forget that Hilbert had confirmed it too. But my increased belief in the importance
of this idea would remain something I'd learned from this book, even after I'd forgotten I'd
learned it.
Reading and experience train your model of the world. And even if you forget the experience or
what you read, its effect on your model of the world persists. Your mind is like a compiled
program you've lost the source of. It works, but you don't know why.
The place to look for what I learned from Villehardouin's chronicle is not what I remember from
it, but my mental models of the crusades, Venice, medieval culture, siege warfare, and so on.
Which doesn't mean I couldn't have read more attentively, but at least the harvest of reading is
not so miserably small as it might seem.
This is one of those things that seem obvious in retrospect. But it was a surprise to me and
presumably would be to anyone else who felt uneasy about (apparently) forgetting so much
they'd read.
Realizing it does more than make you feel a little better about forgetting, though. There are
specific implications.
For example, reading and experience are usually "compiled" at the time they happen, using the
state of your brain at that time. The same book would get compiled differently at different points
in your life. Which means it is very much worth reading important books multiple times. I always
used to feel some misgivings about rereading books. I unconsciously lumped reading together
with work like carpentry, where having to do something again is a sign you did it wrong the first
time. Whereas now the phrase "already read" seems almost ill-formed.
Intriguingly, this implication isn't limited to books. Technology will increasingly make it possible
to relive our experiences. When people do that today it's usually to enjoy them again (e.g. when
looking at pictures of a trip) or to find the origin of some bug in their compiled code (e.g. when
Stephen Fry succeeded in remembering the childhood trauma that prevented him from singing).
But as technologies for recording and playing back your life improve, it may become common
for people to relive experiences without any goal in mind, simply to learn from them again as
one might when rereading a book.
Eventually we may be able not just to play back experiences but also to index and even edit
them. So although not knowing how you know things may seem part of being human, it may not
be.
Thanks to Sam Altman, Jessica Livingston, and Robert Morris for reading drafts of this.
The Fatal Pinch - # 158
December 2014
Many startups go through a point a few months before they die where although they have a
significant amount of money in the bank, they're also losing a lot each month, and revenue
growth is either nonexistent or mediocre. The company has, say, 6 months of runway. Or to put
it more brutally, 6 months before they're out of business. They expect to avoid that by raising
more from investors. [1]
That last sentence is the fatal one.
There may be nothing founders are so prone to delude themselves about as how interested
investors will be in giving them additional funding. It's hard to convince investors the first time
too, but founders expect that. What bites them the second time is a confluence of three forces:
The company is spending more now than it did the first time it raised money.
Investors have much higher standards for companies that have already raised money.
The company is now starting to read as a failure. The first time it raised money, it was neither a
success nor a failure; it was too early to ask. Now it's possible to ask that question, and the
default answer is failure, because at this point that is the default outcome. I'm going to call the
situation I described in the first paragraph "the fatal pinch." I try to resist coining phrases, but
making up a name for this situation may snap founders into realizing when they're in it.
One of the things that makes the fatal pinch so dangerous is that it's self-reinforcing. Founders
overestimate their chances of raising more money, and so are slack about reaching profitability,
which further decreases their chances of raising money.
Now that you know about the fatal pinch, how do you avoid it? Y Combinator tells founders who
raise money to act as if it's the last they'll ever get. Because the self-reinforcing nature of this
situation works the other way too: the less you need further investment, the easier it is to get.
What do you do if you're already in the fatal pinch? The first step is to re-evaluate the probability
of raising more money. I will now, by an amazing feat of clairvoyance, do this for you: the
probability is zero. [2]
Three options remain: you can shut down the company, you can increase how much you make,
and you can decrease how much you spend.
You should shut down the company if you're certain it will fail no matter what you do. Then at
least you can give back the money you have left, and save yourself however many months you
would have spent riding it down.
Companies rarely have to fail though. What I'm really doing here is giving you the option of
admitting you've already given up.
If you don't want to shut down the company, that leaves increasing revenues and decreasing
expenses. In most startups, expenses = people, and decreasing expenses = firing people. [3]
Deciding to fire people is usually hard, but there's one case in which it shouldn't be: when there
are people you already know you should fire but you're in denial about it. If so, now's the time.
If that makes you profitable, or will enable you to make it to profitability on the money you have
left, you've avoided the immediate danger.
Otherwise you have three options: you either have to fire good people, get some or all of the
employees to take less salary for a while, or increase revenues.
Getting people to take less salary is a weak solution that will only work when the problem isn't
too bad. If your current trajectory won't quite get you to profitability but you can get over the
threshold by cutting salaries a little, you might be able to make the case to everyone for doing it.
Otherwise you're probably just postponing the problem, and that will be obvious to the people
whose salaries you're proposing to cut. [4]
Which leaves two options, firing good people and making more money. While trying to balance
them, keep in mind the eventual goal: to be a successful product company in the sense of
having a single thing lots of people use.
You should lean more toward firing people if the source of your trouble is overhiring. If you went
out and hired 15 people before you even knew what you were building, you've created a broken
company. You need to figure out what you're building, and it will probably be easier to do that
with a handful of people than 15. Plus those 15 people might not even be the ones you need for
whatever you end up building. So the solution may be to shrink and then figure out what
direction to grow in. After all, you're not doing those 15 people any favors if you fly the company
into ground with them aboard. They'll all lose their jobs eventually, along with all the time they
expended on this doomed company.
Whereas if you only have a handful of people, it may be better to focus on trying to make more
money. It may seem facile to suggest a startup make more money, as if that could be done for
the asking. Usually a startup is already trying as hard as it can to sell whatever it sells. What I'm
suggesting here is not so much to try harder to make money but to try to make money in a
different way. For example, if you have only one person selling while the rest are writing code,
consider having everyone work on selling. What good will more code do you when you're out of
business? If you have to write code to close a certain deal, go ahead; that follows from
everyone working on selling. But only work on whatever will get you the most revenue the
soonest.
Another way to make money differently is to sell different things, and in particular to do more
consultingish work. I say consultingish because there is a long slippery slope from making
products to pure consulting, and you don't have to go far down it before you start to offer
something really attractive to customers. Although your product may not be very appealing yet,
if you're a startup your programmers will often be way better than the ones your customers
have. Or you may have expertise in some new field they don't understand. So if you change
your sales conversations just a little from "do you want to buy our product?" to "what do you
need that you'd pay a lot for?" you may find it's suddenly a lot easier to extract money from
customers.
Be ruthlessly mercenary when you start doing this, though. You're trying to save your company
from death here, so make customers pay a lot, quickly. And to the extent you can, try to avoid
the worst pitfalls of consulting. The ideal thing might be if you built a precisely defined derivative
version of your product for the customer, and it was otherwise a straight product sale. You keep
the IP and no billing by the hour.
In the best case, this consultingish work may not be just something you do to survive, but may
turn out to be the thing-that-doesn't-scale that defines your company. Don't expect it to be, but
as you dive into individual users' needs, keep your eyes open for narrow openings that have
wide vistas beyond.
There is usually so much demand for custom work that unless you're really incompetent there
has to be some point down the slope of consulting at which you can survive. But I didn't use the
term slippery slope by accident; customers' insatiable demand for custom work will always be
pushing you toward the bottom. So while you'll probably survive, the problem now becomes to
survive with the least damage and distraction.
The good news is, plenty of successful startups have passed through near-death experiences
and gone on to flourish. You just have to realize in time that you're near death. And if you're in
the fatal pinch, you are.
Notes:
[1] There are a handful of companies that can't reasonably expect to make money for the first year or two, because
what they're building takes so long. For these companies substitute "progress" for "revenue growth." You're not one of
these companies unless your initial investors agreed in advance that you were. And frankly even these companies
wish they weren't, because the illiquidity of "progress" puts them at the mercy of investors.
[2] There's a variant of the fatal pinch where your existing investors help you along by promising to invest more. Or
rather, where you read them as promising to invest more, while they think they're just mentioning the possibility. The
way to solve this problem, if you have 8 months of runway or less, is to try to get the money right now. Then you'll
either get the money, in which case (immediate) problem solved, or at least prevent your investors from helping you
to remain in denial about your fundraising prospects.
[3] Obviously, if you have significant expenses other than salaries that you can eliminate, do it now.
[4] Unless of course the source of the problem is that you're paying yourselves high salaries. If by cutting the
founders' salaries to the minimum you need, you can make it to profitability, you should. But it's a bad sign if you
needed to read this to realize that.
Thanks to Sam Altman, Paul Buchheit, Jessica Livingston, and Geoff Ralston for reading drafts of this.
Mean People Fail - # 157
November 2014
It struck me recently how few of the most successful people I know are mean. There are
exceptions, but remarkably few.
Meanness isn't rare. In fact, one of the things the internet has shown us is how mean people
can be. A few decades ago, only famous people and professional writers got to publish their
opinions. Now everyone can, and we can all see the long tail of meanness that had previously
been hidden.
And yet while there are clearly a lot of mean people out there, there are next to none among the
most successful people I know. What's going on here? Are meanness and success inversely
correlated?
Part of what's going on, of course, is selection bias. I only know people who work in certain
fields: startup founders, programmers, professors. I'm willing to believe that successful people in
other fields are mean. Maybe successful hedge fund managers are mean; I don't know enough
to say. It seems quite likely that most successful drug lords are mean. But there are at least big
chunks of the world that mean people don't rule, and that territory seems to be growing.
My wife and Y Combinator cofounder Jessica is one of those rare people who have x-ray vision
for character. Being married to her is like standing next to an airport baggage scanner. She
came to the startup world from investment banking, and she has always been struck both by
how consistently successful startup founders turn out to be good people, and how consistently
bad people fail as startup founders.
Why? I think there are several reasons. One is that being mean makes you stupid. That's why I
hate fights. You never do your best work in a fight, because fights are not sufficiently general.
Winning is always a function of the situation and the people involved. You don't win fights by
thinking of big ideas but by thinking of tricks that work in one particular case. And yet fighting is
just as much work as thinking about real problems. Which is particularly painful to someone
who cares how their brain is used: your brain goes fast but you get nowhere, like a car spinning
its wheels.
Startups don't win by attacking. They win by transcending. There are exceptions of course, but
usually the way to win is to race ahead, not to stop and fight.
Another reason mean founders lose is that they can't get the best people to work for them. They
can hire people who will put up with them because they need a job. But the best people have
other options. A mean person can't convince the best people to work for him unless he is super
convincing. And while having the best people helps any organization, it's critical for startups.
There is also a complementary force at work: if you want to build great things, it helps to be
driven by a spirit of benevolence. The startup founders who end up richest are not the ones
driven by money. The ones driven by money take the big acquisition offer that nearly every
successful startup gets en route. [1] The ones who keep going are driven by something else.
They may not say so explicitly, but they're usually trying to improve the world. Which means
people with a desire to improve the world have a natural advantage. [2]
The exciting thing is that startups are not just one random type of work in which meanness and
success are inversely correlated. This kind of work is the future.
For most of history success meant control of scarce resources. One got that by fighting,
whether literally in the case of pastoral nomads driving hunter-gatherers into marginal lands, or
metaphorically in the case of Gilded Age financiers contending with one another to assemble
railroad monopolies. For most of history, success meant success at zero-sum games. And in
most of them meanness was not a handicap but probably an advantage.
That is changing. Increasingly the games that matter are not zero-sum. Increasingly you win not
by fighting to get control of a scarce resource, but by having new ideas and building new things.
[3]
There have long been games where you won by having new ideas. In the third century BC,
Archimedes won by doing that. At least until an invading Roman army killed him. Which
illustrates why this change is happening: for new ideas to matter, you need a certain degree of
civil order. And not just not being at war. You also need to prevent the sort of economic violence
that nineteenth century magnates practiced against one another and communist countries
practiced against their citizens. People need to feel that what they create can't be stolen. [4]
That has always been the case for thinkers, which is why this trend began with them. When you
think of successful people from history who weren't ruthless, you get mathematicians and
writers and artists. The exciting thing is that their m.o. seems to be spreading. The games
played by intellectuals are leaking into the real world, and this is reversing the historical polarity
of the relationship between meanness and success.
So I'm really glad I stopped to think about this. Jessica and I have always worked hard to teach
our kids not to be mean. We tolerate noise and mess and junk food, but not meanness. And
now I have both an additional reason to crack down on it, and an additional argument to use
when I do: that being mean makes you fail.
Notes:
[1] I'm not saying all founders who take big acquisition offers are driven only by money, but rather that those who
don't aren't. Plus one can have benevolent motives for being driven by money — for example, to take care of one's
family, or to be free to work on projects that improve the world.
[2] It's unlikely that every successful startup improves the world. But their founders, like parents, truly believe they do.
Successful founders are in love with their companies. And while this sort of love is as blind as the love people have
for one another, it is genuine.
[3] Peter Thiel would point out that successful founders still get rich from controlling monopolies, just monopolies they
create rather than ones they capture. And while this is largely true, it means a big change in the sort of person who
wins.
[4] To be fair, the Romans didn't mean to kill Archimedes. The Roman commander specifically ordered that he be
spared. But he got killed in the chaos anyway.
In sufficiently disordered times, even thinking requires control of scarce resources, because living at all is a scarce
resource.
Thanks to Sam Altman, Ron Conway, Daniel Gackle, Jessica Livingston, Robert Morris, Geoff Ralston, and Fred
Wilson for reading drafts of this.
Before the Startup - # 156
Want to start a startup? Get funded by Y Combinator.
October 2014
(This essay is derived from a guest lecture in Sam Altman's startup class at Stanford. It's
intended for college students, but much of it is applicable to potential founders at other ages.)
One of the advantages of having kids is that when you have to give advice, you can ask
yourself "what would I tell my own kids?" My kids are little, but I can imagine what I'd tell them
about startups if they were in college, and that's what I'm going to tell you.
Startups are very counterintuitive. I'm not sure why. Maybe it's just because knowledge about
them hasn't permeated our culture yet. But whatever the reason, starting a startup is a task
where you can't always trust your instincts.
It's like skiing in that way. When you first try skiing and you want to slow down, your instinct is to
lean back. But if you lean back on skis you fly down the hill out of control. So part of learning to
ski is learning to suppress that impulse. Eventually you get new habits, but at first it takes a
conscious effort. At first there's a list of things you're trying to remember as you start down the
hill.
Startups are as unnatural as skiing, so there's a similar list for startups. Here I'm going to give
you the first part of it — the things to remember if you want to prepare yourself to start a startup.
Counterintuitive
The first item on it is the fact I already mentioned: that startups are so weird that if you trust
your instincts, you'll make a lot of mistakes. If you know nothing more than this, you may at least
pause before making them.
When I was running Y Combinator I used to joke that our function was to tell founders things
they would ignore. It's really true. Batch after batch, the YC partners warn founders about
mistakes they're about to make, and the founders ignore them, and then come back a year later
and say "I wish we'd listened."
Why do the founders ignore the partners' advice? Well, that's the thing about counterintuitive
ideas: they contradict your intuitions. They seem wrong. So of course your first impulse is to
disregard them. And in fact my joking description is not merely the curse of Y Combinator but
part of its raison d'etre. If founders' instincts already gave them the right answers, they wouldn't
need us. You only need other people to give you advice that surprises you. That's why there are
a lot of ski instructors and not many running instructors. [1]
You can, however, trust your instincts about people. And in fact one of the most common
mistakes young founders make is not to do that enough. They get involved with people who
seem impressive, but about whom they feel some misgivings personally. Later when things blow
up they say "I knew there was something off about him, but I ignored it because he seemed so
impressive."
If you're thinking about getting involved with someone — as a cofounder, an employee, an
investor, or an acquirer — and you have misgivings about them, trust your gut. If someone
seems slippery, or bogus, or a jerk, don't ignore it.
This is one case where it pays to be self-indulgent. Work with people you genuinely like, and
you've known long enough to be sure.
Expertise
The second counterintuitive point is that it's not that important to know a lot about startups. The
way to succeed in a startup is not to be an expert on startups, but to be an expert on your users
and the problem you're solving for them. Mark Zuckerberg didn't succeed because he was an
expert on startups. He succeeded despite being a complete noob at startups, because he
understood his users really well.
If you don't know anything about, say, how to raise an angel round, don't feel bad on that
account. That sort of thing you can learn when you need to, and forget after you've done it.
In fact, I worry it's not merely unnecessary to learn in great detail about the mechanics of
startups, but possibly somewhat dangerous. If I met an undergrad who knew all about
convertible notes and employee agreements and (God forbid) class FF stock, I wouldn't think
"here is someone who is way ahead of their peers." It would set off alarms. Because another of
the characteristic mistakes of young founders is to go through the motions of starting a startup.
They make up some plausible-sounding idea, raise money at a good valuation, rent a cool
office, hire a bunch of people. From the outside that seems like what startups do. But the next
step after rent a cool office and hire a bunch of people is: gradually realize how completely
fucked they are, because while imitating all the outward forms of a startup they have neglected
the one thing that's actually essential: making something people want.
Game
We saw this happen so often that we made up a name for it: playing house. Eventually I
realized why it was happening. The reason young founders go through the motions of starting a
startup is because that's what they've been trained to do for their whole lives up to that point.
Think about what you have to do to get into college, for example. Extracurricular activities,
check. Even in college classes most of the work is as artificial as running laps.
I'm not attacking the educational system for being this way. There will always be a certain
amount of fakeness in the work you do when you're being taught something, and if you
measure their performance it's inevitable that people will exploit the difference to the point
where much of what you're measuring is artifacts of the fakeness.
I confess I did it myself in college. I found that in a lot of classes there might only be 20 or 30
ideas that were the right shape to make good exam questions. The way I studied for exams in
these classes was not (except incidentally) to master the material taught in the class, but to
make a list of potential exam questions and work out the answers in advance. When I walked
into the final, the main thing I'd be feeling was curiosity about which of my questions would turn
up on the exam. It was like a game.
It's not surprising that after being trained for their whole lives to play such games, young
founders' first impulse on starting a startup is to try to figure out the tricks for winning at this
new game. Since fundraising appears to be the measure of success for startups (another
classic noob mistake), they always want to know what the tricks are for convincing investors.
We tell them the best way to convince investors is to make a startup that's actually doing well,
meaning growing fast, and then simply tell investors so. Then they want to know what the tricks
are for growing fast. And we have to tell them the best way to do that is simply to make
something people want.
So many of the conversations YC partners have with young founders begin with the founder
asking "How do we..." and the partner replying "Just..."
Why do the founders always make things so complicated? The reason, I realized, is that they're
looking for the trick.
So this is the third counterintuitive thing to remember about startups: starting a startup is where
gaming the system stops working. Gaming the system may continue to work if you go to work
for a big company. Depending on how broken the company is, you can succeed by sucking up
to the right people, giving the impression of productivity, and so on. [2] But that doesn't work
with startups. There is no boss to trick, only users, and all users care about is whether your
product does what they want. Startups are as impersonal as physics. You have to make
something people want, and you prosper only to the extent you do.
The dangerous thing is, faking does work to some degree on investors. If you're super good at
sounding like you know what you're talking about, you can fool investors for at least one and
perhaps even two rounds of funding. But it's not in your interest to. The company is ultimately
doomed. All you're doing is wasting your own time riding it down.
So stop looking for the trick. There are tricks in startups, as there are in any domain, but they
are an order of magnitude less important than solving the real problem. A founder who knows
nothing about fundraising but has made something users love will have an easier time raising
money than one who knows every trick in the book but has a flat usage graph. And more
importantly, the founder who has made something users love is the one who will go on to
succeed after raising the money.
Though in a sense it's bad news in that you're deprived of one of your most powerful weapons, I
think it's exciting that gaming the system stops working when you start a startup. It's exciting
that there even exist parts of the world where you win by doing good work. Imagine how
depressing the world would be if it were all like school and big companies, where you either
have to spend a lot of time on bullshit things or lose to people who do. [3] I would have been
delighted if I'd realized in college that there were parts of the real world where gaming the
system mattered less than others, and a few where it hardly mattered at all. But there are, and
this variation is one of the most important things to consider when you're thinking about your
future. How do you win in each type of work, and what would you like to win by doing? [4]
All-Consuming
That brings us to our fourth counterintuitive point: startups are all-consuming. If you start a
startup, it will take over your life to a degree you cannot imagine. And if your startup succeeds, it
will take over your life for a long time: for several years at the very least, maybe for a decade,
maybe for the rest of your working life. So there is a real opportunity cost here.
Larry Page may seem to have an enviable life, but there are aspects of it that are unenviable.
Basically at 25 he started running as fast as he could and it must seem to him that he hasn't
stopped to catch his breath since. Every day new shit happens in the Google empire that only
the CEO can deal with, and he, as CEO, has to deal with it. If he goes on vacation for even a
week, a whole week's backlog of shit accumulates. And he has to bear this uncomplainingly,
partly because as the company's daddy he can never show fear or weakness, and partly
because billionaires get less than zero sympathy if they talk about having difficult lives. Which
has the strange side effect that the difficulty of being a successful startup founder is concealed
from almost everyone except those who've done it.
Y Combinator has now funded several companies that can be called big successes, and in
every single case the founders say the same thing. It never gets any easier. The nature of the
problems change. You're worrying about construction delays at your London office instead of
the broken air conditioner in your studio apartment. But the total volume of worry never
decreases; if anything it increases.
Starting a successful startup is similar to having kids in that it's like a button you push that
changes your life irrevocably. And while it's truly wonderful having kids, there are a lot of things
that are easier to do before you have them than after. Many of which will make you a better
parent when you do have kids. And since you can delay pushing the button for a while, most
people in rich countries do.
Yet when it comes to startups, a lot of people seem to think they're supposed to start them
while they're still in college. Are you crazy? And what are the universities thinking? They go out
of their way to ensure their students are well supplied with contraceptives, and yet they're
setting up entrepreneurship programs and startup incubators left and right.
To be fair, the universities have their hand forced here. A lot of incoming students are interested
in startups. Universities are, at least de facto, expected to prepare them for their careers. So
students who want to start startups hope universities can teach them about startups. And
whether universities can do this or not, there's some pressure to claim they can, lest they lose
applicants to other universities that do.
Can universities teach students about startups? Yes and no. They can teach students about
startups, but as I explained before, this is not what you need to know. What you need to learn
about are the needs of your own users, and you can't do that until you actually start the
company. [5] So starting a startup is intrinsically something you can only really learn by doing it.
And it's impossible to do that in college, for the reason I just explained: startups take over your
life. You can't start a startup for real as a student, because if you start a startup for real you're
not a student anymore. You may be nominally a student for a bit, but you won't even be that for
long. [6]
Given this dichotomy, which of the two paths should you take? Be a real student and not start a
startup, or start a real startup and not be a student? I can answer that one for you. Do not start
a startup in college. How to start a startup is just a subset of a bigger problem you're trying to
solve: how to have a good life. And though starting a startup can be part of a good life for a lot
of ambitious people, age 20 is not the optimal time to do it. Starting a startup is like a brutally
fast depth-first search. Most people should still be searching breadth-first at 20.
You can do things in your early 20s that you can't do as well before or after, like plunge deeply
into projects on a whim and travel super cheaply with no sense of a deadline. For unambitious
people, this sort of thing is the dreaded "failure to launch," but for the ambitious ones it can be
an incomparably valuable sort of exploration. If you start a startup at 20 and you're sufficiently
successful, you'll never get to do it. [7]
Mark Zuckerberg will never get to bum around a foreign country. He can do other things most
people can't, like charter jets to fly him to foreign countries. But success has taken a lot of the
serendipity out of his life. Facebook is running him as much as he's running Facebook. And
while it can be very cool to be in the grip of a project you consider your life's work, there are
advantages to serendipity too, especially early in life. Among other things it gives you more
options to choose your life's work from.
There's not even a tradeoff here. You're not sacrificing anything if you forgo starting a startup at
20, because you're more likely to succeed if you wait. In the unlikely case that you're 20 and
one of your side projects takes off like Facebook did, you'll face a choice of running with it or
not, and it may be reasonable to run with it. But the usual way startups take off is for the
founders to make them take off, and it's gratuitously stupid to do that at 20.
Try
Should you do it at any age? I realize I've made startups sound pretty hard. If I haven't, let me
try again: starting a startup is really hard. What if it's too hard? How can you tell if you're up to
this challenge?
The answer is the fifth counterintuitive point: you can't tell. Your life so far may have given you
some idea what your prospects might be if you tried to become a mathematician, or a
professional football player. But unless you've had a very strange life you haven't done much
that was like being a startup founder. Starting a startup will change you a lot. So what you're
trying to estimate is not just what you are, but what you could grow into, and who can do that?
For the past 9 years it was my job to predict whether people would have what it took to start
successful startups. It was easy to tell how smart they were, and most people reading this will
be over that threshold. The hard part was predicting how tough and ambitious they would
become. There may be no one who has more experience at trying to predict that, so I can tell
you how much an expert can know about it, and the answer is: not much. I learned to keep a
completely open mind about which of the startups in each batch would turn out to be the stars.
The founders sometimes think they know. Some arrive feeling sure they will ace Y Combinator
just as they've aced every one of the (few, artificial, easy) tests they've faced in life so far.
Others arrive wondering how they got in, and hoping YC doesn't discover whatever mistake
caused it to accept them. But there is little correlation between founders' initial attitudes and
how well their companies do.
I've read that the same is true in the military — that the swaggering recruits are no more likely
to turn out to be really tough than the quiet ones. And probably for the same reason: that the
tests involved are so different from the ones in their previous lives.
If you're absolutely terrified of starting a startup, you probably shouldn't do it. But if you're
merely unsure whether you're up to it, the only way to find out is to try. Just not now.
Ideas
So if you want to start a startup one day, what should you do in college? There are only two
things you need initially: an idea and cofounders. And the m.o. for getting both is the same.
Which leads to our sixth and last counterintuitive point: that the way to get startup ideas is not
to try to think of startup ideas.
I've written a whole essay on this, so I won't repeat it all here. But the short version is that if you
make a conscious effort to think of startup ideas, the ideas you come up with will not merely be
bad, but bad and plausible-sounding, meaning you'll waste a lot of time on them before
realizing they're bad.
The way to come up with good startup ideas is to take a step back. Instead of making a
conscious effort to think of startup ideas, turn your mind into the type that startup ideas form in
without any conscious effort. In fact, so unconsciously that you don't even realize at first that
they're startup ideas.
This is not only possible, it's how Apple, Yahoo, Google, and Facebook all got started. None of
these companies were even meant to be companies at first. They were all just side projects.
The best startups almost have to start as side projects, because great ideas tend to be such
outliers that your conscious mind would reject them as ideas for companies.
Ok, so how do you turn your mind into the type that startup ideas form in unconsciously? (1)
Learn a lot about things that matter, then (2) work on problems that interest you (3) with people
you like and respect. The third part, incidentally, is how you get cofounders at the same time as
the idea.
The first time I wrote that paragraph, instead of "learn a lot about things that matter," I wrote
"become good at some technology." But that prescription, though sufficient, is too narrow. What
was special about Brian Chesky and Joe Gebbia was not that they were experts in technology.
They were good at design, and perhaps even more importantly, they were good at organizing
groups and making projects happen. So you don't have to work on technology per se, so long
as you work on problems demanding enough to stretch you.
What kind of problems are those? That is very hard to answer in the general case. History is full
of examples of young people who were working on important problems that no one else at the
time thought were important, and in particular that their parents didn't think were important. On
the other hand, history is even fuller of examples of parents who thought their kids were
wasting their time and who were right. So how do you know when you're working on real stuff?
[8]
I know how I know. Real problems are interesting, and I am self-indulgent in the sense that I
always want to work on interesting things, even if no one else cares about them (in fact,
especially if no one else cares about them), and find it very hard to make myself work on boring
things, even if they're supposed to be important.
My life is full of case after case where I worked on something just because it seemed
interesting, and it turned out later to be useful in some worldly way. Y Combinator itself was
something I only did because it seemed interesting. So I seem to have some sort of internal
compass that helps me out. But I don't know what other people have in their heads. Maybe if I
think more about this I can come up with heuristics for recognizing genuinely interesting
problems, but for the moment the best I can offer is the hopelessly question-begging advice that
if you have a taste for genuinely interesting problems, indulging it energetically is the best way
to prepare yourself for a startup. And indeed, probably also the best way to live. [9]
But although I can't explain in the general case what counts as an interesting problem, I can tell
you about a large subset of them. If you think of technology as something that's spreading like a
sort of fractal stain, every moving point on the edge represents an interesting problem. So one
guaranteed way to turn your mind into the type that has good startup ideas is to get yourself to
the leading edge of some technology — to cause yourself, as Paul Buchheit put it, to "live in the
future." When you reach that point, ideas that will seem to other people uncannily prescient will
seem obvious to you. You may not realize they're startup ideas, but you'll know they're
something that ought to exist.
For example, back at Harvard in the mid 90s a fellow grad student of my friends Robert and
Trevor wrote his own voice over IP software. He didn't mean it to be a startup, and he never
tried to turn it into one. He just wanted to talk to his girlfriend in Taiwan without paying for long
distance calls, and since he was an expert on networks it seemed obvious to him that the way
to do it was turn the sound into packets and ship it over the Internet. He never did any more
with his software than talk to his girlfriend, but this is exactly the way the best startups get
started.
So strangely enough the optimal thing to do in college if you want to be a successful startup
founder is not some sort of new, vocational version of college focused on "entrepreneurship."
It's the classic version of college as education for its own sake. If you want to start a startup
after college, what you should do in college is learn powerful things. And if you have genuine
intellectual curiosity, that's what you'll naturally tend to do if you just follow your own inclinations.
[10]
The component of entrepreneurship that really matters is domain expertise. The way to become
Larry Page was to become an expert on search. And the way to become an expert on search
was to be driven by genuine curiosity, not some ulterior motive.
At its best, starting a startup is merely an ulterior motive for curiosity. And you'll do it best if you
introduce the ulterior motive toward the end of the process.
So here is the ultimate advice for young would-be startup founders, boiled down to two words:
just learn.
Notes:
[1] Some founders listen more than others, and this tends to be a predictor of success. One of the things I remember
about the Airbnbs during YC is how intently they listened.
[2] In fact, this is one of the reasons startups are possible. If big companies weren't plagued by internal inefficiencies,
they'd be proportionately more effective, leaving less room for startups.
[3] In a startup you have to spend a lot of time on schleps, but this sort of work is merely unglamorous, not bogus.
[4] What should you do if your true calling is gaming the system? Management consulting.
[5] The company may not be incorporated, but if you start to get significant numbers of users, you've started it,
whether you realize it yet or not.
[6] It shouldn't be that surprising that colleges can't teach students how to be good startup founders, because they
can't teach them how to be good employees either.
The way universities "teach" students how to be employees is to hand off the task to companies via internship
programs. But you couldn't do the equivalent thing for startups, because by definition if the students did well they
would never come back.
[7] Charles Darwin was 22 when he received an invitation to travel aboard the HMS Beagle as a naturalist. It was
only because he was otherwise unoccupied, to a degree that alarmed his family, that he could accept it. And yet if he
hadn't we probably would not know his name.
[8] Parents can sometimes be especially conservative in this department. There are some whose definition of
important problems includes only those on the critical path to med school.
[9] I did manage to think of a heuristic for detecting whether you have a taste for interesting ideas: whether you find
known boring ideas intolerable. Could you endure studying literary theory, or working in middle management at a
large company?
[10] In fact, if your goal is to start a startup, you can stick even more closely to the ideal of a liberal education than
past generations have. Back when students focused mainly on getting a job after college, they thought at least a little
about how the courses they took might look to an employer. And perhaps even worse, they might shy away from
taking a difficult class lest they get a low grade, which would harm their all-important GPA. Good news: users don't
care what your GPA was. And I've never heard of investors caring either. Y Combinator certainly never asks what
classes you took in college or what grades you got in them.
Thanks to Sam Altman, Paul Buchheit, John Collison, Patrick Collison, Jessica Livingston, Robert Morris, Geoff
Ralston, and Fred Wilson for reading drafts of this.
How to Raise Money - # 155
Want to start a startup? Get funded by Y Combinator.
September 2013
Most startups that raise money do it more than once. A typical trajectory might be (1) to get
started with a few tens of thousands from something like Y Combinator or individual angels,
then (2) raise a few hundred thousand to a few million to build the company, and then (3) once
the company is clearly succeeding, raise one or more later rounds to accelerate growth.
Reality can be messier. Some companies raise money twice in phase 2. Others skip phase 1
and go straight to phase 2. And at Y Combinator we get an increasing number of companies
that have already raised amounts in the hundreds of thousands. But the three phase path is at
least the one about which individual startups' paths oscillate.
This essay focuses on phase 2 fundraising. That's the type the startups we fund are doing on
Demo Day, and this essay is the advice we give them.
Forces
Fundraising is hard in both senses: hard like lifting a heavy weight, and hard like solving a
puzzle. It's hard like lifting a weight because it's intrinsically hard to convince people to part with
large sums of money. That problem is irreducible; it should be hard. But much of the other kind
of difficulty can be eliminated. Fundraising only seems a puzzle because it's an alien world to
most founders, and I hope to fix that by supplying a map through it.
To founders, the behavior of investors is often opaque — partly because their motivations are
obscure, but partly because they deliberately mislead you. And the misleading ways of
investors combine horribly with the wishful thinking of inexperienced founders. At YC we're
always warning founders about this danger, and investors are probably more circumspect with
YC startups than with other companies they talk to, and even so we witness a constant series
of explosions as these two volatile components combine. [1]
If you're an inexperienced founder, the only way to survive is by imposing external constraints
on yourself. You can't trust your intuitions. I'm going to give you a set of rules here that will get
you through this process if anything will. At certain moments you'll be tempted to ignore them.
So rule number zero is: these rules exist for a reason. You wouldn't need a rule to keep you
going in one direction if there weren't powerful forces pushing you in another.
The ultimate source of the forces acting on you are the forces acting on investors. Investors are
pinched between two kinds of fear: fear of investing in startups that fizzle, and fear of missing
out on startups that take off. The cause of all this fear is the very thing that makes startups such
attractive investments: the successful ones grow very fast. But that fast growth means investors
can't wait around. If you wait till a startup is obviously a success, it's too late. To get the really
high returns, you have to invest in startups when it's still unclear how they'll do. But that in turn
makes investors nervous they're about to invest in a flop. As indeed they often are.
What investors would like to do, if they could, is wait. When a startup is only a few months old,
every week that passes gives you significantly more information about them. But if you wait too
long, other investors might take the deal away from you. And of course the other investors are
all subject to the same forces. So what tends to happen is that they all wait as long as they can,
then when some act the rest have to.
Don't raise money unless you want it and it wants you.
Such a high proportion of successful startups raise money that it might seem fundraising is one
of the defining qualities of a startup. Actually it isn't. Rapid growth is what makes a company a
startup. Most companies in a position to grow rapidly find that (a) taking outside money helps
them grow faster, and (b) their growth potential makes it easy to attract such money. It's so
common for both (a) and (b) to be true of a successful startup that practically all do raise
outside money. But there may be cases where a startup either wouldn't want to grow faster, or
outside money wouldn't help them to, and if you're one of them, don't raise money.
The other time not to raise money is when you won't be able to. If you try to raise money before
you can convince investors, you'll not only waste your time, but also burn your reputation with
those investors.
Be in fundraising mode or not.
One of the things that surprises founders most about fundraising is how distracting it is. When
you start fundraising, everything else grinds to a halt. The problem is not the time fundraising
consumes but that it becomes the top idea in your mind. A startup can't endure that level of
distraction for long. An early stage startup grows mostly because the founders make it grow,
and if the founders look away, growth usually drops sharply.
Because fundraising is so distracting, a startup should either be in fundraising mode or not. And
when you do decide to raise money, you should focus your whole attention on it so you can get
it done quickly and get back to work. [2]
You can take money from investors when you're not in fundraising mode. You just can't expend
any attention on it. There are two things that take attention: convincing investors, and
negotiating with them. So when you're not in fundraising mode, you should take money from
investors only if they require no convincing, and are willing to invest on terms you'll take without
negotiation. For example, if a reputable investor is willing to invest on a convertible note, using
standard paperwork, that is either uncapped or capped at a good valuation, you can take that
without having to think. [3] The terms will be whatever they turn out to be in your next equity
round. And "no convincing" means just that: zero time spent meeting with investors or preparing
materials for them. If an investor says they're ready to invest, but they need you to come in for
one meeting to meet some of the partners, tell them no, if you're not in fundraising mode,
because that's fundraising. [4] Tell them politely; tell them you're focusing on the company right
now, and that you'll get back to them when you're fundraising; but do not get sucked down the
slippery slope.
Investors will try to lure you into fundraising when you're not. It's great for them if they can,
because they can thereby get a shot at you before everyone else. They'll send you emails
saying they want to meet to learn more about you. If you get cold-emailed by an associate at a
VC firm, you shouldn't meet even if you are in fundraising mode. Deals don't happen that way.
[5] But even if you get an email from a partner you should try to delay meeting till you're in
fundraising mode. They may say they just want to meet and chat, but investors never just want
to meet and chat. What if they like you? What if they start to talk about giving you money? Will
you be able to resist having that conversation? Unless you're experienced enough at
fundraising to have a casual conversation with investors that stays casual, it's safer to tell them
that you'd be happy to later, when you're fundraising, but that right now you need to focus on
the company. [6]
Companies that are successful at raising money in phase 2 sometimes tack on a few investors
after leaving fundraising mode. This is fine; if fundraising went well, you'll be able to do it without
spending time convincing them or negotiating about terms.
Get introductions to investors.
Before you can talk to investors, you have to be introduced to them. If you're presenting at a
Demo Day, you'll be introduced to a whole bunch simultaneously. But even if you are, you
should supplement these with intros you collect yourself.
Do you have to be introduced? In phase 2, yes. Some investors will let you email them a
business plan, but you can tell from the way their sites are organized that they don't really want
startups to approach them directly.
Intros vary greatly in effectiveness. The best type of intro is from a well-known investor who has
just invested in you. So when you get an investor to commit, ask them to introduce you to other
investors they respect. [7] The next best type of intro is from a founder of a company they've
funded. You can also get intros from other people in the startup community, like lawyers and
reporters.
There are now sites like AngelList, FundersClub, and WeFunder that can introduce you to
investors. We recommend startups treat them as auxiliary sources of money. Raise money first
from leads you get yourself. Those will on average be better investors. Plus you'll have an
easier time raising money on these sites once you can say you've already raised some from
well-known investors.
Hear no till you hear yes.
Treat investors as saying no till they unequivocally say yes, in the form of a definite offer with no
contingencies.
I mentioned earlier that investors prefer to wait if they can. What's particularly dangerous for
founders is the way they wait. Essentially, they lead you on. They seem like they're about to
invest right up till the moment they say no. If they even say no. Some of the worse ones never
actually do say no; they just stop replying to your emails. They hope that way to get a free
option on investing. If they decide later that they want to invest — usually because they've
heard you're a hot deal — they can pretend they just got distracted and then restart the
conversation as if they'd been about to. [8]
That's not the worst thing investors will do. Some will use language that makes it sound as if
they're committing, but which doesn't actually commit them. And wishful thinking founders are
happy to meet them half way. [9]
Fortunately, the next rule is a tactic for neutralizing this behavior. But to work it depends on you
not being tricked by the no that sounds like yes. It's so common for founders to be misled/
mistaken about this that we designed a protocol to fix the problem. If you believe an investor
has committed, get them to confirm it. If you and they have different views of reality, whether the
source of the discrepancy is their sketchiness or your wishful thinking, the prospect of
confirming a commitment in writing will flush it out. And till they confirm, regard them as saying
no.
Do breadth-first search weighted by expected value.
When you talk to investors your m.o. should be breadth-first search, weighted by expected
value. You should always talk to investors in parallel rather than serially. You can't afford the time
it takes to talk to investors serially, plus if you only talk to one investor at a time, they don't have
the pressure of other investors to make them act. But you shouldn't pay the same attention to
every investor, because some are more promising prospects than others. The optimal solution
is to talk to all potential investors in parallel, but give higher priority to the more promising ones.
[10]
Expected value = how likely an investor is to say yes, multiplied by how good it would be if they
did. So for example, an eminent investor who would invest a lot, but will be hard to convince,
might have the same expected value as an obscure angel who won't invest much, but will be
easy to convince. Whereas an obscure angel who will only invest a small amount, and yet
needs to meet multiple times before making up his mind, has very low expected value. Meet
such investors last, if at all. [11]
Doing breadth-first search weighted by expected value will save you from investors who never
explicitly say no but merely drift away, because you'll drift away from them at the same rate. It
protects you from investors who flake in much the same way that a distributed algorithm
protects you from processors that fail. If some investor isn't returning your emails, or wants to
have lots of meetings but isn't progressing toward making you an offer, you automatically focus
less on them. But you have to be disciplined about assigning probabilities. You can't let how
much you want an investor influence your estimate of how much they want you.
Know where you stand.
How do you judge how well you're doing with an investor, when investors habitually seem more
positive than they are? By looking at their actions rather than their words. Every investor has
some track they need to move along from the first conversation to wiring the money, and you
should always know what that track consists of, where you are on it, and how fast you're moving
forward.
Never leave a meeting with an investor without asking what happens next. What more do they
need in order to decide? Do they need another meeting with you? To talk about what? And how
soon? Do they need to do something internally, like talk to their partners, or investigate some
issue? How long do they expect it to take? Don't be too pushy, but know where you stand. If
investors are vague or resist answering such questions, assume the worst; investors who are
seriously interested in you will usually be happy to talk about what has to happen between now
and wiring the money, because they're already running through that in their heads. [12]
If you're experienced at negotiations, you already know how to ask such questions. [13] If you're
not, there's a trick you can use in this situation. Investors know you're inexperienced at raising
money. Inexperience there doesn't make you unattractive. Being a noob at technology would, if
you're starting a technology startup, but not being a noob at fundraising. Larry and Sergey were
noobs at fundraising. So you can just confess that you're inexperienced at this and ask how
their process works and where you are in it. [14]
Get the first commitment.
The biggest factor in most investors' opinions of you is the opinion of other investors. Once you
start getting investors to commit, it becomes increasingly easy to get more to. But the other side
of this coin is that it's often hard to get the first commitment.
Getting the first substantial offer can be half the total difficulty of fundraising. What counts as a
substantial offer depends on who it's from and how much it is. Money from friends and family
doesn't usually count, no matter how much. But if you get $50k from a well known VC firm or
angel investor, that will usually be enough to set things rolling. [15]
Close committed money.
It's not a deal till the money's in the bank. I often hear inexperienced founders say things like
"We've raised $800,000," only to discover that zero of it is in the bank so far. Remember the
twin fears that torment investors? The fear of missing out that makes them jump early, and the
fear of jumping onto a turd that results? This is a market where people are exceptionally prone
to buyer's remorse. And it's also one that furnishes them plenty of excuses to gratify it. The
public markets snap startup investing around like a whip. If the Chinese economy blows up
tomorrow, all bets are off. But there are lots of surprises for individual startups too, and they
tend to be concentrated around fundraising. Tomorrow a big competitor could appear, or you
could get C&Ded, or your cofounder could quit. [16]
Even a day's delay can bring news that causes an investor to change their mind. So when
someone commits, get the money. Knowing where you stand doesn't end when they say they'll
invest. After they say yes, know what the timetable is for getting the money, and then babysit
that process till it happens. Institutional investors have people in charge of wiring money, but
you may have to hunt angels down in person to collect a check.
Inexperienced investors are the ones most likely to get buyer's remorse. Established ones have
learned to treat saying yes as like diving off a diving board, and they also have more brand to
preserve. But I've heard of cases of even top-tier VC firms welching on deals.
Avoid investors who don't "lead."
Since getting the first offer is most of the difficulty of fundraising, that should be part of your
calculation of expected value when you start. You have to estimate not just the probability that
an investor will say yes, but the probability that they'd be the first to say yes, and the latter is not
simply a constant fraction of the former. Some investors are known for deciding quickly, and
those are extra valuable early on.
Conversely, an investor who will only invest once other investors have is worthless initially. And
while most investors are influenced by how interested other investors are in you, there are
some who have an explicit policy of only investing after other investors have. You can recognize
this contemptible subspecies of investor because they often talk about "leads." They say that
they don't lead, or that they'll invest once you have a lead. Sometimes they even claim to be
willing to lead themselves, by which they mean they won't invest till you get $x from other
investors. (It's great if by "lead" they mean they'll invest unilaterally, and in addition will help you
raise more. What's lame is when they use the term to mean they won't invest unless you can
raise more elsewhere.) [17]
Where does this term "lead" come from? Up till a few years ago, startups raising money in
phase 2 would usually raise equity rounds in which several investors invested at the same time
using the same paperwork. You'd negotiate the terms with one "lead" investor, and then all the
others would sign the same documents and all the money change hands at the closing.
Series A rounds still work that way, but things now work differently for most fundraising prior to
the series A. Now there are rarely actual rounds before the A round, or leads for them. Now
startups simply raise money from investors one at a time till they feel they have enough.
Since there are no longer leads, why do investors use that term? Because it's a more legitimatesounding way of saying what they really mean. All they really mean is that their interest in you is
a function of other investors' interest in you. I.e. the spectral signature of all mediocre investors.
But when phrased in terms of leads, it sounds like there is something structural and therefore
legitimate about their behavior.
When an investor tells you "I want to invest in you, but I don't lead," translate that in your mind
to "No, except yes if you turn out to be a hot deal." And since that's the default opinion of any
investor about any startup, they've essentially just told you nothing.
When you first start fundraising, the expected value of an investor who won't "lead" is zero, so
talk to such investors last if at all.
Have multiple plans.
Many investors will ask how much you're planning to raise. This question makes founders feel
they should be planning to raise a specific amount. But in fact you shouldn't. It's a mistake to
have fixed plans in an undertaking as unpredictable as fundraising.
So why do investors ask how much you plan to raise? For much the same reasons a
salesperson in a store will ask "How much were you planning to spend?" if you walk in looking
for a gift for a friend. You probably didn't have a precise amount in mind; you just want to find
something good, and if it's inexpensive, so much the better. The salesperson asks you this not
because you're supposed to have a plan to spend a specific amount, but so they can show you
only things that cost the most you'll pay.
Similarly, when investors ask how much you plan to raise, it's not because you're supposed to
have a plan. It's to see whether you'd be a suitable recipient for the size of investment they like
to make, and also to judge your ambition, reasonableness, and how far you are along with
fundraising.
If you're a wizard at fundraising, you can say "We plan to raise a $7 million series A round, and
we'll be accepting termsheets next tuesday." I've known a handful of founders who could pull
that off without having VCs laugh in their faces. But if you're in the inexperienced but earnest
majority, the solution is analogous to the solution I recommend for pitching your startup: do the
right thing and then just tell investors what you're doing.
And the right strategy, in fundraising, is to have multiple plans depending on how much you can
raise. Ideally you should be able to tell investors something like: we can make it to profitability
without raising any more money, but if we raise a few hundred thousand we can hire one or two
smart friends, and if we raise a couple million, we can hire a whole engineering team, etc.
Different plans match different investors. If you're talking to a VC firm that only does series A
rounds (though there are few of those left), it would be a waste of time talking about any but
your most expensive plan. Whereas if you're talking to an angel who invests $20k at a time and
you haven't raised any money yet, you probably want to focus on your least expensive plan.
If you're so fortunate as to have to think about the upper limit on what you should raise, a good
rule of thumb is to multiply the number of people you want to hire times $15k times 18 months.
In most startups, nearly all the costs are a function of the number of people, and $15k per
month is the conventional total cost (including benefits and even office space) per person. $15k
per month is high, so don't actually spend that much. But it's ok to use a high estimate when
fundraising to add a margin for error. If you have additional expenses, like manufacturing, add in
those at the end. Assuming you have none and you think you might hire 20 people, the most
you'd want to raise is 20 x $15k x 18 = $5.4 million. [18]
Underestimate how much you want.
Though you can focus on different plans when talking to different types of investors, you should
on the whole err on the side of underestimating the amount you hope to raise.
For example, if you'd like to raise $500k, it's better to say initially that you're trying to raise
$250k. Then when you reach $150k you're more than half done. That sends two useful signals
to investors: that you're doing well, and that they have to decide quickly because you're running
out of room. Whereas if you'd said you were raising $500k, you'd be less than a third done at
$150k. If fundraising stalled there for an appreciable time, you'd start to read as a failure.
Saying initially that you're raising $250k doesn't limit you to raising that much. When you reach
your initial target and you still have investor interest, you can just decide to raise more. Startups
do that all the time. In fact, most startups that are very successful at fundraising end up raising
more than they originally intended.
I'm not saying you should lie, but that you should lower your expectations initially. There is
almost no downside in starting with a low number. It not only won't cap the amount you raise,
but will on the whole tend to increase it.
A good metaphor here is angle of attack. If you try to fly at too steep an angle of attack, you just
stall. If you say right out of the gate that you want to raise a $5 million series A round, unless
you're in a very strong position, you not only won't get that but won't get anything. Better to start
at a low angle of attack, build up speed, and then gradually increase the angle if you want.
Be profitable if you can.
You will be in a much stronger position if your collection of plans includes one for raising zero
dollars — i.e. if you can make it to profitability without raising any additional money. Ideally you
want to be able to say to investors "We'll succeed no matter what, but raising money will help us
do it faster."
There are many analogies between fundraising and dating, and this is one of the strongest. No
one wants you if you seem desperate. And the best way not to seem desperate is not to be
desperate. That's one reason we urge startups during YC to keep expenses low and to try to
make it to ramen profitability before Demo Day. Though it sounds slightly paradoxical, if you
want to raise money, the best thing you can do is get yourself to the point where you don't need
to.
There are almost two distinct modes of fundraising: one in which founders who need money
knock on doors seeking it, knowing that otherwise the company will die or at the very least
people will have to be fired, and one in which founders who don't need money take some to
grow faster than they could merely on their own revenues. To emphasize the distinction I'm
going to name them: type A fundraising is when you don't need money, and type B fundraising
is when you do.
Inexperienced founders read about famous startups doing what was type A fundraising, and
decide they should raise money too, since that seems to be how startups work. Except when
they raise money they don't have a clear path to profitability and are thus doing type B
fundraising. And they are then surprised how difficult and unpleasant it is.
Of course not all startups can make it to ramen profitability in a few months. And some that
don't still manage to have the upper hand over investors, if they have some other advantage like
extraordinary growth numbers or exceptionally formidable founders. But as time passes it gets
increasingly difficult to fundraise from a position of strength without being profitable. [19]
Don't optimize for valuation.
When you raise money, what should your valuation be? The most important thing to understand
about valuation is that it's not that important.
Founders who raise money at high valuations tend to be unduly proud of it. Founders are often
competitive people, and since valuation is usually the only visible number attached to a startup,
they end up competing to raise money at the highest valuation. This is stupid, because
fundraising is not the test that matters. The real test is revenue. Fundraising is just a means to
that end. Being proud of how well you did at fundraising is like being proud of your college
grades.
Not only is fundraising not the test that matters, valuation is not even the thing to optimize about
fundraising. The number one thing you want from phase 2 fundraising is to get the money you
need, so you can get back to focusing on the real test, the success of your company. Number
two is good investors. Valuation is at best third.
The empirical evidence shows just how unimportant it is. Dropbox and Airbnb are the most
successful companies we've funded so far, and they raised money after Y Combinator at
premoney valuations of $4 million and $2.6 million respectively. Prices are so much higher now
that if you can raise money at all you'll probably raise it at higher valuations than Dropbox and
Airbnb. So let that satisfy your competitiveness. You're doing better than Dropbox and Airbnb! At
a test that doesn't matter.
When you start fundraising, your initial valuation (or valuation cap) will be set by the deal you
make with the first investor who commits. You can increase the price for later investors, if you
get a lot of interest, but by default the valuation you got from the first investor becomes your
asking price.
So if you're raising money from multiple investors, as most companies do in phase 2, you have
to be careful to avoid raising the first from an over-eager investor at a price you won't be able to
sustain. You can of course lower your price if you need to (in which case you should give the
same terms to investors who invested earlier at a higher price), but you may lose a bunch of
leads in the process of realizing you need to do this.
What you can do if you have eager first investors is raise money from them on an uncapped
convertible note with an MFN clause. This is essentially a way of saying that the valuation cap
of the note will be determined by the next investors you raise money from.
It will be easier to raise money at a lower valuation. It shouldn't be, but it is. Since phase 2
prices vary at most 10x and the big successes generate returns of at least 100x, investors
should pick startups entirely based on their estimate of the probability that the company will be
a big success and hardly at all on price. But although it's a mistake for investors to care about
price, a significant number do. A startup that investors seem to like but won't invest in at a cap
of $x will have an easier time at $x/2. [20]
Yes/no before valuation.
Some investors want to know what your valuation is before they even talk to you about
investing. If your valuation has already been set by a prior investment at a specific valuation or
cap, you can tell them that number. But if it isn't set because you haven't closed anyone yet,
and they try to push you to name a price, resist doing so. If this would be the first investor
you've closed, then this could be the tipping point of fundraising. That means closing this
investor is the first priority, and you need to get the conversation onto that instead of being
dragged sideways into a discussion of price.
Fortunately there is a way to avoid naming a price in this situation. And it is not just a
negotiating trick; it's how you (both) should be operating. Tell them that valuation is not the most
important thing to you and that you haven't thought much about it, that you are looking for
investors you want to partner with and who want to partner with you, and that you should talk
first about whether they want to invest at all. Then if they decide they do want to invest, you can
figure out a price. But first things first.
Since valuation isn't that important and getting fundraising rolling is, we usually tell founders to
give the first investor who commits as low a price as they need to. This is a safe technique so
long as you combine it with the next one. [21]
Beware "valuation sensitive" investors.
Occasionally you'll encounter investors who describe themselves as "valuation sensitive." What
this means in practice is that they are compulsive negotiators who will suck up a lot of your time
trying to push your price down. You should therefore never approach such investors first. While
you shouldn't chase high valuations, you also don't want your valuation to be set artificially low
because the first investor who committed happened to be a compulsive negotiator. Some such
investors have value, but the time to approach them is near the end of fundraising, when you're
in a position to say "this is the price everyone else has paid; take it or leave it" and not mind if
they leave it. This way, you'll not only get market price, but it will also take less time.
Ideally you know which investors have a reputation for being "valuation sensitive" and can
postpone dealing with them till last, but occasionally one you didn't know about will pop up early
on. The rule of doing breadth first search weighted by expected value already tells you what to
do in this case: slow down your interactions with them.
There are a handful of investors who will try to invest at a lower valuation even when your price
has already been set. Lowering your price is a backup plan you resort to when you discover
you've let the price get set too high to close all the money you need. So you'd only want to talk
to this sort of investor if you were about to do that anyway. But since investor meetings have to
be arranged at least a few days in advance and you can't predict when you'll need to resort to
lowering your price, this means in practice that you should approach this type of investor last if
at all.
If you're surprised by a lowball offer, treat it as a backup offer and delay responding to it. When
someone makes an offer in good faith, you have a moral obligation to respond in a reasonable
time. But lowballing you is a dick move that should be met with the corresponding countermove.
Accept offers greedily.
I'm a little leery of using the term "greedily" when writing about fundraising lest nonprogrammers misunderstand me, but a greedy algorithm is simply one that doesn't try to look
into the future. A greedy algorithm takes the best of the options in front of it right now. And that
is how startups should approach fundraising in phases 2 and later. Don't try to look into the
future because (a) the future is unpredictable, and indeed in this business you're often being
deliberately misled about it and (b) your first priority in fundraising should be to get it finished
and get back to work anyway.
If someone makes you an acceptable offer, take it. If you have multiple incompatible offers, take
the best. Don't reject an acceptable offer in the hope of getting a better one in the future.
These simple rules cover a wide variety of cases. If you're raising money from many investors,
roll them up as they say yes. As you start to feel you've raised enough, the threshold for
acceptable will start to get higher.
In practice offers exist for stretches of time, not points. So when you get an acceptable offer that
would be incompatible with others (e.g. an offer to invest most of the money you need), you can
tell the other investors you're talking to that you have an offer good enough to accept, and give
them a few days to make their own. This could lose you some that might have made an offer if
they had more time. But by definition you don't care; the initial offer was acceptable.
Some investors will try to prevent others from having time to decide by giving you an
"exploding" offer, meaning one that's only valid for a few days. Offers from the very best
investors explode less frequently and less rapidly — Fred Wilson never gives exploding offers,
for example — because they're confident you'll pick them. But lower-tier investors sometimes
give offers with very short fuses, because they believe no one who had other options would
choose them. A deadline of three working days is acceptable. You shouldn't need more than
that if you've been talking to investors in parallel. But a deadline any shorter is a sign you're
dealing with a sketchy investor. You can usually call their bluff, and you may need to. [22]
It might seem that instead of accepting offers greedily, your goal should be to get the best
investors as partners. That is certainly a good goal, but in phase 2 "get the best investors" only
rarely conflicts with "accept offers greedily," because the best investors don't usually take any
longer to decide than the others. The only case where the two strategies give conflicting advice
is when you have to forgo an offer from an acceptable investor to see if you'll get an offer from a
better one. If you talk to investors in parallel and push back on exploding offers with excessively
short deadlines, that will almost never happen. But if it does, "get the best investors" is in the
average case bad advice. The best investors are also the most selective, because they get their
pick of all the startups. They reject nearly everyone they talk to, which means in the average
case it's a bad trade to exchange a definite offer from an acceptable investor for a potential offer
from a better one.
(The situation is different in phase 1. You can't apply to all the incubators in parallel, because
some offset their schedules to prevent this. In phase 1, "accept offers greedily" and "get the
best investors" do conflict, so if you want to apply to multiple incubators, you should do it in
such a way that the ones you want most decide first.)
Sometimes when you're raising money from multiple investors, a series A will emerge out of
those conversations, and these rules even cover what to do in that case. When an investor
starts to talk to you about a series A, keep taking smaller investments till they actually give you
a termsheet. There's no practical difficulty. If the smaller investments are on convertible notes,
they'll just convert into the series A round. The series A investor won't like having all these other
random investors as bedfellows, but if it bothers them so much they should get on with giving
you a termsheet. Till they do, you don't know for sure they will, and the greedy algorithm tells
you what to do. [23]
Don't sell more than 25% in phase 2.
If you do well, you will probably raise a series A round eventually. I say probably because things
are changing with series A rounds. Startups may start to skip them. But only one company
we've funded has so far, so tentatively assume the path to huge passes through an A round. [24]
Which means you should avoid doing things in earlier rounds that will mess up raising an A
round. For example, if you've sold more than about 40% of your company total, it starts to get
harder to raise an A round, because VCs worry there will not be enough stock left to keep the
founders motivated.
Our rule of thumb is not to sell more than 25% in phase 2, on top of whatever you sold in phase
1, which should be less than 15%. If you're raising money on uncapped notes, you'll have to
guess what the eventual equity round valuation might be. Guess conservatively.
(Since the goal of this rule is to avoid messing up the series A, there's obviously an exception if
you end up raising a series A in phase 2, as a handful of startups do.)
Have one person handle fundraising.
If you have multiple founders, pick one to handle fundraising so the other(s) can keep working
on the company. And since the danger of fundraising is not the time taken up by the actual
meetings but that it becomes the top idea in your mind, the founder who handles fundraising
should make a conscious effort to insulate the other founder(s) from the details of the process.
[25]
(If the founders mistrust one another, this could cause some friction. But if the founders mistrust
one another, you have worse problems to worry about than how to organize fundraising.)
The founder who handles fundraising should be the CEO, who should in turn be the most
formidable of the founders. Even if the CEO is a programmer and another founder is a
salesperson? Yes. If you happen to be that type of founding team, you're effectively a single
founder when it comes to fundraising.
It's ok to bring all the founders to meet an investor who will invest a lot, and who needs this
meeting as the final step before deciding. But wait till that point. Introducing an investor to your
cofounder(s) should be like introducing a girl/boyfriend to your parents — something you do
only when things reach a certain stage of seriousness.
Even if there are still one or more founders focusing on the company during fundraising, growth
will slow. But try to get as much growth as you can, because fundraising is a segment of time,
not a point, and what happens to the company during that time affects the outcome. If your
numbers grow significantly between two investor meetings, investors will be hot to close, and if
your numbers are flat or down they'll start to get cold feet.
You'll need an executive summary and (maybe) a deck.
Traditionally phase 2 fundraising consists of presenting a slide deck in person to investors.
Sequoia describes what such a deck should contain, and since they're the customer you can
take their word for it.
I say "traditionally" because I'm ambivalent about decks, and (though perhaps this is wishful
thinking) they seem to be on the way out. A lot of the most successful startups we fund never
make decks in phase 2. They just talk to investors and explain what they plan to do. Fundraising
usually takes off fast for the startups that are most successful at it, and they're thus able to
excuse themselves by saying that they haven't had time to make a deck.
You'll also want an executive summary, which should be no more than a page long and
describe in the most matter of fact language what you plan to do, why it's a good idea, and what
progress you've made so far. The point of the summary is to remind the investor (who may have
met many startups that day) what you talked about.
Assume that if you give someone a copy of your deck or executive summary, it will be passed
on to whoever you'd least like to have it. But don't refuse on that account to give copies to
investors you meet. You just have to treat such leaks as a cost of doing business. In practice it's
not that high a cost. Though founders are rightly indignant when their plans get leaked to
competitors, I can't think of a startup whose outcome has been affected by it.
Sometimes an investor will ask you to send them your deck and/or executive summary before
they decide whether to meet with you. I wouldn't do that. It's a sign they're not really interested.
Stop fundraising when it stops working.
When do you stop fundraising? Ideally when you've raised enough. But what if you haven't
raised as much as you'd like? When do you give up?
It's hard to give general advice about this, because there have been cases of startups that kept
trying to raise money even when it seemed hopeless, and miraculously succeeded. But what I
usually tell founders is to stop fundraising when you start to get a lot of air in the straw. When
you're drinking through a straw, you can tell when you get to the end of the liquid because you
start to get a lot of air in the straw. When your fundraising options run out, they usually run out
in the same way. Don't keep sucking on the straw if you're just getting air. It's not going to get
better.
Don't get addicted to fundraising.
Fundraising is a chore for most founders, but some find it more interesting than working on their
startup. The work at an early stage startup often consists of unglamorous schleps. Whereas
fundraising, when it's going well, can be quite the opposite. Instead of sitting in your grubby
apartment listening to users complain about bugs in your software, you're being offered millions
of dollars by famous investors over lunch at a nice restaurant. [26]
The danger of fundraising is particularly acute for people who are good at it. It's always fun to
work on something you're good at. If you're one of these people, beware. Fundraising is not
what will make your company successful. Listening to users complain about bugs in your
software is what will make you successful. And the big danger of getting addicted to fundraising
is not merely that you'll spend too long on it or raise too much money. It's that you'll start to think
of yourself as being already successful, and lose your taste for the schleps you need to
undertake to actually be successful. Startups can be destroyed by this.
When I see a startup with young founders that is fabulously successful at fundraising, I mentally
decrease my estimate of the probability that they'll succeed. The press may be writing about
them as if they'd been anointed as the next Google, but I'm thinking "this is going to end badly."
Don't raise too much.
Though only a handful of startups have to worry about this, it is possible to raise too much. The
dangers of raising too much are subtle but insidious. One is that it will set impossibly high
expectations. If you raise an excessive amount of money, it will be at a high valuation, and the
danger of raising money at too high a valuation is that you won't be able to increase it
sufficiently the next time you raise money.
A company's valuation is expected to rise each time it raises money. If not it's a sign of a
company in trouble, which makes you unattractive to investors. So if you raise money in phase
2 at a post-money valuation of $30 million, the pre-money valuation of your next round, if you
want to raise one, is going to have to be at least $50 million. And you have to be doing really,
really well to raise money at $50 million.
It's very dangerous to let the competitiveness of your current round set the performance
threshold you have to meet to raise your next one, because the two are only loosely coupled.
But the money itself may be more dangerous than the valuation. The more you raise, the more
you spend, and spending a lot of money can be disastrous for an early stage startup. Spending
a lot makes it harder to become profitable, and perhaps even worse, it makes you more rigid,
because the main way to spend money is people, and the more people you have, the harder it
is to change directions. So if you do raise a huge amount of money, don't spend it. (You will find
that advice almost impossible to follow, so hot will be the money burning a hole in your pocket,
but I feel obliged at least to try.)
Be nice.
Startups raising money occasionally alienate investors by seeming arrogant. Sometimes
because they are arrogant, and sometimes because they're noobs clumsily attempting to mimic
the toughness they've observed in experienced founders.
It's a mistake to behave arrogantly to investors. While there are certain situations in which
certain investors like certain kinds of arrogance, investors vary greatly in this respect, and a
flick of the whip that will bring one to heel will make another roar with indignation. The only safe
strategy is never to seem arrogant at all.
That will require some diplomacy if you follow the advice I've given here, because the advice
I've given is essentially how to play hardball back. When you refuse to meet an investor
because you're not in fundraising mode, or slow down your interactions with an investor who
moves too slow, or treat a contingent offer as the no it actually is and then, by accepting offers
greedily, end up leaving that investor out, you're going to be doing things investors don't like. So
you must cushion the blow with soft words. At YC we tell startups they can blame us. And now
that I've written this, everyone else can blame me if they want. That plus the inexperience card
should work in most situations: sorry, we think you're great, but PG said startups shouldn't ___,
and since we're new to fundraising, we feel like we have to play it safe.
The danger of behaving arrogantly is greatest when you're doing well. When everyone wants
you, it's hard not to let it go to your head. Especially if till recently no one wanted you. But
restrain yourself. The startup world is a small place, and startups have lots of ups and downs.
This is a domain where it's more true than usual that pride goeth before a fall. [27]
Be nice when investors reject you as well. The best investors are not wedded to their initial
opinion of you. If they reject you in phase 2 and you end up doing well, they'll often invest in
phase 3. In fact investors who reject you are some of your warmest leads for future fundraising.
Any investor who spent significant time deciding probably came close to saying yes. Often you
have some internal champion who only needs a little more evidence to convince the skeptics.
So it's wise not merely to be nice to investors who reject you, but (unless they behaved badly)
to treat it as the beginning of a relationship.
The bar will be higher next time.
Assume the money you raise in phase 2 will be the last you ever raise. You must make it to
profitability on this money if you can.
Over the past several years, the investment community has evolved from a strategy of anointing
a small number of winners early and then supporting them for years to a strategy of spraying
money at early stage startups and then ruthlessly culling them at the next stage. This is
probably the optimal strategy for investors. It's too hard to pick winners early on. Better to let the
market do it for you. But it often comes as a surprise to startups how much harder it is to raise
money in phase 3.
When your company is only a couple months old, all it has to be is a promising experiment
that's worth funding to see how it turns out. The next time you raise money, the experiment has
to have worked. You have to be on a trajectory that leads to going public. And while there are
some ideas where the proof that the experiment worked might consist of e.g. query response
times, usually the proof is profitability. Usually phase 3 fundraising has to be type A fundraising.
In practice there are two ways startups hose themselves between phases 2 and 3. Some are
just too slow to become profitable. They raise enough money to last for two years. There doesn't
seem any particular urgency to be profitable. So they don't make any effort to make money for a
year. But by that time, not making money has become habitual. When they finally decide to try,
they find they can't.
The other way companies hose themselves is by letting their expenses grow too fast. Which
almost always means hiring too many people. You usually shouldn't go out and hire 8 people as
soon as you raise money at phase 2. Usually you want to wait till you have growth (and thus
usually revenues) to justify them. A lot of VCs will encourage you to hire aggressively. VCs
generally tell you to spend too much, partly because as money people they err on the side of
solving problems by spending money, and partly because they want you to sell them more of
your company in subsequent rounds. Don't listen to them.
Don't make things complicated.
I realize it may seem odd to sum up this huge treatise by saying that my overall advice is not to
make fundraising too complicated, but if you go back and look at this list you'll see it's basically
a simple recipe with a lot of implications and edge cases. Avoid investors till you decide to raise
money, and then when you do, talk to them all in parallel, prioritized by expected value, and
accept offers greedily. That's fundraising in one sentence. Don't introduce complicated
optimizations, and don't let investors introduce complications either.
Fundraising is not what will make you successful. It's just a means to an end. Your primary goal
should be to get it over with and get back to what will make you successful — making things
and talking to users — and the path I've described will for most startups be the surest way to
that destination.
Be good, take care of yourselves, and don't leave the path.
Notes:
[1] The worst explosions happen when unpromising-seeming startups encounter mediocre investors. Good investors
don't lead startups on; their reputations are too valuable. And startups that seem promising can usually get enough
money from good investors that they don't have to talk to mediocre ones. It is the unpromising-seeming startups that
have to resort to raising money from mediocre investors. And it's particularly damaging when these investors flake,
because unpromising-seeming startups are usually more desperate for money.
(Not all unpromising-seeming startups do badly. Some are merely ugly ducklings in the sense that they violate
current startup fashions.)
[2] One YC founder told me: I think in general we've done ok at fundraising, but I managed to screw up twice at the
exact same thing — trying to focus on building the company and fundraising at the same time. [3] There is one subtle
danger you have to watch out for here, which I warn about later: beware of getting too high a valuation from an eager
investor, lest that set an impossibly high target when raising additional money.
[4] If they really need a meeting, then they're not ready to invest, regardless of what they say. They're still deciding,
which means you're being asked to come in and convince them. Which is fundraising.
[5] Associates at VC firms regularly cold email startups. Naive founders think "Wow, a VC is interested in us!" But an
associate is not a VC. They have no decision-making power. And while they may introduce startups they like to
partners at their firm, the partners discriminate against deals that come to them this way. I don't know of a single VC
investment that began with an associate cold-emailing a startup. If you want to approach a specific firm, get an intro
to a partner from someone they respect.
It's ok to talk to an associate if you get an intro to a VC firm or they see you at a Demo Day and they begin by having
an associate vet you. That's not a promising lead and should therefore get low priority, but it's not as completely
worthless as a cold email.
Because the title "associate" has gotten a bad reputation, a few VC firms have started to give their associates the
title "partner," which can make things very confusing. If you're a YC startup you can ask us who's who; otherwise you
may have to do some research online. There may be a special title for actual partners. If someone speaks for the firm
in the press or a blog on the firm's site, they're probably a real partner. If they're on boards of directors they're
probably a real partner.
There are titles between "associate" and "partner," including "principal" and "venture partner." The meanings of these
titles vary too much to generalize.
[6] For similar reasons, avoid casual conversations with potential acquirers. They can lead to distractions even more
dangerous than fundraising. Don't even take a meeting with a potential acquirer unless you want to sell your
company right now.
[7] Joshua Reeves specifically suggests asking each investor to intro you to two more investors.
Don't ask investors who say no for introductions to other investors. That will in many cases be an antirecommendation.
[8] This is not always as deliberate as its sounds. A lot of the delays and disconnects between founders and investors
are induced by the customs of the venture business, which have evolved the way they have because they suit
investors' interests.
[9] One YC founder who read a draft of this essay wrote: This is the most important section. I think it might bear
stating even more clearly. "Investors will deliberately affect more interest than they have to preserve optionality. If an
investor seems very interested in you, they still probably won't invest. The solution for this is to assume the worst —
that an investor is just feigning interest — until you get a definite commitment." [10] Though you should probably
pack investor meetings as closely as you can, Jeff Byun mentions one reason not to: if you pack investor meetings
too closely, you'll have less time for your pitch to evolve.
Some founders deliberately schedule a handful of lame investors first, to get the bugs out of their pitch.
[11] There is not an efficient market in this respect. Some of the most useless investors are also the highest
maintenance.
[12] Incidentally, this paragraph is sales 101. If you want to see it in action, go talk to a car dealer.
[13] I know one very smooth founder who used to end investor meetings with "So, can I count you in?" delivered as if
it were "Can you pass the salt?" Unless you're very smooth (if you're not sure...), do not do this yourself. There is
nothing more unconvincing, for an investor, than a nerdy founder trying to deliver the lines meant for a smooth one.
Investors are fine with funding nerds. So if you're a nerd, just try to be a good nerd, rather than doing a bad imitation
of a smooth salesman.
[14] Ian Hogarth suggests a good way to tell how serious potential investors are: the resources they expend on you
after the first meeting. An investor who's seriously interested will already be working to help you even before they've
committed.
[15] In principle you might have to think about so-called "signalling risk." If a prestigious VC makes a small seed
investment in you, what if they don't want to invest the next time you raise money? Other investors might assume that
the VC knows you well, since they're an existing investor, and if they don't want to invest in your next round, that must
mean you suck. The reason I say "in principle" is that in practice signalling hasn't been much of a problem so far. It
rarely arises, and in the few cases where it does, the startup in question usually is doing badly and is doomed
anyway.
If you have the luxury of choosing among seed investors, you can play it safe by excluding VC firms. But it isn't
critical to.
[16] Sometimes a competitor will deliberately threaten you with a lawsuit just as you start fundraising, because they
know you'll have to disclose the threat to potential investors and they hope this will make it harder for you to raise
money. If this happens it will probably frighten you more than investors. Experienced investors know about this trick,
and know the actual lawsuits rarely happen. So if you're attacked in this way, be forthright with investors. They'll be
more alarmed if you seem evasive than if you tell them everything.
[17] A related trick is to claim that they'll only invest contingently on other investors doing so because otherwise you'd
be "undercapitalized." This is almost always bullshit. They can't estimate your minimum capital needs that precisely.
[18] You won't hire all those 20 people at once, and you'll probably have some revenues before 18 months are out.
But those too are acceptable or at least accepted additions to the margin for error.
[19] Type A fundraising is so much better that it might even be worth doing something different if it gets you there
sooner. One YC founder told me that if he were a first-time founder again he'd "leave ideas that are up-front capital
intensive to founders with established reputations."
[20] I don't know whether this happens because they're innumerate, or because they believe they have zero ability to
predict startup outcomes (in which case this behavior at least wouldn't be irrational). In either case the implications
are similar.
[21] If you're a YC startup and you have an investor who for some reason insists that you decide the price, any YC
partner can estimate a market price for you.
[22] You should respond in kind when investors behave upstandingly too. When an investor makes you a clean offer
with no deadline, you have a moral obligation to respond promptly.
[23] Tell the investors talking to you about an A round about the smaller investments you raise as you raise them. You
owe them such updates on your cap table, and this is also a good way to pressure them to act. They won't like you
raising other money and may pressure you to stop, but they can't legitimately ask you to commit to them till they also
commit to you. If they want you to stop raising money, the way to do it is to give you a series A termsheet with a noshop clause.
You can relent a little if the potential series A investor has a great reputation and they're clearly working fast to get
you a termsheet, particularly if a third party like YC is involved to ensure there are no misunderstandings. But be
careful.
[24] The company is Weebly, which made it to profitability on a seed investment of $650k. They did try to raise a
series A in the fall of 2008 but (no doubt partly because it was the fall of 2008) the terms they were offered were so
bad that they decided to skip raising an A round.
[25] Another advantage of having one founder take fundraising meetings is that you never have to negotiate in real
time, which is something inexperienced founders should avoid. One YC founder told me: Investors are professional
negotiators and can negotiate on the spot very easily. If only one founder is in the room, you can say "I need to circle
back with my co-founder" before making any commitments. I used to do this all the time. [26] You'll be lucky if
fundraising feels pleasant enough to become addictive. More often you have to worry about the other extreme —
becoming demoralized when investors reject you. As one (very successful) YC founder wrote after reading a draft of
this: It's hard to mentally deal with the sheer scale of rejection in fundraising and if you are not in the right mindset
you will fail. Users may love you but these supposedly smart investors may not understand you at all. At this point for
me, rejection still rankles but I've come to accept that investors are just not super thoughtful for the most part and you
need to play the game according to certain somewhat depressing rules (many of which you are listing) in order to
win. [27] The actual sentence in the King James Bible is "Pride goeth before destruction, and an haughty spirit before
a fall."
Thanks to Slava Akhmechet, Sam Altman, Nate Blecharczyk, Adora Cheung, Bill Clerico, John Collison, Patrick
Collison, Parker Conrad, Ron Conway, Travis Deyle, Jason Freedman, Joe Gebbia, Mattan Griffel, Kevin Hale, Jacob
Heller, Ian Hogarth, Justin Kan, Professor Moriarty, Nikhil Nirmel, David Petersen, Geoff Ralston, Joshua Reeves,
Yuri Sagalov, Emmett Shear, Rajat Suri, Garry Tan, and Nick Tomarello for reading drafts of this.
Investor Herd Dynamics - # 154
Want to start a startup? Get funded by Y Combinator.
August 2013
The biggest component in most investors' opinion of you is the opinion of other investors. Which
is of course a recipe for exponential growth. When one investor wants to invest in you, that
makes other investors want to, which makes others want to, and so on.
Sometimes inexperienced founders mistakenly conclude that manipulating these forces is the
essence of fundraising. They hear stories about stampedes to invest in successful startups, and
think it's therefore the mark of a successful startup to have this happen. But actually the two are
not that highly correlated. Lots of startups that cause stampedes end up flaming out (in extreme
cases, partly as a result of the stampede), and lots of very successful startups were only
moderately popular with investors the first time they raised money.
So the point of this essay is not to explain how to create a stampede, but merely to explain the
forces that generate them. These forces are always at work to some degree in fundraising, and
they can cause surprising situations. If you understand them, you can at least avoid being
surprised.
One reason investors like you more when other investors like you is that you actually become a
better investment. Raising money decreases the risk of failure. Indeed, although investors hate
it, you are for this reason justified in raising your valuation for later investors. The investors who
invested when you had no money were taking more risk, and are entitled to higher returns. Plus
a company that has raised money is literally more valuable. After you raise the first million
dollars, the company is at least a million dollars more valuable, because it's the same company
as before, plus it has a million dollars in the bank. [1]
Beware, though, because later investors so hate to have the price raised on them that they
resist even this self-evident reasoning. Only raise the price on an investor you're comfortable
with losing, because some will angrily refuse. [2]
The second reason investors like you more when you've had some success at fundraising is
that it makes you more confident, and an investors' opinion of you is the foundation of their
opinion of your company. Founders are often surprised how quickly investors seem to know
when they start to succeed at raising money. And while there are in fact lots of ways for such
information to spread among investors, the main vector is probably the founders themselves.
Though they're often clueless about technology, most investors are pretty good at reading
people. When fundraising is going well, investors are quick to sense it in your increased
confidence. (This is one case where the average founder's inability to remain poker-faced works
to your advantage.)
But frankly the most important reason investors like you more when you've started to raise
money is that they're bad at judging startups. Judging startups is hard even for the best
investors. The mediocre ones might as well be flipping coins. So when mediocre investors see
that lots of other people want to invest in you, they assume there must be a reason. This leads
to the phenomenon known in the Valley as the "hot deal," where you have more interest from
investors than you can handle.
The best investors aren't influenced much by the opinion of other investors. It would only dilute
their own judgment to average it together with other people's. But they are indirectly influenced
in the practical sense that interest from other investors imposes a deadline. This is the fourth
way in which offers beget offers. If you start to get far along the track toward an offer with one
firm, it will sometimes provoke other firms, even good ones, to make up their minds, lest they
lose the deal.
Unless you're a wizard at negotiation (and if you're not sure, you're not) be very careful about
exaggerating this to push a good investor to decide. Founders try this sort of thing all the time,
and investors are very sensitive to it. If anything oversensitive. But you're safe so long as you're
telling the truth. If you're getting far along with investor B, but you'd rather raise money from
investor A, you can tell investor A that this is happening. There's no manipulation in that. You're
genuinely in a bind, because you really would rather raise money from A, but you can't safely
reject an offer from B when it's still uncertain what A will decide.
Do not, however, tell A who B is. VCs will sometimes ask which other VCs you're talking to, but
you should never tell them. Angels you can sometimes tell about other angels, because angels
cooperate more with one another. But if VCs ask, just point out that they wouldn't want you
telling other firms about your conversations, and you feel obliged to do the same for any firm
you talk to. If they push you, point out that you're inexperienced at fundraising — which is
always a safe card to play — and you feel you have to be extra cautious. [3]
While few startups will experience a stampede of interest, almost all will at least initially
experience the other side of this phenomenon, where the herd remains clumped together at a
distance. The fact that investors are so much influenced by other investors' opinions means you
always start out in something of a hole. So don't be demoralized by how hard it is to get the first
commitment, because much of the difficulty comes from this external force. The second will be
easier.
Notes:
[1] An accountant might say that a company that has raised a million dollars is no richer if it's convertible debt, but in
practice money raised as convertible debt is little different from money raised in an equity round.
[2] Founders are often surprised by this, but investors can get very emotional. Or rather indignant; that's the main
emotion I've observed; but it is very common, to the point where it sometimes causes investors to act against their
own interests. I know of one investor who invested in a startup at a $15 million valuation cap. Earlier he'd had an
opportunity to invest at a $5 million cap, but he refused because a friend who invested earlier had been able to invest
at a $3 million cap.
[3] If an investor pushes you hard to tell them about your conversations with other investors, is this someone you
want as an investor?
Thanks to Paul Buchheit, Jessica Livingston, Geoff Ralston, and Garry Tan for reading drafts of this.
How to Convince Investors - # 153
Want to start a startup? Get funded by Y Combinator.
August 2013
When people hurt themselves lifting heavy things, it's usually because they try to lift with their
back. The right way to lift heavy things is to let your legs do the work. Inexperienced founders
make the same mistake when trying to convince investors. They try to convince with their pitch.
Most would be better off if they let their startup do the work — if they started by understanding
why their startup is worth investing in, then simply explained this well to investors.
Investors are looking for startups that will be very successful. But that test is not as simple as it
sounds. In startups, as in a lot of other domains, the distribution of outcomes follows a power
law, but in startups the curve is startlingly steep. The big successes are so big they dwarf the
rest. And since there are only a handful each year (the conventional wisdom is 15), investors
treat "big success" as if it were binary. Most are interested in you if you seem like you have a
chance, however small, of being one of the 15 big successes, and otherwise not. [1]
(There are a handful of angels who'd be interested in a company with a high probability of being
moderately successful. But angel investors like big successes too.)
How do you seem like you'll be one of the big successes? You need three things: formidable
founders, a promising market, and (usually) some evidence of success so far.
Formidable
The most important ingredient is formidable founders. Most investors decide in the first few
minutes whether you seem like a winner or a loser, and once their opinion is set it's hard to
change. [2] Every startup has reasons both to invest and not to invest. If investors think you're a
winner they focus on the former, and if not they focus on the latter. For example, it might be a
rich market, but with a slow sales cycle. If investors are impressed with you as founders, they
say they want to invest because it's a rich market, and if not, they say they can't invest because
of the slow sales cycle.
They're not necessarily trying to mislead you. Most investors are genuinely unclear in their own
minds why they like or dislike startups. If you seem like a winner, they'll like your idea more. But
don't be too smug about this weakness of theirs, because you have it too; almost everyone
does.
There is a role for ideas of course. They're fuel for the fire that starts with liking the founders.
Once investors like you, you'll see them reaching for ideas: they'll be saying "yes, and you could
also do x." (Whereas when they don't like you, they'll be saying "but what about y?")
But the foundation of convincing investors is to seem formidable, and since this isn't a word
most people use in conversation much, I should explain what it means. A formidable person is
one who seems like they'll get what they want, regardless of whatever obstacles are in the way.
Formidable is close to confident, except that someone could be confident and mistaken.
Formidable is roughly justifiably confident.
There are a handful of people who are really good at seeming formidable — some because
they actually are very formidable and just let it show, and others because they are more or less
con artists. [3] But most founders, including many who will go on to start very successful
companies, are not that good at seeming formidable the first time they try fundraising. What
should they do? [4]
What they should not do is try to imitate the swagger of more experienced founders. Investors
are not always that good at judging technology, but they're good at judging confidence. If you try
to act like something you're not, you'll just end up in an uncanny valley. You'll depart from
sincere, but never arrive at convincing.
Truth
The way to seem most formidable as an inexperienced founder is to stick to the truth. How
formidable you seem isn't a constant. It varies depending on what you're saying. Most people
can seem confident when they're saying "one plus one is two," because they know it's true. The
most diffident person would be puzzled and even slightly contemptuous if they told a VC "one
plus one is two" and the VC reacted with skepticism. The magic ability of people who are good
at seeming formidable is that they can do this with the sentence "we're going to make a billion
dollars a year." But you can do the same, if not with that sentence with some fairly impressive
ones, so long as you convince yourself first.
That's the secret. Convince yourself that your startup is worth investing in, and then when you
explain this to investors they'll believe you. And by convince yourself, I don't mean play mind
games with yourself to boost your confidence. I mean truly evaluate whether your startup is
worth investing in. If it isn't, don't try to raise money. [5] But if it is, you'll be telling the truth when
you tell investors it's worth investing in, and they'll sense that. You don't have to be a smooth
presenter if you understand something well and tell the truth about it.
To evaluate whether your startup is worth investing in, you have to be a domain expert. If you're
not a domain expert, you can be as convinced as you like about your idea, and it will seem to
investors no more than an instance of the Dunning-Kruger effect. Which in fact it will usually be.
And investors can tell fairly quickly whether you're a domain expert by how well you answer
their questions. Know everything about your market. [6]
Why do founders persist in trying to convince investors of things they're not convinced of
themselves? Partly because we've all been trained to.
When my friends Robert Morris and Trevor Blackwell were in grad school, one of their fellow
students was on the receiving end of a question from their faculty advisor that we still quote
today. When the unfortunate fellow got to his last slide, the professor burst out: Which one of
these conclusions do you actually believe? One of the artifacts of the way schools are
organized is that we all get trained to talk even when we have nothing to say. If you have a ten
page paper due, then ten pages you must write, even if you only have one page of ideas. Even
if you have no ideas. You have to produce something. And all too many startups go into
fundraising in the same spirit. When they think it's time to raise money, they try gamely to make
the best case they can for their startup. Most never think of pausing beforehand to ask whether
what they're saying is actually convincing, because they've all been trained to treat the need to
present as a given — as an area of fixed size, over which however much truth they have must
needs be spread, however thinly.
The time to raise money is not when you need it, or when you reach some artificial deadline like
a Demo Day. It's when you can convince investors, and not before. [7]
And unless you're a good con artist, you'll never convince investors if you're not convinced
yourself. They're far better at detecting bullshit than you are at producing it, even if you're
producing it unknowingly. If you try to convince investors before you've convinced yourself, you'll
be wasting both your time.
But pausing first to convince yourself will do more than save you from wasting your time. It will
force you to organize your thoughts. To convince yourself that your startup is worth investing in,
you'll have to figure out why it's worth investing in. And if you can do that you'll end up with
more than added confidence. You'll also have a provisional roadmap of how to succeed.
Market
Notice I've been careful to talk about whether a startup is worth investing in, rather than
whether it's going to succeed. No one knows whether a startup is going to succeed. And it's a
good thing for investors that this is so, because if you could know in advance whether a startup
would succeed, the stock price would already be the future price, and there would be no room
for investors to make money. Startup investors know that every investment is a bet, and against
pretty long odds.
So to prove you're worth investing in, you don't have to prove you're going to succeed, just that
you're a sufficiently good bet. What makes a startup a sufficiently good bet? In addition to
formidable founders, you need a plausible path to owning a big piece of a big market. Founders
think of startups as ideas, but investors think of them as markets. If there are x number of
customers who'd pay an average of $y per year for what you're making, then the total
addressable market, or TAM, of your company is $xy. Investors don't expect you to collect all
that money, but it's an upper bound on how big you can get.
Your target market has to be big, and it also has to be capturable by you. But the market doesn't
have to be big yet, nor do you necessarily have to be in it yet. Indeed, it's often better to start in
a small market that will either turn into a big one or from which you can move into a big one.
There just has to be some plausible sequence of hops that leads to dominating a big market a
few years down the line.
The standard of plausibility varies dramatically depending on the age of the startup. A three
month old company at Demo Day only needs to be a promising experiment that's worth funding
to see how it turns out. Whereas a two year old company raising a series A round needs to be
able to show the experiment worked. [8]
But every company that gets really big is "lucky" in the sense that their growth is due mostly to
some external wave they're riding, so to make a convincing case for becoming huge, you have
to identify some specific trend you'll benefit from. Usually you can find this by asking "why
now?" If this is such a great idea, why hasn't someone else already done it? Ideally the answer
is that it only recently became a good idea, because something changed, and no one else has
noticed yet.
Microsoft for example was not going to grow huge selling Basic interpreters. But by starting
there they were perfectly poised to expand up the stack of microcomputer software as
microcomputers grew powerful enough to support one. And microcomputers turned out to be a
really huge wave, bigger than even the most optimistic observers would have predicted in 1975.
But while Microsoft did really well and there is thus a temptation to think they would have
seemed a great bet a few months in, they probably didn't. Good, but not great. No company,
however successful, ever looks more than a pretty good bet a few months in. Microcomputers
turned out to be a big deal, and Microsoft both executed well and got lucky. But it was by no
means obvious that this was how things would play out. Plenty of companies seem as good a
bet a few months in. I don't know about startups in general, but at least half the startups we
fund could make as good a case as Microsoft could have for being on a path to dominating a
large market. And who can reasonably expect more of a startup than that?
Rejection
If you can make as good a case as Microsoft could have, will you convince investors? Not
always. A lot of VCs would have rejected Microsoft. [9] Certainly some rejected Google. And
getting rejected will put you in a slightly awkward position, because as you'll see when you start
fundraising, the most common question you'll get from investors will be "who else is investing?"
What do you say if you've been fundraising for a while and no one has committed yet? [10]
The people who are really good at acting formidable often solve this problem by giving investors
the impression that while no investors have committed yet, several are about to. This is
arguably a permissible tactic. It's slightly dickish of investors to care more about who else is
investing than any other aspect of your startup, and misleading them about how far along you
are with other investors seems the complementary countermove. It's arguably an instance of
scamming a scammer. But I don't recommend this approach to most founders, because most
founders wouldn't be able to carry it off. This is the single most common lie told to investors,
and you have to be really good at lying to tell members of some profession the most common
lie they're told.
If you're not a master of negotiation (and perhaps even if you are) the best solution is to tackle
the problem head-on, and to explain why investors have turned you down and why they're
mistaken. If you know you're on the right track, then you also know why investors were wrong to
reject you. Experienced investors are well aware that the best ideas are also the scariest. They
all know about the VCs who rejected Google. If instead of seeming evasive and ashamed about
having been turned down (and thereby implicitly agreeing with the verdict) you talk candidly
about what scared investors about you, you'll seem more confident, which they like, and you'll
probably also do a better job of presenting that aspect of your startup. At the very least, that
worry will now be out in the open instead of being a gotcha left to be discovered by the
investors you're currently talking to, who will be proud of and thus attached to their discovery.
[11]
This strategy will work best with the best investors, who are both hard to bluff and who already
believe most other investors are conventional-minded drones doomed always to miss the big
outliers. Raising money is not like applying to college, where you can assume that if you can get
into MIT, you can also get into Foobar State. Because the best investors are much smarter than
the rest, and the best startup ideas look initially like bad ideas, it's not uncommon for a startup
to be rejected by all the VCs except the best ones. That's what happened to Dropbox. Y
Combinator started in Boston, and for the first 3 years we ran alternating batches in Boston and
Silicon Valley. Because Boston investors were so few and so timid, we used to ship Boston
batches out for a second Demo Day in Silicon Valley. Dropbox was part of a Boston batch,
which means all those Boston investors got the first look at Dropbox, and none of them closed
the deal. Yet another backup and syncing thing, they all thought. A couple weeks later, Dropbox
raised a series A round from Sequoia. [12]
Different
Not understanding that investors view investments as bets combines with the ten page paper
mentality to prevent founders from even considering the possibility of being certain of what
they're saying. They think they're trying to convince investors of something very uncertain —
that their startup will be huge — and convincing anyone of something like that must obviously
entail some wild feat of salesmanship. But in fact when you raise money you're trying to
convince investors of something so much less speculative — whether the company has all the
elements of a good bet — that you can approach the problem in a qualitatively different way.
You can convince yourself, then convince them.
And when you convince them, use the same matter-of-fact language you used to convince
yourself. You wouldn't use vague, grandiose marketing-speak among yourselves. Don't use it
with investors either. It not only doesn't work on them, but seems a mark of incompetence. Just
be concise. Many investors explicitly use that as a test, reasoning (correctly) that if you can't
explain your plans concisely, you don't really understand them. But even investors who don't
have a rule about this will be bored and frustrated by unclear explanations. [13]
So here's the recipe for impressing investors when you're not already good at seeming
formidable: Make something worth investing in.
Understand why it's worth investing in.
Explain that clearly to investors. If you're saying something you know is true, you'll seem
confident when you're saying it. Conversely, never let pitching draw you into bullshitting. As long
as you stay on the territory of truth, you're strong. Make the truth good, then just tell it.
Notes:
[1] There's no reason to believe this number is a constant. In fact it's our explicit goal at Y Combinator to increase it,
by encouraging people to start startups who otherwise wouldn't have.
[2] Or more precisely, investors decide whether you're a loser or possibly a winner. If you seem like a winner, they
may then, depending on how much you're raising, have several more meetings with you to test whether that initial
impression holds up.
But if you seem like a loser they're done, at least for the next year or so. And when they decide you're a loser they
usually decide in way less than the 50 minutes they may have allotted for the first meeting. Which explains the
astonished stories one always hears about VC inattentiveness. How could these people make investment decisions
well when they're checking their messages during startups' presentations? The solution to that mystery is that
they've already made the decision.
[3] The two are not mutually exclusive. There are people who are both genuinely formidable, and also really good at
acting that way.
[4] How can people who will go on to create giant companies not seem formidable early on? I think the main reason
is that their experience so far has trained them to keep their wings folded, as it were. Family, school, and jobs
encourage cooperation, not conquest. And it's just as well they do, because even being Genghis Khan is probably
99% cooperation. But the result is that most people emerge from the tube of their upbringing in their early twenties
compressed into the shape of the tube. Some find they have wings and start to spread them. But this takes a few
years. In the beginning even they don't know yet what they're capable of.
[5] In fact, change what you're doing. You're investing your own time in your startup. If you're not convinced that what
you're working on is a sufficiently good bet, why are you even working on that?
[6] When investors ask you a question you don't know the answer to, the best response is neither to bluff nor give up,
but instead to explain how you'd figure out the answer. If you can work out a preliminary answer on the spot, so much
the better, but explain that's what you're doing.
[7] At YC we try to ensure startups are ready to raise money on Demo Day by encouraging them to ignore investors
and instead focus on their companies till about a week before. That way most reach the stage where they're
sufficiently convincing well before Demo Day. But not all do, so we also give any startup that wants to the option of
deferring to a later Demo Day.
[8] Founders are often surprised by how much harder it is to raise the next round. There is a qualitative difference in
investors' attitudes. It's like the difference between being judged as a kid and as an adult. The next time you raise
money, it's not enough to be promising. You have to be delivering results.
So although it works well to show growth graphs at either stage, investors treat them differently. At three months, a
growth graph is mostly evidence that the founders are effective. At two years, it has to be evidence of a promising
market and a company tuned to exploit it.
[9] By this I mean that if the present day equivalent of the 3 month old Microsoft presented at a Demo Day, there
would be investors who turned them down. Microsoft itself didn't raise outside money, and indeed the venture
business barely existed when they got started in 1975.
[10] The best investors rarely care who else is investing, but mediocre investors almost all do. So you can use this
question as a test of investor quality.
[11] To use this technique, you'll have to find out why investors who rejected you did so, or at least what they claim
was the reason. That may require asking, because investors don't always volunteer a lot of detail. Make it clear when
you ask that you're not trying to dispute their decision — just that if there is some weakness in your plans, you need
to know about it. You won't always get a real reason out of them, but you should at least try.
[12] Dropbox wasn't rejected by all the East Coast VCs. There was one firm that wanted to invest but tried to lowball
them.
[13] Alfred Lin points out that it's doubly important for the explanation of a startup to be clear and concise, because it
has to convince at one remove: it has to work not just on the partner you talk to, but when that partner re-tells it to
colleagues.
We consciously optimize for this at YC. When we work with founders create a Demo Day pitch, the last step is to
imagine how an investor would sell it to colleagues.
Thanks to Marc Andreessen, Sam Altman, Patrick Collison, Ron Conway, Chris Dixon, Alfred Lin, Ben Horowitz,
Steve Huffman, Jessica Livingston, Greg Mcadoo, Andrew Mason, Geoff Ralston, Yuri Sagalov, Emmett Shear, Rajat
Suri, Garry Tan, Albert Wenger, Fred Wilson, and Qasar Younis for reading drafts of this.
Do Things that Don-t Scale - # 152
Want to start a startup? Get funded by Y Combinator.
July 2013
One of the most common types of advice we give at Y Combinator is to do things that don't
scale. A lot of would-be founders believe that startups either take off or don't. You build
something, make it available, and if you've made a better mousetrap, people beat a path to your
door as promised. Or they don't, in which case the market must not exist. [1]
Actually startups take off because the founders make them take off. There may be a handful
that just grew by themselves, but usually it takes some sort of push to get them going. A good
metaphor would be the cranks that car engines had before they got electric starters. Once the
engine was going, it would keep going, but there was a separate and laborious process to get it
going.
Recruit
The most common unscalable thing founders have to do at the start is to recruit users manually.
Nearly all startups have to. You can't wait for users to come to you. You have to go out and get
them.
Stripe is one of the most successful startups we've funded, and the problem they solved was an
urgent one. If anyone could have sat back and waited for users, it was Stripe. But in fact they're
famous within YC for aggressive early user acquisition.
Startups building things for other startups have a big pool of potential users in the other
companies we've funded, and none took better advantage of it than Stripe. At YC we use the
term "Collison installation" for the technique they invented. More diffident founders ask "Will you
try our beta?" and if the answer is yes, they say "Great, we'll send you a link." But the Collison
brothers weren't going to wait. When anyone agreed to try Stripe they'd say "Right then, give
me your laptop" and set them up on the spot.
There are two reasons founders resist going out and recruiting users individually. One is a
combination of shyness and laziness. They'd rather sit at home writing code than go out and
talk to a bunch of strangers and probably be rejected by most of them. But for a startup to
succeed, at least one founder (usually the CEO) will have to spend a lot of time on sales and
marketing. [2]
The other reason founders ignore this path is that the absolute numbers seem so small at first.
This can't be how the big, famous startups got started, they think. The mistake they make is to
underestimate the power of compound growth. We encourage every startup to measure their
progress by weekly growth rate. If you have 100 users, you need to get 10 more next week to
grow 10% a week. And while 110 may not seem much better than 100, if you keep growing at
10% a week you'll be surprised how big the numbers get. After a year you'll have 14,000 users,
and after 2 years you'll have 2 million.
You'll be doing different things when you're acquiring users a thousand at a time, and growth
has to slow down eventually. But if the market exists you can usually start by recruiting users
manually and then gradually switch to less manual methods. [3]
Airbnb is a classic example of this technique. Marketplaces are so hard to get rolling that you
should expect to take heroic measures at first. In Airbnb's case, these consisted of going door
to door in New York, recruiting new users and helping existing ones improve their listings. When
I remember the Airbnbs during YC, I picture them with rolly bags, because when they showed
up for tuesday dinners they'd always just flown back from somewhere.
Fragile
Airbnb now seems like an unstoppable juggernaut, but early on it was so fragile that about 30
days of going out and engaging in person with users made the difference between success and
failure.
That initial fragility was not a unique feature of Airbnb. Almost all startups are fragile initially.
And that's one of the biggest things inexperienced founders and investors (and reporters and
know-it-alls on forums) get wrong about them. They unconsciously judge larval startups by the
standards of established ones. They're like someone looking at a newborn baby and concluding
"there's no way this tiny creature could ever accomplish anything."
It's harmless if reporters and know-it-alls dismiss your startup. They always get things wrong.
It's even ok if investors dismiss your startup; they'll change their minds when they see growth.
The big danger is that you'll dismiss your startup yourself. I've seen it happen. I often have to
encourage founders who don't see the full potential of what they're building. Even Bill Gates
made that mistake. He returned to Harvard for the fall semester after starting Microsoft. He
didn't stay long, but he wouldn't have returned at all if he'd realized Microsoft was going to be
even a fraction of the size it turned out to be. [4]
The question to ask about an early stage startup is not "is this company taking over the world?"
but "how big could this company get if the founders did the right things?" And the right things
often seem both laborious and inconsequential at the time. Microsoft can't have seemed very
impressive when it was just a couple guys in Albuquerque writing Basic interpreters for a
market of a few thousand hobbyists (as they were then called), but in retrospect that was the
optimal path to dominating microcomputer software. And I know Brian Chesky and Joe Gebbia
didn't feel like they were en route to the big time as they were taking "professional" photos of
their first hosts' apartments. They were just trying to survive. But in retrospect that too was the
optimal path to dominating a big market.
How do you find users to recruit manually? If you build something to solve your own problems,
then you only have to find your peers, which is usually straightforward. Otherwise you'll have to
make a more deliberate effort to locate the most promising vein of users. The usual way to do
that is to get some initial set of users by doing a comparatively untargeted launch, and then to
observe which kind seem most enthusiastic, and seek out more like them. For example, Ben
Silbermann noticed that a lot of the earliest Pinterest users were interested in design, so he
went to a conference of design bloggers to recruit users, and that worked well. [5]
Delight
You should take extraordinary measures not just to acquire users, but also to make them happy.
For as long as they could (which turned out to be surprisingly long), Wufoo sent each new user
a hand-written thank you note. Your first users should feel that signing up with you was one of
the best choices they ever made. And you in turn should be racking your brains to think of new
ways to delight them.
Why do we have to teach startups this? Why is it counterintuitive for founders? Three reasons, I
think.
One is that a lot of startup founders are trained as engineers, and customer service is not part
of the training of engineers. You're supposed to build things that are robust and elegant, not be
slavishly attentive to individual users like some kind of salesperson. Ironically, part of the reason
engineering is traditionally averse to handholding is that its traditions date from a time when
engineers were less powerful — when they were only in charge of their narrow domain of
building things, rather than running the whole show. You can be ornery when you're Scotty, but
not when you're Kirk.
Another reason founders don't focus enough on individual customers is that they worry it won't
scale. But when founders of larval startups worry about this, I point out that in their current state
they have nothing to lose. Maybe if they go out of their way to make existing users super happy,
they'll one day have too many to do so much for. That would be a great problem to have. See if
you can make it happen. And incidentally, when it does, you'll find that delighting customers
scales better than you expected. Partly because you can usually find ways to make anything
scale more than you would have predicted, and partly because delighting customers will by
then have permeated your culture.
I have never once seen a startup lured down a blind alley by trying too hard to make their initial
users happy.
But perhaps the biggest thing preventing founders from realizing how attentive they could be to
their users is that they've never experienced such attention themselves. Their standards for
customer service have been set by the companies they've been customers of, which are mostly
big ones. Tim Cook doesn't send you a hand-written note after you buy a laptop. He can't. But
you can. That's one advantage of being small: you can provide a level of service no big
company can. [6]
Once you realize that existing conventions are not the upper bound on user experience, it's
interesting in a very pleasant way to think about how far you could go to delight your users.
Experience
I was trying to think of a phrase to convey how extreme your attention to users should be, and I
realized Steve Jobs had already done it: insanely great. Steve wasn't just using "insanely" as a
synonym for "very." He meant it more literally — that one should focus on quality of execution to
a degree that in everyday life would be considered pathological.
All the most successful startups we've funded have, and that probably doesn't surprise wouldbe founders. What novice founders don't get is what insanely great translates to in a larval
startup. When Steve Jobs started using that phrase, Apple was already an established
company. He meant the Mac (and its documentation and even packaging — such is the nature
of obsession) should be insanely well designed and manufactured. That's not hard for
engineers to grasp. It's just a more extreme version of designing a robust and elegant product.
What founders have a hard time grasping (and Steve himself might have had a hard time
grasping) is what insanely great morphs into as you roll the time slider back to the first couple
months of a startup's life. It's not the product that should be insanely great, but the experience
of being your user. The product is just one component of that. For a big company it's
necessarily the dominant one. But you can and should give users an insanely great experience
with an early, incomplete, buggy product, if you make up the difference with attentiveness.
Can, perhaps, but should? Yes. Over-engaging with early users is not just a permissible
technique for getting growth rolling. For most successful startups it's a necessary part of the
feedback loop that makes the product good. Making a better mousetrap is not an atomic
operation. Even if you start the way most successful startups have, by building something you
yourself need, the first thing you build is never quite right. And except in domains with big
penalties for making mistakes, it's often better not to aim for perfection initially. In software,
especially, it usually works best to get something in front of users as soon as it has a quantum
of utility, and then see what they do with it. Perfectionism is often an excuse for procrastination,
and in any case your initial model of users is always inaccurate, even if you're one of them. [7]
The feedback you get from engaging directly with your earliest users will be the best you ever
get. When you're so big you have to resort to focus groups, you'll wish you could go over to your
users' homes and offices and watch them use your stuff like you did when there were only a
handful of them.
Fire
Sometimes the right unscalable trick is to focus on a deliberately narrow market. It's like
keeping a fire contained at first to get it really hot before adding more logs.
That's what Facebook did. At first it was just for Harvard students. In that form it only had a
potential market of a few thousand people, but because they felt it was really for them, a critical
mass of them signed up. After Facebook stopped being for Harvard students, it remained for
students at specific colleges for quite a while. When I interviewed Mark Zuckerberg at Startup
School, he said that while it was a lot of work creating course lists for each school, doing that
made students feel the site was their natural home.
Any startup that could be described as a marketplace usually has to start in a subset of the
market, but this can work for other startups as well. It's always worth asking if there's a subset
of the market in which you can get a critical mass of users quickly. [8]
Most startups that use the contained fire strategy do it unconsciously. They build something for
themselves and their friends, who happen to be the early adopters, and only realize later that
they could offer it to a broader market. The strategy works just as well if you do it unconsciously.
The biggest danger of not being consciously aware of this pattern is for those who naively
discard part of it. E.g. if you don't build something for yourself and your friends, or even if you
do, but you come from the corporate world and your friends are not early adopters, you'll no
longer have a perfect initial market handed to you on a platter.
Among companies, the best early adopters are usually other startups. They're more open to
new things both by nature and because, having just been started, they haven't made all their
choices yet. Plus when they succeed they grow fast, and you with them. It was one of many
unforeseen advantages of the YC model (and specifically of making YC big) that B2B startups
now have an instant market of hundreds of other startups ready at hand.
Meraki
For hardware startups there's a variant of doing things that don't scale that we call "pulling a
Meraki." Although we didn't fund Meraki, the founders were Robert Morris's grad students, so
we know their history. They got started by doing something that really doesn't scale: assembling
their routers themselves.
Hardware startups face an obstacle that software startups don't. The minimum order for a
factory production run is usually several hundred thousand dollars. Which can put you in a
catch-22: without a product you can't generate the growth you need to raise the money to
manufacture your product. Back when hardware startups had to rely on investors for money,
you had to be pretty convincing to overcome this. The arrival of crowdfunding (or more
precisely, preorders) has helped a lot. But even so I'd advise startups to pull a Meraki initially if
they can. That's what Pebble did. The Pebbles assembled the first several hundred watches
themselves. If they hadn't gone through that phase, they probably wouldn't have sold $10
million worth of watches when they did go on Kickstarter.
Like paying excessive attention to early customers, fabricating things yourself turns out to be
valuable for hardware startups. You can tweak the design faster when you're the factory, and
you learn things you'd never have known otherwise. Eric Migicovsky of Pebble said one of the
things he learned was "how valuable it was to source good screws." Who knew?
Consult
Sometimes we advise founders of B2B startups to take over-engagement to an extreme, and to
pick a single user and act as if they were consultants building something just for that one user.
The initial user serves as the form for your mold; keep tweaking till you fit their needs perfectly,
and you'll usually find you've made something other users want too. Even if there aren't many of
them, there are probably adjacent territories that have more. As long as you can find just one
user who really needs something and can act on that need, you've got a toehold in making
something people want, and that's as much as any startup needs initially. [9]
Consulting is the canonical example of work that doesn't scale. But (like other ways of
bestowing one's favors liberally) it's safe to do it so long as you're not being paid to. That's
where companies cross the line. So long as you're a product company that's merely being extra
attentive to a customer, they're very grateful even if you don't solve all their problems. But when
they start paying you specifically for that attentiveness — when they start paying you by the
hour — they expect you to do everything.
Another consulting-like technique for recruiting initially lukewarm users is to use your software
yourselves on their behalf. We did that at Viaweb. When we approached merchants asking if
they wanted to use our software to make online stores, some said no, but they'd let us make
one for them. Since we would do anything to get users, we did. We felt pretty lame at the time.
Instead of organizing big strategic e-commerce partnerships, we were trying to sell luggage and
pens and men's shirts. But in retrospect it was exactly the right thing to do, because it taught us
how it would feel to merchants to use our software. Sometimes the feedback loop was near
instantaneous: in the middle of building some merchant's site I'd find I needed a feature we
didn't have, so I'd spend a couple hours implementing it and then resume building the site.
Manual
There's a more extreme variant where you don't just use your software, but are your software.
When you only have a small number of users, you can sometimes get away with doing by hand
things that you plan to automate later. This lets you launch faster, and when you do finally
automate yourself out of the loop, you'll know exactly what to build because you'll have muscle
memory from doing it yourself.
When manual components look to the user like software, this technique starts to have aspects
of a practical joke. For example, the way Stripe delivered "instant" merchant accounts to its first
users was that the founders manually signed them up for traditional merchant accounts behind
the scenes.
Some startups could be entirely manual at first. If you can find someone with a problem that
needs solving and you can solve it manually, go ahead and do that for as long as you can, and
then gradually automate the bottlenecks. It would be a little frightening to be solving users'
problems in a way that wasn't yet automatic, but less frightening than the far more common
case of having something automatic that doesn't yet solve anyone's problems.
Big
I should mention one sort of initial tactic that usually doesn't work: the Big Launch. I
occasionally meet founders who seem to believe startups are projectiles rather than powered
aircraft, and that they'll make it big if and only if they're launched with sufficient initial velocity.
They want to launch simultaneously in 8 different publications, with embargoes. And on a
tuesday, of course, since they read somewhere that's the optimum day to launch something.
It's easy to see how little launches matter. Think of some successful startups. How many of their
launches do you remember? All you need from a launch is some initial core of users. How well
you're doing a few months later will depend more on how happy you made those users than
how many there were of them. [10]
So why do founders think launches matter? A combination of solipsism and laziness. They think
what they're building is so great that everyone who hears about it will immediately sign up. Plus
it would be so much less work if you could get users merely by broadcasting your existence,
rather than recruiting them one at a time. But even if what you're building really is great, getting
users will always be a gradual process — partly because great things are usually also novel,
but mainly because users have other things to think about.
Partnerships too usually don't work. They don't work for startups in general, but they especially
don't work as a way to get growth started. It's a common mistake among inexperienced
founders to believe that a partnership with a big company will be their big break. Six months
later they're all saying the same thing: that was way more work than we expected, and we
ended up getting practically nothing out of it. [11]
It's not enough just to do something extraordinary initially. You have to make an extraordinary
effort initially. Any strategy that omits the effort — whether it's expecting a big launch to get you
users, or a big partner — is ipso facto suspect.
Vector
The need to do something unscalably laborious to get started is so nearly universal that it might
be a good idea to stop thinking of startup ideas as scalars. Instead we should try thinking of
them as pairs of what you're going to build, plus the unscalable thing(s) you're going to do
initially to get the company going.
It could be interesting to start viewing startup ideas this way, because now that there are two
components you can try to be imaginative about the second as well as the first. But in most
cases the second component will be what it usually is — recruit users manually and give them
an overwhelmingly good experience — and the main benefit of treating startups as vectors will
be to remind founders they need to work hard in two dimensions. [12]
In the best case, both components of the vector contribute to your company's DNA: the
unscalable things you have to do to get started are not merely a necessary evil, but change the
company permanently for the better. If you have to be aggressive about user acquisition when
you're small, you'll probably still be aggressive when you're big. If you have to manufacture your
own hardware, or use your software on users's behalf, you'll learn things you couldn't have
learned otherwise. And most importantly, if you have to work hard to delight users when you
only have a handful of them, you'll keep doing it when you have a lot.
Notes:
[1] Actually Emerson never mentioned mousetraps specifically. He wrote "If a man has good corn or wood, or boards,
or pigs, to sell, or can make better chairs or knives, crucibles or church organs, than anybody else, you will find a
broad hard-beaten road to his house, though it be in the woods."
[2] Thanks to Sam Altman for suggesting I make this explicit. And no, you can't avoid doing sales by hiring someone
to do it for you. You have to do sales yourself initially. Later you can hire a real salesperson to replace you.
[3] The reason this works is that as you get bigger, your size helps you grow. Patrick Collison wrote "At some point,
there was a very noticeable change in how Stripe felt. It tipped from being this boulder we had to push to being a
train car that in fact had its own momentum."
[4] One of the more subtle ways in which YC can help founders is by calibrating their ambitions, because we know
exactly how a lot of successful startups looked when they were just getting started.
[5] If you're building something for which you can't easily get a small set of users to observe — e.g. enterprise
software — and in a domain where you have no connections, you'll have to rely on cold calls and introductions. But
should you even be working on such an idea?
[6] Garry Tan pointed out an interesting trap founders fall into in the beginning. They want so much to seem big that
they imitate even the flaws of big companies, like indifference to individual users. This seems to them more
"professional." Actually it's better to embrace the fact that you're small and use whatever advantages that brings.
[7] Your user model almost couldn't be perfectly accurate, because users' needs often change in response to what
you build for them. Build them a microcomputer, and suddenly they need to run spreadsheets on it, because the
arrival of your new microcomputer causes someone to invent the spreadsheet.
[8] If you have to choose between the subset that will sign up quickest and those that will pay the most, it's usually
best to pick the former, because those are probably the early adopters. They'll have a better influence on your
product, and they won't make you expend as much effort on sales. And though they have less money, you don't need
that much to maintain your target growth rate early on.
[9] Yes, I can imagine cases where you could end up making something that was really only useful for one user. But
those are usually obvious, even to inexperienced founders. So if it's not obvious you'd be making something for a
market of one, don't worry about that danger.
[10] There may even be an inverse correlation between launch magnitude and success. The only launches I
remember are famous flops like the Segway and Google Wave. Wave is a particularly alarming example, because I
think it was actually a great idea that was killed partly by its overdone launch.
[11] Google grew big on the back of Yahoo, but that wasn't a partnership. Yahoo was their customer.
[12] It will also remind founders that an idea where the second component is empty — an idea where there is nothing
you can do to get going, e.g. because you have no way to find users to recruit manually — is probably a bad idea, at
least for those founders.
Thanks to Sam Altman, Paul Buchheit, Patrick Collison, Kevin Hale, Steven Levy, Jessica Livingston, Geoff Ralston,
and Garry Tan for reading drafts of this.
Startup Investing Trends - # 151
June 2013
(This talk was written for an audience of investors.)
Y Combinator has now funded 564 startups including the current batch, which has 53. The total
valuation of the 287 that have valuations (either by raising an equity round, getting acquired, or
dying) is about $11.7 billion, and the 511 prior to the current batch have collectively raised
about $1.7 billion. [1]
As usual those numbers are dominated by a few big winners. The top 10 startups account for
8.6 of that 11.7 billion. But there is a peloton of younger startups behind them. There are about
40 more that have a shot at being really big.
Things got a little out of hand last summer when we had 84 companies in the batch, so we
tightened up our filter to decrease the batch size. [2] Several journalists have tried to interpret
that as evidence for some macro story they were telling, but the reason had nothing to do with
any external trend. The reason was that we discovered we were using an n² algorithm, and we
needed to buy time to fix it. Fortunately we've come up with several techniques for sharding YC,
and the problem now seems to be fixed. With a new more scaleable model and only 53
companies, the current batch feels like a walk in the park. I'd guess we can grow another 2 or
3x before hitting the next bottleneck. [3]
One consequence of funding such a large number of startups is that we see trends early. And
since fundraising is one of the main things we help startups with, we're in a good position to
notice trends in investing.
I'm going to take a shot at describing where these trends are leading. Let's start with the most
basic question: will the future be better or worse than the past? Will investors, in the aggregate,
make more money or less?
I think more. There are multiple forces at work, some of which will decrease returns, and some
of which will increase them. I can't predict for sure which forces will prevail, but I'll describe
them and you can decide for yourself.
There are two big forces driving change in startup funding: it's becoming cheaper to start a
startup, and startups are becoming a more normal thing to do.
When I graduated from college in 1986, there were essentially two options: get a job or go to
grad school. Now there's a third: start your own company. That's a big change. In principle it
was possible to start your own company in 1986 too, but it didn't seem like a real possibility. It
seemed possible to start a consulting company, or a niche product company, but it didn't seem
possible to start a company that would become big. [4]
That kind of change, from 2 paths to 3, is the sort of big social shift that only happens once
every few generations. I think we're still at the beginning of this one. It's hard to predict how big
a deal it will be. As big a deal as the Industrial Revolution? Maybe. Probably not. But it will be a
big enough deal that it takes almost everyone by surprise, because those big social shifts
always do.
One thing we can say for sure is that there will be a lot more startups. The monolithic,
hierarchical companies of the mid 20th century are being replaced by networks of smaller
companies. This process is not just something happening now in Silicon Valley. It started
decades ago, and it's happening as far afield as the car industry. It has a long way to run. [5]
The other big driver of change is that startups are becoming cheaper to start. And in fact the
two forces are related: the decreasing cost of starting a startup is one of the reasons startups
are becoming a more normal thing to do.
The fact that startups need less money means founders will increasingly have the upper hand
over investors. You still need just as much of their energy and imagination, but they don't need
as much of your money. Because founders have the upper hand, they'll retain an increasingly
large share of the stock in, and control of, their companies. Which means investors will get less
stock and less control.
Does that mean investors will make less money? Not necessarily, because there will be more
good startups. The total amount of desirable startup stock available to investors will probably
increase, because the number of desirable startups will probably grow faster than the
percentage they sell to investors shrinks.
There's a rule of thumb in the VC business that there are about 15 companies a year that will
be really successful. Although a lot of investors unconsciously treat this number as if it were
some sort of cosmological constant, I'm certain it isn't. There are probably limits on the rate at
which technology can develop, but that's not the limiting factor now. If it were, each successful
startup would be founded the month it became possible, and that is not the case. Right now the
limiting factor on the number of big hits is the number of sufficiently good founders starting
companies, and that number can and will increase. There are still a lot of people who'd make
great founders who never end up starting a company. You can see that from how randomly
some of the most successful startups got started. So many of the biggest startups almost didn't
happen that there must be a lot of equally good startups that actually didn't happen.
There might be 10x or even 50x more good founders out there. As more of them go ahead and
start startups, those 15 big hits a year could easily become 50 or even 100. [6]
What about returns, though? Are we heading for a world in which returns will be pinched by
increasingly high valuations? I think the top firms will actually make more money than they have
in the past. High returns don't come from investing at low valuations. They come from investing
in the companies that do really well. So if there are more of those to be had each year, the best
pickers should have more hits.
This means there should be more variability in the VC business. The firms that can recognize
and attract the best startups will do even better, because there will be more of them to
recognize and attract. Whereas the bad firms will get the leftovers, as they do now, and yet pay
a higher price for them.
Nor do I think it will be a problem that founders keep control of their companies for longer. The
empirical evidence on that is already clear: investors make more money as founders' bitches
than their bosses. Though somewhat humiliating, this is actually good news for investors,
because it takes less time to serve founders than to micromanage them.
What about angels? I think there is a lot of opportunity there. It used to suck to be an angel
investor. You couldn't get access to the best deals, unless you got lucky like Andy
Bechtolsheim, and when you did invest in a startup, VCs might try to strip you of your stock
when they arrived later. Now an angel can go to something like Demo Day or AngelList and
have access to the same deals VCs do. And the days when VCs could wash angels out of the
cap table are long gone.
I think one of the biggest unexploited opportunities in startup investing right now is angel-sized
investments made quickly. Few investors understand the cost that raising money from them
imposes on startups. When the company consists only of the founders, everything grinds to a
halt during fundraising, which can easily take 6 weeks. The current high cost of fundraising
means there is room for low-cost investors to undercut the rest. And in this context, low-cost
means deciding quickly. If there were a reputable investor who invested $100k on good terms
and promised to decide yes or no within 24 hours, they'd get access to almost all the best
deals, because every good startup would approach them first. It would be up to them to pick,
because every bad startup would approach them first too, but at least they'd see everything.
Whereas if an investor is notorious for taking a long time to make up their mind or negotiating a
lot about valuation, founders will save them for last. And in the case of the most promising
startups, which tend to have an easy time raising money, last can easily become never.
Will the number of big hits grow linearly with the total number of new startups? Probably not, for
two reasons. One is that the scariness of starting a startup in the old days was a pretty effective
filter. Now that the cost of failing is becoming lower, we should expect founders to do it more.
That's not a bad thing. It's common in technology for an innovation that decreases the cost of
failure to increase the number of failures and yet leave you net ahead.
The other reason the number of big hits won't grow proportionately to the number of startups is
that there will start to be an increasing number of idea clashes. Although the finiteness of the
number of good ideas is not the reason there are only 15 big hits a year, the number has to be
finite, and the more startups there are, the more we'll see multiple companies doing the same
thing at the same time. It will be interesting, in a bad way, if idea clashes become a lot more
common. [7]
Mostly because of the increasing number of early failures, the startup business of the future
won't simply be the same shape, scaled up. What used to be an obelisk will become a pyramid.
It will be a little wider at the top, but a lot wider at the bottom.
What does that mean for investors? One thing it means is that there will be more opportunities
for investors at the earliest stage, because that's where the volume of our imaginary solid is
growing fastest. Imagine the obelisk of investors that corresponds to the obelisk of startups. As
it widens out into a pyramid to match the startup pyramid, all the contents are adhering to the
top, leaving a vacuum at the bottom.
That opportunity for investors mostly means an opportunity for new investors, because the
degree of risk an existing investor or firm is comfortable taking is one of the hardest things for
them to change. Different types of investors are adapted to different degrees of risk, but each
has its specific degree of risk deeply imprinted on it, not just in the procedures they follow but in
the personalities of the people who work there.
I think the biggest danger for VCs, and also the biggest opportunity, is at the series A stage. Or
rather, what used to be the series A stage before series As turned into de facto series B rounds.
Right now, VCs often knowingly invest too much money at the series A stage. They do it
because they feel they need to get a big chunk of each series A company to compensate for
the opportunity cost of the board seat it consumes. Which means when there is a lot of
competition for a deal, the number that moves is the valuation (and thus amount invested)
rather than the percentage of the company being sold. Which means, especially in the case of
more promising startups, that series A investors often make companies take more money than
they want.
Some VCs lie and claim the company really needs that much. Others are more candid, and
admit their financial models require them to own a certain percentage of each company. But we
all know the amounts being raised in series A rounds are not determined by asking what would
be best for the companies. They're determined by VCs starting from the amount of the
company they want to own, and the market setting the valuation and thus the amount invested.
Like a lot of bad things, this didn't happen intentionally. The VC business backed into it as their
initial assumptions gradually became obsolete. The traditions and financial models of the VC
business were established when founders needed investors more. In those days it was natural
for founders to sell VCs a big chunk of their company in the series A round. Now founders
would prefer to sell less, and VCs are digging in their heels because they're not sure if they can
make money buying less than 20% of each series A company.
The reason I describe this as a danger is that series A investors are increasingly at odds with
the startups they supposedly serve, and that tends to come back to bite you eventually. The
reason I describe it as an opportunity is that there is now a lot of potential energy built up, as
the market has moved away from VCs' traditional business model. Which means the first VC to
break ranks and start to do series A rounds for as much equity as founders want to sell (and
with no "option pool" that comes only from the founders' shares) stands to reap huge benefits.
What will happen to the VC business when that happens? Hell if I know. But I bet that particular
firm will end up ahead. If one top-tier VC firm started to do series A rounds that started from the
amount the company needed to raise and let the percentage acquired vary with the market,
instead of the other way around, they'd instantly get almost all the best startups. And that's
where the money is.
You can't fight market forces forever. Over the last decade we've seen the percentage of the
company sold in series A rounds creep inexorably downward. 40% used to be common. Now
VCs are fighting to hold the line at 20%. But I am daily waiting for the line to collapse. It's going
to happen. You may as well anticipate it, and look bold.
Who knows, maybe VCs will make more money by doing the right thing. It wouldn't be the first
time that happened. Venture capital is a business where occasional big successes generate
hundredfold returns. How much confidence can you really have in financial models for
something like that anyway? The big successes only have to get a tiny bit less occasional to
compensate for a 2x decrease in the stock sold in series A rounds.
If you want to find new opportunities for investing, look for things founders complain about.
Founders are your customers, and the things they complain about are unsatisfied demand. I've
given two examples of things founders complain about most—investors who take too long to
make up their minds, and excessive dilution in series A rounds—so those are good places to
look now. But the more general recipe is: do something founders want.
Notes:
[1] I realize revenue and not fundraising is the proper test of success for a startup. The reason we quote statistics
about fundraising is because those are the numbers we have. We couldn't talk meaningfully about revenues without
including the numbers from the most successful startups, and we don't have those. We often discuss revenue growth
with the earlier stage startups, because that's how we gauge their progress, but when companies reach a certain
size it gets presumptuous for a seed investor to do that.
In any case, companies' market caps do eventually become a function of revenues, and post-money valuations of
funding rounds are at least guesses by pros about where those market caps will end up.
The reason only 287 have valuations is that the rest have mostly raised money on convertible notes, and although
convertible notes often have valuation caps, a valuation cap is merely an upper bound on a valuation.
[2] We didn't try to accept a particular number. We have no way of doing that even if we wanted to. We just tried to be
significantly pickier.
[3] Though you never know with bottlenecks, I'm guessing the next one will be coordinating efforts among partners.
[4] I realize starting a company doesn't have to mean starting a startup. There will be lots of people starting normal
companies too. But that's not relevant to an audience of investors.
Geoff Ralston reports that in Silicon Valley it seemed thinkable to start a startup in the mid 1980s. It would have
started there. But I know it didn't to undergraduates on the East Coast.
[5] This trend is one of the main causes of the increase in economic inequality in the US since the mid twentieth
century. The person who would in 1950 have been the general manager of the x division of Megacorp is now the
founder of the x company, and owns significant equity in it.
[6] If Congress passes the founder visa in a non-broken form, that alone could in principle get us up to 20x, since
95% of the world's population lives outside the US.
[7] If idea clashes got bad enough, it could change what it means to be a startup. We currently advise startups mostly
to ignore competitors. We tell them startups are competitive like running, not like soccer; you don't have to go and
steal the ball away from the other team. But if idea clashes became common enough, maybe you'd start to have to.
That would be unfortunate.
Thanks to Sam Altman, Paul Buchheit, Dalton Caldwell, Patrick Collison, Jessica Livingston, Andrew Mason, Geoff
Ralston, and Garry Tan for reading drafts of this.
How to Get Startup Ideas - # 150
Want to start a startup? Get funded by Y Combinator.
November 2012
The way to get startup ideas is not to try to think of startup ideas. It's to look for problems,
preferably problems you have yourself.
The very best startup ideas tend to have three things in common: they're something the
founders themselves want, that they themselves can build, and that few others realize are worth
doing. Microsoft, Apple, Yahoo, Google, and Facebook all began this way.
Problems
Why is it so important to work on a problem you have? Among other things, it ensures the
problem really exists. It sounds obvious to say you should only work on problems that exist. And
yet by far the most common mistake startups make is to solve problems no one has.
I made it myself. In 1995 I started a company to put art galleries online. But galleries didn't want
to be online. It's not how the art business works. So why did I spend 6 months working on this
stupid idea? Because I didn't pay attention to users. I invented a model of the world that didn't
correspond to reality, and worked from that. I didn't notice my model was wrong until I tried to
convince users to pay for what we'd built. Even then I took embarrassingly long to catch on. I
was attached to my model of the world, and I'd spent a lot of time on the software. They had to
want it!
Why do so many founders build things no one wants? Because they begin by trying to think of
startup ideas. That m.o. is doubly dangerous: it doesn't merely yield few good ideas; it yields
bad ideas that sound plausible enough to fool you into working on them.
At YC we call these "made-up" or "sitcom" startup ideas. Imagine one of the characters on a TV
show was starting a startup. The writers would have to invent something for it to do. But coming
up with good startup ideas is hard. It's not something you can do for the asking. So (unless they
got amazingly lucky) the writers would come up with an idea that sounded plausible, but was
actually bad.
For example, a social network for pet owners. It doesn't sound obviously mistaken. Millions of
people have pets. Often they care a lot about their pets and spend a lot of money on them.
Surely many of these people would like a site where they could talk to other pet owners. Not all
of them perhaps, but if just 2 or 3 percent were regular visitors, you could have millions of users.
You could serve them targeted offers, and maybe charge for premium features. [1]
The danger of an idea like this is that when you run it by your friends with pets, they don't say "I
would never use this." They say "Yeah, maybe I could see using something like that." Even
when the startup launches, it will sound plausible to a lot of people. They don't want to use it
themselves, at least not right now, but they could imagine other people wanting it. Sum that
reaction across the entire population, and you have zero users. [2]
Well
When a startup launches, there have to be at least some users who really need what they're
making — not just people who could see themselves using it one day, but who want it urgently.
Usually this initial group of users is small, for the simple reason that if there were something
that large numbers of people urgently needed and that could be built with the amount of effort a
startup usually puts into a version one, it would probably already exist. Which means you have
to compromise on one dimension: you can either build something a large number of people
want a small amount, or something a small number of people want a large amount. Choose the
latter. Not all ideas of that type are good startup ideas, but nearly all good startup ideas are of
that type.
Imagine a graph whose x axis represents all the people who might want what you're making
and whose y axis represents how much they want it. If you invert the scale on the y axis, you
can envision companies as holes. Google is an immense crater: hundreds of millions of people
use it, and they need it a lot. A startup just starting out can't expect to excavate that much
volume. So you have two choices about the shape of hole you start with. You can either dig a
hole that's broad but shallow, or one that's narrow and deep, like a well.
Made-up startup ideas are usually of the first type. Lots of people are mildly interested in a
social network for pet owners.
Nearly all good startup ideas are of the second type. Microsoft was a well when they made
Altair Basic. There were only a couple thousand Altair owners, but without this software they
were programming in machine language. Thirty years later Facebook had the same shape.
Their first site was exclusively for Harvard students, of which there are only a few thousand, but
those few thousand users wanted it a lot.
When you have an idea for a startup, ask yourself: who wants this right now? Who wants this so
much that they'll use it even when it's a crappy version one made by a two-person startup
they've never heard of? If you can't answer that, the idea is probably bad. [3]
You don't need the narrowness of the well per se. It's depth you need; you get narrowness as a
byproduct of optimizing for depth (and speed). But you almost always do get it. In practice the
link between depth and narrowness is so strong that it's a good sign when you know that an
idea will appeal strongly to a specific group or type of user.
But while demand shaped like a well is almost a necessary condition for a good startup idea,
it's not a sufficient one. If Mark Zuckerberg had built something that could only ever have
appealed to Harvard students, it would not have been a good startup idea. Facebook was a
good idea because it started with a small market there was a fast path out of. Colleges are
similar enough that if you build a facebook that works at Harvard, it will work at any college. So
you spread rapidly through all the colleges. Once you have all the college students, you get
everyone else simply by letting them in.
Similarly for Microsoft: Basic for the Altair; Basic for other machines; other languages besides
Basic; operating systems; applications; IPO.
Self
How do you tell whether there's a path out of an idea? How do you tell whether something is
the germ of a giant company, or just a niche product? Often you can't. The founders of Airbnb
didn't realize at first how big a market they were tapping. Initially they had a much narrower
idea. They were going to let hosts rent out space on their floors during conventions. They didn't
foresee the expansion of this idea; it forced itself upon them gradually. All they knew at first is
that they were onto something. That's probably as much as Bill Gates or Mark Zuckerberg knew
at first.
Occasionally it's obvious from the beginning when there's a path out of the initial niche. And
sometimes I can see a path that's not immediately obvious; that's one of our specialties at YC.
But there are limits to how well this can be done, no matter how much experience you have.
The most important thing to understand about paths out of the initial idea is the meta-fact that
these are hard to see.
So if you can't predict whether there's a path out of an idea, how do you choose between
ideas? The truth is disappointing but interesting: if you're the right sort of person, you have the
right sort of hunches. If you're at the leading edge of a field that's changing fast, when you have
a hunch that something is worth doing, you're more likely to be right.
In Zen and the Art of Motorcycle Maintenance, Robert Pirsig says: You want to know how to
paint a perfect painting? It's easy. Make yourself perfect and then just paint naturally. I've
wondered about that passage since I read it in high school. I'm not sure how useful his advice is
for painting specifically, but it fits this situation well. Empirically, the way to have good startup
ideas is to become the sort of person who has them.
Being at the leading edge of a field doesn't mean you have to be one of the people pushing it
forward. You can also be at the leading edge as a user. It was not so much because he was a
programmer that Facebook seemed a good idea to Mark Zuckerberg as because he used
computers so much. If you'd asked most 40 year olds in 2004 whether they'd like to publish their
lives semi-publicly on the Internet, they'd have been horrified at the idea. But Mark already lived
online; to him it seemed natural.
Paul Buchheit says that people at the leading edge of a rapidly changing field "live in the
future." Combine that with Pirsig and you get: Live in the future, then build what's missing. That
describes the way many if not most of the biggest startups got started. Neither Apple nor Yahoo
nor Google nor Facebook were even supposed to be companies at first. They grew out of things
their founders built because there seemed a gap in the world.
If you look at the way successful founders have had their ideas, it's generally the result of some
external stimulus hitting a prepared mind. Bill Gates and Paul Allen hear about the Altair and
think "I bet we could write a Basic interpreter for it." Drew Houston realizes he's forgotten his
USB stick and thinks "I really need to make my files live online." Lots of people heard about the
Altair. Lots forgot USB sticks. The reason those stimuli caused those founders to start
companies was that their experiences had prepared them to notice the opportunities they
represented.
The verb you want to be using with respect to startup ideas is not "think up" but "notice." At YC
we call ideas that grow naturally out of the founders' own experiences "organic" startup ideas.
The most successful startups almost all begin this way.
That may not have been what you wanted to hear. You may have expected recipes for coming
up with startup ideas, and instead I'm telling you that the key is to have a mind that's prepared
in the right way. But disappointing though it may be, this is the truth. And it is a recipe of a sort,
just one that in the worst case takes a year rather than a weekend.
If you're not at the leading edge of some rapidly changing field, you can get to one. For
example, anyone reasonably smart can probably get to an edge of programming (e.g. building
mobile apps) in a year. Since a successful startup will consume at least 3-5 years of your life, a
year's preparation would be a reasonable investment. Especially if you're also looking for a
cofounder. [4]
You don't have to learn programming to be at the leading edge of a domain that's changing fast.
Other domains change fast. But while learning to hack is not necessary, it is for the forseeable
future sufficient. As Marc Andreessen put it, software is eating the world, and this trend has
decades left to run.
Knowing how to hack also means that when you have ideas, you'll be able to implement them.
That's not absolutely necessary (Jeff Bezos couldn't) but it's an advantage. It's a big advantage,
when you're considering an idea like putting a college facebook online, if instead of merely
thinking "That's an interesting idea," you can think instead "That's an interesting idea. I'll try
building an initial version tonight." It's even better when you're both a programmer and the
target user, because then the cycle of generating new versions and testing them on users can
happen inside one head.
Noticing
Once you're living in the future in some respect, the way to notice startup ideas is to look for
things that seem to be missing. If you're really at the leading edge of a rapidly changing field,
there will be things that are obviously missing. What won't be obvious is that they're startup
ideas. So if you want to find startup ideas, don't merely turn on the filter "What's missing?" Also
turn off every other filter, particularly "Could this be a big company?" There's plenty of time to
apply that test later. But if you're thinking about that initially, it may not only filter out lots of good
ideas, but also cause you to focus on bad ones.
Most things that are missing will take some time to see. You almost have to trick yourself into
seeing the ideas around you.
But you know the ideas are out there. This is not one of those problems where there might not
be an answer. It's impossibly unlikely that this is the exact moment when technological progress
stops. You can be sure people are going to build things in the next few years that will make you
think "What did I do before x?"
And when these problems get solved, they will probably seem flamingly obvious in retrospect.
What you need to do is turn off the filters that usually prevent you from seeing them. The most
powerful is simply taking the current state of the world for granted. Even the most radically openminded of us mostly do that. You couldn't get from your bed to the front door if you stopped to
question everything.
But if you're looking for startup ideas you can sacrifice some of the efficiency of taking the
status quo for granted and start to question things. Why is your inbox overflowing? Because you
get a lot of email, or because it's hard to get email out of your inbox? Why do you get so much
email? What problems are people trying to solve by sending you email? Are there better ways
to solve them? And why is it hard to get emails out of your inbox? Why do you keep emails
around after you've read them? Is an inbox the optimal tool for that?
Pay particular attention to things that chafe you. The advantage of taking the status quo for
granted is not just that it makes life (locally) more efficient, but also that it makes life more
tolerable. If you knew about all the things we'll get in the next 50 years but don't have yet, you'd
find present day life pretty constraining, just as someone from the present would if they were
sent back 50 years in a time machine. When something annoys you, it could be because you're
living in the future.
When you find the right sort of problem, you should probably be able to describe it as obvious,
at least to you. When we started Viaweb, all the online stores were built by hand, by web
designers making individual HTML pages. It was obvious to us as programmers that these sites
would have to be generated by software. [5]
Which means, strangely enough, that coming up with startup ideas is a question of seeing the
obvious. That suggests how weird this process is: you're trying to see things that are obvious,
and yet that you hadn't seen.
Since what you need to do here is loosen up your own mind, it may be best not to make too
much of a direct frontal attack on the problem — i.e. to sit down and try to think of ideas. The
best plan may be just to keep a background process running, looking for things that seem to be
missing. Work on hard problems, driven mainly by curiosity, but have a second self watching
over your shoulder, taking note of gaps and anomalies. [6]
Give yourself some time. You have a lot of control over the rate at which you turn yours into a
prepared mind, but you have less control over the stimuli that spark ideas when they hit it. If Bill
Gates and Paul Allen had constrained themselves to come up with a startup idea in one month,
what if they'd chosen a month before the Altair appeared? They probably would have worked
on a less promising idea. Drew Houston did work on a less promising idea before Dropbox: an
SAT prep startup. But Dropbox was a much better idea, both in the absolute sense and also as
a match for his skills. [7]
A good way to trick yourself into noticing ideas is to work on projects that seem like they'd be
cool. If you do that, you'll naturally tend to build things that are missing. It wouldn't seem as
interesting to build something that already existed.
Just as trying to think up startup ideas tends to produce bad ones, working on things that could
be dismissed as "toys" often produces good ones. When something is described as a toy, that
means it has everything an idea needs except being important. It's cool; users love it; it just
doesn't matter. But if you're living in the future and you build something cool that users love, it
may matter more than outsiders think. Microcomputers seemed like toys when Apple and
Microsoft started working on them. I'm old enough to remember that era; the usual term for
people with their own microcomputers was "hobbyists." BackRub seemed like an
inconsequential science project. The Facebook was just a way for undergrads to stalk one
another.
At YC we're excited when we meet startups working on things that we could imagine know-italls on forums dismissing as toys. To us that's positive evidence an idea is good.
If you can afford to take a long view (and arguably you can't afford not to), you can turn "Live in
the future and build what's missing" into something even better: Live in the future and build what
seems interesting.
School
That's what I'd advise college students to do, rather than trying to learn about
"entrepreneurship." "Entrepreneurship" is something you learn best by doing it. The examples
of the most successful founders make that clear. What you should be spending your time on in
college is ratcheting yourself into the future. College is an incomparable opportunity to do that.
What a waste to sacrifice an opportunity to solve the hard part of starting a startup — becoming
the sort of person who can have organic startup ideas — by spending time learning about the
easy part. Especially since you won't even really learn about it, any more than you'd learn about
sex in a class. All you'll learn is the words for things.
The clash of domains is a particularly fruitful source of ideas. If you know a lot about
programming and you start learning about some other field, you'll probably see problems that
software could solve. In fact, you're doubly likely to find good problems in another domain: (a)
the inhabitants of that domain are not as likely as software people to have already solved their
problems with software, and (b) since you come into the new domain totally ignorant, you don't
even know what the status quo is to take it for granted.
So if you're a CS major and you want to start a startup, instead of taking a class on
entrepreneurship you're better off taking a class on, say, genetics. Or better still, go work for a
biotech company. CS majors normally get summer jobs at computer hardware or software
companies. But if you want to find startup ideas, you might do better to get a summer job in
some unrelated field. [8]
Or don't take any extra classes, and just build things. It's no coincidence that Microsoft and
Facebook both got started in January. At Harvard that is (or was) Reading Period, when
students have no classes to attend because they're supposed to be studying for finals. [9]
But don't feel like you have to build things that will become startups. That's premature
optimization. Just build things. Preferably with other students. It's not just the classes that make
a university such a good place to crank oneself into the future. You're also surrounded by other
people trying to do the same thing. If you work together with them on projects, you'll end up
producing not just organic ideas, but organic ideas with organic founding teams — and that,
empirically, is the best combination.
Beware of research. If an undergrad writes something all his friends start using, it's quite likely
to represent a good startup idea. Whereas a PhD dissertation is extremely unlikely to. For some
reason, the more a project has to count as research, the less likely it is to be something that
could be turned into a startup. [10] I think the reason is that the subset of ideas that count as
research is so narrow that it's unlikely that a project that satisfied that constraint would also
satisfy the orthogonal constraint of solving users' problems. Whereas when students (or
professors) build something as a side-project, they automatically gravitate toward solving users'
problems — perhaps even with an additional energy that comes from being freed from the
constraints of research.
Competition
Because a good idea should seem obvious, when you have one you'll tend to feel that you're
late. Don't let that deter you. Worrying that you're late is one of the signs of a good idea. Ten
minutes of searching the web will usually settle the question. Even if you find someone else
working on the same thing, you're probably not too late. It's exceptionally rare for startups to be
killed by competitors — so rare that you can almost discount the possibility. So unless you
discover a competitor with the sort of lock-in that would prevent users from choosing you, don't
discard the idea.
If you're uncertain, ask users. The question of whether you're too late is subsumed by the
question of whether anyone urgently needs what you plan to make. If you have something that
no competitor does and that some subset of users urgently need, you have a beachhead. [11]
The question then is whether that beachhead is big enough. Or more importantly, who's in it: if
the beachhead consists of people doing something lots more people will be doing in the future,
then it's probably big enough no matter how small it is. For example, if you're building
something differentiated from competitors by the fact that it works on phones, but it only works
on the newest phones, that's probably a big enough beachhead.
Err on the side of doing things where you'll face competitors. Inexperienced founders usually
give competitors more credit than they deserve. Whether you succeed depends far more on you
than on your competitors. So better a good idea with competitors than a bad one without.
You don't need to worry about entering a "crowded market" so long as you have a thesis about
what everyone else in it is overlooking. In fact that's a very promising starting point. Google was
that type of idea. Your thesis has to be more precise than "we're going to make an x that doesn't
suck" though. You have to be able to phrase it in terms of something the incumbents are
overlooking. Best of all is when you can say that they didn't have the courage of their
convictions, and that your plan is what they'd have done if they'd followed through on their own
insights. Google was that type of idea too. The search engines that preceded them shied away
from the most radical implications of what they were doing — particularly that the better a job
they did, the faster users would leave.
A crowded market is actually a good sign, because it means both that there's demand and that
none of the existing solutions are good enough. A startup can't hope to enter a market that's
obviously big and yet in which they have no competitors. So any startup that succeeds is either
going to be entering a market with existing competitors, but armed with some secret weapon
that will get them all the users (like Google), or entering a market that looks small but which will
turn out to be big (like Microsoft). [12]
Filters
There are two more filters you'll need to turn off if you want to notice startup ideas: the unsexy
filter and the schlep filter.
Most programmers wish they could start a startup by just writing some brilliant code, pushing it
to a server, and having users pay them lots of money. They'd prefer not to deal with tedious
problems or get involved in messy ways with the real world. Which is a reasonable preference,
because such things slow you down. But this preference is so widespread that the space of
convenient startup ideas has been stripped pretty clean. If you let your mind wander a few
blocks down the street to the messy, tedious ideas, you'll find valuable ones just sitting there
waiting to be implemented.
The schlep filter is so dangerous that I wrote a separate essay about the condition it induces,
which I called schlep blindness. I gave Stripe as an example of a startup that benefited from
turning off this filter, and a pretty striking example it is. Thousands of programmers were in a
position to see this idea; thousands of programmers knew how painful it was to process
payments before Stripe. But when they looked for startup ideas they didn't see this one,
because unconsciously they shrank from having to deal with payments. And dealing with
payments is a schlep for Stripe, but not an intolerable one. In fact they might have had net less
pain; because the fear of dealing with payments kept most people away from this idea, Stripe
has had comparatively smooth sailing in other areas that are sometimes painful, like user
acquisition. They didn't have to try very hard to make themselves heard by users, because
users were desperately waiting for what they were building.
The unsexy filter is similar to the schlep filter, except it keeps you from working on problems you
despise rather than ones you fear. We overcame this one to work on Viaweb. There were
interesting things about the architecture of our software, but we weren't interested in
ecommerce per se. We could see the problem was one that needed to be solved though.
Turning off the schlep filter is more important than turning off the unsexy filter, because the
schlep filter is more likely to be an illusion. And even to the degree it isn't, it's a worse form of
self-indulgence. Starting a successful startup is going to be fairly laborious no matter what.
Even if the product doesn't entail a lot of schleps, you'll still have plenty dealing with investors,
hiring and firing people, and so on. So if there's some idea you think would be cool but you're
kept away from by fear of the schleps involved, don't worry: any sufficiently good idea will have
as many.
The unsexy filter, while still a source of error, is not as entirely useless as the schlep filter. If
you're at the leading edge of a field that's changing rapidly, your ideas about what's sexy will be
somewhat correlated with what's valuable in practice. Particularly as you get older and more
experienced. Plus if you find an idea sexy, you'll work on it more enthusiastically. [13]
Recipes
While the best way to discover startup ideas is to become the sort of person who has them and
then build whatever interests you, sometimes you don't have that luxury. Sometimes you need
an idea now. For example, if you're working on a startup and your initial idea turns out to be bad.
For the rest of this essay I'll talk about tricks for coming up with startup ideas on demand.
Although empirically you're better off using the organic strategy, you could succeed this way.
You just have to be more disciplined. When you use the organic method, you don't even notice
an idea unless it's evidence that something is truly missing. But when you make a conscious
effort to think of startup ideas, you have to replace this natural constraint with self-discipline.
You'll see a lot more ideas, most of them bad, so you need to be able to filter them.
One of the biggest dangers of not using the organic method is the example of the organic
method. Organic ideas feel like inspirations. There are a lot of stories about successful startups
that began when the founders had what seemed a crazy idea but "just knew" it was promising.
When you feel that about an idea you've had while trying to come up with startup ideas, you're
probably mistaken.
When searching for ideas, look in areas where you have some expertise. If you're a database
expert, don't build a chat app for teenagers (unless you're also a teenager). Maybe it's a good
idea, but you can't trust your judgment about that, so ignore it. There have to be other ideas that
involve databases, and whose quality you can judge. Do you find it hard to come up with good
ideas involving databases? That's because your expertise raises your standards. Your ideas
about chat apps are just as bad, but you're giving yourself a Dunning-Kruger pass in that
domain.
The place to start looking for ideas is things you need. There must be things you need. [14]
One good trick is to ask yourself whether in your previous job you ever found yourself saying
"Why doesn't someone make x? If someone made x we'd buy it in a second." If you can think of
any x people said that about, you probably have an idea. You know there's demand, and people
don't say that about things that are impossible to build.
More generally, try asking yourself whether there's something unusual about you that makes
your needs different from most other people's. You're probably not the only one. It's especially
good if you're different in a way people will increasingly be.
If you're changing ideas, one unusual thing about you is the idea you'd previously been working
on. Did you discover any needs while working on it? Several well-known startups began this
way. Hotmail began as something its founders wrote to talk about their previous startup idea
while they were working at their day jobs. [15]
A particularly promising way to be unusual is to be young. Some of the most valuable new ideas
take root first among people in their teens and early twenties. And while young founders are at
a disadvantage in some respects, they're the only ones who really understand their peers. It
would have been very hard for someone who wasn't a college student to start Facebook. So if
you're a young founder (under 23 say), are there things you and your friends would like to do
that current technology won't let you?
The next best thing to an unmet need of your own is an unmet need of someone else. Try
talking to everyone you can about the gaps they find in the world. What's missing? What would
they like to do that they can't? What's tedious or annoying, particularly in their work? Let the
conversation get general; don't be trying too hard to find startup ideas. You're just looking for
something to spark a thought. Maybe you'll notice a problem they didn't consciously realize they
had, because you know how to solve it.
When you find an unmet need that isn't your own, it may be somewhat blurry at first. The
person who needs something may not know exactly what they need. In that case I often
recommend that founders act like consultants — that they do what they'd do if they'd been
retained to solve the problems of this one user. People's problems are similar enough that
nearly all the code you write this way will be reusable, and whatever isn't will be a small price to
start out certain that you've reached the bottom of the well. [16]
One way to ensure you do a good job solving other people's problems is to make them your
own. When Rajat Suri of E la Carte decided to write software for restaurants, he got a job as a
waiter to learn how restaurants worked. That may seem like taking things to extremes, but
startups are extreme. We love it when founders do such things.
In fact, one strategy I recommend to people who need a new idea is not merely to turn off their
schlep and unsexy filters, but to seek out ideas that are unsexy or involve schleps. Don't try to
start Twitter. Those ideas are so rare that you can't find them by looking for them. Make
something unsexy that people will pay you for.
A good trick for bypassing the schlep and to some extent the unsexy filter is to ask what you
wish someone else would build, so that you could use it. What would you pay for right now?
Since startups often garbage-collect broken companies and industries, it can be a good trick to
look for those that are dying, or deserve to, and try to imagine what kind of company would
profit from their demise. For example, journalism is in free fall at the moment. But there may still
be money to be made from something like journalism. What sort of company might cause
people in the future to say "this replaced journalism" on some axis?
But imagine asking that in the future, not now. When one company or industry replaces another,
it usually comes in from the side. So don't look for a replacement for x; look for something that
people will later say turned out to be a replacement for x. And be imaginative about the axis
along which the replacement occurs. Traditional journalism, for example, is a way for readers to
get information and to kill time, a way for writers to make money and to get attention, and a
vehicle for several different types of advertising. It could be replaced on any of these axes (it
has already started to be on most).
When startups consume incumbents, they usually start by serving some small but important
market that the big players ignore. It's particularly good if there's an admixture of disdain in the
big players' attitude, because that often misleads them. For example, after Steve Wozniak built
the computer that became the Apple I, he felt obliged to give his then-employer HewlettPackard the option to produce it. Fortunately for him, they turned it down, and one of the
reasons they did was that it used a TV for a monitor, which seemed intolerably dÿýclassÿý to a highend hardware company like HP was at the time. [17]
Are there groups of scruffy but sophisticated users like the early microcomputer "hobbyists" that
are currently being ignored by the big players? A startup with its sights set on bigger things can
often capture a small market easily by expending an effort that wouldn't be justified by that
market alone.
Similarly, since the most successful startups generally ride some wave bigger than themselves,
it could be a good trick to look for waves and ask how one could benefit from them. The prices
of gene sequencing and 3D printing are both experiencing Moore's Law-like declines. What new
things will we be able to do in the new world we'll have in a few years? What are we
unconsciously ruling out as impossible that will soon be possible?
Organic
But talking about looking explicitly for waves makes it clear that such recipes are plan B for
getting startup ideas. Looking for waves is essentially a way to simulate the organic method. If
you're at the leading edge of some rapidly changing field, you don't have to look for waves; you
are the wave.
Finding startup ideas is a subtle business, and that's why most people who try fail so miserably.
It doesn't work well simply to try to think of startup ideas. If you do that, you get bad ones that
sound dangerously plausible. The best approach is more indirect: if you have the right sort of
background, good startup ideas will seem obvious to you. But even then, not immediately. It
takes time to come across situations where you notice something missing. And often these
gaps won't seem to be ideas for companies, just things that would be interesting to build. Which
is why it's good to have the time and the inclination to build things just because they're
interesting.
Live in the future and build what seems interesting. Strange as it sounds, that's the real recipe.
Notes:
[1] This form of bad idea has been around as long as the web. It was common in the 1990s, except then people who
had it used to say they were going to create a portal for x instead of a social network for x. Structurally the idea is
stone soup: you post a sign saying "this is the place for people interested in x," and all those people show up and you
make money from them. What lures founders into this sort of idea are statistics about the millions of people who
might be interested in each type of x. What they forget is that any given person might have 20 affinities by this
standard, and no one is going to visit 20 different communities regularly.
[2] I'm not saying, incidentally, that I know for sure a social network for pet owners is a bad idea. I know it's a bad idea
the way I know randomly generated DNA would not produce a viable organism. The set of plausible sounding startup
ideas is many times larger than the set of good ones, and many of the good ones don't even sound that plausible. So
if all you know about a startup idea is that it sounds plausible, you have to assume it's bad.
[3] More precisely, the users' need has to give them sufficient activation energy to start using whatever you make,
which can vary a lot. For example, the activation energy for enterprise software sold through traditional channels is
very high, so you'd have to be a lot better to get users to switch. Whereas the activation energy required to switch to
a new search engine is low. Which in turn is why search engines are so much better than enterprise software.
[4] This gets harder as you get older. While the space of ideas doesn't have dangerous local maxima, the space of
careers does. There are fairly high walls between most of the paths people take through life, and the older you get,
the higher the walls become.
[5] It was also obvious to us that the web was going to be a big deal. Few non-programmers grasped that in 1995, but
the programmers had seen what GUIs had done for desktop computers.
[6] Maybe it would work to have this second self keep a journal, and each night to make a brief entry listing the gaps
and anomalies you'd noticed that day. Not startup ideas, just the raw gaps and anomalies.
[7] Sam Altman points out that taking time to come up with an idea is not merely a better strategy in an absolute
sense, but also like an undervalued stock in that so few founders do it.
There's comparatively little competition for the best ideas, because few founders are willing to put in the time required
to notice them. Whereas there is a great deal of competition for mediocre ideas, because when people make up
startup ideas, they tend to make up the same ones.
[8] For the computer hardware and software companies, summer jobs are the first phase of the recruiting funnel. But
if you're good you can skip the first phase. If you're good you'll have no trouble getting hired by these companies
when you graduate, regardless of how you spent your summers.
[9] The empirical evidence suggests that if colleges want to help their students start startups, the best thing they can
do is leave them alone in the right way.
[10] I'm speaking here of IT startups; in biotech things are different.
[11] This is an instance of a more general rule: focus on users, not competitors. The most important information
about competitors is what you learn via users anyway.
[12] In practice most successful startups have elements of both. And you can describe each strategy in terms of the
other by adjusting the boundaries of what you call the market. But it's useful to consider these two ideas separately.
[13] I almost hesitate to raise that point though. Startups are businesses; the point of a business is to make money;
and with that additional constraint, you can't expect you'll be able to spend all your time working on what interests
you most.
[14] The need has to be a strong one. You can retroactively describe any made-up idea as something you need. But
do you really need that recipe site or local event aggregator as much as Drew Houston needed Dropbox, or Brian
Chesky and Joe Gebbia needed Airbnb?
Quite often at YC I find myself asking founders "Would you use this thing yourself, if you hadn't written it?" and you'd
be surprised how often the answer is no.
[15] Paul Buchheit points out that trying to sell something bad can be a source of better ideas:
"The best technique I've found for dealing with YC companies that have bad ideas is to tell them to go sell the
product ASAP (before wasting time building it). Not only do they learn that nobody wants what they are building, they
very often come back with a real idea that they discovered in the process of trying to sell the bad idea."
[16] Here's a recipe that might produce the next Facebook, if you're college students. If you have a connection to one
of the more powerful sororities at your school, approach the queen bees thereof and offer to be their personal IT
consultants, building anything they could imagine needing in their social lives that didn't already exist. Anything that
got built this way would be very promising, because such users are not just the most demanding but also the perfect
point to spread from.
I have no idea whether this would work.
[17] And the reason it used a TV for a monitor is that Steve Wozniak started out by solving his own problems. He, like
most of his peers, couldn't afford a monitor.
Thanks to Sam Altman, Mike Arrington, Paul Buchheit, John Collison, Patrick Collison, Garry Tan, and Harj Taggar
for reading drafts of this, and Marc Andreessen, Joe Gebbia, Reid Hoffman, Shel Kaphan, Mike Moritz and Kevin
Systrom for answering my questions about startup history.
The Hardware Renaissance - # 149
Want to start a startup? Get funded by Y Combinator.
October 2012
One advantage of Y Combinator's early, broad focus is that we see trends before most other
people. And one of the most conspicuous trends in the last batch was the large number of
hardware startups. Out of 84 companies, 7 were making hardware. On the whole they've done
better than the companies that weren't.
They've faced resistance from investors of course. Investors have a deep-seated bias against
hardware. But investors' opinions are a trailing indicator. The best founders are better at seeing
the future than the best investors, because the best founders are making it.
There is no one single force driving this trend. Hardware does well on crowdfunding sites. The
spread of tablets makes it possible to build new things controlled by and even incorporating
them. Electric motors have improved. Wireless connectivity of various types can now be taken
for granted. It's getting more straightforward to get things manufactured. Arduinos, 3D printing,
laser cutters, and more accessible CNC milling are making hardware easier to prototype.
Retailers are less of a bottleneck as customers increasingly buy online.
One question I can answer is why hardware is suddenly cool. It always was cool. Physical
things are great. They just haven't been as great a way to start a rapidly growing business as
software. But that rule may not be permanent. It's not even that old; it only dates from about
1990. Maybe the advantage of software will turn out to have been temporary. Hackers love to
build hardware, and customers love to buy it. So if the ease of shipping hardware even
approached the ease of shipping software, we'd see a lot more hardware startups.
It wouldn't be the first time something was a bad idea till it wasn't. And it wouldn't be the first
time investors learned that lesson from founders.
So if you want to work on hardware, don't be deterred from doing it because you worry
investors will discriminate against you. And in particular, don't be deterred from applying to Y
Combinator with a hardware idea, because we're especially interested in hardware startups.
We know there's room for the next Steve Jobs. But there's almost certainly also room for the
first <Your Name Here>.
Thanks to Sam Altman, Trevor Blackwell, David Cann, Sanjay Dastoor, Paul Gerhardt,
Cameron Robertson, Harj Taggar, and Garry Tan for reading drafts of this.
Startup - Growth - # 148
Want to start a startup? Get funded by Y Combinator.
September 2012
A startup is a company designed to grow fast. Being newly founded does not in itself make a
company a startup. Nor is it necessary for a startup to work on technology, or take venture
funding, or have some sort of "exit." The only essential thing is growth. Everything else we
associate with startups follows from growth.
If you want to start one it's important to understand that. Startups are so hard that you can't be
pointed off to the side and hope to succeed. You have to know that growth is what you're after.
The good news is, if you get growth, everything else tends to fall into place. Which means you
can use growth like a compass to make almost every decision you face.
Redwoods
Let's start with a distinction that should be obvious but is often overlooked: not every newly
founded company is a startup. Millions of companies are started every year in the US. Only a
tiny fraction are startups. Most are service businesses — restaurants, barbershops, plumbers,
and so on. These are not startups, except in a few unusual cases. A barbershop isn't designed
to grow fast. Whereas a search engine, for example, is.
When I say startups are designed to grow fast, I mean it in two senses. Partly I mean designed
in the sense of intended, because most startups fail. But I also mean startups are different by
nature, in the same way a redwood seedling has a different destiny from a bean sprout.
That difference is why there's a distinct word, "startup," for companies designed to grow fast. If
all companies were essentially similar, but some through luck or the efforts of their founders
ended up growing very fast, we wouldn't need a separate word. We could just talk about supersuccessful companies and less successful ones. But in fact startups do have a different sort of
DNA from other businesses. Google is not just a barbershop whose founders were unusually
lucky and hard-working. Google was different from the beginning.
To grow rapidly, you need to make something you can sell to a big market. That's the difference
between Google and a barbershop. A barbershop doesn't scale.
For a company to grow really big, it must (a) make something lots of people want, and (b) reach
and serve all those people. Barbershops are doing fine in the (a) department. Almost everyone
needs their hair cut. The problem for a barbershop, as for any retail establishment, is (b). A
barbershop serves customers in person, and few will travel far for a haircut. And even if they
did, the barbershop couldn't accomodate them. [1]
Writing software is a great way to solve (b), but you can still end up constrained in (a). If you
write software to teach Tibetan to Hungarian speakers, you'll be able to reach most of the
people who want it, but there won't be many of them. If you make software to teach English to
Chinese speakers, however, you're in startup territory.
Most businesses are tightly constrained in (a) or (b). The distinctive feature of successful
startups is that they're not.
Ideas
It might seem that it would always be better to start a startup than an ordinary business. If
you're going to start a company, why not start the type with the most potential? The catch is
that this is a (fairly) efficient market. If you write software to teach Tibetan to Hungarians, you
won't have much competition. If you write software to teach English to Chinese speakers, you'll
face ferocious competition, precisely because that's such a larger prize. [2]
The constraints that limit ordinary companies also protect them. That's the tradeoff. If you start
a barbershop, you only have to compete with other local barbers. If you start a search engine
you have to compete with the whole world.
The most important thing that the constraints on a normal business protect it from is not
competition, however, but the difficulty of coming up with new ideas. If you open a bar in a
particular neighborhood, as well as limiting your potential and protecting you from competitors,
that geographic constraint also helps define your company. Bar + neighborhood is a sufficient
idea for a small business. Similarly for companies constrained in (a). Your niche both protects
and defines you.
Whereas if you want to start a startup, you're probably going to have to think of something fairly
novel. A startup has to make something it can deliver to a large market, and ideas of that type
are so valuable that all the obvious ones are already taken.
That space of ideas has been so thoroughly picked over that a startup generally has to work on
something everyone else has overlooked. I was going to write that one has to make a
conscious effort to find ideas everyone else has overlooked. But that's not how most startups
get started. Usually successful startups happen because the founders are sufficiently different
from other people that ideas few others can see seem obvious to them. Perhaps later they step
back and notice they've found an idea in everyone else's blind spot, and from that point make a
deliberate effort to stay there. [3] But at the moment when successful startups get started, much
of the innovation is unconscious.
What's different about successful founders is that they can see different problems. It's a
particularly good combination both to be good at technology and to face problems that can be
solved by it, because technology changes so rapidly that formerly bad ideas often become
good without anyone noticing. Steve Wozniak's problem was that he wanted his own computer.
That was an unusual problem to have in 1975. But technological change was about to make it a
much more common one. Because he not only wanted a computer but knew how to build them,
Wozniak was able to make himself one. And the problem he solved for himself became one that
Apple solved for millions of people in the coming years. But by the time it was obvious to
ordinary people that this was a big market, Apple was already established.
Google has similar origins. Larry Page and Sergey Brin wanted to search the web. But unlike
most people they had the technical expertise both to notice that existing search engines were
not as good as they could be, and to know how to improve them. Over the next few years their
problem became everyone's problem, as the web grew to a size where you didn't have to be a
picky search expert to notice the old algorithms weren't good enough. But as happened with
Apple, by the time everyone else realized how important search was, Google was entrenched.
That's one connection between startup ideas and technology. Rapid change in one area
uncovers big, soluble problems in other areas. Sometimes the changes are advances, and what
they change is solubility. That was the kind of change that yielded Apple; advances in chip
technology finally let Steve Wozniak design a computer he could afford. But in Google's case
the most important change was the growth of the web. What changed there was not solubility
but bigness.
The other connection between startups and technology is that startups create new ways of
doing things, and new ways of doing things are, in the broader sense of the word, new
technology. When a startup both begins with an idea exposed by technological change and
makes a product consisting of technology in the narrower sense (what used to be called "high
technology"), it's easy to conflate the two. But the two connections are distinct and in principle
one could start a startup that was neither driven by technological change, nor whose product
consisted of technology except in the broader sense. [4]
Rate
How fast does a company have to grow to be considered a startup? There's no precise answer
to that. "Startup" is a pole, not a threshold. Starting one is at first no more than a declaration of
one's ambitions. You're committing not just to starting a company, but to starting a fast growing
one, and you're thus committing to search for one of the rare ideas of that type. But at first you
have no more than commitment. Starting a startup is like being an actor in that respect. "Actor"
too is a pole rather than a threshold. At the beginning of his career, an actor is a waiter who
goes to auditions. Getting work makes him a successful actor, but he doesn't only become an
actor when he's successful.
So the real question is not what growth rate makes a company a startup, but what growth rate
successful startups tend to have. For founders that's more than a theoretical question, because
it's equivalent to asking if they're on the right path.
The growth of a successful startup usually has three phases: There's an initial period of slow or
no growth while the startup tries to figure out what it's doing.
As the startup figures out how to make something lots of people want and how to reach those
people, there's a period of rapid growth.
Eventually a successful startup will grow into a big company. Growth will slow, partly due to
internal limits and partly because the company is starting to bump up against the limits of the
markets it serves. [5] Together these three phases produce an S-curve. The phase whose
growth defines the startup is the second one, the ascent. Its length and slope determine how
big the company will be.
The slope is the company's growth rate. If there's one number every founder should always
know, it's the company's growth rate. That's the measure of a startup. If you don't know that
number, you don't even know if you're doing well or badly.
When I first meet founders and ask what their growth rate is, sometimes they tell me "we get
about a hundred new customers a month." That's not a rate. What matters is not the absolute
number of new customers, but the ratio of new customers to existing ones. If you're really
getting a constant number of new customers every month, you're in trouble, because that
means your growth rate is decreasing.
During Y Combinator we measure growth rate per week, partly because there is so little time
before Demo Day, and partly because startups early on need frequent feedback from their
users to tweak what they're doing. [6]
A good growth rate during YC is 5-7% a week. If you can hit 10% a week you're doing
exceptionally well. If you can only manage 1%, it's a sign you haven't yet figured out what you're
doing.
The best thing to measure the growth rate of is revenue. The next best, for startups that aren't
charging initially, is active users. That's a reasonable proxy for revenue growth because
whenever the startup does start trying to make money, their revenues will probably be a
constant multiple of active users. [7]
Compass
We usually advise startups to pick a growth rate they think they can hit, and then just try to hit it
every week. The key word here is "just." If they decide to grow at 7% a week and they hit that
number, they're successful for that week. There's nothing more they need to do. But if they don't
hit it, they've failed in the only thing that mattered, and should be correspondingly alarmed.
Programmers will recognize what we're doing here. We're turning starting a startup into an
optimization problem. And anyone who has tried optimizing code knows how wonderfully
effective that sort of narrow focus can be. Optimizing code means taking an existing program
and changing it to use less of something, usually time or memory. You don't have to think about
what the program should do, just make it faster. For most programmers this is very satisfying
work. The narrow focus makes it a sort of puzzle, and you're generally surprised how fast you
can solve it.
Focusing on hitting a growth rate reduces the otherwise bewilderingly multifarious problem of
starting a startup to a single problem. You can use that target growth rate to make all your
decisions for you; anything that gets you the growth you need is ipso facto right. Should you
spend two days at a conference? Should you hire another programmer? Should you focus more
on marketing? Should you spend time courting some big customer? Should you add x feature?
Whatever gets you your target growth rate. [8]
Judging yourself by weekly growth doesn't mean you can look no more than a week ahead.
Once you experience the pain of missing your target one week (it was the only thing that
mattered, and you failed at it), you become interested in anything that could spare you such
pain in the future. So you'll be willing for example to hire another programmer, who won't
contribute to this week's growth but perhaps in a month will have implemented some new
feature that will get you more users. But only if (a) the distraction of hiring someone won't make
you miss your numbers in the short term, and (b) you're sufficiently worried about whether you
can keep hitting your numbers without hiring someone new.
It's not that you don't think about the future, just that you think about it no more than necessary.
In theory this sort of hill-climbing could get a startup into trouble. They could end up on a local
maximum. But in practice that never happens. Having to hit a growth number every week forces
founders to act, and acting versus not acting is the high bit of succeeding. Nine times out of ten,
sitting around strategizing is just a form of procrastination. Whereas founders' intuitions about
which hill to climb are usually better than they realize. Plus the maxima in the space of startup
ideas are not spiky and isolated. Most fairly good ideas are adjacent to even better ones.
The fascinating thing about optimizing for growth is that it can actually discover startup ideas.
You can use the need for growth as a form of evolutionary pressure. If you start out with some
initial plan and modify it as necessary to keep hitting, say, 10% weekly growth, you may end up
with a quite different company than you meant to start. But anything that grows consistently at
10% a week is almost certainly a better idea than you started with.
There's a parallel here to small businesses. Just as the constraint of being located in a
particular neighborhood helps define a bar, the constraint of growing at a certain rate can help
define a startup.
You'll generally do best to follow that constraint wherever it leads rather than being influenced
by some initial vision, just as a scientist is better off following the truth wherever it leads rather
than being influenced by what he wishes were the case. When Richard Feynman said that the
imagination of nature was greater than the imagination of man, he meant that if you just keep
following the truth you'll discover cooler things than you could ever have made up. For startups,
growth is a constraint much like truth. Every successful startup is at least partly a product of the
imagination of growth. [9]
Value
It's hard to find something that grows consistently at several percent a week, but if you do you
may have found something surprisingly valuable. If we project forward we see why.
weeklyyearly 1%1.7x 2%2.8x 5%12.6x 7%33.7x 10%142.0x A company that grows at 1% a
week will grow 1.7x a year, whereas a company that grows at 5% a week will grow 12.6x. A
company making $1000 a month (a typical number early in YC) and growing at 1% a week will
4 years later be making $7900 a month, which is less than a good programmer makes in salary
in Silicon Valley. A startup that grows at 5% a week will in 4 years be making $25 million a
month. [10]
Our ancestors must rarely have encountered cases of exponential growth, because our
intuitions are no guide here. What happens to fast growing startups tends to surprise even the
founders.
Small variations in growth rate produce qualitatively different outcomes. That's why there's a
separate word for startups, and why startups do things that ordinary companies don't, like
raising money and getting acquired. And, strangely enough, it's also why they fail so frequently.
Considering how valuable a successful startup can become, anyone familiar with the concept of
expected value would be surprised if the failure rate weren't high. If a successful startup could
make a founder $100 million, then even if the chance of succeeding were only 1%, the
expected value of starting one would be $1 million. And the probability of a group of sufficiently
smart and determined founders succeeding on that scale might be significantly over 1%. For
the right people — e.g. the young Bill Gates — the probability might be 20% or even 50%. So
it's not surprising that so many want to take a shot at it. In an efficient market, the number of
failed startups should be proportionate to the size of the successes. And since the latter is huge
the former should be too. [11]
What this means is that at any given time, the great majority of startups will be working on
something that's never going to go anywhere, and yet glorifying their doomed efforts with the
grandiose title of "startup."
This doesn't bother me. It's the same with other high-beta vocations, like being an actor or a
novelist. I've long since gotten used to it. But it seems to bother a lot of people, particularly
those who've started ordinary businesses. Many are annoyed that these so-called startups get
all the attention, when hardly any of them will amount to anything.
If they stepped back and looked at the whole picture they might be less indignant. The mistake
they're making is that by basing their opinions on anecdotal evidence they're implicitly judging
by the median rather than the average. If you judge by the median startup, the whole concept of
a startup seems like a fraud. You have to invent a bubble to explain why founders want to start
them or investors want to fund them. But it's a mistake to use the median in a domain with so
much variation. If you look at the average outcome rather than the median, you can understand
why investors like them, and why, if they aren't median people, it's a rational choice for founders
to start them.
Deals
Why do investors like startups so much? Why are they so hot to invest in photo-sharing apps,
rather than solid money-making businesses? Not only for the obvious reason.
The test of any investment is the ratio of return to risk. Startups pass that test because although
they're appallingly risky, the returns when they do succeed are so high. But that's not the only
reason investors like startups. An ordinary slower-growing business might have just as good a
ratio of return to risk, if both were lower. So why are VCs interested only in high-growth
companies? The reason is that they get paid by getting their capital back, ideally after the
startup IPOs, or failing that when it's acquired.
The other way to get returns from an investment is in the form of dividends. Why isn't there a
parallel VC industry that invests in ordinary companies in return for a percentage of their
profits? Because it's too easy for people who control a private company to funnel its revenues
to themselves (e.g. by buying overpriced components from a supplier they control) while making
it look like the company is making little profit. Anyone who invested in private companies in
return for dividends would have to pay close attention to their books.
The reason VCs like to invest in startups is not simply the returns, but also because such
investments are so easy to oversee. The founders can't enrich themselves without also
enriching the investors. [12]
Why do founders want to take the VCs' money? Growth, again. The constraint between good
ideas and growth operates in both directions. It's not merely that you need a scalable idea to
grow. If you have such an idea and don't grow fast enough, competitors will. Growing too slowly
is particularly dangerous in a business with network effects, which the best startups usually
have to some degree.
Almost every company needs some amount of funding to get started. But startups often raise
money even when they are or could be profitable. It might seem foolish to sell stock in a
profitable company for less than you think it will later be worth, but it's no more foolish than
buying insurance. Fundamentally that's how the most successful startups view fundraising.
They could grow the company on its own revenues, but the extra money and help supplied by
VCs will let them grow even faster. Raising money lets you choose your growth rate.
Money to grow faster is always at the command of the most successful startups, because the
VCs need them more than they need the VCs. A profitable startup could if it wanted just grow
on its own revenues. Growing slower might be slightly dangerous, but chances are it wouldn't
kill them. Whereas VCs need to invest in startups, and in particular the most successful
startups, or they'll be out of business. Which means that any sufficiently promising startup will
be offered money on terms they'd be crazy to refuse. And yet because of the scale of the
successes in the startup business, VCs can still make money from such investments. You'd
have to be crazy to believe your company was going to become as valuable as a high growth
rate can make it, but some do.
Pretty much every successful startup will get acquisition offers too. Why? What is it about
startups that makes other companies want to buy them? [13]
Fundamentally the same thing that makes everyone else want the stock of successful startups:
a rapidly growing company is valuable. It's a good thing eBay bought Paypal, for example,
because Paypal is now responsible for 43% of their sales and probably more of their growth.
But acquirers have an additional reason to want startups. A rapidly growing company is not
merely valuable, but dangerous. If it keeps expanding, it might expand into the acquirer's own
territory. Most product acquisitions have some component of fear. Even if an acquirer isn't
threatened by the startup itself, they might be alarmed at the thought of what a competitor could
do with it. And because startups are in this sense doubly valuable to acquirers, acquirers will
often pay more than an ordinary investor would. [14]
Understand
The combination of founders, investors, and acquirers forms a natural ecosystem. It works so
well that those who don't understand it are driven to invent conspiracy theories to explain how
neatly things sometimes turn out. Just as our ancestors did to explain the apparently too neat
workings of the natural world. But there is no secret cabal making it all work.
If you start from the mistaken assumption that Instagram was worthless, you have to invent a
secret boss to force Mark Zuckerberg to buy it. To anyone who knows Mark Zuckerberg, that is
the reductio ad absurdum of the initial assumption. The reason he bought Instagram was that it
was valuable and dangerous, and what made it so was growth.
If you want to understand startups, understand growth. Growth drives everything in this world.
Growth is why startups usually work on technology — because ideas for fast growing
companies are so rare that the best way to find new ones is to discover those recently made
viable by change, and technology is the best source of rapid change. Growth is why it's a
rational choice economically for so many founders to try starting a startup: growth makes the
successful companies so valuable that the expected value is high even though the risk is too.
Growth is why VCs want to invest in startups: not just because the returns are high but also
because generating returns from capital gains is easier to manage than generating returns from
dividends. Growth explains why the most successful startups take VC money even if they don't
need to: it lets them choose their growth rate. And growth explains why successful startups
almost invariably get acquisition offers. To acquirers a fast-growing company is not merely
valuable but dangerous too.
It's not just that if you want to succeed in some domain, you have to understand the forces
driving it. Understanding growth is what starting a startup consists of. What you're really doing
(and to the dismay of some observers, all you're really doing) when you start a startup is
committing to solve a harder type of problem than ordinary businesses do. You're committing to
search for one of the rare ideas that generates rapid growth. Because these ideas are so
valuable, finding one is hard. The startup is the embodiment of your discoveries so far. Starting
a startup is thus very much like deciding to be a research scientist: you're not committing to
solve any specific problem; you don't know for sure which problems are soluble; but you're
committing to try to discover something no one knew before. A startup founder is in effect an
economic research scientist. Most don't discover anything that remarkable, but some discover
relativity.
Notes:
[1] Strictly speaking it's not lots of customers you need but a big market, meaning a high product of number of
customers times how much they'll pay. But it's dangerous to have too few customers even if they pay a lot, or the
power that individual customers have over you could turn you into a de facto consulting firm. So whatever market
you're in, you'll usually do best to err on the side of making the broadest type of product for it.
[2] One year at Startup School David Heinemeier Hansson encouraged programmers who wanted to start
businesses to use a restaurant as a model. What he meant, I believe, is that it's fine to start software companies
constrained in (a) in the same way a restaurant is constrained in (b). I agree. Most people should not try to start
startups.
[3] That sort of stepping back is one of the things we focus on at Y Combinator. It's common for founders to have
discovered something intuitively without understanding all its implications. That's probably true of the biggest
discoveries in any field.
[4] I got it wrong in "How to Make Wealth" when I said that a startup was a small company that takes on a hard
technical problem. That is the most common recipe but not the only one.
[5] In principle companies aren't limited by the size of the markets they serve, because they could just expand into
new markets. But there seem to be limits on the ability of big companies to do that. Which means the slowdown that
comes from bumping up against the limits of one's markets is ultimately just another way in which internal limits are
expressed.
It may be that some of these limits could be overcome by changing the shape of the organization — specifically by
sharding it.
[6] This is, obviously, only for startups that have already launched or can launch during YC. A startup building a new
database will probably not do that. On the other hand, launching something small and then using growth rate as
evolutionary pressure is such a valuable technique that any company that could start this way probably should.
[7] If the startup is taking the Facebook/Twitter route and building something they hope will be very popular but from
which they don't yet have a definite plan to make money, the growth rate has to be higher, even though it's a proxy for
revenue growth, because such companies need huge numbers of users to succeed at all.
Beware too of the edge case where something spreads rapidly but the churn is high as well, so that you have good
net growth till you run through all the potential users, at which point it suddenly stops.
[8] Within YC when we say it's ipso facto right to do whatever gets you growth, it's implicit that this excludes trickery
like buying users for more than their lifetime value, counting users as active when they're really not, bleeding out
invites at a regularly increasing rate to manufacture a perfect growth curve, etc. Even if you were able to fool
investors with such tricks, you'd ultimately be hurting yourself, because you're throwing off your own compass.
[9] Which is why it's such a dangerous mistake to believe that successful startups are simply the embodiment of
some brilliant initial idea. What you're looking for initially is not so much a great idea as an idea that could evolve into
a great one. The danger is that promising ideas are not merely blurry versions of great ones. They're often different in
kind, because the early adopters you evolve the idea upon have different needs from the rest of the market. For
example, the idea that evolves into Facebook isn't merely a subset of Facebook; the idea that evolves into Facebook
is a site for Harvard undergrads.
[10] What if a company grew at 1.7x a year for a really long time? Could it not grow just as big as any successful
startup? In principle yes, of course. If our hypothetical company making $1000 a month grew at 1% a week for 19
years, it would grow as big as a company growing at 5% a week for 4 years. But while such trajectories may be
common in, say, real estate development, you don't see them much in the technology business. In technology,
companies that grow slowly tend not to grow as big.
[11] Any expected value calculation varies from person to person depending on their utility function for money. I.e. the
first million is worth more to most people than subsequent millions. How much more depends on the person. For
founders who are younger or more ambitious the utility function is flatter. Which is probably part of the reason the
founders of the most successful startups of all tend to be on the young side.
[12] More precisely, this is the case in the biggest winners, which is where all the returns come from. A startup
founder could pull the same trick of enriching himself at the company's expense by selling them overpriced
components. But it wouldn't be worth it for the founders of Google to do that. Only founders of failing startups would
even be tempted, but those are writeoffs from the VCs' point of view anyway.
[13] Acquisitions fall into two categories: those where the acquirer wants the business, and those where the acquirer
just wants the employees. The latter type is sometimes called an HR acquisition. Though nominally acquisitions and
sometimes on a scale that has a significant effect on the expected value calculation for potential founders, HR
acquisitions are viewed by acquirers as more akin to hiring bonuses.
[14] I once explained this to some founders who had recently arrived from Russia. They found it novel that if you
threatened a company they'd pay a premium for you. "In Russia they just kill you," they said, and they were only
partly joking. Economically, the fact that established companies can't simply eliminate new competitors may be one of
the most valuable aspects of the rule of law. And so to the extent we see incumbents suppressing competitors via
regulations or patent suits, we should worry, not because it's a departure from the rule of law per se but from what
the rule of law is aiming at.
Thanks to Sam Altman, Marc Andreessen, Paul Buchheit, Patrick Collison, Jessica Livingston, Geoff Ralston, and
Harj Taggar for reading drafts of this.
Black Swan Farming - # 147
Want to start a startup? Get funded by Y Combinator.
September 2012
I've done several types of work over the years but I don't know another as counterintuitive as
startup investing.
The two most important things to understand about startup investing, as a business, are (1) that
effectively all the returns are concentrated in a few big winners, and (2) that the best ideas look
initially like bad ideas.
The first rule I knew intellectually, but didn't really grasp till it happened to us. The total value of
the companies we've funded is around 10 billion, give or take a few. But just two companies,
Dropbox and Airbnb, account for about three quarters of it.
In startups, the big winners are big to a degree that violates our expectations about variation. I
don't know whether these expectations are innate or learned, but whatever the cause, we are
just not prepared for the 1000x variation in outcomes that one finds in startup investing.
That yields all sorts of strange consequences. For example, in purely financial terms, there is
probably at most one company in each YC batch that will have a significant effect on our
returns, and the rest are just a cost of doing business. [1] I haven't really assimilated that fact,
partly because it's so counterintuitive, and partly because we're not doing this just for financial
reasons; YC would be a pretty lonely place if we only had one company per batch. And yet it's
true.
To succeed in a domain that violates your intuitions, you need to be able to turn them off the
way a pilot does when flying through clouds. [2] You need to do what you know intellectually to
be right, even though it feels wrong.
It's a constant battle for us. It's hard to make ourselves take enough risks. When you interview a
startup and think "they seem likely to succeed," it's hard not to fund them. And yet, financially at
least, there is only one kind of success: they're either going to be one of the really big winners
or not, and if not it doesn't matter whether you fund them, because even if they succeed the
effect on your returns will be insignificant. In the same day of interviews you might meet some
smart 19 year olds who aren't even sure what they want to work on. Their chances of
succeeding seem small. But again, it's not their chances of succeeding that matter but their
chances of succeeding really big. The probability that any group will succeed really big is
microscopically small, but the probability that those 19 year olds will might be higher than that
of the other, safer group.
The probability that a startup will make it big is not simply a constant fraction of the probability
that they will succeed at all. If it were, you could fund everyone who seemed likely to succeed at
all, and you'd get that fraction of big hits. Unfortunately picking winners is harder than that. You
have to ignore the elephant in front of you, the likelihood they'll succeed, and focus instead on
the separate and almost invisibly intangible question of whether they'll succeed really big.
Harder
That's made harder by the fact that the best startup ideas seem at first like bad ideas. I've
written about this before: if a good idea were obviously good, someone else would already have
done it. So the most successful founders tend to work on ideas that few beside them realize are
good. Which is not that far from a description of insanity, till you reach the point where you see
results.
The first time Peter Thiel spoke at YC he drew a Venn diagram that illustrates the situation
perfectly. He drew two intersecting circles, one labelled "seems like a bad idea" and the other
"is a good idea." The intersection is the sweet spot for startups.
This concept is a simple one and yet seeing it as a Venn diagram is illuminating. It reminds you
that there is an intersection—that there are good ideas that seem bad. It also reminds you that
the vast majority of ideas that seem bad are bad.
The fact that the best ideas seem like bad ideas makes it even harder to recognize the big
winners. It means the probability of a startup making it really big is not merely not a constant
fraction of the probability that it will succeed, but that the startups with a high probability of the
former will seem to have a disproportionately low probability of the latter.
History tends to get rewritten by big successes, so that in retrospect it seems obvious they were
going to make it big. For that reason one of my most valuable memories is how lame Facebook
sounded to me when I first heard about it. A site for college students to waste time? It seemed
the perfect bad idea: a site (1) for a niche market (2) with no money (3) to do something that
didn't matter.
One could have described Microsoft and Apple in exactly the same terms. [3]
Harder Still
Wait, it gets worse. You not only have to solve this hard problem, but you have to do it with no
indication of whether you're succeeding. When you pick a big winner, you won't know it for two
years.
Meanwhile, the one thing you can measure is dangerously misleading. The one thing we can
track precisely is how well the startups in each batch do at fundraising after Demo Day. But we
know that's the wrong metric. There's no correlation between the percentage of startups that
raise money and the metric that does matter financially, whether that batch of startups contains
a big winner or not.
Except an inverse one. That's the scary thing: fundraising is not merely a useless metric, but
positively misleading. We're in a business where we need to pick unpromising-looking outliers,
and the huge scale of the successes means we can afford to spread our net very widely. The
big winners could generate 10,000x returns. That means for each big winner we could pick a
thousand companies that returned nothing and still end up 10x ahead.
If we ever got to the point where 100% of the startups we funded were able to raise money after
Demo Day, it would almost certainly mean we were being too conservative. [4]
It takes a conscious effort not to do that too. After 15 cycles of preparing startups for investors
and then watching how they do, I can now look at a group we're interviewing through Demo Day
investors' eyes. But those are the wrong eyes to look through!
We can afford to take at least 10x as much risk as Demo Day investors. And since risk is
usually proportionate to reward, if you can afford to take more risk you should. What would it
mean to take 10x more risk than Demo Day investors? We'd have to be willing to fund 10x more
startups than they would. Which means that even if we're generous to ourselves and assume
that YC can on average triple a startup's expected value, we'd be taking the right amount of risk
if only 30% of the startups were able to raise significant funding after Demo Day.
I don't know what fraction of them currently raise more after Demo Day. I deliberately avoid
calculating that number, because if you start measuring something you start optimizing it, and I
know it's the wrong thing to optimize. [5] But the percentage is certainly way over 30%. And
frankly the thought of a 30% success rate at fundraising makes my stomach clench. A Demo
Day where only 30% of the startups were fundable would be a shambles. Everyone would
agree that YC had jumped the shark. We ourselves would feel that YC had jumped the shark.
And yet we'd all be wrong.
For better or worse that's never going to be more than a thought experiment. We could never
stand it. How about that for counterintuitive? I can lay out what I know to be the right thing to do,
and still not do it. I can make up all sorts of plausible justifications. It would hurt YC's brand (at
least among the innumerate) if we invested in huge numbers of risky startups that flamed out. It
might dilute the value of the alumni network. Perhaps most convincingly, it would be
demoralizing for us to be up to our chins in failure all the time. But I know the real reason we're
so conservative is that we just haven't assimilated the fact of 1000x variation in returns.
We'll probably never be able to bring ourselves to take risks proportionate to the returns in this
business. The best we can hope for is that when we interview a group and find ourselves
thinking "they seem like good founders, but what are investors going to think of this crazy idea?"
we'll continue to be able to say "who cares what investors think?" That's what we thought about
Airbnb, and if we want to fund more Airbnbs we have to stay good at thinking it.
Notes:
[1] I'm not saying that the big winners are all that matters, just that they're all that matters financially for investors.
Since we're not doing YC mainly for financial reasons, the big winners aren't all that matters to us. We're delighted to
have funded Reddit, for example. Even though we made comparatively little from it, Reddit has had a big effect on
the world, and it introduced us to Steve Huffman and Alexis Ohanian, both of whom have become good friends.
Nor do we push founders to try to become one of the big winners if they don't want to. We didn't "swing for the
fences" in our own startup (Viaweb, which was acquired for $50 million), and it would feel pretty bogus to press
founders to do something we didn't do. Our rule is that it's up to the founders. Some want to take over the world, and
some just want that first few million. But we invest in so many companies that we don't have to sweat any one
outcome. In fact, we don't have to sweat whether startups have exits at all. The biggest exits are the only ones that
matter financially, and those are guaranteed in the sense that if a company becomes big enough, a market for its
shares will inevitably arise. Since the remaining outcomes don't have a significant effect on returns, it's cool with us if
the founders want to sell early for a small amount, or grow slowly and never sell (i.e. become a so-called lifestyle
business), or even shut the company down. We're sometimes disappointed when a startup we had high hopes for
doesn't do well, but this disappointment is mostly the ordinary variety that anyone feels when that happens.
[2] Without visual cues (e.g. the horizon) you can't distinguish between gravity and acceleration. Which means if
you're flying through clouds you can't tell what the attitude of the aircraft is. You could feel like you're flying straight
and level while in fact you're descending in a spiral. The solution is to ignore what your body is telling you and listen
only to your instruments. But it turns out to be very hard to ignore what your body is telling you. Every pilot knows
about this problem and yet it is still a leading cause of accidents.
[3] Not all big hits follow this pattern though. The reason Google seemed a bad idea was that there were already lots
of search engines and there didn't seem to be room for another.
[4] A startup's success at fundraising is a function of two things: what they're selling and how good they are at selling
it. And while we can teach startups a lot about how to appeal to investors, even the most convincing pitch can't sell
an idea that investors don't like. I was genuinely worried that Airbnb, for example, would not be able to raise money
after Demo Day. I couldn't convince Fred Wilson to fund them. They might not have raised money at all but for the
coincidence that Greg McAdoo, our contact at Sequoia, was one of a handful of VCs who understood the vacation
rental business, having spent much of the previous two years investigating it.
[5] I calculated it once for the last batch before a consortium of investors started offering investment automatically to
every startup we funded, summer 2010. At the time it was 94% (33 of 35 companies that tried to raise money
succeeded, and one didn't try because they were already profitable). Presumably it's lower now because of that
investment; in the old days it was raise after Demo Day or die.
Thanks to Sam Altman, Paul Buchheit, Patrick Collison, Jessica Livingston, Geoff Ralston, and Harj Taggar for
reading drafts of this.
The Top of My Todo List - # 146
April 2012
A palliative care nurse called Bronnie Ware made a list of the biggest regrets of the dying. Her
list seems plausible. I could see myself — can see myself — making at least 4 of these 5
mistakes.
If you had to compress them into a single piece of advice, it might be: don't be a cog. The 5
regrets paint a portrait of post-industrial man, who shrinks himself into a shape that fits his
circumstances, then turns dutifully till he stops.
The alarming thing is, the mistakes that produce these regrets are all errors of omission. You
forget your dreams, ignore your family, suppress your feelings, neglect your friends, and forget
to be happy. Errors of omission are a particularly dangerous type of mistake, because you make
them by default.
I would like to avoid making these mistakes. But how do you avoid mistakes you make by
default? Ideally you transform your life so it has other defaults. But it may not be possible to do
that completely. As long as these mistakes happen by default, you probably have to be
reminded not to make them. So I inverted the 5 regrets, yielding a list of 5 commands Don't
ignore your dreams; don't work too much; say what you think; cultivate friendships; be happy.
which I then put at the top of the file I use as a todo list.
Writing and Speaking - # 145
March 2012
I'm not a very good speaker. I say "um" a lot. Sometimes I have to pause when I lose my train of
thought. I wish I were a better speaker. But I don't wish I were a better speaker like I wish I were
a better writer. What I really want is to have good ideas, and that's a much bigger part of being
a good writer than being a good speaker.
Having good ideas is most of writing well. If you know what you're talking about, you can say it
in the plainest words and you'll be perceived as having a good style. With speaking it's the
opposite: having good ideas is an alarmingly small component of being a good speaker.
I first noticed this at a conference several years ago. There was another speaker who was much
better than me. He had all of us roaring with laughter. I seemed awkward and halting by
comparison. Afterward I put my talk online like I usually do. As I was doing it I tried to imagine
what a transcript of the other guy's talk would be like, and it was only then I realized he hadn't
said very much.
Maybe this would have been obvious to someone who knew more about speaking, but it was a
revelation to me how much less ideas mattered in speaking than writing. [1]
A few years later I heard a talk by someone who was not merely a better speaker than me, but
a famous speaker. Boy was he good. So I decided I'd pay close attention to what he said, to
learn how he did it. After about ten sentences I found myself thinking "I don't want to be a good
speaker."
Being a really good speaker is not merely orthogonal to having good ideas, but in many ways
pushes you in the opposite direction. For example, when I give a talk, I usually write it out
beforehand. I know that's a mistake; I know delivering a prewritten talk makes it harder to
engage with an audience. The way to get the attention of an audience is to give them your full
attention, and when you're delivering a prewritten talk, your attention is always divided between
the audience and the talk — even if you've memorized it. If you want to engage an audience, it's
better to start with no more than an outline of what you want to say and ad lib the individual
sentences. But if you do that, you might spend no more time thinking about each sentence than
it takes to say it. [2] Occasionally the stimulation of talking to a live audience makes you think of
new things, but in general this is not going to generate ideas as well as writing does, where you
can spend as long on each sentence as you want.
If you rehearse a prewritten speech enough, you can get asymptotically close to the sort of
engagement you get when speaking ad lib. Actors do. But here again there's a tradeoff between
smoothness and ideas. All the time you spend practicing a talk, you could instead spend
making it better. Actors don't face that temptation, except in the rare cases where they've
written the script, but any speaker does. Before I give a talk I can usually be found sitting in a
corner somewhere with a copy printed out on paper, trying to rehearse it in my head. But I
always end up spending most of the time rewriting it instead. Every talk I give ends up being
given from a manuscript full of things crossed out and rewritten. Which of course makes me um
even more, because I haven't had any time to practice the new bits. [3]
Depending on your audience, there are even worse tradeoffs than these. Audiences like to be
flattered; they like jokes; they like to be swept off their feet by a vigorous stream of words. As
you decrease the intelligence of the audience, being a good speaker is increasingly a matter of
being a good bullshitter. That's true in writing too of course, but the descent is steeper with
talks. Any given person is dumber as a member of an audience than as a reader. Just as a
speaker ad libbing can only spend as long thinking about each sentence as it takes to say it, a
person hearing a talk can only spend as long thinking about each sentence as it takes to hear
it. Plus people in an audience are always affected by the reactions of those around them, and
the reactions that spread from person to person in an audience are disproportionately the more
brutish sort, just as low notes travel through walls better than high ones. Every audience is an
incipient mob, and a good speaker uses that. Part of the reason I laughed so much at the talk
by the good speaker at that conference was that everyone else did. [4]
So are talks useless? They're certainly inferior to the written word as a source of ideas. But
that's not all talks are good for. When I go to a talk, it's usually because I'm interested in the
speaker. Listening to a talk is the closest most of us can get to having a conversation with
someone like the president, who doesn't have time to meet individually with all the people who
want to meet him.
Talks are also good at motivating me to do things. It's probably no coincidence that so many
famous speakers are described as motivational speakers. That may be what public speaking is
really for. It's probably what it was originally for. The emotional reactions you can elicit with a
talk can be a powerful force. I wish I could say that this force was more often used for good than
ill, but I'm not sure.
Notes:
[1] I'm not talking here about academic talks, which are a different type of thing. While the audience at an academic
talk might appreciate a joke, they will (or at least should) make a conscious effort to see what new ideas you're
presenting.
[2] That's the lower bound. In practice you can often do better, because talks are usually about things you've written
or talked about before, and when you ad lib, you end up reproducing some of those sentences. Like early medieval
architecture, impromptu talks are made of spolia. Which feels a bit dishonest, incidentally, because you have to
deliver these sentences as if you'd just thought of them.
[3] Robert Morris points out that there is a way in which practicing talks makes them better: reading a talk out loud
can expose awkward parts. I agree and in fact I read most things I write out loud at least once for that reason.
[4] For sufficiently small audiences, it may not be true that being part of an audience makes people dumber. The real
decline seems to set in when the audience gets too big for the talk to feel like a conversation — maybe around 10
people.
Thanks to Sam Altman and Robert Morris for reading drafts of this.
How Y Combinator Started - # 144
March 2012
Y Combinator's 7th birthday was March 11. As usual we were so busy we didn't notice till a few
days after. I don't think we've ever managed to remember our birthday on our birthday. On
March 11 2005, Jessica and I were walking home from dinner in Harvard Square. Jessica was
working at an investment bank at the time, but she didn't like it much, so she had interviewed
for a job as director of marketing at a Boston VC fund. The VC fund was doing what now seems
a comically familiar thing for a VC fund to do: taking a long time to make up their mind.
Meanwhile I had been telling Jessica all the things they should change about the VC business ÿý
essentially the ideas now underlying Y Combinator: investors should be making more, smaller
investments, they should be funding hackers instead of suits, they should be willing to fund
younger founders, etc. At the time I had been thinking about doing some angel investing. I had
just given a talk to the undergraduate computer club at Harvard about how to start a startup,
and it hit me afterward that although I had always meant to do angel investing, 7 years had now
passed since I got enough money to do it, and I still hadn't started. I had also been thinking
about ways to work with Robert Morris and Trevor Blackwell again. A few hours before I had
sent them an email trying to figure out what we could do together. Between Harvard Square
and my house the idea gelled. We'd start our own investment firm and Jessica could work for
that instead. As we turned onto Walker Street we decided to do it. I agreed to put $100k into the
new fund and Jessica agreed to quit her job to work for it. Over the next couple days I recruited
Robert and Trevor, who put in another $50k each. So YC started with $200k. Jessica was so
happy to be able to quit her job and start her own company that I took her picture when we got
home. The company wasn't called Y Combinator yet. At first we called it Cambridge Seed. But
that name never saw the light of day, because by the time we announced it a few days later,
we'd changed the name to Y Combinator. We realized early on that what we were doing could
be national in scope and we didn't want a name that tied us to one place. Initially we only had
part of the idea. We were going to do seed funding with standardized terms. Before YC, seed
funding was very haphazard. You'd get that first $10k from your friend's rich uncle. The deal
terms were often a disaster; often neither the investor nor the founders nor the lawyer knew
what the documents should look like. Facebook's early history as a Florida LLC shows how
random things could be in those days. We were going to be something there had not been
before: a standard source of seed funding. We modelled YC on the seed funding we ourselves
had taken when we started Viaweb. We started Viaweb with $10k we got from our friend Julian
Weber, the husband of Idelle Weber, whose painting class I took as a grad student at Harvard.
Julian knew about business, but you would not describe him as a suit. Among other things he'd
been president of the National Lampoon. He was also a lawyer, and got all our paperwork set
up properly. In return for $10k, getting us set up as a company, teaching us what business was
about, and remaining calm in times of crisis, Julian got 10% of Viaweb. I remember thinking
once what a good deal Julian got. And then a second later I realized that without Julian, Viaweb
would never have made it. So even though it was a good deal for him, it was a good deal for us
too. That's why I knew there was room for something like Y Combinator. Initially we didn't have
what turned out to be the most important idea: funding startups synchronously, instead of
asynchronously as it had always been done before. Or rather we had the idea, but we didn't
realize its significance. We decided very early that the first thing we'd do would be to fund a
bunch of startups over the coming summer. But we didn't realize initially that this would be the
way we'd do all our investing. The reason we began by funding a bunch of startups at once was
not that we thought it would be a better way to fund startups, but simply because we wanted to
learn how to be angel investors, and a summer program for undergrads seemed the fastest way
to do it. No one takes summer jobs that seriously. The opportunity cost for a bunch of
undergrads to spend a summer working on startups was low enough that we wouldn't feel guilty
encouraging them to do it. We knew students would already be making plans for the summer,
so we did what we're always telling startups to do: we launched fast. Here are the initial
announcement and description of what was at the time called the Summer Founders Program.
We got lucky in that the length and structure of a summer program turns out to be perfect for
what we do. The structure of the YC cycle is still almost identical to what it was that first
summer. We also got lucky in who the first batch of founders were. We never expected to make
any money from that first batch. We thought of the money we were investing as a combination
of an educational expense and a charitable donation. But the founders in the first batch turned
out to be surprisingly good. And great people too. We're still friends with a lot of them today. It's
hard for people to realize now how inconsequential YC seemed at the time. I can't blame people
who didn't take us seriously, because we ourselves didn't take that first summer program
seriously in the very beginning. But as the summer progressed we were increasingly impressed
by how well the startups were doing. Other people started to be impressed too. Jessica and I
invented a term, "the Y Combinator effect," to describe the moment when the realization hit
someone that YC was not totally lame. When people came to YC to speak at the dinners that
first summer, they came in the spirit of someone coming to address a Boy Scout troop. By the
time they left the building they were all saying some variant of "Wow, these companies might
actually succeed." Now YC is well enough known that people are no longer surprised when the
companies we fund are legit, but it took a while for reputation to catch up with reality. That's one
of the reasons we especially like funding ideas that might be dismissed as "toys" ÿý because YC
itself was dismissed as one initially. When we saw how well it worked to fund companies
synchronously, we decided we'd keep doing that. We'd fund two batches of startups a year. We
funded the second batch in Silicon Valley. That was a last minute decision. In retrospect I think
what pushed me over the edge was going to Foo Camp that fall. The density of startup people
in the Bay Area was so much greater than in Boston, and the weather was so nice. I
remembered that from living there in the 90s. Plus I didn't want someone else to copy us and
describe it as the Y Combinator of Silicon Valley. I wanted YC to be the Y Combinator of Silicon
Valley. So doing the winter batch in California seemed like one of those rare cases where the
self-indulgent choice and the ambitious one were the same. If we'd had enough time to do what
we wanted, Y Combinator would have been in Berkeley. That was our favorite part of the Bay
Area. But we didn't have time to get a building in Berkeley. We didn't have time to get our own
building anywhere. The only way to get enough space in time was to convince Trevor to let us
take over part of his (as it then seemed) giant building in Mountain View. Yet again we lucked
out, because Mountain View turned out to be the ideal place to put something like YC. But even
then we barely made it. The first dinner in California, we had to warn all the founders not to
touch the walls, because the paint was still wet.
Defining Property - # 143
March 2012
As a child I read a book of stories about a famous judge in eighteenth century Japan called
Ooka Tadasuke. One of the cases he decided was brought by the owner of a food shop. A poor
student who could afford only rice was eating his rice while enjoying the delicious cooking
smells coming from the food shop. The owner wanted the student to pay for the smells he was
enjoying.
The student was stealing his smells!
This story often comes to mind when I hear the RIAA and MPAA accusing people of stealing
music and movies.
It sounds ridiculous to us to treat smells as property. But I can imagine scenarios in which one
could charge for smells. Imagine we were living on a moon base where we had to buy air by the
liter. I could imagine air suppliers adding scents at an extra charge.
The reason it seems ridiculous to us to treat smells as property is that it wouldn't work to. It
would work on a moon base, though.
What counts as property depends on what works to treat as property. And that not only can
change, but has changed. Humans may always (for some definition of human and always) have
treated small items carried on one's person as property. But hunter gatherers didn't treat land,
for example, as property in the way we do. [1]
The reason so many people think of property as having a single unchanging definition is that its
definition changes very slowly. [2] But we are in the midst of such a change now. The record
labels and movie studios used to distribute what they made like air shipped through tubes on a
moon base. But with the arrival of networks, it's as if we've moved to a planet with a breathable
atmosphere. Data moves like smells now. And through a combination of wishful thinking and
short-term greed, the labels and studios have put themselves in the position of the food shop
owner, accusing us all of stealing their smells.
(The reason I say short-term greed is that the underlying problem with the labels and studios is
that the people who run them are driven by bonuses rather than equity. If they were driven by
equity they'd be looking for ways to take advantage of technological change instead of fighting
it. But building new things takes too long. Their bonuses depend on this year's revenues, and
the best way to increase those is to extract more money from stuff they do already.)
So what does this mean? Should people not be able to charge for content? There's not a single
yes or no answer to that question. People should be able to charge for content when it works to
charge for content.
But by "works" I mean something more subtle than "when they can get away with it." I mean
when people can charge for content without warping society in order to do it. After all, the
companies selling smells on the moon base could continue to sell them on the Earth, if they
lobbied successfully for laws requiring us all to continue to breathe through tubes down here
too, even though we no longer needed to.
The crazy legal measures that the labels and studios have been taking have a lot of that flavor.
Newspapers and magazines are just as screwed, but they are at least declining gracefully. The
RIAA and MPAA would make us breathe through tubes if they could.
Ultimately it comes down to common sense. When you're abusing the legal system by trying to
use mass lawsuits against randomly chosen people as a form of exemplary punishment, or
lobbying for laws that would break the Internet if they passed, that's ipso facto evidence you're
using a definition of property that doesn't work.
This is where it's helpful to have working democracies and multiple sovereign countries. If the
world had a single, autocratic government, the labels and studios could buy laws making the
definition of property be whatever they wanted. But fortunately there are still some countries
that are not copyright colonies of the US, and even in the US, politicians still seem to be afraid
of actual voters, in sufficient numbers. [3]
The people running the US may not like it when voters or other countries refuse to bend to their
will, but ultimately it's in all our interest that there's not a single point of attack for people trying
to warp the law to serve their own purposes. Private property is an extremely useful idea —
arguably one of our greatest inventions. So far, each new definition of it has brought us
increasing material wealth. [4] It seems reasonable to suppose the newest one will too. It would
be a disaster if we all had to keep running an obsolete version just because a few powerful
people were too lazy to upgrade.
Notes:
[1] If you want to learn more about hunter gatherers I strongly recommend Elizabeth Marshall Thomas's The
Harmless People and The Old Way.
[2] Change in the definition of property is driven mostly by technological progress, however, and since technological
progress is accelerating, so presumably will the rate of change in the definition of property. Which means it's all the
more important for societies to be able to respond gracefully to such changes, because they will come at an ever
increasing rate.
[3] As far as I know, the term "copyright colony" was first used by Myles Peterson.
[4] The state of technology isn't simply a function of the definition of property. They each constrain the other. But that
being so, you can't mess with the definition of property without affecting (and probably harming) the state of
technology. The history of the USSR offers a vivid illustration of that.
Thanks to Sam Altman and Geoff Ralston for reading drafts of this.
Frighteningly Ambitious Startup Ideas - # 142
Want to start a startup? Get funded by Y Combinator.
March 2012
One of the more surprising things I've noticed while working on Y Combinator is how frightening
the most ambitious startup ideas are. In this essay I'm going to demonstrate this phenomenon
by describing some. Any one of them could make you a billionaire. That might sound like an
attractive prospect, and yet when I describe these ideas you may notice you find yourself
shrinking away from them.
Don't worry, it's not a sign of weakness. Arguably it's a sign of sanity. The biggest startup ideas
are terrifying. And not just because they'd be a lot of work. The biggest ideas seem to threaten
your identity: you wonder if you'd have enough ambition to carry them through.
There's a scene in Being John Malkovich where the nerdy hero encounters a very attractive,
sophisticated woman. She says to him: Here's the thing: If you ever got me, you wouldn't have a
clue what to do with me. That's what these ideas say to us.
This phenomenon is one of the most important things you can understand about startups. [1]
You'd expect big startup ideas to be attractive, but actually they tend to repel you. And that has
a bunch of consequences. It means these ideas are invisible to most people who try to think of
startup ideas, because their subconscious filters them out. Even the most ambitious people are
probably best off approaching them obliquely.
1. A New Search Engine
The best ideas are just on the right side of impossible. I don't know if this one is possible, but
there are signs it might be. Making a new search engine means competing with Google, and
recently I've noticed some cracks in their fortress.
The point when it became clear to me that Microsoft had lost their way was when they decided
to get into the search business. That was not a natural move for Microsoft. They did it because
they were afraid of Google, and Google was in the search business. But this meant (a) Google
was now setting Microsoft's agenda, and (b) Microsoft's agenda consisted of stuff they weren't
good at.
Microsoft : Google :: Google : Facebook.
That does not by itself mean there's room for a new search engine, but lately when using
Google search I've found myself nostalgic for the old days, when Google was true to its own
slightly aspy self. Google used to give me a page of the right answers, fast, with no clutter. Now
the results seem inspired by the Scientologist principle that what's true is what's true for you.
And the pages don't have the clean, sparse feel they used to. Google search results used to
look like the output of a Unix utility. Now if I accidentally put the cursor in the wrong place,
anything might happen.
The way to win here is to build the search engine all the hackers use. A search engine whose
users consisted of the top 10,000 hackers and no one else would be in a very powerful position
despite its small size, just as Google was when it was that search engine. And for the first time
in over a decade the idea of switching seems thinkable to me.
Since anyone capable of starting this company is one of those 10,000 hackers, the route is at
least straightforward: make the search engine you yourself want. Feel free to make it
excessively hackerish. Make it really good for code search, for example. Would you like search
queries to be Turing complete? Anything that gets you those 10,000 users is ipso facto good.
Don't worry if something you want to do will constrain you in the long term, because if you don't
get that initial core of users, there won't be a long term. If you can just build something that you
and your friends genuinely prefer to Google, you're already about 10% of the way to an IPO,
just as Facebook was (though they probably didn't realize it) when they got all the Harvard
undergrads.
2. Replace Email
Email was not designed to be used the way we use it now. Email is not a messaging protocol.
It's a todo list. Or rather, my inbox is a todo list, and email is the way things get onto it. But it is a
disastrously bad todo list.
I'm open to different types of solutions to this problem, but I suspect that tweaking the inbox is
not enough, and that email has to be replaced with a new protocol. This new protocol should be
a todo list protocol, not a messaging protocol, although there is a degenerate case where what
someone wants you to do is: read the following text.
As a todo list protocol, the new protocol should give more power to the recipient than email
does. I want there to be more restrictions on what someone can put on my todo list. And when
someone can put something on my todo list, I want them to tell me more about what they want
from me. Do they want me to do something beyond just reading some text? How important is it?
(There obviously has to be some mechanism to prevent people from saying everything is
important.) When does it have to be done?
This is one of those ideas that's like an irresistible force meeting an immovable object. On one
hand, entrenched protocols are impossible to replace. On the other, it seems unlikely that
people in 100 years will still be living in the same email hell we do now. And if email is going to
get replaced eventually, why not now?
If you do it right, you may be able to avoid the usual chicken and egg problem new protocols
face, because some of the most powerful people in the world will be among the first to switch to
it. They're all at the mercy of email too.
Whatever you build, make it fast. GMail has become painfully slow. [2] If you made something
no better than GMail, but fast, that alone would let you start to pull users away from GMail.
GMail is slow because Google can't afford to spend a lot on it. But people will pay for this. I'd
have no problem paying $50 a month. Considering how much time I spend in email, it's kind of
scary to think how much I'd be justified in paying. At least $1000 a month. If I spend several
hours a day reading and writing email, that would be a cheap way to make my life better.
3. Replace Universities
People are all over this idea lately, and I think they're onto something. I'm reluctant to suggest
that an institution that's been around for a millennium is finished just because of some mistakes
they made in the last few decades, but certainly in the last few decades US universities seem to
have been headed down the wrong path. One could do a lot better for a lot less money.
I don't think universities will disappear. They won't be replaced wholesale. They'll just lose the
de facto monopoly on certain types of learning that they once had. There will be many different
ways to learn different things, and some may look quite different from universities. Y
Combinator itself is arguably one of them.
Learning is such a big problem that changing the way people do it will have a wave of
secondary effects. For example, the name of the university one went to is treated by a lot of
people (correctly or not) as a credential in its own right. If learning breaks up into many little
pieces, credentialling may separate from it. There may even need to be replacements for
campus social life (and oddly enough, YC even has aspects of that).
You could replace high schools too, but there you face bureaucratic obstacles that would slow
down a startup. Universities seem the place to start.
4. Internet Drama
Hollywood has been slow to embrace the Internet. That was a mistake, because I think we can
now call a winner in the race between delivery mechanisms, and it is the Internet, not cable.
A lot of the reason is the horribleness of cable clients, also known as TVs. Our family didn't wait
for Apple TV. We hated our last TV so much that a few months ago we replaced it with an iMac
bolted to the wall. It's a little inconvenient to control it with a wireless mouse, but the overall
experience is much better than the nightmare UI we had to deal with before.
Some of the attention people currently devote to watching movies and TV can be stolen by
things that seem completely unrelated, like social networking apps. More can be stolen by
things that are a little more closely related, like games. But there will probably always remain
some residual demand for conventional drama, where you sit passively and watch as a plot
happens. So how do you deliver drama via the Internet? Whatever you make will have to be on
a larger scale than Youtube clips. When people sit down to watch a show, they want to know
what they're going to get: either part of a series with familiar characters, or a single longer
"movie" whose basic premise they know in advance.
There are two ways delivery and payment could play out. Either some company like Netflix or
Apple will be the app store for entertainment, and you'll reach audiences through them. Or the
would-be app stores will be too overreaching, or too technically inflexible, and companies will
arise to supply payment and streaming a la carte to the producers of drama. If that's the way
things play out, there will also be a need for such infrastructure companies.
5. The Next Steve Jobs
I was talking recently to someone who knew Apple well, and I asked him if the people now
running the company would be able to keep creating new things the way Apple had under Steve
Jobs. His answer was simply "no." I already feared that would be the answer. I asked more to
see how he'd qualify it. But he didn't qualify it at all. No, there will be no more great new stuff
beyond whatever's currently in the pipeline. Apple's revenues may continue to rise for a long
time, but as Microsoft shows, revenue is a lagging indicator in the technology business.
So if Apple's not going to make the next iPad, who is? None of the existing players. None of
them are run by product visionaries, and empirically you can't seem to get those by hiring them.
Empirically the way you get a product visionary as CEO is for him to found the company and
not get fired. So the company that creates the next wave of hardware is probably going to have
to be a startup.
I realize it sounds preposterously ambitious for a startup to try to become as big as Apple. But
no more ambitious than it was for Apple to become as big as Apple, and they did it. Plus a
startup taking on this problem now has an advantage the original Apple didn't: the example of
Apple. Steve Jobs has shown us what's possible. That helps would-be successors both directly,
as Roger Bannister did, by showing how much better you can do than people did before, and
indirectly, as Augustus did, by lodging the idea in users' minds that a single person could unroll
the future for them. [3]
Now Steve is gone there's a vacuum we can all feel. If a new company led boldly into the future
of hardware, users would follow. The CEO of that company, the "next Steve Jobs," might not
measure up to Steve Jobs. But he wouldn't have to. He'd just have to do a better job than
Samsung and HP and Nokia, and that seems pretty doable.
6. Bring Back Moore's Law
The last 10 years have reminded us what Moore's Law actually says. Till about 2002 you could
safely misinterpret it as promising that clock speeds would double every 18 months. Actually
what it says is that circuit densities will double every 18 months. It used to seem pedantic to
point that out. Not any more. Intel can no longer give us faster CPUs, just more of them.
This Moore's Law is not as good as the old one. Moore's Law used to mean that if your software
was slow, all you had to do was wait, and the inexorable progress of hardware would solve your
problems. Now if your software is slow you have to rewrite it to do more things in parallel, which
is a lot more work than waiting.
It would be great if a startup could give us something of the old Moore's Law back, by writing
software that could make a large number of CPUs look to the developer like one very fast CPU.
There are several ways to approach this problem. The most ambitious is to try to do it
automatically: to write a compiler that will parallelize our code for us. There's a name for this
compiler, the sufficiently smart compiler, and it is a byword for impossibility. But is it really
impossible? Is there no configuration of the bits in memory of a present day computer that is
this compiler? If you really think so, you should try to prove it, because that would be an
interesting result. And if it's not impossible but simply very hard, it might be worth trying to write
it. The expected value would be high even if the chance of succeeding was low.
The reason the expected value is so high is web services. If you could write software that gave
programmers the convenience of the way things were in the old days, you could offer it to them
as a web service. And that would in turn mean that you got practically all the users.
Imagine there was another processor manufacturer that could still translate increased circuit
densities into increased clock speeds. They'd take most of Intel's business. And since web
services mean that no one sees their processors anymore, by writing the sufficiently smart
compiler you could create a situation indistinguishable from you being that manufacturer, at
least for the server market.
The least ambitious way of approaching the problem is to start from the other end, and offer
programmers more parallelizable Lego blocks to build programs out of, like Hadoop and
MapReduce. Then the programmer still does much of the work of optimization.
There's an intriguing middle ground where you build a semi-automatic weapon—where there's
a human in the loop. You make something that looks to the user like the sufficiently smart
compiler, but inside has people, using highly developed optimization tools to find and eliminate
bottlenecks in users' programs. These people might be your employees, or you might create a
marketplace for optimization.
An optimization marketplace would be a way to generate the sufficiently smart compiler
piecemeal, because participants would immediately start writing bots. It would be a curious
state of affairs if you could get to the point where everything could be done by bots, because
then you'd have made the sufficiently smart compiler, but no one person would have a complete
copy of it.
I realize how crazy all this sounds. In fact, what I like about this idea is all the different ways in
which it's wrong. The whole idea of focusing on optimization is counter to the general trend in
software development for the last several decades. Trying to write the sufficiently smart
compiler is by definition a mistake. And even if it weren't, compilers are the sort of software
that's supposed to be created by open source projects, not companies. Plus if this works it will
deprive all the programmers who take pleasure in making multithreaded apps of so much
amusing complexity. The forum troll I have by now internalized doesn't even know where to
begin in raising objections to this project. Now that's what I call a startup idea.
7. Ongoing Diagnosis
But wait, here's another that could face even greater resistance: ongoing, automatic medical
diagnosis.
One of my tricks for generating startup ideas is to imagine the ways in which we'll seem
backward to future generations. And I'm pretty sure that to people 50 or 100 years in the future,
it will seem barbaric that people in our era waited till they had symptoms to be diagnosed with
conditions like heart disease and cancer.
For example, in 2004 Bill Clinton found he was feeling short of breath. Doctors discovered that
several of his arteries were over 90% blocked and 3 days later he had a quadruple bypass. It
seems reasonable to assume Bill Clinton has the best medical care available. And yet even he
had to wait till his arteries were over 90% blocked to learn that the number was over 90%.
Surely at some point in the future we'll know these numbers the way we now know something
like our weight. Ditto for cancer. It will seem preposterous to future generations that we wait till
patients have physical symptoms to be diagnosed with cancer. Cancer will show up on some
sort of radar screen immediately.
(Of course, what shows up on the radar screen may be different from what we think of now as
cancer. I wouldn't be surprised if at any given time we have ten or even hundreds of
microcancers going at once, none of which normally amount to anything.)
A lot of the obstacles to ongoing diagnosis will come from the fact that it's going against the
grain of the medical profession. The way medicine has always worked is that patients come to
doctors with problems, and the doctors figure out what's wrong. A lot of doctors don't like the
idea of going on the medical equivalent of what lawyers call a "fishing expedition," where you
go looking for problems without knowing what you're looking for. They call the things that get
discovered this way "incidentalomas," and they are something of a nuisance.
For example, a friend of mine once had her brain scanned as part of a study. She was horrified
when the doctors running the study discovered what appeared to be a large tumor. After further
testing, it turned out to be a harmless cyst. But it cost her a few days of terror. A lot of doctors
worry that if you start scanning people with no symptoms, you'll get this on a giant scale: a
huge number of false alarms that make patients panic and require expensive and perhaps even
dangerous tests to resolve. But I think that's just an artifact of current limitations. If people were
scanned all the time and we got better at deciding what was a real problem, my friend would
have known about this cyst her whole life and known it was harmless, just as we do a birthmark.
There is room for a lot of startups here. In addition to the technical obstacles all startups face,
and the bureaucratic obstacles all medical startups face, they'll be going against thousands of
years of medical tradition. But it will happen, and it will be a great thing—so great that people in
the future will feel as sorry for us as we do for the generations that lived before anaesthesia and
antibiotics.
Tactics
Let me conclude with some tactical advice. If you want to take on a problem as big as the ones
I've discussed, don't make a direct frontal attack on it. Don't say, for example, that you're going
to replace email. If you do that you raise too many expectations. Your employees and investors
will constantly be asking "are we there yet?" and you'll have an army of haters waiting to see
you fail. Just say you're building todo-list software. That sounds harmless. People can notice
you've replaced email when it's a fait accompli. [4]
Empirically, the way to do really big things seems to be to start with deceptively small things.
Want to dominate microcomputer software? Start by writing a Basic interpreter for a machine
with a few thousand users. Want to make the universal web site? Start by building a site for
Harvard undergrads to stalk one another.
Empirically, it's not just for other people that you need to start small. You need to for your own
sake. Neither Bill Gates nor Mark Zuckerberg knew at first how big their companies were going
to get. All they knew was that they were onto something. Maybe it's a bad idea to have really big
ambitions initially, because the bigger your ambition, the longer it's going to take, and the
further you project into the future, the more likely you'll get it wrong.
I think the way to use these big ideas is not to try to identify a precise point in the future and
then ask yourself how to get from here to there, like the popular image of a visionary. You'll be
better off if you operate like Columbus and just head in a general westerly direction. Don't try to
construct the future like a building, because your current blueprint is almost certainly mistaken.
Start with something you know works, and when you expand, expand westward.
The popular image of the visionary is someone with a clear view of the future, but empirically it
may be better to have a blurry one.
Notes:
[1] It's also one of the most important things VCs fail to understand about startups. Most expect founders to walk in
with a clear plan for the future, and judge them based on that. Few consciously realize that in the biggest successes
there is the least correlation between the initial plan and what the startup eventually becomes.
[2] This sentence originally read "GMail is painfully slow." Thanks to Paul Buchheit for the correction.
[3] Roger Bannister is famous as the first person to run a mile in under 4 minutes. But his world record only lasted 46
days. Once he showed it could be done, lots of others followed. Ten years later Jim Ryun ran a 3:59 mile as a high
school junior.
[4] If you want to be the next Apple, maybe you don't even want to start with consumer electronics. Maybe at first you
make something hackers use. Or you make something popular but apparently unimportant, like a headset or router.
All you need is a bridgehead.
Thanks to Sam Altman, Trevor Blackwell, Paul Buchheit, Patrick Collison, Aaron Iba, Jessica Livingston, Robert
Morris, Harj Taggar and Garry Tan for reading drafts of this.
A Word to the Resourceful - # 141
Want to start a startup? Get funded by Y Combinator.
January 2012
A year ago I noticed a pattern in the least successful startups we'd funded: they all seemed
hard to talk to. It felt as if there was some kind of wall between us. I could never quite tell if they
understood what I was saying.
This caught my attention because earlier we'd noticed a pattern among the most successful
startups, and it seemed to hinge on a different quality. We found the startups that did best were
the ones with the sort of founders about whom we'd say "they can take care of themselves."
The startups that do best are fire-and-forget in the sense that all you have to do is give them a
lead, and they'll close it, whatever type of lead it is. When they're raising money, for example,
you can do the initial intros knowing that if you wanted to you could stop thinking about it at that
point. You won't have to babysit the round to make sure it happens. That type of founder is
going to come back with the money; the only question is how much on what terms.
It seemed odd that the outliers at the two ends of the spectrum could be detected by what
appeared to be unrelated tests. You'd expect that if the founders at one end were distinguished
by the presence of quality x, at the other end they'd be distinguished by lack of x. Was there
some kind of inverse relation between resourcefulness and being hard to talk to?
It turns out there is, and the key to the mystery is the old adage "a word to the wise is
sufficient." Because this phrase is not only overused, but overused in an indirect way (by
prepending the subject to some advice), most people who've heard it don't know what it means.
What it means is that if someone is wise, all you have to do is say one word to them, and they'll
understand immediately. You don't have to explain in detail; they'll chase down all the
implications.
In much the same way that all you have to do is give the right sort of founder a one line intro to
a VC, and he'll chase down the money. That's the connection. Understanding all the
implications — even the inconvenient implications — of what someone tells you is a subset of
resourcefulness. It's conversational resourcefulness.
Like real world resourcefulness, conversational resourcefulness often means doing things you
don't want to. Chasing down all the implications of what's said to you can sometimes lead to
uncomfortable conclusions. The best word to describe the failure to do so is probably "denial,"
though that seems a bit too narrow. A better way to describe the situation would be to say that
the unsuccessful founders had the sort of conservatism that comes from weakness. They
traversed idea space as gingerly as a very old person traverses the physical world. [1]
The unsuccessful founders weren't stupid. Intellectually they were as capable as the successful
founders of following all the implications of what one said to them. They just weren't eager to.
So being hard to talk to was not what was killing the unsuccessful startups. It was a sign of an
underlying lack of resourcefulness. That's what was killing them. As well as failing to chase
down the implications of what was said to them, the unsuccessful founders would also fail to
chase down funding, and users, and sources of new ideas. But the most immediate evidence I
had that something was amiss was that I couldn't talk to them.
Notes:
[1] A YC partner wrote:
My feeling with the bad groups is that coming into office hours, they've already decided what they're going to do and
everything I say is being put through an internal process in their heads, which either desperately tries to munge what
I've said into something that conforms with their decision or just outright dismisses it and creates a rationalization for
doing so. They may not even be conscious of this process but that's what I think is happening when you say
something to bad groups and they have that glazed over look. I don't think it's confusion or lack of understanding per
se, it's this internal process at work.
With the good groups, you can tell that everything you say is being looked at with fresh eyes and even if it's
dismissed, it's because of some logical reason e.g. "we already tried that" or "from speaking to our users that isn't
what they'd like," etc. Those groups never have that glazed over look.
Thanks to Sam Altman, Patrick Collison, Aaron Iba, Jessica Livingston, Robert Morris, Harj Taggar, and Garry Tan
for reading drafts of this.
Schlep Blindness - # 140
Want to start a startup? Get funded by Y Combinator.
January 2012
There are great startup ideas lying around unexploited right under our noses. One reason we
don't see them is a phenomenon I call schlep blindness. Schlep was originally a Yiddish word
but has passed into general use in the US. It means a tedious, unpleasant task.
No one likes schleps, but hackers especially dislike them. Most hackers who start startups wish
they could do it by just writing some clever software, putting it on a server somewhere, and
watching the money roll in—without ever having to talk to users, or negotiate with other
companies, or deal with other people's broken code. Maybe that's possible, but I haven't seen it.
One of the many things we do at Y Combinator is teach hackers about the inevitability of
schleps. No, you can't start a startup by just writing code. I remember going through this
realization myself. There was a point in 1995 when I was still trying to convince myself I could
start a company by just writing code. But I soon learned from experience that schleps are not
merely inevitable, but pretty much what business consists of. A company is defined by the
schleps it will undertake. And schleps should be dealt with the same way you'd deal with a cold
swimming pool: just jump in. Which is not to say you should seek out unpleasant work per se,
but that you should never shrink from it if it's on the path to something great.
The most dangerous thing about our dislike of schleps is that much of it is unconscious. Your
unconscious won't even let you see ideas that involve painful schleps. That's schlep blindness.
The phenomenon isn't limited to startups. Most people don't consciously decide not to be in as
good physical shape as Olympic athletes, for example. Their unconscious mind decides for
them, shrinking from the work involved.
The most striking example I know of schlep blindness is Stripe, or rather Stripe's idea. For over
a decade, every hacker who'd ever had to process payments online knew how painful the
experience was. Thousands of people must have known about this problem. And yet when they
started startups, they decided to build recipe sites, or aggregators for local events. Why? Why
work on problems few care much about and no one will pay for, when you could fix one of the
most important components of the world's infrastructure? Because schlep blindness prevented
people from even considering the idea of fixing payments.
Probably no one who applied to Y Combinator to work on a recipe site began by asking "should
we fix payments, or build a recipe site?" and chose the recipe site. Though the idea of fixing
payments was right there in plain sight, they never saw it, because their unconscious mind
shrank from the complications involved. You'd have to make deals with banks. How do you do
that? Plus you're moving money, so you're going to have to deal with fraud, and people trying to
break into your servers. Plus there are probably all sorts of regulations to comply with. It's a lot
more intimidating to start a startup like this than a recipe site.
That scariness makes ambitious ideas doubly valuable. In addition to their intrinsic value,
they're like undervalued stocks in the sense that there's less demand for them among founders.
If you pick an ambitious idea, you'll have less competition, because everyone else will have
been frightened off by the challenges involved. (This is also true of starting a startup generally.)
How do you overcome schlep blindness? Frankly, the most valuable antidote to schlep
blindness is probably ignorance. Most successful founders would probably say that if they'd
known when they were starting their company about the obstacles they'd have to overcome,
they might never have started it. Maybe that's one reason the most successful startups of all so
often have young founders.
In practice the founders grow with the problems. But no one seems able to foresee that, not
even older, more experienced founders. So the reason younger founders have an advantage is
that they make two mistakes that cancel each other out. They don't know how much they can
grow, but they also don't know how much they'll need to. Older founders only make the first
mistake.
Ignorance can't solve everything though. Some ideas so obviously entail alarming schleps that
anyone can see them. How do you see ideas like that? The trick I recommend is to take
yourself out of the picture. Instead of asking "what problem should I solve?" ask "what problem
do I wish someone else would solve for me?" If someone who had to process payments before
Stripe had tried asking that, Stripe would have been one of the first things they wished for.
It's too late now to be Stripe, but there's plenty still broken in the world, if you know how to see it.
Thanks to Sam Altman, Paul Buchheit, Patrick Collison, Aaron Iba, Jessica Livingston, Emmett
Shear, and Harj Taggar for reading drafts of this.
Snapshot- Viaweb- June 1998 - # 139
January 2012
A few hours before the Yahoo acquisition was announced in June 1998 I took a snapshot of
Viaweb's site. I thought it might be interesting to look at one day.
The first thing one notices is is how tiny the pages are. Screens were a lot smaller in 1998. If I
remember correctly, our frontpage used to just fit in the size window people typically used then.
Browsers then (IE 6 was still 3 years in the future) had few fonts and they weren't antialiased. If
you wanted to make pages that looked good, you had to render display text as images.
You may notice a certain similarity between the Viaweb and Y Combinator logos. We did that as
an inside joke when we started YC. Considering how basic a red circle is, it seemed surprising
to me when we started Viaweb how few other companies used one as their logo. A bit later I
realized why.
On the Company page you'll notice a mysterious individual called John McArtyem. Robert
Morris (aka Rtm) was so publicity averse after the Worm that he didn't want his name on the
site. I managed to get him to agree to a compromise: we could use his bio but not his name. He
has since relaxed a bit on that point.
Trevor graduated at about the same time the acquisition closed, so in the course of 4 days he
went from impecunious grad student to millionaire PhD. The culmination of my career as a
writer of press releases was one celebrating his graduation, illustrated with a drawing I did of
him during a meeting.
(Trevor also appears as Trevino Bagwell in our directory of web designers merchants could hire
to build stores for them. We inserted him as a ringer in case some competitor tried to spam our
web designers. We assumed his logo would deter any actual customers, but it did not.)
Back in the 90s, to get users you had to get mentioned in magazines and newspapers. There
were not the same ways to get found online that there are today. So we used to pay a PR firm
$16,000 a month to get us mentioned in the press. Fortunately reporters liked us.
In our advice about getting traffic from search engines (I don't think the term SEO had been
coined yet), we say there are only 7 that matter: Yahoo, AltaVista, Excite, WebCrawler,
InfoSeek, Lycos, and HotBot. Notice anything missing? Google was incorporated that
September.
We supported online transactions via a company called Cybercash, since if we lacked that
feature we'd have gotten beaten up in product comparisons. But Cybercash was so bad and
most stores' order volumes were so low that it was better if merchants processed orders like
phone orders. We had a page in our site trying to talk merchants out of doing real time
authorizations.
The whole site was organized like a funnel, directing people to the test drive. It was a novel
thing to be able to try out software online. We put cgi-bin in our dynamic urls to fool competitors
about how our software worked.
We had some well known users. Needless to say, Frederick's of Hollywood got the most traffic.
We charged a flat fee of $300/month for big stores, so it was a little alarming to have users who
got lots of traffic. I once calculated how much Frederick's was costing us in bandwidth, and it
was about $300/month.
Since we hosted all the stores, which together were getting just over 10 million page views per
month in June 1998, we consumed what at the time seemed a lot of bandwidth. We had 2 T1s
(3 Mb/sec) coming into our offices. In those days there was no AWS. Even colocating servers
seemed too risky, considering how often things went wrong with them. So we had our servers in
our offices. Or more precisely, in Trevor's office. In return for the unique privilege of sharing his
office with no other humans, he had to share it with 6 shrieking tower servers. His office was
nicknamed the Hot Tub on account of the heat they generated. Most days his stack of window
air conditioners could keep up.
For describing pages, we had a template language called RTML, which supposedly stood for
something, but which in fact I named after Rtm. RTML was Common Lisp augmented by some
macros and libraries, and concealed under a structure editor that made it look like it had syntax.
Since we did continuous releases, our software didn't actually have versions. But in those days
the trade press expected versions, so we made them up. If we wanted to get lots of attention,
we made the version number an integer. That "version 4.0" icon was generated by our own
button generator, incidentally. The whole Viaweb site was made with our software, even though
it wasn't an online store, because we wanted to experience what our users did.
At the end of 1997, we released a general purpose shopping search engine called Shopfind. It
was pretty advanced for the time. It had a programmable crawler that could crawl most of the
different stores online and pick out the products.
Why Startup Hubs Work - # 138
Want to start a startup? Get funded by Y Combinator.
October 2011
If you look at a list of US cities sorted by population, the number of successful startups per
capita varies by orders of magnitude. Somehow it's as if most places were sprayed with
startupicide.
I wondered about this for years. I could see the average town was like a roach motel for startup
ambitions: smart, ambitious people went in, but no startups came out. But I was never able to
figure out exactly what happened inside the motel—exactly what was killing all the potential
startups. [1]
A couple weeks ago I finally figured it out. I was framing the question wrong. The problem is not
that most towns kill startups. It's that death is the default for startups, and most towns don't save
them. Instead of thinking of most places as being sprayed with startupicide, it's more accurate
to think of startups as all being poisoned, and a few places being sprayed with the antidote.
Startups in other places are just doing what startups naturally do: fail. The real question is,
what's saving startups in places like Silicon Valley? [2]
Environment
I think there are two components to the antidote: being in a place where startups are the cool
thing to do, and chance meetings with people who can help you. And what drives them both is
the number of startup people around you.
The first component is particularly helpful in the first stage of a startup's life, when you go from
merely having an interest in starting a company to actually doing it. It's quite a leap to start a
startup. It's an unusual thing to do. But in Silicon Valley it seems normal. [3]
In most places, if you start a startup, people treat you as if you're unemployed. People in the
Valley aren't automatically impressed with you just because you're starting a company, but they
pay attention. Anyone who's been here any amount of time knows not to default to skepticism,
no matter how inexperienced you seem or how unpromising your idea sounds at first, because
they've all seen inexperienced founders with unpromising sounding ideas who a few years later
were billionaires.
Having people around you care about what you're doing is an extraordinarily powerful force.
Even the most willful people are susceptible to it. About a year after we started Y Combinator I
said something to a partner at a well known VC firm that gave him the (mistaken) impression I
was considering starting another startup. He responded so eagerly that for about half a second
I found myself considering doing it.
In most other cities, the prospect of starting a startup just doesn't seem real. In the Valley it's
not only real but fashionable. That no doubt causes a lot of people to start startups who
shouldn't. But I think that's ok. Few people are suited to running a startup, and it's very hard to
predict beforehand which are (as I know all too well from being in the business of trying to
predict beforehand), so lots of people starting startups who shouldn't is probably the optimal
state of affairs. As long as you're at a point in your life when you can bear the risk of failure, the
best way to find out if you're suited to running a startup is to try it.
Chance
The second component of the antidote is chance meetings with people who can help you. This
force works in both phases: both in the transition from the desire to start a startup to starting
one, and the transition from starting a company to succeeding. The power of chance meetings
is more variable than people around you caring about startups, which is like a sort of
background radiation that affects everyone equally, but at its strongest it is far stronger.
Chance meetings produce miracles to compensate for the disasters that characteristically befall
startups. In the Valley, terrible things happen to startups all the time, just like they do to startups
everywhere. The reason startups are more likely to make it here is that great things happen to
them too. In the Valley, lightning has a sign bit.
For example, you start a site for college students and you decide to move to the Valley for the
summer to work on it. And then on a random suburban street in Palo Alto you happen to run
into Sean Parker, who understands the domain really well because he started a similar startup
himself, and also knows all the investors. And moreover has advanced views, for 2004, on
founders retaining control of their companies.
You can't say precisely what the miracle will be, or even for sure that one will happen. The best
one can say is: if you're in a startup hub, unexpected good things will probably happen to you,
especially if you deserve them.
I bet this is true even for startups we fund. Even with us working to make things happen for
them on purpose rather than by accident, the frequency of helpful chance meetings in the
Valley is so high that it's still a significant increment on what we can deliver.
Chance meetings play a role like the role relaxation plays in having ideas. Most people have
had the experience of working hard on some problem, not being able to solve it, giving up and
going to bed, and then thinking of the answer in the shower in the morning. What makes the
answer appear is letting your thoughts drift a bit—and thus drift off the wrong path you'd been
pursuing last night and onto the right one adjacent to it.
Chance meetings let your acquaintance drift in the same way taking a shower lets your
thoughts drift. The critical thing in both cases is that they drift just the right amount. The meeting
between Larry Page and Sergey Brin was a good example. They let their acquaintance drift, but
only a little; they were both meeting someone they had a lot in common with.
For Larry Page the most important component of the antidote was Sergey Brin, and vice versa.
The antidote is people. It's not the physical infrastructure of Silicon Valley that makes it work, or
the weather, or anything like that. Those helped get it started, but now that the reaction is selfsustaining what drives it is the people.
Many observers have noticed that one of the most distinctive things about startup hubs is the
degree to which people help one another out, with no expectation of getting anything in return.
I'm not sure why this is so. Perhaps it's because startups are less of a zero sum game than
most types of business; they are rarely killed by competitors. Or perhaps it's because so many
startup founders have backgrounds in the sciences, where collaboration is encouraged.
A large part of YC's function is to accelerate that process. We're a sort of Valley within the
Valley, where the density of people working on startups and their willingness to help one
another are both artificially amplified.
Numbers
Both components of the antidote—an environment that encourages startups, and chance
meetings with people who help you—are driven by the same underlying cause: the number of
startup people around you. To make a startup hub, you need a lot of people interested in
startups.
There are three reasons. The first, obviously, is that if you don't have enough density, the
chance meetings don't happen. [4] The second is that different startups need such different
things, so you need a lot of people to supply each startup with what they need most. Sean
Parker was exactly what Facebook needed in 2004. Another startup might have needed a
database guy, or someone with connections in the movie business.
This is one of the reasons we fund such a large number of companies, incidentally. The bigger
the community, the greater the chance it will contain the person who has that one thing you
need most.
The third reason you need a lot of people to make a startup hub is that once you have enough
people interested in the same problem, they start to set the social norms. And it is a particularly
valuable thing when the atmosphere around you encourages you to do something that would
otherwise seem too ambitious. In most places the atmosphere pulls you back toward the mean.
I flew into the Bay Area a few days ago. I notice this every time I fly over the Valley: somehow
you can sense something is going on. Obviously you can sense prosperity in how well kept a
place looks. But there are different kinds of prosperity. Silicon Valley doesn't look like Boston, or
New York, or LA, or DC. I tried asking myself what word I'd use to describe the feeling the Valley
radiated, and the word that came to mind was optimism.
Notes:
[1] I'm not saying it's impossible to succeed in a city with few other startups, just harder. If you're sufficiently good at
generating your own morale, you can survive without external encouragement. Wufoo was based in Tampa and they
succeeded. But the Wufoos are exceptionally disciplined.
[2] Incidentally, this phenomenon is not limited to startups. Most unusual ambitions fail, unless the person who has
them manages to find the right sort of community.
[3] Starting a company is common, but starting a startup is rare. I've talked about the distinction between the two
elsewhere, but essentially a startup is a new business designed for scale. Most new businesses are service
businesses and except in rare cases those don't scale.
[4] As I was writing this, I had a demonstration of the density of startup people in the Valley. Jessica and I bicycled to
University Ave in Palo Alto to have lunch at the fabulous Oren's Hummus. As we walked in, we met Charlie Cheever
sitting near the door. Selina Tobaccowala stopped to say hello on her way out. Then Josh Wilson came in to pick up a
take out order. After lunch we went to get frozen yogurt. On the way we met Rajat Suri. When we got to the yogurt
place, we found Dave Shen there, and as we walked out we ran into Yuri Sagalov. We walked with him for a block or
so and we ran into Muzzammil Zaveri, and then a block later we met Aydin Senkut. This is everyday life in Palo Alto. I
wasn't trying to meet people; I was just having lunch. And I'm sure for every startup founder or investor I saw that I
knew, there were 5 more I didn't. If Ron Conway had been with us he would have met 30 people he knew.
Thanks to Sam Altman, Paul Buchheit, Jessica Livingston, and Harj Taggar for reading drafts of this.
The Patent Pledge - # 137
August 2011
I realized recently that we may be able to solve part of the patent problem without waiting for
the government.
I've never been 100% sure whether patents help or hinder technological progress. When I was
a kid I thought they helped. I thought they protected inventors from having their ideas stolen by
big companies. Maybe that was truer in the past, when more things were physical. But
regardless of whether patents are in general a good thing, there do seem to be bad ways of
using them. And since bad uses of patents seem to be increasing, there is an increasing call for
patent reform.
The problem with patent reform is that it has to go through the government. That tends to be
slow. But recently I realized we can also attack the problem downstream. As well as pinching off
the stream of patents at the point where they're issued, we may in some cases be able to pinch
it off at the point where they're used.
One way of using patents that clearly does not encourage innovation is when established
companies with bad products use patents to suppress small competitors with good products.
This is the type of abuse we may be able to decrease without having to go through the
government.
The way to do it is to get the companies that are above pulling this sort of trick to pledge
publicly not to. Then the ones that won't make such a pledge will be very conspicuous. Potential
employees won't want to work for them. And investors, too, will be able to see that they're the
sort of company that competes by litigation rather than by making good products.
Here's the pledge: No first use of software patents against companies with less than 25 people.
I've deliberately traded precision for brevity. The patent pledge is not legally binding. It's like
Google's "Don't be evil." They don't define what evil is, but by publicly saying that, they're saying
they're willing to be held to a standard that, say, Altria is not. And though constraining, "Don't be
evil" has been good for Google. Technology companies win by attracting the most productive
people, and the most productive people are attracted to employers who hold themselves to a
higher standard than the law requires. [1]
The patent pledge is in effect a narrower but open source "Don't be evil." I encourage every
technology company to adopt it. If you want to help fix patents, encourage your employer to.
Already most technology companies wouldn't sink to using patents on startups. You don't see
Google or Facebook suing startups for patent infringement. They don't need to. So for the better
technology companies, the patent pledge requires no change in behavior. They're just
promising to do what they'd do anyway. And when all the companies that won't use patents on
startups have said so, the holdouts will be very conspicuous.
The patent pledge doesn't fix every problem with patents. It won't stop patent trolls, for example;
they're already pariahs. But the problem the patent pledge does fix may be more serious than
the problem of patent trolls. Patent trolls are just parasites. A clumsy parasite may occasionally
kill the host, but that's not its goal. Whereas companies that sue startups for patent
infringement generally do it with explicit goal of keeping their product off the market.
Companies that use patents on startups are attacking innovation at the root. Now there's
something any individual can do about this problem, without waiting for the government: ask
companies where they stand.
Patent Pledge Site
Notes:
[1] Because the pledge is deliberately vague, we're going to need common sense when intepreting it. And even more
vice versa: the pledge is vague in order to make people use common sense when interpreting it.
So for example I've deliberately avoided saying whether the 25 people have to be employees, or whether contractors
count too. If a company has to split hairs that fine about whether a suit would violate the patent pledge, it's probably
still a dick move.
Subject- Airbnb - # 136
March 2011
Yesterday Fred Wilson published a remarkable post about missing Airbnb. VCs miss good
startups all the time, but it's extraordinarily rare for one to talk about it publicly till long afterward.
So that post is further evidence what a rare bird Fred is. He's probably the nicest VC I know.
Reading Fred's post made me go back and look at the emails I exchanged with him at the time,
trying to convince him to invest in Airbnb. It was quite interesting to read. You can see Fred's
mind at work as he circles the deal.
Fred and the Airbnb founders have generously agreed to let me publish this email exchange
(with one sentence redacted about something that's strategically important to Airbnb and not an
important part of the conversation). It's an interesting illustration of an element of the startup
ecosystem that few except the participants ever see: investors trying to convince one another to
invest in their portfolio companies. Hundreds if not thousands of conversations of this type are
happening now, but if one has ever been published, I haven't seen it. The Airbnbs themselves
never even saw these emails at the time.
We do a lot of this behind the scenes stuff at YC, because we invest in such a large number of
companies, and we invest so early that investors sometimes need a lot of convincing to see
their merits. I don't always try as hard as this though. Fred must have found me quite annoying.
from: Paul Graham to: Fred Wilson, AirBedAndBreakfast Founders date: Fri, Jan 23, 2009 at
11:42 AM subject: meet the airbeds
One of the startups from the batch that just started, AirbedAndBreakfast, is in NYC right now
meeting their users. (NYC is their biggest market.) I'd recommend meeting them if your
schedule allows.
I'd been thinking to myself that though these guys were going to do really well, I should
introduce them to angels, because VCs would never go for it. But then I thought maybe I should
give you more credit. You'll certainly like meeting them. Be sure to ask about how they funded
themselves with breakfast cereal.
There's no reason this couldn't be as big as Ebay. And this team is the right one to do it.
--pg
from: Brian Chesky to: Paul Graham cc: Nathan Blecharczyk, Joe Gebbia date: Fri, Jan 23,
2009 at 11:40 AM subject: Re: meet the airbeds
PG,
Thanks for the intro!
Brian
from: Paul Graham to: Brian Chesky cc: Nathan Blecharczyk, Joe Gebbia date: Fri, Jan 23,
2009 at 12:38 PM subject: Re: meet the airbeds
It's a longshot, at this stage, but if there was any VC who'd get you guys, it would be Fred. He is
the least suburban-golf-playing VC I know.
He likes to observe startups for a while before acting, so don't be bummed if he seems
ambivalent.
--pg
from: Fred Wilson to: Paul Graham, date: Sun, Jan 25, 2009 at 5:28 PM subject: Re: meet the
airbeds
Thanks Paul
We are having a bit of a debate inside our partnership about the airbed concept. We'll finish that
debate tomorrow in our weekly meeting and get back to you with our thoughts
Thanks
Fred
from: Paul Graham to: Fred Wilson date: Sun, Jan 25, 2009 at 10:48 PM subject: Re: meet the
airbeds
I'd recommend having the debate after meeting them instead of before. We had big doubts
about this idea, but they vanished on meeting the guys.
from: Fred Wilson to: Paul Graham date: Mon, Jan 26, 2009 at 11:08 AM subject: RE: meet the
airbeds
We are still very suspect of this idea but will take a meeting as you suggest
Thanks
fred
from: Fred Wilson to: Paul Graham, AirBedAndBreakfast Founders date: Mon, Jan 26, 2009 at
11:09 AM subject: RE: meet the airbeds
Airbed team Are you still in NYC?
We'd like to meet if you are
Thanks
fred
from: Paul Graham to: Fred Wilson date: Mon, Jan 26, 2009 at 1:42 PM subject: Re: meet the
airbeds
Ideas can morph. Practically every really big startup could say, five years later, "believe it or not,
we started out doing ___." It just seemed a very good sign to me that these guys were actually
on the ground in NYC hunting down (and understanding) their users. On top of several previous
good signs.
--pg
from: Fred Wilson to: Paul Graham date: Sun, Feb 1, 2009 at 7:15 AM subject: Re: meet the
airbeds
It's interesting
Our two junior team members were enthusiastic
The three "old guys" didn't get it
from: Paul Graham to: Fred Wilson date: Mon, Feb 9, 2009 at 5:58 PM subject: airbnb
The Airbeds just won the first poll among all the YC startups in their batch by a landslide. In the
past this has not been a 100% indicator of success (if only anything were) but much better than
random.
--pg
from: Fred Wilson to: Paul Graham date: Fri, Feb 13, 2009 at 5:29 PM subject: Re: airbnb
I met them today
They have an interesting business
I'm just not sure how big it's going to be
fred
from: Paul Graham to: Fred Wilson date: Sat, Feb 14, 2009 at 9:50 AM subject: Re: airbnb
Did they explain the long-term goal of being the market in accommodation the way eBay is in
stuff? That seems like it would be huge. Hotels now are like airlines in the 1970s before they
figured out how to increase their load factors.
from: Fred Wilson to: Paul Graham date: Tue, Feb 17, 2009 at 2:05 PM subject: Re: airbnb
They did but I am not sure I buy that
ABNB reminds me of Etsy in that it facilitates real commerce in a marketplace model directly
between two people
So I think it can scale all the way to the bed and breakfast market
But I am not sure they can take on the hotel market
I could be wrong
But even so, if you include short term room rental, second home rental, bed and breakfast, and
other similar classes of accommodations, you get to a pretty big opportunity
fred
from: Paul Graham to: Fred Wilson date: Wed, Feb 18, 2009 at 12:21 AM subject: Re: airbnb
So invest in them! They're very capital efficient. They would make an investor's money go a
long way.
It's also counter-cyclical. They just arrived back from NYC, and when I asked them what was
the most significant thing they'd observed, it was how many of their users actually needed to do
these rentals to pay their rents.
--pg
from: Fred Wilson to: Paul Graham date: Wed, Feb 18, 2009 at 2:21 AM subject: Re: airbnb
There's a lot to like
I've done a few things, like intro it to my friends at Foundry who were investors in Service
Metrics and understand this model
I am also talking to my friend Mark Pincus who had an idea like this a few years ago.
So we are working on it
Thanks for the lead
Fred
from: Paul Graham to: Fred Wilson date: Fri, Feb 20, 2009 at 10:00 PM subject: airbnb already
spreading to pros
I know you're skeptical they'll ever get hotels, but there's a continuum between private sofas
and hotel rooms, and they just moved one step further along it.
[link to an airbnb user]
This is after only a few months. I bet you they will get hotels eventually. It will start with small
ones. Just wait till all the 10-room pensiones in Rome discover this site. And once it spreads to
hotels, where is the point (in size of chain) at which it stops? Once something becomes a big
marketplace, you ignore it at your peril.
--pg
from: Fred Wilson to: Paul Graham date: Sat, Feb 21, 2009 at 4:26 AM subject: Re: airbnb
already spreading to pros
That's true. It's also true that there are quite a few marketplaces out there that serve this same
market
If you look at many of the people who list at ABNB, they list elsewhere too
I am not negative on this one, I am interested, but we are still in the gathering data phase.
fred
Founder Control - # 135
Want to start a startup? Get funded by Y Combinator.
December 2010
Someone we funded is talking to VCs now, and asked me how common it was for a startup's
founders to retain control of the board after a series A round. He said VCs told him this almost
never happened.
Ten years ago that was true. In the past, founders rarely kept control of the board through a
series A. The traditional series A board consisted of two founders, two VCs, and one
independent member. More recently the recipe is often one founder, one VC, and one
independent. In either case the founders lose their majority.
But not always. Mark Zuckerberg kept control of Facebook's board through the series A and still
has it today. Mark Pincus has kept control of Zynga's too. But are these just outliers? How
common is it for founders to keep control after an A round? I'd heard of several cases among
the companies we've funded, but I wasn't sure how many there were, so I emailed the
ycfounders list.
The replies surprised me. In a dozen companies we've funded, the founders still had a majority
of the board seats after the series A round.
I feel like we're at a tipping point here. A lot of VCs still act as if founders retaining board control
after a series A is unheard-of. A lot of them try to make you feel bad if you even ask — as if
you're a noob or a control freak for wanting such a thing. But the founders I heard from aren't
noobs or control freaks. Or if they are, they are, like Mark Zuckerberg, the kind of noobs and
control freaks VCs should be trying to fund more of.
Founders retaining control after a series A is clearly heard-of. And barring financial catastrophe,
I think in the coming year it will become the norm.
Control of a company is a more complicated matter than simply outvoting other parties in board
meetings. Investors usually get vetos over certain big decisions, like selling the company,
regardless of how many board seats they have. And board votes are rarely split. Matters are
decided in the discussion preceding the vote, not in the vote itself, which is usually unanimous.
But if opinion is divided in such discussions, the side that knows it would lose in a vote will tend
to be less insistent. That's what board control means in practice. You don't simply get to do
whatever you want; the board still has to act in the interest of the shareholders; but if you have a
majority of board seats, then your opinion about what's in the interest of the shareholders will
tend to prevail.
So while board control is not total control, it's not imaginary either. There's inevitably a
difference in how things feel within the company. Which means if it becomes the norm for
founders to retain board control after a series A, that will change the way things feel in the
whole startup world.
The switch to the new norm may be surprisingly fast, because the startups that can retain
control tend to be the best ones. They're the ones that set the trends, both for other startups
and for VCs.
A lot of the reason VCs are harsh when negotiating with startups is that they're embarrassed to
go back to their partners looking like they got beaten. When they sign a termsheet, they want to
be able to brag about the good terms they got. A lot of them don't care that much personally
about whether founders keep board control. They just don't want to seem like they had to make
concessions. Which means if letting the founders keep control stops being perceived as a
concession, it will rapidly become much more common.
Like a lot of changes that have been forced on VCs, this change won't turn out to be as big a
problem as they might think. VCs will still be able to convince; they just won't be able to compel.
And the startups where they have to resort to compulsion are not the ones that matter anyway.
VCs make most of their money from a few big hits, and those aren't them.
Knowing that founders will keep control of the board may even help VCs pick better. If they
know they can't fire the founders, they'll have to choose founders they can trust. And that's who
they should have been choosing all along.
Thanks to Sam Altman, John Bautista, Trevor Blackwell, Paul Buchheit, Brian Chesky, Bill
Clerico, Patrick Collison, Adam Goldstein, James Lindenbaum, Jessica Livingston, and Fred
Wilson for reading drafts of this.
Tablets - # 134
December 2010
I was thinking recently how inconvenient it was not to have a general term for iPhones, iPads,
and the corresponding things running Android. The closest to a general term seems to be
"mobile devices," but that (a) applies to any mobile phone, and (b) doesn't really capture what's
distinctive about the iPad.
After a few seconds it struck me that what we'll end up calling these things is tablets. The only
reason we even consider calling them "mobile devices" is that the iPhone preceded the iPad. If
the iPad had come first, we wouldn't think of the iPhone as a phone; we'd think of it as a tablet
small enough to hold up to your ear.
The iPhone isn't so much a phone as a replacement for a phone. That's an important
distinction, because it's an early instance of what will become a common pattern. Many if not
most of the special-purpose objects around us are going to be replaced by apps running on
tablets.
This is already clear in cases like GPSes, music players, and cameras. But I think it will surprise
people how many things are going to get replaced. We funded one startup that's replacing keys.
The fact that you can change font sizes easily means the iPad effectively replaces reading
glasses. I wouldn't be surprised if by playing some clever tricks with the accelerometer you
could even replace the bathroom scale.
The advantages of doing things in software on a single device are so great that everything that
can get turned into software will. So for the next couple years, a good recipe for startups will be
to look around you for things that people haven't realized yet can be made unnecessary by a
tablet app.
In 1938 Buckminster Fuller coined the term ephemeralization to describe the increasing
tendency of physical machinery to be replaced by what we would now call software. The reason
tablets are going to take over the world is not (just) that Steve Jobs and Co are industrial design
wizards, but because they have this force behind them. The iPhone and the iPad have
effectively drilled a hole that will allow ephemeralization to flow into a lot of new areas. No one
who has studied the history of technology would want to underestimate the power of that force.
I worry about the power Apple could have with this force behind them. I don't want to see
another era of client monoculture like the Microsoft one in the 80s and 90s. But if
ephemeralization is one of the main forces driving the spread of tablets, that suggests a way to
compete with Apple: be a better platform for it.
It has turned out to be a great thing that Apple tablets have accelerometers in them. Developers
have used the accelerometer in ways Apple could never have imagined. That's the nature of
platforms. The more versatile the tool, the less you can predict how people will use it. So tablet
makers should be thinking: what else can we put in there? Not merely hardware, but software
too. What else can we give developers access to? Give hackers an inch and they'll take you a
mile.
Thanks to Sam Altman, Paul Buchheit, Jessica Livingston, and Robert Morris for reading drafts
of this.
What We Look for in Founders - # 133
Want to start a startup? Get funded by Y Combinator.
October 2010 (I wrote this for Forbes, who asked me to write something about the qualities we
look for in founders. In print they had to cut the last item because they didn't have room.)
1. Determination
This has turned out to be the most important quality in startup founders. We thought when we
started Y Combinator that the most important quality would be intelligence. That's the myth in
the Valley. And certainly you don't want founders to be stupid. But as long as you're over a
certain threshold of intelligence, what matters most is determination. You're going to hit a lot of
obstacles. You can't be the sort of person who gets demoralized easily.
Bill Clerico and Rich Aberman of WePay are a good example. They're doing a finance startup,
which means endless negotiations with big, bureaucratic companies. When you're starting a
startup that depends on deals with big companies to exist, it often feels like they're trying to
ignore you out of existence. But when Bill Clerico starts calling you, you may as well do what he
asks, because he is not going away.
2. Flexibility
You do not however want the sort of determination implied by phrases like "don't give up on
your dreams." The world of startups is so unpredictable that you need to be able to modify your
dreams on the fly. The best metaphor I've found for the combination of determination and
flexibility you need is a running back. He's determined to get downfield, but at any given
moment he may need to go sideways or even backwards to get there.
The current record holder for flexibility may be Daniel Gross of Greplin. He applied to YC with
some bad ecommerce idea. We told him we'd fund him if he did something else. He thought for
a second, and said ok. He then went through two more ideas before settling on Greplin. He'd
only been working on it for a couple days when he presented to investors at Demo Day, but he
got a lot of interest. He always seems to land on his feet.
3. Imagination
Intelligence does matter a lot of course. It seems like the type that matters most is imagination.
It's not so important to be able to solve predefined problems quickly as to be able to come up
with surprising new ideas. In the startup world, most good ideas seem bad initially. If they were
obviously good, someone would already be doing them. So you need the kind of intelligence
that produces ideas with just the right level of craziness.
Airbnb is that kind of idea. In fact, when we funded Airbnb, we thought it was too crazy. We
couldn't believe large numbers of people would want to stay in other people's places. We
funded them because we liked the founders so much. As soon as we heard they'd been
supporting themselves by selling Obama and McCain branded breakfast cereal, they were in.
And it turned out the idea was on the right side of crazy after all.
4. Naughtiness
Though the most successful founders are usually good people, they tend to have a piratical
gleam in their eye. They're not Goody Two-Shoes type good. Morally, they care about getting
the big questions right, but not about observing proprieties. That's why I'd use the word naughty
rather than evil. They delight in breaking rules, but not rules that matter. This quality may be
redundant though; it may be implied by imagination.
Sam Altman of Loopt is one of the most successful alumni, so we asked him what question we
could put on the Y Combinator application that would help us discover more people like him. He
said to ask about a time when they'd hacked something to their advantage—hacked in the
sense of beating the system, not breaking into computers. It has become one of the questions
we pay most attention to when judging applications.
5. Friendship
Empirically it seems to be hard to start a startup with just one founder. Most of the big
successes have two or three. And the relationship between the founders has to be strong. They
must genuinely like one another, and work well together. Startups do to the relationship
between the founders what a dog does to a sock: if it can be pulled apart, it will be.
Emmett Shear and Justin Kan of Justin.tv are a good example of close friends who work well
together. They've known each other since second grade. They can practically read one
another's minds. I'm sure they argue, like all founders, but I have never once sensed any
unresolved tension between them.
Thanks to Jessica Livingston and Chris Steiner for reading drafts of this.
The New Funding Landscape - # 132
Want to start a startup? Get funded by Y Combinator.
October 2010
After barely changing at all for decades, the startup funding business is now in what could, at
least by comparison, be called turmoil. At Y Combinator we've seen dramatic changes in the
funding environment for startups. Fortunately one of them is much higher valuations.
The trends we've been seeing are probably not YC-specific. I wish I could say they were, but
the main cause is probably just that we see trends first—partly because the startups we fund
are very plugged into the Valley and are quick to take advantage of anything new, and partly
because we fund so many that we have enough data points to see patterns clearly.
What we're seeing now, everyone's probably going to be seeing in the next couple years. So I'm
going to explain what we're seeing, and what that will mean for you if you try to raise money.
Super-Angels
Let me start by describing what the world of startup funding used to look like. There used to be
two sharply differentiated types of investors: angels and venture capitalists. Angels are
individual rich people who invest small amounts of their own money, while VCs are employees
of funds that invest large amounts of other people's.
For decades there were just those two types of investors, but now a third type has appeared
halfway between them: the so-called super-angels. [1] And VCs have been provoked by their
arrival into making a lot of angel-style investments themselves. So the previously sharp line
between angels and VCs has become hopelessly blurred.
There used to be a no man's land between angels and VCs. Angels would invest $20k to $50k
apiece, and VCs usually a million or more. So an angel round meant a collection of angel
investments that combined to maybe $200k, and a VC round meant a series A round in which a
single VC fund (or occasionally two) invested $1-5 million.
The no man's land between angels and VCs was a very inconvenient one for startups, because
it coincided with the amount many wanted to raise. Most startups coming out of Demo Day
wanted to raise around $400k. But it was a pain to stitch together that much out of angel
investments, and most VCs weren't interested in investments so small. That's the fundamental
reason the super-angels have appeared. They're responding to the market.
The arrival of a new type of investor is big news for startups, because there used to be only two
and they rarely competed with one another. Super-angels compete with both angels and VCs.
That's going to change the rules about how to raise money. I don't know yet what the new rules
will be, but it looks like most of the changes will be for the better.
A super-angel has some of the qualities of an angel, and some of the qualities of a VC. They're
usually individuals, like angels. In fact many of the current super-angels were initially angels of
the classic type. But like VCs, they invest other people's money. This allows them to invest
larger amounts than angels: a typical super-angel investment is currently about $100k. They
make investment decisions quickly, like angels. And they make a lot more investments per
partner than VCs—up to 10 times as many.
The fact that super-angels invest other people's money makes them doubly alarming to VCs.
They don't just compete for startups; they also compete for investors. What super-angels really
are is a new form of fast-moving, lightweight VC fund. And those of us in the technology world
know what usually happens when something comes along that can be described in terms like
that. Usually it's the replacement.
Will it be? As of now, few of the startups that take money from super-angels are ruling out
taking VC money. They're just postponing it. But that's still a problem for VCs. Some of the
startups that postpone raising VC money may do so well on the angel money they raise that
they never bother to raise more. And those who do raise VC rounds will be able to get higher
valuations when they do. If the best startups get 10x higher valuations when they raise series A
rounds, that would cut VCs' returns from winners at least tenfold. [2]
So I think VC funds are seriously threatened by the super-angels. But one thing that may save
them to some extent is the uneven distribution of startup outcomes: practically all the returns
are concentrated in a few big successes. The expected value of a startup is the percentage
chance it's Google. So to the extent that winning is a matter of absolute returns, the superangels could win practically all the battles for individual startups and yet lose the war, if they
merely failed to get those few big winners. And there's a chance that could happen, because
the top VC funds have better brands, and can also do more for their portfolio companies. [3]
Because super-angels make more investments per partner, they have less partner per
investment. They can't pay as much attention to you as a VC on your board could. How much is
that extra attention worth? It will vary enormously from one partner to another. There's no
consensus yet in the general case. So for now this is something startups are deciding
individually.
Till now, VCs' claims about how much value they added were sort of like the government's.
Maybe they made you feel better, but you had no choice in the matter, if you needed money on
the scale only VCs could supply. Now that VCs have competitors, that's going to put a market
price on the help they offer. The interesting thing is, no one knows yet what it will be.
Do startups that want to get really big need the sort of advice and connections only the top VCs
can supply? Or would super-angel money do just as well? The VCs will say you need them, and
the super-angels will say you don't. But the truth is, no one knows yet, not even the VCs and
super-angels themselves. All the super-angels know is that their new model seems promising
enough to be worth trying, and all the VCs know is that it seems promising enough to worry
about.
Rounds
Whatever the outcome, the conflict between VCs and super-angels is good news for founders.
And not just for the obvious reason that more competition for deals means better terms. The
whole shape of deals is changing.
One of the biggest differences between angels and VCs is the amount of your company they
want. VCs want a lot. In a series A round they want a third of your company, if they can get it.
They don't care much how much they pay for it, but they want a lot because the number of
series A investments they can do is so small. In a traditional series A investment, at least one
partner from the VC fund takes a seat on your board. [4] Since board seats last about 5 years
and each partner can't handle more than about 10 at once, that means a VC fund can only do
about 2 series A deals per partner per year. And that means they need to get as much of the
company as they can in each one. You'd have to be a very promising startup indeed to get a VC
to use up one of his 10 board seats for only a few percent of you.
Since angels generally don't take board seats, they don't have this constraint. They're happy to
buy only a few percent of you. And although the super-angels are in most respects mini VC
funds, they've retained this critical property of angels. They don't take board seats, so they don't
need a big percentage of your company.
Though that means you'll get correspondingly less attention from them, it's good news in other
respects. Founders never really liked giving up as much equity as VCs wanted. It was a lot of
the company to give up in one shot. Most founders doing series A deals would prefer to take
half as much money for half as much stock, and then see what valuation they could get for the
second half of the stock after using the first half of the money to increase its value. But VCs
never offered that option.
Now startups have another alternative. Now it's easy to raise angel rounds about half the size of
series A rounds. Many of the startups we fund are taking this route, and I predict that will be
true of startups in general.
A typical big angel round might be $600k on a convertible note with a valuation cap of $4 million
premoney. Meaning that when the note converts into stock (in a later round, or upon
acquisition), the investors in that round will get .6 / 4.6, or 13% of the company. That's a lot less
than the 30 to 40% of the company you usually give up in a series A round if you do it so early.
[5]
But the advantage of these medium-sized rounds is not just that they cause less dilution. You
also lose less control. After an angel round, the founders almost always still have control of the
company, whereas after a series A round they often don't. The traditional board structure after a
series A round is two founders, two VCs, and a (supposedly) neutral fifth person. Plus series A
terms usually give the investors a veto over various kinds of important decisions, including
selling the company. Founders usually have a lot of de facto control after a series A, as long as
things are going well. But that's not the same as just being able to do what you want, like you
could before.
A third and quite significant advantage of angel rounds is that they're less stressful to raise.
Raising a traditional series A round has in the past taken weeks, if not months. When a VC firm
can only do 2 deals per partner per year, they're careful about which they do. To get a traditional
series A round you have to go through a series of meetings, culminating in a full partner
meeting where the firm as a whole says yes or no. That's the really scary part for founders: not
just that series A rounds take so long, but at the end of this long process the VCs might still say
no. The chance of getting rejected after the full partner meeting averages about 25%. At some
firms it's over 50%.
Fortunately for founders, VCs have been getting a lot faster. Nowadays Valley VCs are more
likely to take 2 weeks than 2 months. But they're still not as fast as angels and super-angels,
the most decisive of whom sometimes decide in hours.
Raising an angel round is not only quicker, but you get feedback as it progresses. An angel
round is not an all or nothing thing like a series A. It's composed of multiple investors with
varying degrees of seriousness, ranging from the upstanding ones who commit unequivocally
to the jerks who give you lines like "come back to me to fill out the round." You usually start
collecting money from the most committed investors and work your way out toward the
ambivalent ones, whose interest increases as the round fills up.
But at each point you know how you're doing. If investors turn cold you may have to raise less,
but when investors in an angel round turn cold the process at least degrades gracefully, instead
of blowing up in your face and leaving you with nothing, as happens if you get rejected by a VC
fund after a full partner meeting. Whereas if investors seem hot, you can not only close the
round faster, but now that convertible notes are becoming the norm, actually raise the price to
reflect demand.
Valuation
However, the VCs have a weapon they can use against the super-angels, and they have started
to use it. VCs have started making angel-sized investments too. The term "angel round" doesn't
mean that all the investors in it are angels; it just describes the structure of the round.
Increasingly the participants include VCs making investments of a hundred thousand or two.
And when VCs invest in angel rounds they can do things that super-angels don't like. VCs are
quite valuation-insensitive in angel rounds—partly because they are in general, and partly
because they don't care that much about the returns on angel rounds, which they still view
mostly as a way to recruit startups for series A rounds later. So VCs who invest in angel rounds
can blow up the valuations for angels and super-angels who invest in them. [6]
Some super-angels seem to care about valuations. Several turned down YC-funded startups
after Demo Day because their valuations were too high. This was not a problem for the startups;
by definition a high valuation means enough investors were willing to accept it. But it was
mysterious to me that the super-angels would quibble about valuations. Did they not understand
that the big returns come from a few big successes, and that it therefore mattered far more
which startups you picked than how much you paid for them?
After thinking about it for a while and observing certain other signs, I have a theory that
explains why the super-angels may be smarter than they seem. It would make sense for superangels to want low valuations if they're hoping to invest in startups that get bought early. If
you're hoping to hit the next Google, you shouldn't care if the valuation is 20 million. But if you're
looking for companies that are going to get bought for 30 million, you care. If you invest at 20
and the company gets bought for 30, you only get 1.5x. You might as well buy Apple.
So if some of the super-angels were looking for companies that could get acquired quickly, that
would explain why they'd care about valuations. But why would they be looking for those?
Because depending on the meaning of "quickly," it could actually be very profitable. A company
that gets acquired for 30 million is a failure to a VC, but it could be a 10x return for an angel,
and moreover, a quick 10x return. Rate of return is what matters in investing—not the multiple
you get, but the multiple per year. If a super-angel gets 10x in one year, that's a higher rate of
return than a VC could ever hope to get from a company that took 6 years to go public. To get
the same rate of return, the VC would have to get a multiple of 10^6—one million x. Even
Google didn't come close to that.
So I think at least some super-angels are looking for companies that will get bought. That's the
only rational explanation for focusing on getting the right valuations, instead of the right
companies. And if so they'll be different to deal with than VCs. They'll be tougher on valuations,
but more accommodating if you want to sell early.
Prognosis
Who will win, the super-angels or the VCs? I think the answer to that is, some of each. They'll
each become more like one another. The super-angels will start to invest larger amounts, and
the VCs will gradually figure out ways to make more, smaller investments faster. A decade from
now the players will be hard to tell apart, and there will probably be survivors from each group.
What does that mean for founders? One thing it means is that the high valuations startups are
presently getting may not last forever. To the extent that valuations are being driven up by priceinsensitive VCs, they'll fall again if VCs become more like super-angels and start to become
more miserly about valuations. Fortunately if this does happen it will take years.
The short term forecast is more competition between investors, which is good news for you.
The super-angels will try to undermine the VCs by acting faster, and the VCs will try to
undermine the super-angels by driving up valuations. Which for founders will result in the
perfect combination: funding rounds that close fast, with high valuations.
But remember that to get that combination, your startup will have to appeal to both superangels and VCs. If you don't seem like you have the potential to go public, you won't be able to
use VCs to drive up the valuation of an angel round.
There is a danger of having VCs in an angel round: the so-called signalling risk. If VCs are only
doing it in the hope of investing more later, what happens if they don't? That's a signal to
everyone else that they think you're lame.
How much should you worry about that? The seriousness of signalling risk depends on how far
along you are. If by the next time you need to raise money, you have graphs showing rising
revenue or traffic month after month, you don't have to worry about any signals your existing
investors are sending. Your results will speak for themselves. [7]
Whereas if the next time you need to raise money you won't yet have concrete results, you may
need to think more about the message your investors might send if they don't invest more. I'm
not sure yet how much you have to worry, because this whole phenomenon of VCs doing angel
investments is so new. But my instincts tell me you don't have to worry much. Signalling risk
smells like one of those things founders worry about that's not a real problem. As a rule, the
only thing that can kill a good startup is the startup itself. Startups hurt themselves way more
often than competitors hurt them, for example. I suspect signalling risk is in this category too.
One thing YC-funded startups have been doing to mitigate the risk of taking money from VCs in
angel rounds is not to take too much from any one VC. Maybe that will help, if you have the
luxury of turning down money.
Fortunately, more and more startups will. After decades of competition that could best be
described as intramural, the startup funding business is finally getting some real competition.
That should last several years at least, and maybe a lot longer. Unless there's some huge
market crash, the next couple years are going to be a good time for startups to raise money.
And that's exciting because it means lots more startups will happen.
Notes:
[1] I've also heard them called "Mini-VCs" and "Micro-VCs." I don't know which name will stick.
There were a couple predecessors. Ron Conway had angel funds starting in the 1990s, and in some ways First
Round Capital is closer to a super-angel than a VC fund.
[2] It wouldn't cut their overall returns tenfold, because investing later would probably (a) cause them to lose less on
investments that failed, and (b) not allow them to get as large a percentage of startups as they do now. So it's hard to
predict precisely what would happen to their returns.
[3] The brand of an investor derives mostly from the success of their portfolio companies. The top VCs thus have a
big brand advantage over the super-angels. They could make it self-perpetuating if they used it to get all the best new
startups. But I don't think they'll be able to. To get all the best startups, you have to do more than make them want
you. You also have to want them; you have to recognize them when you see them, and that's much harder. Superangels will snap up stars that VCs miss. And that will cause the brand gap between the top VCs and the superangels gradually to erode.
[4] Though in a traditional series A round VCs put two partners on your board, there are signs now that VCs may
begin to conserve board seats by switching to what used to be considered an angel-round board, consisting of two
founders and one VC. Which is also to the founders' advantage if it means they still control the company.
[5] In a series A round, you usually have to give up more than the actual amount of stock the VCs buy, because they
insist you dilute yourselves to set aside an "option pool" as well. I predict this practice will gradually disappear though.
[6] The best thing for founders, if they can get it, is a convertible note with no valuation cap at all. In that case the
money invested in the angel round just converts into stock at the valuation of the next round, no matter how large.
Angels and super-angels tend not to like uncapped notes. They have no idea how much of the company they're
buying. If the company does well and the valuation of the next round is high, they may end up with only a sliver of it.
So by agreeing to uncapped notes, VCs who don't care about valuations in angel rounds can make offers that superangels hate to match.
[7] Obviously signalling risk is also not a problem if you'll never need to raise more money. But startups are often
mistaken about that.
Thanks to Sam Altman, John Bautista, Patrick Collison, James Lindenbaum, Reid Hoffman, Jessica Livingston and
Harj Taggar for reading drafts of this.
Where to See Silicon Valley - # 131
Want to start a startup? Get funded by Y Combinator.
October 2010
Silicon Valley proper is mostly suburban sprawl. At first glance it doesn't seem there's anything
to see. It's not the sort of place that has conspicuous monuments. But if you look, there are
subtle signs you're in a place that's different from other places.
1. Stanford University
Stanford is a strange place. Structurally it is to an ordinary university what suburbia is to a city.
It's enormously spread out, and feels surprisingly empty much of the time. But notice the
weather. It's probably perfect. And notice the beautiful mountains to the west. And though you
can't see it, cosmopolitan San Francisco is 40 minutes to the north. That combination is much
of the reason Silicon Valley grew up around this university and not some other one.
2. University Ave
A surprising amount of the work of the Valley is done in the cafes on or just off University Ave in
Palo Alto. If you visit on a weekday between 10 and 5, you'll often see founders pitching
investors. In case you can't tell, the founders are the ones leaning forward eagerly, and the
investors are the ones sitting back with slightly pained expressions.
3. The Lucky Office
The office at 165 University Ave was Google's first. Then it was Paypal's. (Now it's Wepay's.)
The interesting thing about it is the location. It's a smart move to put a startup in a place with
restaurants and people walking around instead of in an office park, because then the people
who work there want to stay there, instead of fleeing as soon as conventional working hours
end. They go out for dinner together, talk about ideas, and then come back and implement them.
It's important to realize that Google's current location in an office park is not where they started;
it's just where they were forced to move when they needed more space. Facebook was till
recently across the street, till they too had to move because they needed more space.
4. Old Palo Alto
Palo Alto was not originally a suburb. For the first 100 years or so of its existence, it was a
college town out in the countryside. Then in the mid 1950s it was engulfed in a wave of
suburbia that raced down the peninsula. But Palo Alto north of Oregon expressway still feels
noticeably different from the area around it. It's one of the nicest places in the Valley. The
buildings are old (though increasingly they are being torn down and replaced with generic
McMansions) and the trees are tall. But houses are very expensive—around $1000 per square
foot. This is post-exit Silicon Valley.
5. Sand Hill Road
It's interesting to see the VCs' offices on the north side of Sand Hill Road precisely because
they're so boringly uniform. The buildings are all more or less the same, their exteriors express
very little, and they are arranged in a confusing maze. (I've been visiting them for years and I
still occasionally get lost.) It's not a coincidence. These buildings are a pretty accurate reflection
of the VC business.
If you go on a weekday you may see groups of founders there to meet VCs. But mostly you
won't see anyone; bustling is the last word you'd use to describe the atmos. Visiting Sand Hill
Road reminds you that the opposite of "down and dirty" would be "up and clean."
6. Castro Street
It's a tossup whether Castro Street or University Ave should be considered the heart of the
Valley now. University Ave would have been 10 years ago. But Palo Alto is getting expensive.
Increasingly startups are located in Mountain View, and Palo Alto is a place they come to meet
investors. Palo Alto has a lot of different cafes, but there is one that clearly dominates in
Mountain View: Red Rock.
7. Google
Google spread out from its first building in Mountain View to a lot of the surrounding ones. But
because the buildings were built at different times by different people, the place doesn't have
the sterile, walled-off feel that a typical large company's headquarters have. It definitely has a
flavor of its own though. You sense there is something afoot. The general atmos is vaguely
utopian; there are lots of Priuses, and people who look like they drive them.
You can't get into Google unless you know someone there. It's very much worth seeing inside if
you can, though. Ditto for Facebook, at the end of California Ave in Palo Alto, though there is
nothing to see outside.
8. Skyline Drive
Skyline Drive runs along the crest of the Santa Cruz mountains. On one side is the Valley, and
on the other is the sea—which because it's cold and foggy and has few harbors, plays
surprisingly little role in the lives of people in the Valley, considering how close it is. Along some
parts of Skyline the dominant trees are huge redwoods, and in others they're live oaks.
Redwoods mean those are the parts where the fog off the coast comes in at night; redwoods
condense rain out of fog. The MROSD manages a collection of great walking trails off Skyline.
9. 280
Silicon Valley has two highways running the length of it: 101, which is pretty ugly, and 280,
which is one of the more beautiful highways in the world. I always take 280 when I have a
choice. Notice the long narrow lake to the west? That's the San Andreas Fault. It runs along the
base of the hills, then heads uphill through Portola Valley. One of the MROSD trails runs right
along the fault. A string of rich neighborhoods runs along the foothills to the west of 280:
Woodside, Portola Valley, Los Altos Hills, Saratoga, Los Gatos.
SLAC goes right under 280 a little bit south of Sand Hill Road. And a couple miles south of that
is the Valley's equivalent of the "Welcome to Las Vegas" sign: The Dish.
Notes:
I skipped the Computer History Museum because this is a list of where to see the Valley itself, not where to see
artifacts from it. I also skipped San Jose. San Jose calls itself the capital of Silicon Valley, but when people in the
Valley use the phrase "the city," they mean San Francisco. San Jose is a dotted line on a map.
Thanks to Sam Altman, Paul Buchheit, Patrick Collison, and Jessica Livingston for reading drafts of this.
High Resolution Fundraising - # 130
Want to start a startup? Get funded by Y Combinator.
September 2010
The reason startups have been using more convertible notes in angel rounds is that they make
deals close faster. By making it easier for startups to give different prices to different investors,
they help them break the sort of deadlock that happens when investors all wait to see who else
is going to invest.
By far the biggest influence on investors' opinions of a startup is the opinion of other investors.
There are very, very few who simply decide for themselves. Any startup founder can tell you the
most common question they hear from investors is not about the founders or the product, but
"who else is investing?"
That tends to produce deadlocks. Raising an old-fashioned fixed-size equity round can take
weeks, because all the angels sit around waiting for the others to commit, like competitors in a
bicycle sprint who deliberately ride slowly at the start so they can follow whoever breaks first.
Convertible notes let startups beat such deadlocks by rewarding investors willing to move first
with lower (effective) valuations. Which they deserve because they're taking more risk. It's much
safer to invest in a startup Ron Conway has already invested in; someone who comes after him
should pay a higher price.
The reason convertible notes allow more flexibility in price is that valuation caps aren't actual
valuations, and notes are cheap and easy to do. So you can do high-resolution fundraising: if
you wanted you could have a separate note with a different cap for each investor.
That cap need not simply rise monotonically. A startup could also give better deals to investors
they expected to help them most. The point is simply that different investors, whether because
of the help they offer or their willingness to commit, have different values for startups, and their
terms should reflect that.
Different terms for different investors is clearly the way of the future. Markets always evolve
toward higher resolution. You may not need to use convertible notes to do it. With sufficiently
lightweight standardized equity terms (and some changes in investors' and lawyers'
expectations about equity rounds) you might be able to do the same thing with equity instead of
debt. Either would be fine with startups, so long as they can easily change their valuation.
Deadlocks weren't the only problem with fixed-size equity rounds. Another was that startups
had to decide in advance how much to raise. I think it's a mistake for a startup to fix upon a
specific number. If investors are easily convinced, the startup should raise more now, and if
investors are skeptical, the startup should take a smaller amount and use that to get the
company to the point where it's more convincing.
It's just not reasonable to expect startups to pick an optimal round size in advance, because
that depends on the reactions of investors, and those are impossible to predict.
Fixed-size, multi-investor angel rounds are such a bad idea for startups that one wonders why
things were ever done that way. One possibility is that this custom reflects the way investors like
to collude when they can get away with it. But I think the actual explanation is less sinister. I
think angels (and their lawyers) organized rounds this way in unthinking imitation of VC series A
rounds. In a series A, a fixed-size equity round with a lead makes sense, because there is
usually just one big investor, who is unequivocally the lead. Fixed-size series A rounds already
are high res. But the more investors you have in a round, the less sense it makes for everyone
to get the same price.
The most interesting question here may be what high res fundraising will do to the world of
investors. Bolder investors will now get rewarded with lower prices. But more important, in a hitsdriven business, is that they'll be able to get into the deals they want. Whereas the "who else is
investing?" type of investors will not only pay higher prices, but may not be able to get into the
best deals at all.
Thanks to Immad Akhund, Sam Altman, John Bautista, Pete Koomen, Jessica Livingston, Dan
Siroker, Harj Taggar, and Fred Wilson for reading drafts of this.
What Happened to Yahoo - # 129
Want to start a startup? Get funded by Y Combinator.
August 2010
When I went to work for Yahoo after they bought our startup in 1998, it felt like the center of the
world. It was supposed to be the next big thing. It was supposed to be what Google turned out
to be.
What went wrong? The problems that hosed Yahoo go back a long time, practically to the
beginning of the company. They were already very visible when I got there in 1998. Yahoo had
two problems Google didn't: easy money, and ambivalence about being a technology company.
Money
The first time I met Jerry Yang, we thought we were meeting for different reasons. He thought
we were meeting so he could check us out in person before buying us. I thought we were
meeting so we could show him our new technology, Revenue Loop. It was a way of sorting
shopping search results. Merchants bid a percentage of sales for traffic, but the results were
sorted not by the bid but by the bid times the average amount a user would buy. It was like the
algorithm Google uses now to sort ads, but this was in the spring of 1998, before Google was
founded.
Revenue Loop was the optimal sort for shopping search, in the sense that it sorted in order of
how much money Yahoo would make from each link. But it wasn't just optimal in that sense.
Ranking search results by user behavior also makes search better. Users train the search: you
can start out finding matches based on mere textual similarity, and as users buy more stuff the
search results get better and better.
Jerry didn't seem to care. I was confused. I was showing him technology that extracted the
maximum value from search traffic, and he didn't care? I couldn't tell whether I was explaining it
badly, or he was just very poker faced.
I didn't realize the answer till later, after I went to work at Yahoo. It was neither of my guesses.
The reason Yahoo didn't care about a technique that extracted the full value of traffic was that
advertisers were already overpaying for it. If Yahoo merely extracted the actual value, they'd
have made less.
Hard as it is to believe now, the big money then was in banner ads. Advertisers were willing to
pay ridiculous amounts for banner ads. So Yahoo's sales force had evolved to exploit this
source of revenue. Led by a large and terrifyingly formidable man called Anil Singh, Yahoo's
sales guys would fly out to Procter & Gamble and come back with million dollar orders for
banner ad impressions.
The prices seemed cheap compared to print, which was what advertisers, for lack of any other
reference, compared them to. But they were expensive compared to what they were worth. So
these big, dumb companies were a dangerous source of revenue to depend on. But there was
another source even more dangerous: other Internet startups.
By 1998, Yahoo was the beneficiary of a de facto Ponzi scheme. Investors were excited about
the Internet. One reason they were excited was Yahoo's revenue growth. So they invested in
new Internet startups. The startups then used the money to buy ads on Yahoo to get traffic.
Which caused yet more revenue growth for Yahoo, and further convinced investors the Internet
was worth investing in. When I realized this one day, sitting in my cubicle, I jumped up like
Archimedes in his bathtub, except instead of "Eureka!" I was shouting "Sell!"
Both the Internet startups and the Procter & Gambles were doing brand advertising. They didn't
care about targeting. They just wanted lots of people to see their ads. So traffic became the
thing to get at Yahoo. It didn't matter what type. [1]
It wasn't just Yahoo. All the search engines were doing it. This was why they were trying to get
people to start calling them "portals" instead of "search engines." Despite the actual meaning of
the word portal, what they meant by it was a site where users would find what they wanted on
the site itself, instead of just passing through on their way to other destinations, as they did at a
search engine.
I remember telling David Filo in late 1998 or early 1999 that Yahoo should buy Google, because
I and most of the other programmers in the company were using it instead of Yahoo for search.
He told me that it wasn't worth worrying about. Search was only 6% of our traffic, and we were
growing at 10% a month. It wasn't worth doing better.
I didn't say "But search traffic is worth more than other traffic!" I said "Oh, ok." Because I didn't
realize either how much search traffic was worth. I'm not sure even Larry and Sergey did then. If
they had, Google presumably wouldn't have expended any effort on enterprise search.
If circumstances had been different, the people running Yahoo might have realized sooner how
important search was. But they had the most opaque obstacle in the world between them and
the truth: money. As long as customers were writing big checks for banner ads, it was hard to
take search seriously. Google didn't have that to distract them.
Hackers
But Yahoo also had another problem that made it hard to change directions. They'd been
thrown off balance from the start by their ambivalence about being a technology company.
One of the weirdest things about Yahoo when I went to work there was the way they insisted on
calling themselves a "media company." If you walked around their offices, it seemed like a
software company. The cubicles were full of programmers writing code, product managers
thinking about feature lists and ship dates, support people (yes, there were actually support
people) telling users to restart their browsers, and so on, just like a software company. So why
did they call themselves a media company?
One reason was the way they made money: by selling ads. In 1995 it was hard to imagine a
technology company making money that way. Technology companies made money by selling
their software to users. Media companies sold ads. So they must be a media company.
Another big factor was the fear of Microsoft. If anyone at Yahoo considered the idea that they
should be a technology company, the next thought would have been that Microsoft would crush
them.
It's hard for anyone much younger than me to understand the fear Microsoft still inspired in
1995. Imagine a company with several times the power Google has now, but way meaner. It
was perfectly reasonable to be afraid of them. Yahoo watched them crush the first hot Internet
company, Netscape. It was reasonable to worry that if they tried to be the next Netscape, they'd
suffer the same fate. How were they to know that Netscape would turn out to be Microsoft's last
victim?
It would have been a clever move to pretend to be a media company to throw Microsoft off their
scent. But unfortunately Yahoo actually tried to be one, sort of. Project managers at Yahoo were
called "producers," for example, and the different parts of the company were called "properties."
But what Yahoo really needed to be was a technology company, and by trying to be something
else, they ended up being something that was neither here nor there. That's why Yahoo as a
company has never had a sharply defined identity.
The worst consequence of trying to be a media company was that they didn't take programming
seriously enough. Microsoft (back in the day), Google, and Facebook have all had hackercentric cultures. But Yahoo treated programming as a commodity. At Yahoo, user-facing
software was controlled by product managers and designers. The job of programmers was just
to take the work of the product managers and designers the final step, by translating it into code.
One obvious result of this practice was that when Yahoo built things, they often weren't very
good. But that wasn't the worst problem. The worst problem was that they hired bad
programmers.
Microsoft (back in the day), Google, and Facebook have all been obsessed with hiring the best
programmers. Yahoo wasn't. They preferred good programmers to bad ones, but they didn't
have the kind of single-minded, almost obnoxiously elitist focus on hiring the smartest people
that the big winners have had. And when you consider how much competition there was for
programmers when they were hiring, during the Bubble, it's not surprising that the quality of
their programmers was uneven.
In technology, once you have bad programmers, you're doomed. I can't think of an instance
where a company has sunk into technical mediocrity and recovered. Good programmers want
to work with other good programmers. So once the quality of programmers at your company
starts to drop, you enter a death spiral from which there is no recovery. [2]
At Yahoo this death spiral started early. If there was ever a time when Yahoo was a Google-style
talent magnet, it was over by the time I got there in 1998.
The company felt prematurely old. Most technology companies eventually get taken over by
suits and middle managers. At Yahoo it felt as if they'd deliberately accelerated this process.
They didn't want to be a bunch of hackers. They wanted to be suits. A media company should
be run by suits.
The first time I visited Google, they had about 500 people, the same number Yahoo had when I
went to work there. But boy did things seem different. It was still very much a hacker-centric
culture. I remember talking to some programmers in the cafeteria about the problem of gaming
search results (now known as SEO), and they asked "what should we do?" Programmers at
Yahoo wouldn't have asked that. Theirs was not to reason why; theirs was to build what product
managers spec'd. I remember coming away from Google thinking "Wow, it's still a startup."
There's not much we can learn from Yahoo's first fatal flaw. It's probably too much to hope any
company could avoid being damaged by depending on a bogus source of revenue. But startups
can learn an important lesson from the second one. In the software business, you can't afford
not to have a hacker-centric culture.
Probably the most impressive commitment I've heard to having a hacker-centric culture came
from Mark Zuckerberg, when he spoke at Startup School in 2007. He said that in the early days
Facebook made a point of hiring programmers even for jobs that would not ordinarily consist of
programming, like HR and marketing.
So which companies need to have a hacker-centric culture? Which companies are "in the
software business" in this respect? As Yahoo discovered, the area covered by this rule is bigger
than most people realize. The answer is: any company that needs to have good software.
Why would great programmers want to work for a company that didn't have a hacker-centric
culture, as long as there were others that did? I can imagine two reasons: if they were paid a
huge amount, or if the domain was interesting and none of the companies in it were hackercentric. Otherwise you can't attract good programmers to work in a suit-centric culture. And
without good programmers you won't get good software, no matter how many people you put
on a task, or how many procedures you establish to ensure "quality."
Hacker culture often seems kind of irresponsible. That's why people proposing to destroy it use
phrases like "adult supervision." That was the phrase they used at Yahoo. But there are worse
things than seeming irresponsible. Losing, for example.
Notes:
[1] The closest we got to targeting when I was there was when we created pets.yahoo.com in order to provoke a
bidding war between 3 pet supply startups for the spot as top sponsor.
[2] In theory you could beat the death spiral by buying good programmers instead of hiring them. You can get
programmers who would never have come to you as employees by buying their startups. But so far the only
companies smart enough to do this are companies smart enough not to need to.
Thanks to Trevor Blackwell, Jessica Livingston, and Geoff Ralston for reading drafts of this.
The Future of Startup Funding - # 128
Want to start a startup? Get funded by Y Combinator.
August 2010
Two years ago I wrote about what I called "a huge, unexploited opportunity in startup funding:"
the growing disconnect between VCs, whose current business model requires them to invest
large amounts, and a large class of startups that need less than they used to. Increasingly,
startups want a couple hundred thousand dollars, not a couple million. [1]
The opportunity is a lot less unexploited now. Investors have poured into this territory from both
directions. VCs are much more likely to make angel-sized investments than they were a year
ago. And meanwhile the past year has seen a dramatic increase in a new type of investor: the
super-angel, who operates like an angel, but using other people's money, like a VC.
Though a lot of investors are entering this territory, there is still room for more. The distribution
of investors should mirror the distribution of startups, which has the usual power law dropoff. So
there should be a lot more people investing tens or hundreds of thousands than millions. [2]
In fact, it may be good for angels that there are more people doing angel-sized deals, because
if angel rounds become more legitimate, then startups may start to opt for angel rounds even
when they could, if they wanted, raise series A rounds from VCs. One reason startups prefer
series A rounds is that they're more prestigious. But if angel investors become more active and
better known, they'll increasingly be able to compete with VCs in brand.
Of course, prestige isn't the main reason to prefer a series A round. A startup will probably get
more attention from investors in a series A round than an angel round. So if a startup is
choosing between an angel round and an A round from a good VC fund, I usually advise them
to take the A round. [3]
But while series A rounds aren't going away, I think VCs should be more worried about superangels than vice versa. Despite their name, the super-angels are really mini VC funds, and they
clearly have existing VCs in their sights.
They would seem to have history on their side. The pattern here seems the same one we see
when startups and established companies enter a new market. Online video becomes possible,
and YouTube plunges right in, while existing media companies embrace it only half-willingly,
driven more by fear than hope, and aiming more to protect their turf than to do great things for
users. Ditto for PayPal. This pattern is repeated over and over, and it's usually the invaders who
win. In this case the super-angels are the invaders. Angel rounds are their whole business, as
online video was for YouTube. Whereas VCs who make angel investments mostly do it as a way
to generate deal flow for series A rounds. [4]
On the other hand, startup investing is a very strange business. Nearly all the returns are
concentrated in a few big winners. If the super-angels merely fail to invest in (and to some
extent produce) the big winners, they'll be out of business, even if they invest in all the others.
VCs
Why don't VCs start doing smaller series A rounds? The sticking point is board seats. In a
traditional series A round, the partner whose deal it is takes a seat on the startup's board. If we
assume the average startup runs for 6 years and a partner can bear to be on 12 boards at
once, then a VC fund can do 2 series A deals per partner per year.
It has always seemed to me the solution is to take fewer board seats. You don't have to be on
the board to help a startup. Maybe VCs feel they need the power that comes with board
membership to ensure their money isn't wasted. But have they tested that theory? Unless
they've tried not taking board seats and found their returns are lower, they're not bracketing the
problem.
I'm not saying VCs don't help startups. The good ones help them a lot. What I'm saying is that
the kind of help that matters, you may not have to be a board member to give. [5]
How will this all play out? Some VCs will probably adapt, by doing more, smaller deals. I
wouldn't be surprised if by streamlining their selection process and taking fewer board seats,
VC funds could do 2 to 3 times as many series A rounds with no loss of quality.
But other VCs will make no more than superficial changes. VCs are conservative, and the
threat to them isn't mortal. The VC funds that don't adapt won't be violently displaced. They'll
edge gradually into a different business without realizing it. They'll still do what they will call
series A rounds, but these will increasingly be de facto series B rounds. [6]
In such rounds they won't get the 25 to 40% of the company they do now. You don't give up as
much of the company in later rounds unless something is seriously wrong. Since the VCs who
don't adapt will be investing later, their returns from winners may be smaller. But investing later
should also mean they have fewer losers. So their ratio of risk to return may be the same or
even better. They'll just have become a different, more conservative, type of investment.
Angels
In the big angel rounds that increasingly compete with series A rounds, the investors won't take
as much equity as VCs do now. And VCs who try to compete with angels by doing more,
smaller deals will probably find they have to take less equity to do it. Which is good news for
founders: they'll get to keep more of the company.
The deal terms of angel rounds will become less restrictive too—not just less restrictive than
series A terms, but less restrictive than angel terms have traditionally been.
In the future, angel rounds will less often be for specific amounts or have a lead investor. In the
old days, the standard m.o. for startups was to find one angel to act as the lead investor. You'd
negotiate a round size and valuation with the lead, who'd supply some but not all of the money.
Then the startup and the lead would cooperate to find the rest.
The future of angel rounds looks more like this: instead of a fixed round size, startups will do a
rolling close, where they take money from investors one at a time till they feel they have
enough. [7] And though there's going to be one investor who gives them the first check, and his
or her help in recruiting other investors will certainly be welcome, this initial investor will no
longer be the lead in the old sense of managing the round. The startup will now do that
themselves.
There will continue to be lead investors in the sense of investors who take the lead in advising a
startup. They may also make the biggest investment. But they won't always have to be the one
terms are negotiated with, or be the first money in, as they have in the past. Standardized
paperwork will do away with the need to negotiate anything except the valuation, and that will
get easier too.
If multiple investors have to share a valuation, it will be whatever the startup can get from the
first one to write a check, limited by their guess at whether this will make later investors balk.
But there may not have to be just one valuation. Startups are increasingly raising money on
convertible notes, and convertible notes have not valuations but at most valuation caps: caps on
what the effective valuation will be when the debt converts to equity (in a later round, or upon
acquisition if that happens first). That's an important difference because it means a startup
could do multiple notes at once with different caps. This is now starting to happen, and I predict
it will become more common.
Sheep
The reason things are moving this way is that the old way sucked for startups. Leads could (and
did) use a fixed size round as a legitimate-seeming way of saying what all founders hate to
hear: I'll invest if other people will. Most investors, unable to judge startups for themselves, rely
instead on the opinions of other investors. If everyone wants in, they want in too; if not, not.
Founders hate this because it's a recipe for deadlock, and delay is the thing a startup can least
afford. Most investors know this m.o. is lame, and few say openly that they're doing it. But the
craftier ones achieve the same result by offering to lead rounds of fixed size and supplying only
part of the money. If the startup can't raise the rest, the lead is out too. How could they go
ahead with the deal? The startup would be underfunded!
In the future, investors will increasingly be unable to offer investment subject to contingencies
like other people investing. Or rather, investors who do that will get last place in line. Startups
will go to them only to fill up rounds that are mostly subscribed. And since hot startups tend to
have rounds that are oversubscribed, being last in line means they'll probably miss the hot
deals. Hot deals and successful startups are not identical, but there is a significant correlation.
[8] So investors who won't invest unilaterally will have lower returns.
Investors will probably find they do better when deprived of this crutch anyway. Chasing hot
deals doesn't make investors choose better; it just makes them feel better about their choices.
I've seen feeding frenzies both form and fall apart many times, and as far as I can tell they're
mostly random. [9] If investors can no longer rely on their herd instincts, they'll have to think
more about each startup before investing. They may be surprised how well this works.
Deadlock wasn't the only disadvantage of letting a lead investor manage an angel round. The
investors would not infrequently collude to push down the valuation. And rounds took too long to
close, because however motivated the lead was to get the round closed, he was not a tenth as
motivated as the startup.
Increasingly, startups are taking charge of their own angel rounds. Only a few do so far, but I
think we can already declare the old way dead, because those few are the best startups.
They're the ones in a position to tell investors how the round is going to work. And if the
startups you want to invest in do things a certain way, what difference does it make what the
others do?
Traction
In fact, it may be slightly misleading to say that angel rounds will increasingly take the place of
series A rounds. What's really happening is that startup-controlled rounds are taking the place
of investor-controlled rounds.
This is an instance of a very important meta-trend, one that Y Combinator itself has been
based on from the beginning: founders are becoming increasingly powerful relative to investors.
So if you want to predict what the future of venture funding will be like, just ask: how would
founders like it to be? One by one, all the things founders dislike about raising money are going
to get eliminated. [10]
Using that heuristic, I'll predict a couple more things. One is that investors will increasingly be
unable to wait for startups to have "traction" before they put in significant money. It's hard to
predict in advance which startups will succeed. So most investors prefer, if they can, to wait till
the startup is already succeeding, then jump in quickly with an offer. Startups hate this as well,
partly because it tends to create deadlock, and partly because it seems kind of slimy. If you're a
promising startup but don't yet have significant growth, all the investors are your friends in
words, but few are in actions. They all say they love you, but they all wait to invest. Then when
you start to see growth, they claim they were your friend all along, and are aghast at the
thought you'd be so disloyal as to leave them out of your round. If founders become more
powerful, they'll be able to make investors give them more money upfront.
(The worst variant of this behavior is the tranched deal, where the investor makes a small initial
investment, with more to follow if the startup does well. In effect, this structure gives the investor
a free option on the next round, which they'll only take if it's worse for the startup than they
could get in the open market. Tranched deals are an abuse. They're increasingly rare, and
they're going to get rarer.) [11]
Investors don't like trying to predict which startups will succeed, but increasingly they'll have to.
Though the way that happens won't necessarily be that the behavior of existing investors will
change; it may instead be that they'll be replaced by other investors with different behavior—
that investors who understand startups well enough to take on the hard problem of predicting
their trajectory will tend to displace suits whose skills lie more in raising money from LPs.
Speed
The other thing founders hate most about fundraising is how long it takes. So as founders
become more powerful, rounds should start to close faster.
Fundraising is still terribly distracting for startups. If you're a founder in the middle of raising a
round, the round is the top idea in your mind, which means working on the company isn't. If a
round takes 2 months to close, which is reasonably fast by present standards, that means 2
months during which the company is basically treading water. That's the worst thing a startup
could do.
So if investors want to get the best deals, the way to do it will be to close faster. Investors don't
need weeks to make up their minds anyway. We decide based on about 10 minutes of reading
an application plus 10 minutes of in person interview, and we only regret about 10% of our
decisions. If we can decide in 20 minutes, surely the next round of investors can decide in a
couple days. [12]
There are a lot of institutionalized delays in startup funding: the multi-week mating dance with
investors; the distinction between termsheets and deals; the fact that each series A has
enormously elaborate, custom paperwork. Both founders and investors tend to take these for
granted. It's the way things have always been. But ultimately the reason these delays exist is
that they're to the advantage of investors. More time gives investors more information about a
startup's trajectory, and it also tends to make startups more pliable in negotiations, since they're
usually short of money.
These conventions weren't designed to drag out the funding process, but that's why they're
allowed to persist. Slowness is to the advantage of investors, who have in the past been the
ones with the most power. But there is no need for rounds to take months or even weeks to
close, and once founders realize that, it's going to stop. Not just in angel rounds, but in series A
rounds too. The future is simple deals with standard terms, done quickly.
One minor abuse that will get corrected in the process is option pools. In a traditional series A
round, before the VCs invest they make the company set aside a block of stock for future hires—
usually between 10 and 30% of the company. The point is to ensure this dilution is borne by the
existing shareholders. The practice isn't dishonest; founders know what's going on. But it makes
deals unnecessarily complicated. In effect the valuation is 2 numbers. There's no need to keep
doing this. [13]
The final thing founders want is to be able to sell some of their own stock in later rounds. This
won't be a change, because the practice is now quite common. A lot of investors hated the idea,
but the world hasn't exploded as a result, so it will happen more, and more openly.
Surprise
I've talked here about a bunch of changes that will be forced on investors as founders become
more powerful. Now the good news: investors may actually make more money as a result.
A couple days ago an interviewer asked me if founders having more power would be better or
worse for the world. I was surprised, because I'd never considered that question. Better or
worse, it's happening. But after a second's reflection, the answer seemed obvious. Founders
understand their companies better than investors, and it has to be better if the people with more
knowledge have more power.
One of the mistakes novice pilots make is overcontrolling the aircraft: applying corrections too
vigorously, so the aircraft oscillates about the desired configuration instead of approaching it
asymptotically. It seems probable that investors have till now on average been overcontrolling
their portfolio companies. In a lot of startups, the biggest source of stress for the founders is not
competitors but investors. Certainly it was for us at Viaweb. And this is not a new phenomenon:
investors were James Watt's biggest problem too. If having less power prevents investors from
overcontrolling startups, it should be better not just for founders but for investors too.
Investors may end up with less stock per startup, but startups will probably do better with
founders more in control, and there will almost certainly be more of them. Investors all compete
with one another for deals, but they aren't one another's main competitor. Our main competitor
is employers. And so far that competitor is crushing us. Only a tiny fraction of people who could
start a startup do. Nearly all customers choose the competing product, a job. Why? Well, let's
look at the product we're offering. An unbiased review would go something like this: Starting a
startup gives you more freedom and the opportunity to make a lot more money than a job, but
it's also hard work and at times very stressful. Much of the stress comes from dealing with
investors. If reforming the investment process removed that stress, we'd make our product
much more attractive. The kind of people who make good startup founders don't mind dealing
with technical problems—they enjoy technical problems—but they hate the type of problems
investors cause.
Investors have no idea that when they maltreat one startup, they're preventing 10 others from
happening, but they are. Indirectly, but they are. So when investors stop trying to squeeze a little
more out of their existing deals, they'll find they're net ahead, because so many more new deals
appear.
One of our axioms at Y Combinator is not to think of deal flow as a zero-sum game. Our main
focus is to encourage more startups to happen, not to win a larger share of the existing stream.
We've found this principle very useful, and we think as it spreads outward it will help later stage
investors as well.
"Make something people want" applies to us too.
Notes:
[1] In this essay I'm talking mainly about software startups. These points don't apply to types of startups that are still
expensive to start, e.g. in energy or biotech.
Even the cheap kinds of startups will generally raise large amounts at some point, when they want to hire a lot of
people. What has changed is how much they can get done before that.
[2] It's not the distribution of good startups that has a power law dropoff, but the distribution of potentially good
startups, which is to say, good deals. There are lots of potential winners, from which a few actual winners emerge
with superlinear certainty.
[3] As I was writing this, I asked some founders who'd taken series A rounds from top VC funds whether it was worth
it, and they unanimously said yes.
The quality of investor is more important than the type of round, though. I'd take an angel round from good angels
over a series A from a mediocre VC.
[4] Founders also worry that taking an angel investment from a VC means they'll look bad if the VC declines to
participate in the next round. The trend of VC angel investing is so new that it's hard to say how justified this worry is.
Another danger, pointed out by Mitch Kapor, is that if VCs are only doing angel deals to generate series A deal flow,
then their incentives aren't aligned with the founders'. The founders want the valuation of the next round to be high,
and the VCs want it to be low. Again, hard to say yet how much of a problem this will be.
[5] Josh Kopelman pointed out that another way to be on fewer boards at once is to take board seats for shorter
periods.
[6] Google was in this respect as so many others the pattern for the future. It would be great for VCs if the similarity
extended to returns. That's probably too much to hope for, but the returns may be somewhat higher, as I explain later.
[7] Doing a rolling close doesn't mean the company is always raising money. That would be a distraction. The point of
a rolling close is to make fundraising take less time, not more. With a classic fixed sized round, you don't get any
money till all the investors agree, and that often creates a situation where they all sit waiting for the others to act. A
rolling close usually prevents this.
[8] There are two (non-exclusive) causes of hot deals: the quality of the company, and domino effects among
investors. The former is obviously a better predictor of success.
[9] Some of the randomness is concealed by the fact that investment is a self fulfilling prophecy.
[10] The shift in power to founders is exaggerated now because it's a seller's market. On the next downtick it will
seem like I overstated the case. But on the next uptick after that, founders will seem more powerful than ever.
[11] More generally, it will become less common for the same investor to invest in successive rounds, except when
exercising an option to maintain their percentage. When the same investor invests in successive rounds, it often
means the startup isn't getting market price. They may not care; they may prefer to work with an investor they already
know; but as the investment market becomes more efficient, it will become increasingly easy to get market price if
they want it. Which in turn means the investment community will tend to become more stratified.
[12] The two 10 minuteses have 3 weeks between them so founders can get cheap plane tickets, but except for that
they could be adjacent.
[13] I'm not saying option pools themselves will go away. They're an administrative convenience. What will go away is
investors requiring them.
Thanks to Sam Altman, John Bautista, Trevor Blackwell, Paul Buchheit, Jeff Clavier, Patrick Collison, Ron Conway,
Matt Cohler, Chris Dixon, Mitch Kapor, Josh Kopelman, Pete Koomen, Carolynn Levy, Jessica Livingston, Ariel Poler,
Geoff Ralston, Naval Ravikant, Dan Siroker, Harj Taggar, and Fred Wilson for reading drafts of this.
The Acceleration of Addictiveness - # 127
July 2010
What hard liquor, cigarettes, heroin, and crack have in common is that they're all more
concentrated forms of less addictive predecessors. Most if not all the things we describe as
addictive are. And the scary thing is, the process that created them is accelerating.
We wouldn't want to stop it. It's the same process that cures diseases: technological progress.
Technological progress means making things do more of what we want. When the thing we
want is something we want to want, we consider technological progress good. If some new
technique makes solar cells x% more efficient, that seems strictly better. When progress
concentrates something we don't want to want — when it transforms opium into heroin — it
seems bad. But it's the same process at work. [1]
No one doubts this process is accelerating, which means increasing numbers of things we like
will be transformed into things we like too much. [2]
As far as I know there's no word for something we like too much. The closest is the colloquial
sense of "addictive." That usage has become increasingly common during my lifetime. And it's
clear why: there are an increasing number of things we need it for. At the extreme end of the
spectrum are crack and meth. Food has been transformed by a combination of factory farming
and innovations in food processing into something with way more immediate bang for the buck,
and you can see the results in any town in America. Checkers and solitaire have been replaced
by World of Warcraft and FarmVille. TV has become much more engaging, and even so it can't
compete with Facebook.
The world is more addictive than it was 40 years ago. And unless the forms of technological
progress that produced these things are subject to different laws than technological progress in
general, the world will get more addictive in the next 40 years than it did in the last 40.
The next 40 years will bring us some wonderful things. I don't mean to imply they're all to be
avoided. Alcohol is a dangerous drug, but I'd rather live in a world with wine than one without.
Most people can coexist with alcohol; but you have to be careful. More things we like will mean
more things we have to be careful about.
Most people won't, unfortunately. Which means that as the world becomes more addictive, the
two senses in which one can live a normal life will be driven ever further apart. One sense of
"normal" is statistically normal: what everyone else does. The other is the sense we mean when
we talk about the normal operating range of a piece of machinery: what works best.
These two senses are already quite far apart. Already someone trying to live well would seem
eccentrically abstemious in most of the US. That phenomenon is only going to become more
pronounced. You can probably take it as a rule of thumb from now on that if people don't think
you're weird, you're living badly.
Societies eventually develop antibodies to addictive new things. I've seen that happen with
cigarettes. When cigarettes first appeared, they spread the way an infectious disease spreads
through a previously isolated population. Smoking rapidly became a (statistically) normal thing.
There were ashtrays everywhere. We had ashtrays in our house when I was a kid, even though
neither of my parents smoked. You had to for guests.
As knowledge spread about the dangers of smoking, customs changed. In the last 20 years,
smoking has been transformed from something that seemed totally normal into a rather seedy
habit: from something movie stars did in publicity shots to something small huddles of addicts
do outside the doors of office buildings. A lot of the change was due to legislation, of course,
but the legislation couldn't have happened if customs hadn't already changed.
It took a while though—on the order of 100 years. And unless the rate at which social
antibodies evolve can increase to match the accelerating rate at which technological progress
throws off new addictions, we'll be increasingly unable to rely on customs to protect us. [3]
Unless we want to be canaries in the coal mine of each new addiction—the people whose sad
example becomes a lesson to future generations—we'll have to figure out for ourselves what to
avoid and how. It will actually become a reasonable strategy (or a more reasonable strategy) to
suspect everything new.
In fact, even that won't be enough. We'll have to worry not just about new things, but also about
existing things becoming more addictive. That's what bit me. I've avoided most addictions, but
the Internet got me because it became addictive while I was using it. [4]
Most people I know have problems with Internet addiction. We're all trying to figure out our own
customs for getting free of it. That's why I don't have an iPhone, for example; the last thing I
want is for the Internet to follow me out into the world. [5] My latest trick is taking long hikes. I
used to think running was a better form of exercise than hiking because it took less time. Now
the slowness of hiking seems an advantage, because the longer I spend on the trail, the longer
I have to think without interruption.
Sounds pretty eccentric, doesn't it? It always will when you're trying to solve problems where
there are no customs yet to guide you. Maybe I can't plead Occam's razor; maybe I'm simply
eccentric. But if I'm right about the acceleration of addictiveness, then this kind of lonely
squirming to avoid it will increasingly be the fate of anyone who wants to get things done. We'll
increasingly be defined by what we say no to.
Notes:
[1] Could you restrict technological progress to areas where you wanted it? Only in a limited way, without becoming a
police state. And even then your restrictions would have undesirable side effects. "Good" and "bad" technological
progress aren't sharply differentiated, so you'd find you couldn't slow the latter without also slowing the former. And in
any case, as Prohibition and the "war on drugs" show, bans often do more harm than good.
[2] Technology has always been accelerating. By Paleolithic standards, technology evolved at a blistering pace in the
Neolithic period.
[3] Unless we mass produce social customs. I suspect the recent resurgence of evangelical Christianity in the US is
partly a reaction to drugs. In desperation people reach for the sledgehammer; if their kids won't listen to them, maybe
they'll listen to God. But that solution has broader consequences than just getting kids to say no to drugs. You end up
saying no to science as well.
I worry we may be heading for a future in which only a few people plot their own itinerary through no-land, while
everyone else books a package tour. Or worse still, has one booked for them by the government.
[4] People commonly use the word "procrastination" to describe what they do on the Internet. It seems to me too mild
to describe what's happening as merely not-doing-work. We don't call it procrastination when someone gets drunk
instead of working.
[5] Several people have told me they like the iPad because it lets them bring the Internet into situations where a
laptop would be too conspicuous. In other words, it's a hip flask. (This is true of the iPhone too, of course, but this
advantage isn't as obvious because it reads as a phone, and everyone's used to those.)
Thanks to Sam Altman, Patrick Collison, Jessica Livingston, and Robert Morris for reading drafts of this.
The Top Idea in Your Mind - # 126
Want to start a startup? Get funded by Y Combinator.
July 2010
I realized recently that what one thinks about in the shower in the morning is more important
than I'd thought. I knew it was a good time to have ideas. Now I'd go further: now I'd say it's
hard to do a really good job on anything you don't think about in the shower.
Everyone who's worked on difficult problems is probably familiar with the phenomenon of
working hard to figure something out, failing, and then suddenly seeing the answer a bit later
while doing something else. There's a kind of thinking you do without trying to. I'm increasingly
convinced this type of thinking is not merely helpful in solving hard problems, but necessary.
The tricky part is, you can only control it indirectly. [1]
I think most people have one top idea in their mind at any given time. That's the idea their
thoughts will drift toward when they're allowed to drift freely. And this idea will thus tend to get
all the benefit of that type of thinking, while others are starved of it. Which means it's a disaster
to let the wrong idea become the top one in your mind.
What made this clear to me was having an idea I didn't want as the top one in my mind for two
long stretches.
I'd noticed startups got way less done when they started raising money, but it was not till we
ourselves raised money that I understood why. The problem is not the actual time it takes to
meet with investors. The problem is that once you start raising money, raising money becomes
the top idea in your mind. That becomes what you think about when you take a shower in the
morning. And that means other questions aren't.
I'd hated raising money when I was running Viaweb, but I'd forgotten why I hated it so much.
When we raised money for Y Combinator, I remembered. Money matters are particularly likely
to become the top idea in your mind. The reason is that they have to be. It's hard to get money.
It's not the sort of thing that happens by default. It's not going to happen unless you let it
become the thing you think about in the shower. And then you'll make little progress on anything
else you'd rather be working on. [2]
(I hear similar complaints from friends who are professors. Professors nowadays seem to have
become professional fundraisers who do a little research on the side. It may be time to fix that.)
The reason this struck me so forcibly is that for most of the preceding 10 years I'd been able to
think about what I wanted. So the contrast when I couldn't was sharp. But I don't think this
problem is unique to me, because just about every startup I've seen grinds to a halt when they
start raising money ÿý or talking to acquirers.
You can't directly control where your thoughts drift. If you're controlling them, they're not drifting.
But you can control them indirectly, by controlling what situations you let yourself get into. That
has been the lesson for me: be careful what you let become critical to you. Try to get yourself
into situations where the most urgent problems are ones you want to think about.
You don't have complete control, of course. An emergency could push other thoughts out of
your head. But barring emergencies you have a good deal of indirect control over what
becomes the top idea in your mind.
I've found there are two types of thoughts especially worth avoiding ÿý thoughts like the Nile
Perch in the way they push out more interesting ideas. One I've already mentioned: thoughts
about money. Getting money is almost by definition an attention sink. The other is disputes.
These too are engaging in the wrong way: they have the same velcro-like shape as genuinely
interesting ideas, but without the substance. So avoid disputes if you want to get real work
done. [3]
Even Newton fell into this trap. After publishing his theory of colors in 1672 he found himself
distracted by disputes for years, finally concluding that the only solution was to stop publishing: I
see I have made myself a slave to Philosophy, but if I get free of Mr Linus's business I will
resolutely bid adew to it eternally, excepting what I do for my privat satisfaction or leave to come
out after me. For I see a man must either resolve to put out nothing new or become a slave to
defend it. [4] Linus and his students at Liege were among the more tenacious critics. Newton's
biographer Westfall seems to feel he was overreacting: Recall that at the time he wrote,
Newton's "slavery" consisted of five replies to Liege, totalling fourteen printed pages, over the
course of a year. I'm more sympathetic to Newton. The problem was not the 14 pages, but the
pain of having this stupid controversy constantly reintroduced as the top idea in a mind that
wanted so eagerly to think about other things.
Turning the other cheek turns out to have selfish advantages. Someone who does you an injury
hurts you twice: first by the injury itself, and second by taking up your time afterward thinking
about it. If you learn to ignore injuries you can at least avoid the second half. I've found I can to
some extent avoid thinking about nasty things people have done to me by telling myself: this
doesn't deserve space in my head. I'm always delighted to find I've forgotten the details of
disputes, because that means I hadn't been thinking about them. My wife thinks I'm more
forgiving than she is, but my motives are purely selfish.
I suspect a lot of people aren't sure what's the top idea in their mind at any given time. I'm often
mistaken about it. I tend to think it's the idea I'd want to be the top one, rather than the one that
is. But it's easy to figure this out: just take a shower. What topic do your thoughts keep returning
to? If it's not what you want to be thinking about, you may want to change something.
Notes:
[1] No doubt there are already names for this type of thinking, but I call it "ambient thought."
[2] This was made particularly clear in our case, because neither of the funds we raised was difficult, and yet in both
cases the process dragged on for months. Moving large amounts of money around is never something people treat
casually. The attention required increases with the amount—maybe not linearly, but definitely monotonically.
[3] Corollary: Avoid becoming an administrator, or your job will consist of dealing with money and disputes.
[4] Letter to Oldenburg, quoted in Westfall, Richard, Life of Isaac Newton, p. 107.
Thanks to Sam Altman, Patrick Collison, Jessica Livingston, and Robert Morris for reading drafts of this.
How to Lose Time and Money - # 125
July 2010
When we sold our startup in 1998 I suddenly got a lot of money. I now had to think about
something I hadn't had to think about before: how not to lose it. I knew it was possible to go
from rich to poor, just as it was possible to go from poor to rich. But while I'd spent a lot of the
past several years studying the paths from poor to rich, I knew practically nothing about the
paths from rich to poor. Now, in order to avoid them, I had to learn where they were.
So I started to pay attention to how fortunes are lost. If you'd asked me as a kid how rich people
became poor, I'd have said by spending all their money. That's how it happens in books and
movies, because that's the colorful way to do it. But in fact the way most fortunes are lost is not
through excessive expenditure, but through bad investments.
It's hard to spend a fortune without noticing. Someone with ordinary tastes would find it hard to
blow through more than a few tens of thousands of dollars without thinking "wow, I'm spending
a lot of money." Whereas if you start trading derivatives, you can lose a million dollars (as much
as you want, really) in the blink of an eye.
In most people's minds, spending money on luxuries sets off alarms that making investments
doesn't. Luxuries seem self-indulgent. And unless you got the money by inheriting it or winning
a lottery, you've already been thoroughly trained that self-indulgence leads to trouble. Investing
bypasses those alarms. You're not spending the money; you're just moving it from one asset to
another. Which is why people trying to sell you expensive things say "it's an investment."
The solution is to develop new alarms. This can be a tricky business, because while the alarms
that prevent you from overspending are so basic that they may even be in our DNA, the ones
that prevent you from making bad investments have to be learned, and are sometimes fairly
counterintuitive.
A few days ago I realized something surprising: the situation with time is much the same as with
money. The most dangerous way to lose time is not to spend it having fun, but to spend it doing
fake work. When you spend time having fun, you know you're being self-indulgent. Alarms start
to go off fairly quickly. If I woke up one morning and sat down on the sofa and watched TV all
day, I'd feel like something was terribly wrong. Just thinking about it makes me wince. I'd start to
feel uncomfortable after sitting on a sofa watching TV for 2 hours, let alone a whole day.
And yet I've definitely had days when I might as well have sat in front of a TV all day — days at
the end of which, if I asked myself what I got done that day, the answer would have been:
basically, nothing. I feel bad after these days too, but nothing like as bad as I'd feel if I spent the
whole day on the sofa watching TV. If I spent a whole day watching TV I'd feel like I was
descending into perdition. But the same alarms don't go off on the days when I get nothing
done, because I'm doing stuff that seems, superficially, like real work. Dealing with email, for
example. You do it sitting at a desk. It's not fun. So it must be work.
With time, as with money, avoiding pleasure is no longer enough to protect you. It probably was
enough to protect hunter-gatherers, and perhaps all pre-industrial societies. So nature and
nurture combine to make us avoid self-indulgence. But the world has gotten more complicated:
the most dangerous traps now are new behaviors that bypass our alarms about self-indulgence
by mimicking more virtuous types. And the worst thing is, they're not even fun.
Thanks to Sam Altman, Trevor Blackwell, Patrick Collison, Jessica Livingston, and Robert
Morris for reading drafts of this.
Organic Startup Ideas - # 124
Want to start a startup? Get funded by Y Combinator.
April 2010
The best way to come up with startup ideas is to ask yourself the question: what do you wish
someone would make for you?
There are two types of startup ideas: those that grow organically out of your own life, and those
that you decide, from afar, are going to be necessary to some class of users other than you.
Apple was the first type. Apple happened because Steve Wozniak wanted a computer. Unlike
most people who wanted computers, he could design one, so he did. And since lots of other
people wanted the same thing, Apple was able to sell enough of them to get the company
rolling. They still rely on this principle today, incidentally. The iPhone is the phone Steve Jobs
wants. [1]
Our own startup, Viaweb, was of the second type. We made software for building online stores.
We didn't need this software ourselves. We weren't direct marketers. We didn't even know when
we started that our users were called "direct marketers." But we were comparatively old when
we started the company (I was 30 and Robert Morris was 29), so we'd seen enough to know
users would need this type of software. [2]
There is no sharp line between the two types of ideas, but the most successful startups seem
to be closer to the Apple type than the Viaweb type. When he was writing that first Basic
interpreter for the Altair, Bill Gates was writing something he would use, as were Larry and
Sergey when they wrote the first versions of Google.
Organic ideas are generally preferable to the made up kind, but particularly so when the
founders are young. It takes experience to predict what other people will want. The worst ideas
we see at Y Combinator are from young founders making things they think other people will
want.
So if you want to start a startup and don't know yet what you're going to do, I'd encourage you
to focus initially on organic ideas. What's missing or broken in your daily life? Sometimes if you
just ask that question you'll get immediate answers. It must have seemed obviously broken to
Bill Gates that you could only program the Altair in machine language.
You may need to stand outside yourself a bit to see brokenness, because you tend to get used
to it and take it for granted. You can be sure it's there, though. There are always great ideas
sitting right under our noses. In 2004 it was ridiculous that Harvard undergrads were still using a
Facebook printed on paper. Surely that sort of thing should have been online.
There are ideas that obvious lying around now. The reason you're overlooking them is the same
reason you'd have overlooked the idea of building Facebook in 2004: organic startup ideas
usually don't seem like startup ideas at first. We know now that Facebook was very successful,
but put yourself back in 2004. Putting undergraduates' profiles online wouldn't have seemed like
much of a startup idea. And in fact, it wasn't initially a startup idea. When Mark spoke at a YC
dinner this winter he said he wasn't trying to start a company when he wrote the first version of
Facebook. It was just a project. So was the Apple I when Woz first started working on it. He
didn't think he was starting a company. If these guys had thought they were starting companies,
they might have been tempted to do something more "serious," and that would have been a
mistake.
So if you want to come up with organic startup ideas, I'd encourage you to focus more on the
idea part and less on the startup part. Just fix things that seem broken, regardless of whether it
seems like the problem is important enough to build a company on. If you keep pursuing such
threads it would be hard not to end up making something of value to a lot of people, and when
you do, surprise, you've got a company. [3]
Don't be discouraged if what you produce initially is something other people dismiss as a toy. In
fact, that's a good sign. That's probably why everyone else has been overlooking the idea. The
first microcomputers were dismissed as toys. And the first planes, and the first cars. At this
point, when someone comes to us with something that users like but that we could envision
forum trolls dismissing as a toy, it makes us especially likely to invest.
While young founders are at a disadvantage when coming up with made-up ideas, they're the
best source of organic ones, because they're at the forefront of technology. They use the latest
stuff. They only just decided what to use, so why wouldn't they? And because they use the
latest stuff, they're in a position to discover valuable types of fixable brokenness first.
There's nothing more valuable than an unmet need that is just becoming fixable. If you find
something broken that you can fix for a lot of people, you've found a gold mine. As with an
actual gold mine, you still have to work hard to get the gold out of it. But at least you know
where the seam is, and that's the hard part.
Notes:
[1] This suggests a way to predict areas where Apple will be weak: things Steve Jobs doesn't use. E.g. I doubt he is
much into gaming.
[2] In retrospect, we should have become direct marketers. If I were doing Viaweb again, I'd open our own online
store. If we had, we'd have understood users a lot better. I'd encourage anyone starting a startup to become one of
its users, however unnatural it seems.
[3] Possible exception: It's hard to compete directly with open source software. You can build things for programmers,
but there has to be some part you can charge for.
Thanks to Sam Altman, Trevor Blackwell, and Jessica Livingston for reading drafts of this.
Apple-s Mistake - # 123
Want to start a startup? Get funded by Y Combinator.
November 2009
I don't think Apple realizes how badly the App Store approval process is broken. Or rather, I
don't think they realize how much it matters that it's broken.
The way Apple runs the App Store has harmed their reputation with programmers more than
anything else they've ever done. Their reputation with programmers used to be great. It used to
be the most common complaint you heard about Apple was that their fans admired them too
uncritically. The App Store has changed that. Now a lot of programmers have started to see
Apple as evil.
How much of the goodwill Apple once had with programmers have they lost over the App
Store? A third? Half? And that's just so far. The App Store is an ongoing karma leak.
***
How did Apple get into this mess? Their fundamental problem is that they don't understand
software.
They treat iPhone apps the way they treat the music they sell through iTunes. Apple is the
channel; they own the user; if you want to reach users, you do it on their terms. The record
labels agreed, reluctantly. But this model doesn't work for software. It doesn't work for an
intermediary to own the user. The software business learned that in the early 1980s, when
companies like VisiCorp showed that although the words "software" and "publisher" fit together,
the underlying concepts don't. Software isn't like music or books. It's too complicated for a third
party to act as an intermediary between developer and user. And yet that's what Apple is trying
to be with the App Store: a software publisher. And a particularly overreaching one at that, with
fussy tastes and a rigidly enforced house style.
If software publishing didn't work in 1980, it works even less now that software development has
evolved from a small number of big releases to a constant stream of small ones. But Apple
doesn't understand that either. Their model of product development derives from hardware.
They work on something till they think it's finished, then they release it. You have to do that with
hardware, but because software is so easy to change, its design can benefit from evolution. The
standard way to develop applications now is to launch fast and iterate. Which means it's a
disaster to have long, random delays each time you release a new version.
Apparently Apple's attitude is that developers should be more careful when they submit a new
version to the App Store. They would say that. But powerful as they are, they're not powerful
enough to turn back the evolution of technology. Programmers don't use launch-fast-and-iterate
out of laziness. They use it because it yields the best results. By obstructing that process, Apple
is making them do bad work, and programmers hate that as much as Apple would.
How would Apple like it if when they discovered a serious bug in OS X, instead of releasing a
software update immediately, they had to submit their code to an intermediary who sat on it for
a month and then rejected it because it contained an icon they didn't like?
By breaking software development, Apple gets the opposite of what they intended: the version
of an app currently available in the App Store tends to be an old and buggy one. One developer
told me: As a result of their process, the App Store is full of half-baked applications. I make a
new version almost every day that I release to beta users. The version on the App Store feels
old and crappy. I'm sure that a lot of developers feel this way: One emotion is "I'm not really
proud about what's in the App Store", and it's combined with the emotion "Really, it's Apple's
fault." Another wrote: I believe that they think their approval process helps users by ensuring
quality. In reality, bugs like ours get through all the time and then it can take 4-8 weeks to get
that bug fix approved, leaving users to think that iPhone apps sometimes just don't work. Worse
for Apple, these apps work just fine on other platforms that have immediate approval processes.
Actually I suppose Apple has a third misconception: that all the complaints about App Store
approvals are not a serious problem. They must hear developers complaining. But partners and
suppliers are always complaining. It would be a bad sign if they weren't; it would mean you were
being too easy on them. Meanwhile the iPhone is selling better than ever. So why do they need
to fix anything?
They get away with maltreating developers, in the short term, because they make such great
hardware. I just bought a new 27" iMac a couple days ago. It's fabulous. The screen's too shiny,
and the disk is surprisingly loud, but it's so beautiful that you can't make yourself care.
So I bought it, but I bought it, for the first time, with misgivings. I felt the way I'd feel buying
something made in a country with a bad human rights record. That was new. In the past when I
bought things from Apple it was an unalloyed pleasure. Oh boy! They make such great stuff.
This time it felt like a Faustian bargain. They make such great stuff, but they're such assholes.
Do I really want to support this company?
***
Should Apple care what people like me think? What difference does it make if they alienate a
small minority of their users?
There are a couple reasons they should care. One is that these users are the people they want
as employees. If your company seems evil, the best programmers won't work for you. That hurt
Microsoft a lot starting in the 90s. Programmers started to feel sheepish about working there. It
seemed like selling out. When people from Microsoft were talking to other programmers and
they mentioned where they worked, there were a lot of self-deprecating jokes about having
gone over to the dark side. But the real problem for Microsoft wasn't the embarrassment of the
people they hired. It was the people they never got. And you know who got them? Google and
Apple. If Microsoft was the Empire, they were the Rebel Alliance. And it's largely because they
got more of the best people that Google and Apple are doing so much better than Microsoft
today.
Why are programmers so fussy about their employers' morals? Partly because they can afford
to be. The best programmers can work wherever they want. They don't have to work for a
company they have qualms about.
But the other reason programmers are fussy, I think, is that evil begets stupidity. An organization
that wins by exercising power starts to lose the ability to win by doing better work. And it's not
fun for a smart person to work in a place where the best ideas aren't the ones that win. I think
the reason Google embraced "Don't be evil" so eagerly was not so much to impress the outside
world as to inoculate themselves against arrogance. [1]
That has worked for Google so far. They've become more bureaucratic, but otherwise they
seem to have held true to their original principles. With Apple that seems less the case. When
you look at the famous 1984 ad now, it's easier to imagine Apple as the dictator on the screen
than the woman with the hammer. [2] In fact, if you read the dictator's speech it sounds
uncannily like a prophecy of the App Store. We have triumphed over the unprincipled
dissemination of facts.
We have created, for the first time in all history, a garden of pure ideology, where each worker
may bloom secure from the pests of contradictory and confusing truths. The other reason Apple
should care what programmers think of them is that when you sell a platform, developers make
or break you. If anyone should know this, Apple should. VisiCalc made the Apple II.
And programmers build applications for the platforms they use. Most applications—most
startups, probably—grow out of personal projects. Apple itself did. Apple made microcomputers
because that's what Steve Wozniak wanted for himself. He couldn't have afforded a
minicomputer. [3] Microsoft likewise started out making interpreters for little microcomputers
because Bill Gates and Paul Allen were interested in using them. It's a rare startup that doesn't
build something the founders use.
The main reason there are so many iPhone apps is that so many programmers have iPhones.
They may know, because they read it in an article, that Blackberry has such and such market
share. But in practice it's as if RIM didn't exist. If they're going to build something, they want to
be able to use it themselves, and that means building an iPhone app.
So programmers continue to develop iPhone apps, even though Apple continues to maltreat
them. They're like someone stuck in an abusive relationship. They're so attracted to the iPhone
that they can't leave. But they're looking for a way out. One wrote: While I did enjoy developing
for the iPhone, the control they place on the App Store does not give me the drive to develop
applications as I would like. In fact I don't intend to make any more iPhone applications unless
absolutely necessary. [4] Can anything break this cycle? No device I've seen so far could. Palm
and RIM haven't a hope. The only credible contender is Android. But Android is an orphan;
Google doesn't really care about it, not the way Apple cares about the iPhone. Apple cares
about the iPhone the way Google cares about search.
***
Is the future of handheld devices one locked down by Apple? It's a worrying prospect. It would
be a bummer to have another grim monoculture like we had in the 1990s. In 1995, writing
software for end users was effectively identical with writing Windows applications. Our horror at
that prospect was the single biggest thing that drove us to start building web apps.
At least we know now what it would take to break Apple's lock. You'd have to get iPhones out of
programmers' hands. If programmers used some other device for mobile web access, they'd
start to develop apps for that instead.
How could you make a device programmers liked better than the iPhone? It's unlikely you could
make something better designed. Apple leaves no room there. So this alternative device
probably couldn't win on general appeal. It would have to win by virtue of some appeal it had to
programmers specifically.
One way to appeal to programmers is with software. If you could think of an application
programmers had to have, but that would be impossible in the circumscribed world of the
iPhone, you could presumably get them to switch.
That would definitely happen if programmers started to use handhelds as development
machines—if handhelds displaced laptops the way laptops displaced desktops. You need more
control of a development machine than Apple will let you have over an iPhone.
Could anyone make a device that you'd carry around in your pocket like a phone, and yet would
also work as a development machine? It's hard to imagine what it would look like. But I've
learned never to say never about technology. A phone-sized device that would work as a
development machine is no more miraculous by present standards than the iPhone itself would
have seemed by the standards of 1995.
My current development machine is a MacBook Air, which I use with an external monitor and
keyboard in my office, and by itself when traveling. If there was a version half the size I'd prefer
it. That still wouldn't be small enough to carry around everywhere like a phone, but we're within
a factor of 4 or so. Surely that gap is bridgeable. In fact, let's make it an RFS. Wanted: Woman
with hammer.
Notes:
[1] When Google adopted "Don't be evil," they were still so small that no one would have expected them to be, yet.
[2] The dictator in the 1984 ad isn't Microsoft, incidentally; it's IBM. IBM seemed a lot more frightening in those days,
but they were friendlier to developers than Apple is now.
[3] He couldn't even afford a monitor. That's why the Apple I used a TV as a monitor.
[4] Several people I talked to mentioned how much they liked the iPhone SDK. The problem is not Apple's products
but their policies. Fortunately policies are software; Apple can change them instantly if they want to. Handy that, isn't
it?
Thanks to Sam Altman, Trevor Blackwell, Ross Boucher, James Bracy, Gabor Cselle, Patrick Collison, Jason
Freedman, John Gruber, Joe Hewitt, Jessica Livingston, Robert Morris, Teng Siong Ong, Nikhil Pandit, Savraj Singh,
and Jared Tame for reading drafts of this.
What Startups Are Really Like - # 122
Want to start a startup? Get funded by Y Combinator.
October 2009
(This essay is derived from a talk at the 2009 Startup School.)
I wasn't sure what to talk about at Startup School, so I decided to ask the founders of the
startups we'd funded. What hadn't I written about yet?
I'm in the unusual position of being able to test the essays I write about startups. I hope the
ones on other topics are right, but I have no way to test them. The ones on startups get tested
by about 70 people every 6 months.
So I sent all the founders an email asking what surprised them about starting a startup. This
amounts to asking what I got wrong, because if I'd explained things well enough, nothing
should have surprised them.
I'm proud to report I got one response saying: What surprised me the most is that everything
was actually fairly predictable! The bad news is that I got over 100 other responses listing the
surprises they encountered.
There were very clear patterns in the responses; it was remarkable how often several people
had been surprised by exactly the same thing. These were the biggest:
1. Be Careful with Cofounders
This was the surprise mentioned by the most founders. There were two types of responses: that
you have to be careful who you pick as a cofounder, and that you have to work hard to maintain
your relationship.
What people wished they'd paid more attention to when choosing cofounders was character
and commitment, not ability. This was particularly true with startups that failed. The lesson: don't
pick cofounders who will flake.
Here's a typical reponse: You haven't seen someone's true colors unless you've worked with
them on a startup. The reason character is so important is that it's tested more severely than in
most other situations. One founder said explicitly that the relationship between founders was
more important than ability: I would rather cofound a startup with a friend than a stranger with
higher output. Startups are so hard and emotional that the bonds and emotional and social
support that come with friendship outweigh the extra output lost. We learned this lesson a long
time ago. If you look at the YC application, there are more questions about the commitment and
relationship of the founders than their ability.
Founders of successful startups talked less about choosing cofounders and more about how
hard they worked to maintain their relationship. One thing that surprised me is how the
relationship of startup founders goes from a friendship to a marriage. My relationship with my
cofounder went from just being friends to seeing each other all the time, fretting over the
finances and cleaning up shit. And the startup was our baby. I summed it up once like this: "It's
like we're married, but we're not fucking." S