Mind the Gap
May 2004
When people care enough about something to do it well, those who
do it best tend to be far better than everyone else.  There's a
huge gap between Leonardo and second-rate contemporaries like
Borgognone.  You see the same gap between Raymond Chandler and the
average writer of detective novels.  A top-ranked professional chess
player could play ten thousand games against an ordinary club player
without losing once.
Like chess or painting or writing novels, making money is a very
specialized skill.   But for some reason we treat this skill
differently.  No one complains when a few people surpass all the
rest at playing chess or writing novels, but when a few people make
more money than the rest, we get editorials saying this is wrong.
Why?  The pattern of variation seems no different than for any other
skill.  What causes people to react so strongly when the skill is
making money?
I think there are three reasons we treat making money as different:
the misleading model of wealth we learn as children; the disreputable
way in which, till recently, most fortunes were accumulated; and
the worry that great variations in income are somehow bad for
society.  As far as I can tell, the first is mistaken, the second
outdated, and the third empirically false.  Could it be that, in a
modern democracy, variation in income is actually a sign of health?
The Daddy Model of Wealth
When I was five I thought electricity was created by electric
sockets.  I didn't realize there were power plants out there
generating it.  Likewise, it doesn't occur to most kids that wealth
is something that has to be generated.  It seems to be something
that flows from parents.
Because of the circumstances in which they encounter it, children
tend to misunderstand wealth.  They confuse it with money.  They
think that there is a fixed amount of it.  And they think of it as
something that's distributed by authorities (and so should be
distributed equally), rather than something that has to be created
(and might be created unequally).
In fact, wealth is not money.  Money is just a convenient way of
trading one form of wealth for another.  Wealth is the underlying
stuff—the goods and services we buy.  When you travel to a
rich or poor country, you don't have to look at people's bank
accounts to tell which kind you're in.  You can
see
wealth—in buildings and streets, in the clothes and the health
of the people.
Where does wealth come from?  People make it.  This was easier to
grasp when most people lived on farms, and made many of the things
they wanted with their own hands.  Then you could see in the house,
the herds, and the granary the wealth that each family created.  It
was obvious then too that the wealth of the world was not a fixed
quantity that had to be shared out, like slices of a pie.  If you
wanted more wealth, you could make it.
This is just as true today, though few of us create wealth directly
for ourselves (except for a few vestigial domestic tasks).  Mostly
we create wealth for other people in exchange for money, which we
then trade for the forms of wealth we want.
[
1
]
Because kids are unable to create wealth, whatever they have has
to be given to them.  And when wealth is something you're given,
then of course it seems that it should be distributed equally.
[
2
]
As in most families it is.  The kids see to that.  "Unfair," they
cry, when one sibling gets more than another.
In the real world, you can't keep living off your parents.  If you
want something, you either have to make it, or do something of
equivalent value for someone else, in order to get them to give you
enough money to buy it.  In the real world, wealth is (except for
a few specialists like thieves and speculators) something you have
to create, not something that's distributed by Daddy.  And since
the ability and desire to create it vary from person to person,
it's not made equally.
You get paid by doing or making something people want, and those
who make more money are often simply better at doing what people
want.  Top actors make a lot more money than B-list actors.  The
B-list actors might be almost as charismatic, but when people go
to the theater and look at the list of movies playing, they want
that extra oomph that the big stars have.
Doing what people want is not the only way to get money, of course.
You could also rob banks, or solicit bribes, or establish a monopoly.
Such tricks account for some variation in wealth, and indeed for
some of the biggest individual fortunes, but they are not the root
cause of variation in income.  The root cause of variation in income,
as Occam's Razor implies, is the same as the root cause of variation
in every other human skill.
In the United States, the CEO of a large public company makes about
100 times as much as the average person.
[
3
]
Basketball players
make about 128 times as much, and baseball players 72 times as much.
Editorials quote this kind of statistic with horror.  But I have
no trouble imagining that one person could be 100 times as productive
as another.  In ancient Rome the price of
slaves
varied by
a factor of 50 depending on their skills.
[
4
]
And that's without
considering motivation, or the extra leverage in productivity that
you can get from modern technology.
Editorials about athletes' or CEOs' salaries remind me of early
Christian writers, arguing from first principles about whether the
Earth was round, when they could just walk outside and check.
[
5
]
How much someone's work is worth is not a policy question.  It's
something the market already determines.
"Are they really worth 100 of us?" editorialists ask.  Depends on
what you mean by worth.  If you mean worth in the sense of what
people will pay for their skills, the answer is yes, apparently.
A few CEOs' incomes reflect some kind of wrongdoing.  But are there
not others whose incomes really do reflect the wealth they generate?
Steve Jobs saved a company that was in a terminal decline.  And not
merely in the way a turnaround specialist does, by cutting costs;
he had to decide what Apple's next products should be.  Few others
could have done it.  And regardless of the case with CEOs, it's
hard to see how anyone could argue that the salaries of professional
basketball players don't reflect supply and demand.
It may seem unlikely in principle that one individual could really
generate so much more wealth than another.  The key to this mystery
is to revisit that question, are they really worth 100 of us?
Would
a basketball team trade one of their players for 100
random people?  What would Apple's next product look like if you
replaced Steve Jobs with a committee of 100 random people?
[
6
]
These
things don't scale linearly.  Perhaps the CEO or the professional
athlete has only ten times (whatever that means) the skill and
determination of an ordinary person.  But it makes all the difference
that it's concentrated in one individual.
When we say that one kind of work is overpaid and another underpaid,
what are we really saying?  In a free market, prices are determined
by what buyers want.  People like baseball more than  poetry, so
baseball players make more than poets.  To say that a certain kind
of work is underpaid is thus identical with saying that people want
the wrong things.
Well, of course people want the wrong things.  It seems odd to be
surprised by that.  And it seems even odder to say that it's
unjust
that certain kinds of work are underpaid.
[
7
]
Then
you're saying that it's unjust that people want the wrong things.
It's  lamentable that people prefer reality TV and corndogs to
Shakespeare and steamed vegetables, but unjust?  That seems like
saying that blue is heavy, or that up is circular.
The appearance of the word "unjust" here is the unmistakable spectral
signature of the Daddy Model.  Why else would this idea occur in
this odd context?  Whereas if the speaker were still operating on
the Daddy Model, and saw wealth as something that flowed from a
common source and had to be shared out, rather than something
generated by doing what other people wanted, this is exactly what
you'd get on noticing that some people made much more than others.
When we talk about "unequal distribution of income," we should
also ask, where does that income come from?
[
8
]
Who made the wealth
it represents?  Because to the extent that income varies simply
according to how much wealth people create, the distribution may
be unequal, but it's hardly unjust.
Stealing It
The second reason we tend to find great disparities of wealth
alarming is that for most of human history the usual way to accumulate
a fortune was to steal it: in pastoral societies by cattle raiding;
in agricultural societies by appropriating others' estates in times
of war, and taxing them in times of peace.
In conflicts, those on the winning side would receive the estates
confiscated from the losers.  In England in the 1060s, when William
the Conqueror distributed the estates of the defeated Anglo-Saxon
nobles to his followers, the conflict was military.  By the 1530s,
when Henry VIII distributed the estates of the monasteries to his
followers, it was mostly political.
[
9
]
But the principle was the
same.  Indeed, the same principle is at work now in Zimbabwe.
In more organized societies, like China, the ruler and his officials
used taxation instead of confiscation.  But here too we see the
same principle: the way to get rich was not to create wealth, but
to serve a ruler powerful enough to appropriate it.
This started to change in Europe with the rise of the middle class.
Now we think of the middle class as people who are neither rich nor
poor, but originally they were a distinct group.  In a feudal
society, there are just two classes: a warrior aristocracy, and the
serfs who work their estates.  The middle class were a new, third
group who lived in towns and supported themselves by manufacturing
and trade.
Starting in the tenth and eleventh centuries, petty nobles and
former serfs banded together in towns that gradually became powerful
enough to ignore the local feudal lords.
[
10
]
Like serfs, the middle
class made a living largely by creating wealth.  (In port cities
like Genoa and Pisa, they also engaged in piracy.) But unlike serfs
they had an incentive to create a lot of it.  Any wealth a serf
created belonged to his master.  There was not much point in making
more than you could hide.  Whereas the independence of the townsmen
allowed them to keep whatever wealth they created.
Once it became possible to get rich by creating wealth, society as
a whole started to get richer very rapidly.  Nearly everything we
have was created by the middle class.  Indeed, the other two classes
have effectively disappeared in industrial societies, and their
names been given to either end of the middle class.  (In the original
sense of the word, Bill Gates is middle class.)
But it was not till the Industrial Revolution that wealth creation
definitively replaced corruption as the best way to get rich.  In
England, at least, corruption only became unfashionable (and in
fact only started to be called "corruption") when there started to
be other, faster ways to get rich.
Seventeenth-century England was much like the third world today,
in that government office was a recognized route to wealth.  The
great fortunes of that time still derived more from what we would
now call corruption than from commerce.
[
11
]
By the nineteenth
century that had changed.  There continued to be bribes, as there
still are everywhere, but politics had by then been left to men who
were driven more by vanity than greed.  Technology had made it
possible to create wealth faster than you could steal it.  The
prototypical rich man of the nineteenth century was not a courtier
but an industrialist.
With the rise of the middle class, wealth stopped being a zero-sum
game.  Jobs and Wozniak didn't have to make us poor to make themselves
rich.  Quite the opposite: they created things that made our lives
materially richer.  They had to, or we wouldn't have paid for them.
But since for most of the world's history the main route to wealth
was to steal it, we tend to be suspicious of rich people.  Idealistic
undergraduates find their unconsciously preserved child's model of
wealth confirmed by eminent writers of the past.  It is a case of
the mistaken meeting the outdated.
"Behind every great fortune, there is a crime," Balzac wrote.  Except
he didn't.  What he actually said was that a great fortune with no
apparent cause was probably due to a crime well enough executed
that it had been forgotten.  If we were talking about Europe in
1000, or most of the third world today, the standard misquotation
would be spot on.  But Balzac lived in nineteenth-century France,
where the Industrial Revolution was well advanced.  He knew you
could make a fortune without stealing it.  After all, he did himself,
as a popular novelist.
[
12
]
Only a few countries (by no coincidence, the richest ones) have
reached this stage.  In most, corruption still has the upper hand.
In most, the fastest way to get wealth is by stealing it.  And so
when we see increasing differences in income in a rich country,
there is a tendency to worry that it's sliding back toward becoming
another Venezuela.  I think the opposite is happening. I think
you're seeing a country a full step ahead of Venezuela.
The Lever of Technology
Will technology increase the gap between rich and poor?  It will
certainly increase the gap between the productive and the unproductive.
That's the whole point of technology.   With a tractor an energetic
farmer could plow six times as much land in a day as he could with
a team of horses.  But only if he mastered a new kind of farming.
I've seen the lever of technology grow visibly in my own time.  In
high school I made money by mowing lawns and scooping ice cream at
Baskin-Robbins.  This was the only kind of work available at the
time.  Now high school kids could write software or design web
sites.  But only some of them will; the rest will still be scooping
ice cream.
I remember very vividly when in 1985 improved technology made it
possible for me to buy a computer of my own.  Within months I was
using it to make money as a freelance programmer.  A few years
before, I couldn't have done this.  A few years before, there was
no such
thing
as a freelance programmer.  But Apple created
wealth, in the form of powerful, inexpensive computers, and programmers
immediately set to work using it to create more.
As this example suggests, the rate at which technology increases
our productive capacity is probably exponential, rather than linear.
So we should expect to see ever-increasing variation in individual
productivity as time goes on.   Will that increase the gap between
rich and the poor?  Depends which gap you mean.
Technology should increase the gap in income, but it seems to
decrease other gaps.  A hundred years ago, the rich led a different
kind
of life from ordinary people.  They lived in houses
full of servants, wore elaborately uncomfortable clothes, and
travelled about in carriages drawn by teams of horses which themselves
required their own houses and servants.  Now, thanks to technology,
the rich live more like the average person.
Cars are a good example of why.  It's possible to buy expensive,
handmade cars that cost hundreds of thousands of dollars.  But there
is not much point.  Companies make more money by building a large
number of ordinary cars than a small number of expensive ones.  So
a company making a mass-produced car can afford to spend a lot more
on its design.  If you buy a custom-made car, something will always
be breaking.  The only point of buying one now is to advertise that
you can.
Or consider watches.  Fifty years ago, by spending a lot of money
on a watch you could get better performance.  When watches had
mechanical movements, expensive watches kept better time.  Not any
more.  Since the invention of the quartz movement, an ordinary Timex
is more accurate than a Patek Philippe costing hundreds of thousands
of dollars.
[
13
]
Indeed, as with expensive cars, if you're determined
to spend a lot of money on a watch, you have to put up with some
inconvenience to do it: as well as keeping worse time, mechanical
watches have to be wound.
The only thing technology can't cheapen is brand.  Which is precisely
why we hear ever more about it.  Brand is the residue left as the
substantive differences between rich and poor evaporate.  But what
label you have on your stuff is a much smaller matter than having
it versus not having it.  In 1900, if you kept a carriage, no one
asked what year or brand it was.  If you had one, you were rich.
And if you weren't rich, you took the omnibus or walked.  Now even
the poorest Americans drive cars, and it is only because we're so
well trained by advertising that we can even recognize the especially
expensive ones.
[
14
]
The same pattern has played out in industry after industry.  If
there is enough demand for something, technology will make it cheap
enough to sell in large volumes, and the mass-produced versions
will be, if not better, at least more convenient.
[
15
]
And there
is nothing the rich like more than convenience.  The rich people I
know drive the same cars, wear the same clothes, have the same kind
of furniture, and eat the same foods as my other friends.  Their
houses are in different neighborhoods, or if in the same neighborhood
are different sizes, but within them life is similar.  The houses
are made using the same construction techniques and contain much
the same objects.  It's inconvenient to do something expensive and
custom.
The rich spend their time more like everyone else too.  Bertie
Wooster seems long gone.  Now, most people who are rich enough not
to work do anyway.  It's not just social pressure that makes them;
idleness is lonely and demoralizing.
Nor do we have the social distinctions there were a hundred years
ago.   The novels and etiquette manuals of that period read now
like descriptions of some strange tribal society.  "With respect
to the continuance of friendships..." hints
Mrs. Beeton's Book
of Household Management
(1880), "it may be found necessary, in
some cases, for a mistress to relinquish, on assuming the responsibility
of a household, many of those commenced in the earlier part of her
life." A woman who married a rich man was expected to drop friends
who didn't.  You'd seem a barbarian if you behaved that way today.
You'd also have a very boring life.  People still tend to segregate
themselves somewhat, but much more on the basis of education than
wealth.
[
16
]
Materially and socially, technology seems to be decreasing the gap
between the rich and the poor, not increasing it.  If Lenin walked
around the offices of a company like Yahoo or Intel or Cisco, he'd
think communism had won.  Everyone would be wearing the same clothes,
have the same kind of office (or rather, cubicle) with the same
furnishings, and address one another by their first names instead
of by honorifics.  Everything would seem exactly as he'd predicted,
until he looked at their bank accounts.  Oops.
Is it a problem if technology increases that gap?  It doesn't seem
to be so far.  As it increases the gap in income, it seems to
decrease most other gaps.
Alternative to an Axiom
One often hears a policy criticized on the grounds that it would
increase the income gap between rich and poor.  As if it were an
axiom that this would be bad.  It might be true that increased
variation in income would be bad, but I don't see how we can say
it's
axiomatic.
Indeed, it may even be false, in industrial democracies.  In a
society of serfs and warlords, certainly, variation in income is a
sign of an underlying problem.  But serfdom is not the only cause
of variation in income.  A 747 pilot doesn't make 40 times as much
as a checkout clerk because he is a warlord who somehow holds her
in thrall.  His skills are simply much more valuable.
I'd like to propose an alternative idea: that in a modern society,
increasing variation in income is a sign of health.  Technology
seems to increase the variation in productivity at faster than
linear rates.  If we don't see corresponding variation in income,
there are three possible explanations: (a) that technical innovation
has stopped, (b) that the people who would create the most wealth
aren't doing it, or (c) that they aren't getting paid for it.
I think we can safely say that (a) and (b) would be bad.  If you
disagree, try living for a year using only the resources available
to the average Frankish nobleman in 800, and report back to us.
(I'll be generous and not send you back to the stone age.)
The only option, if you're going to have an increasingly prosperous
society without increasing variation in income, seems to be (c),
that people will create a lot of wealth without being paid for it.
That Jobs and Wozniak, for example, will cheerfully work 20-hour
days to produce the Apple computer for a society that allows them,
after taxes, to keep just enough of their income to match what they
would have made working 9 to 5 at a big company.
Will people create wealth if they can't get paid for it?  Only if
it's fun.  People will write operating systems for free.  But they
won't install them, or take support calls, or train customers to
use them.  And at least 90% of the work that even the highest tech
companies do is of this second, unedifying kind.
All the unfun kinds of wealth creation slow dramatically in a society
that confiscates private fortunes.  We can confirm this empirically.
Suppose you hear a strange noise that you think may be due to a
nearby fan.  You turn the fan off, and the noise stops.  You turn
the fan back on, and the noise starts again.  Off, quiet.  On,
noise.  In the absence of other information, it would seem the noise
is caused by the fan.
At various times and places in history, whether you could accumulate
a fortune by creating wealth has been turned on and off.  Northern
Italy in 800, off (warlords would steal it).  Northern Italy in
1100, on.  Central France in 1100, off (still feudal).  England in
1800, on.  England in 1974, off (98% tax on investment income).
United States in 1974, on.  We've even had a twin study: West
Germany, on;  East Germany, off.  In every case, the creation of
wealth seems to appear and disappear like the noise of a fan as you
switch on and off the prospect of keeping it.
There is some momentum involved.  It probably takes at least a
generation to turn people into East Germans (luckily for England).
But if it were merely a fan we were studying, without all the extra
baggage that comes from the controversial topic of wealth, no one
would have any doubt that the fan was causing the noise.
If you suppress variations in income, whether by stealing private
fortunes, as feudal rulers used to do, or by taxing them away, as
some modern governments have done, the result always seems to be
the same.    Society as a whole ends up poorer.
If I had a choice of living in a society where I was materially
much better off than I am now, but was among the poorest, or in one
where I was the richest, but much worse off than I am now, I'd take
the first option.  If I had children, it would arguably be immoral
not to.  It's absolute poverty you want to avoid, not relative
poverty.  If, as the evidence so far implies, you have to have one
or the other in your society, take relative poverty.
You need rich people in your society not so much because in spending
their money they create jobs, but because of what they have to do
to
get
rich.  I'm not talking about the trickle-down effect
here.  I'm not saying that if you let Henry Ford get rich, he'll
hire you as a waiter at his next party.  I'm saying that he'll make
you a tractor to replace your horse.
Notes
[
1
]
Part of the reason this subject is so contentious is that some
of those most vocal on the subject of wealth—university
students, heirs, professors, politicians, and journalists—have
the least experience creating it.  (This phenomenon will be familiar
to anyone who has overheard conversations about sports in a bar.)
Students are mostly still on the parental dole, and have not stopped
to think about where that money comes from.  Heirs will be on the
parental dole for life.  Professors and politicians live within
socialist eddies of the economy, at one remove from the creation
of wealth, and are paid a flat rate regardless of how hard they
work.  And journalists as part of their professional code segregate
themselves from the revenue-collecting half of the businesses they
work for (the ad sales department).  Many of these people never
come face to face with the fact that the money they receive represents
wealth—wealth that, except in the case of journalists, someone
else created earlier.  They live in a world in which income
is
doled out by a central authority according to some abstract notion
of fairness (or randomly, in the case of heirs), rather than given
by other people in return for something they wanted, so it may seem
to them unfair that things don't work the same in the rest of the
economy.
(Some professors do create a great deal of wealth for
society.  But the money they're paid isn't a
quid pro quo
.
It's more in the nature of an investment.)
[
2
]
When one reads about the origins of the Fabian Society, it
sounds like something cooked up by the high-minded Edwardian
child-heroes of Edith Nesbit's
The Wouldbegoods
.
[
3
]
According to a study by the Corporate Library, the median total
compensation, including salary, bonus, stock grants, and the exercise
of stock options, of S&P 500 CEOs in 2002 was $3.65 million.
According to
Sports Illustrated
, the average NBA player's
salary during the 2002-03 season was $4.54 million, and the average
major league baseball player's salary at the start of the 2003
season was $2.56 million.  According to the Bureau of Labor
Statistics, the mean annual wage in the US in 2002 was $35,560.
[
4
]
In the early empire the price of an ordinary adult slave seems
to have been about 2,000 sestertii (e.g. Horace,
Sat.
ii.7.43).
A servant girl cost 600 (Martial vi.66), while Columella (iii.3.8)
says that a skilled vine-dresser was worth 8,000.  A doctor, P.
Decimus Eros Merula, paid 50,000 sestertii for his freedom (Dessau,
Inscriptiones
7812).  Seneca (
Ep.
xxvii.7) reports
that one Calvisius Sabinus paid 100,000 sestertii apiece for slaves
learned in the Greek classics.  Pliny (
Hist. Nat.
vii.39)
says that the highest price paid for a slave up to his time was
700,000 sestertii, for the linguist (and presumably teacher) Daphnis,
but that this had since been exceeded by actors buying their own
freedom.
Classical Athens saw a similar variation in prices.  An ordinary
laborer was worth about 125 to 150 drachmae.  Xenophon (
Mem.
ii.5) mentions prices ranging from 50 to 6,000 drachmae (for the
manager of a silver mine).
For more on the economics of ancient slavery see:
Jones, A. H. M., "Slavery in the Ancient World,"
Economic History
Review
, 2:9 (1956), 185-199, reprinted in Finley, M. I. (ed.),
Slavery in Classical Antiquity
, Heffer, 1964.
[
5
]
Eratosthenes (276—195 BC) used shadow lengths in different
cities to estimate the Earth's circumference.  He was off by only
about 2%.
[
6
]
No, and Windows, respectively.
[
7
]
One of the biggest divergences between the Daddy Model and
reality is the valuation of hard work.  In the Daddy Model, hard
work is in itself deserving.  In reality, wealth is measured by
what one delivers, not how much effort it costs.  If I paint someone's
house, the owner shouldn't pay me extra for doing it with a toothbrush.
It will seem to someone still implicitly operating on the Daddy
Model that it is unfair when someone works hard and doesn't get
paid much.  To help clarify the matter, get rid of everyone else
and put our worker on a desert island, hunting and gathering fruit.
If he's bad at it he'll work very hard and not end up with much
food.  Is this unfair?  Who is being unfair to him?
[
8
]
Part of the reason for the tenacity of the Daddy Model may be
the dual meaning of "distribution." When economists talk about
"distribution of income," they mean statistical distribution.  But
when you use the phrase frequently, you can't help associating it
with the other sense of the word (as in e.g. "distribution of alms"),
and thereby subconsciously seeing wealth as something that flows
from some central tap.  The word "regressive" as applied to tax
rates has a similar effect, at least on me; how can anything
regressive
be good?
[
9
]
"From the beginning of the reign Thomas Lord Roos was an assiduous
courtier of the young Henry VIII and was soon to reap the rewards.
In 1525 he was made a Knight of the Garter and given the Earldom
of Rutland.  In the thirties his support of the breach with Rome,
his zeal in crushing the Pilgrimage of Grace, and his readiness to
vote the death-penalty in the succession of spectacular treason
trials that punctuated Henry's erratic matrimonial progress made
him an obvious candidate for grants of monastic property."
Stone, Lawrence,
Family and Fortune: Studies in Aristocratic
Finance in the Sixteenth and Seventeenth Centuries
, Oxford
University Press, 1973, p. 166.
[
10
]
There is archaeological evidence for large settlements earlier,
but it's hard to say what was happening in them.
Hodges, Richard and David Whitehouse,
Mohammed, Charlemagne and
the Origins of Europe
, Cornell University Press, 1983.
[
11
]
William Cecil and his son Robert were each in turn the most
powerful minister of the crown, and both used their position to
amass fortunes among the largest of their times.  Robert in particular
took bribery to the point of treason.  "As Secretary of State and
the leading advisor to King James on foreign policy, [he] was a
special recipient of favour, being offered large bribes by the Dutch
not to make peace with Spain, and large bribes by Spain to make
peace." (Stone,
op. cit.
, p. 17.)
[
12
]
Though Balzac made a lot of money from writing, he was notoriously
improvident and was troubled by debts all his life.
[
13
]
A Timex will gain or lose about .5 seconds per day.  The most
accurate mechanical watch, the Patek Philippe 10 Day Tourbillon,
is rated at -1.5 to +2 seconds.  Its retail price is about $220,000.
[
14
]
If asked to choose which was more expensive, a well-preserved
1989 Lincoln Town Car ten-passenger limousine ($5,000) or a 2004
Mercedes S600 sedan ($122,000), the average Edwardian might well
guess wrong.
[
15
]
To say anything meaningful about income trends, you have to
talk about real income, or income as measured in what it can buy.
But the usual way of calculating real income ignores much of the
growth in wealth over time, because it depends on a consumer price
index created by bolting end to end a series of numbers that are
only locally accurate, and that don't include the prices of new
inventions until they become so common that their prices stabilize.
So while we might think it was very much better to live in a world
with antibiotics or air travel or an electric power grid than
without, real income statistics calculated in the usual way will
prove to us that we are only slightly richer for having these things.
Another approach would be to ask, if you were going back to the
year x in a time machine, how much would you have to spend on trade
goods to make your fortune?  For example, if you were going back
to 1970 it would certainly be less than $500, because the processing
power you can get for $500 today would have been worth at least
$150 million in 1970.  The function goes asymptotic fairly quickly,
because for times over a hundred years or so you could get all you
needed in present-day trash.  In 1800 an empty plastic drink bottle
with a screw top would have seemed a miracle of workmanship.
[
16
]
Some will say this amounts to the same thing, because the rich
have better opportunities for education.  That's a valid point.  It
is still possible, to a degree, to buy your kids' way into top
colleges by sending them to private schools that in effect hack the
college admissions process.
According to a 2002 report by the National Center for Education
Statistics, about 1.7% of American kids attend private, non-sectarian
schools.  At Princeton, 36% of the class of 2007 came from such
schools.  (Interestingly, the number at Harvard is significantly
lower, about 28%.)  Obviously this is a huge loophole.  It does at
least seem to be closing, not widening.
Perhaps the designers of admissions processes should take a lesson
from the example of computer security, and instead of just assuming
that their system can't be hacked, measure the degree to which it
is.
Spanish Translation


@TheStalwart There are certainly ups and downs in early stage startup valuations, but they're driven mostly by variations in how excited investors are about startups. E.g. valuations are high now because investors are (justifiably in my opinion) excited about AI.

@TheStalwart In practice the effects on early stage valuation are muted by (a) the fact that big exits, where all the returns are, will be 10 years in the future or more, and (b) the dynamics of fundraising; there's no such thing as value investing at the seed stage.

@TheStalwart You mean the value of a sufficiently large number of such bets should vary with the market's expectations about future growth? In theory yes. But in practice not so much.

@AliceFromQueens Meh, life is too short.

@SpencerHakimian So the markets are saying they expect the tariffs to decrease US economic growth by about half, from 3% to 1.5%?

@SpencerHakimian Presumably the message is that the markets expect decreased economic growth, but can you quantify it?

@mr_plumpkin @TheStalwart Only by 2x, whereas great vs ok founders can increase the outcome by 1000x or more.

@TheStalwart Early stage VCs are presumably looking better, because an early stage investment in a startup is mostly a bet on whether the founders are Larry & Sergey or not, and that is independent of global political and financial trends.

@MabreyTed Ted?

What does "this promise" refer to?

@TheFIREorg You won't let us edit the text of the email, but there is a missing linebreak before the last paragraph.


What You (Want to)* Want
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.
Irish Translation


@maxzamy Yes, YC has funded lots of African startups.

@Just__Joaning__ I'd recommend getting a cofounder and then applying for the next batch.

@kenwarner @waitbutwhy Well, the reason I didn't know how stupid he was is that I'd never heard him speak at any length. So probably there are other celebrities who are much stupider than I realize too.

@slip_trace I'll see your insults and raise you the actual data: https://t.co/fce3UspXDa

@pitdesi As long as you're considering moving east: https://t.co/kdpNE6FeAu

@shahidkamal Of the factors you list the one that worries me is that you need cofounders and don't have them. That's hard to fix on the day of the application deadline. So my recommendation would be to recruit cofounders and apply for the next batch.

@MebFaber The actual numbers: https://t.co/d1T37CStPt

@patio11 This made me laugh out loud. Yes, it's true, some of the most successful startups YC has funded applied at the last minute.

@0xAyush1 A deep understanding of the problem is good. Ideally because it's one you have yourself. But you don't need to have customers.

@HUNTERxp It's better to apply as a single founder than with a weak or undecided cofounder. On the other hand, maybe you can use the application deadline to make one of your friends commit.


@Ljungman Arguably a successful startup *always* increases the market size.

@ahistoryinart It's true, a lot of them do look threatening. I wonder what he does that makes them look that way. The starkness for one thing.

@IAPonomarenko How many would you estimate they have left?

@Itsjoeco It's not just that one word. There was a similar uptick all the words that signal wokeness in the early 2010s.

https://t.co/gxo2xFhwRp

@NoahCarl90 There's an important exception: organizations that have some demanding task they need to accomplish. They can't drift toward either wing.

@kendrictonn Jessica says it went fine. I felt slightly high, but definitely relaxed.

@tim_cook Steve wouldn't have shipped that ad. It would have pained him too much to watch.

When I try to get out of doing something because I'm sick, Jessica reminds me of time I gave a talk after having had general anesthesia earlier in the day.

@SpeechUnion It's discouraging that the first thing I've seen you say since I became a member appears to be false.

https://t.co/CZ0BiUfTUl

@unsexy_biz_guys It's hard to find a *good* one, because if you're not a programmer you can't judge programmers.


The suggestion that one should put links in replies is such an obviously broken workaround. Who, starting from scratch, would design Twitter to work like that?

There are a lot of people attributing crazy beliefs to Elon lately, but to me the clearest sign that he's not entirely rational is the continued deprioritization of tweets with links in them. Everyone can see that this makes Twitter worse.

@dbasch @projectkim Yeah, you're right. I shouldn't draw attention to him/her/it.

@ESYudkowsky Should we trust your opinions about AI risk?

Here's what happened to that startup's revenue graph in the next year (in blue). https://t.co/vhEXXEgXnS

@username_is_unq Individuals experiencing repairing.

@ericzawo Yeah, it was a bit like that, but more incomprehensible than indecipherable.

12 yo woke up at 3:00 am with what he thought was a good idea for part of a story, so he wrote it down. When he looked at his note the next morning, he was perplexed to find it said "The thing about kids is that the little fucks are immune to mustard gas."

@TwistedReels @Lunens__ Yes, his story was the main reason I lost interest in trying it.

@J_W_Bennett You guys need to get your story straight. Decide whether you want to claim that people coming to your house to repair your TV is still common, or whether the meaning of the word "repairman" has changed, and then stick to whichever one you choose.


The Best Essay
March 2024
Despite its title this isn't meant to be the best essay. My goal
here is to figure out what the best essay would be like.
It would be well-written, but you can write well about any topic.
What made it special would be what it was about.
Obviously some topics would be better than others. It probably
wouldn't be about this year's lipstick colors. But it wouldn't be
vaporous talk about elevated themes either. A good essay has to be
surprising. It has to tell people something they don't already know.
The best essay would be on the most important topic you could tell
people something surprising about.
That may sound obvious, but it has some unexpected consequences.
One is that science enters the picture like an elephant stepping
into a rowboat. For example, Darwin first described the idea of
natural selection in an essay written in 1844.
Talk about an
important topic you could tell people something surprising about.
If that's the test of a great essay, this was surely the best one
written in 1844.
And indeed, the best possible essay at any given
time would usually be one describing the most important scientific
or technological discovery it was possible to make.
[
1
]
Another unexpected consequence: I imagined when I started writing
this that the best essay would be fairly timeless — that the best
essay you could write in 1844 would be much the same as the best
one you could write now. But in fact the opposite seems to be true.
It might be true that the best painting would be timeless in this
sense. But it wouldn't be impressive to write an essay introducing
natural selection now. The best essay
now
would be one describing
a great discovery we didn't yet know about.
If the question of how to write the best possible essay reduces to
the question of how to make great discoveries, then I started with
the wrong question. Perhaps what this exercise shows is that we
shouldn't waste our time writing essays but instead focus on making
discoveries in some specific domain. But I'm interested in essays
and what can be done with them, so I want to see if there's some
other question I could have asked.
There is, and on the face of it, it seems almost identical to the
one I started with. Instead of asking
what would the best essay
be?
I should have asked
how do you write essays well?
Though
these seem only phrasing apart, their answers diverge. The answer
to the first question, as we've seen, isn't really about essay
writing. The second question forces it to be.
Writing essays, at its best, is a way of discovering ideas. How do
you do that well? How do you discover by writing?
An essay should ordinarily start with what I'm going to call a
question, though I mean this in a very general sense: it doesn't
have to be a question grammatically, just something that acts like
one in the sense that it spurs some response.
How do you get this initial question? It probably won't work to
choose some important-sounding topic at random and go at it.
Professional traders won't even trade unless they have what they
call an
edge
— a convincing story about why in some class of
trades they'll win more than they lose. Similarly, you shouldn't
attack a topic unless you have a way in — some new insight about
it or way of approaching it.
You don't need to have a complete thesis; you just need some kind
of gap you can explore. In fact, merely having questions about
something other people take for granted can be edge enough.
If you come across a question that's sufficiently puzzling, it could
be worth exploring even if it doesn't seem very momentous. Many an
important discovery has been made by pulling on a thread that seemed
insignificant at first. How can they
all
be finches?
[
2
]
Once you've got a question, then what? You start thinking out loud
about it. Not literally out loud, but you commit to a specific
string of words in response, as you would if you were talking. This
initial response is usually mistaken or incomplete. Writing converts
your ideas from vague to bad. But that's a step forward, because
once you can see the brokenness, you can fix it.
Perhaps beginning writers are alarmed at the thought of starting
with something mistaken or incomplete, but you shouldn't be, because
this is why essay writing works. Forcing yourself to commit to some
specific string of words gives you a starting point, and if it's
wrong, you'll see that when you reread it. At least half of essay
writing is rereading what you've written and asking
is this correct
and complete?
You have to be very strict when rereading, not just
because you want to keep yourself honest, but because a gap between
your response and the truth is often a sign of new ideas to be
discovered.
The prize for being strict with what you've written is not just
refinement. When you take a roughly correct answer and try to make
it exactly right, sometimes you find that you can't, and that the
reason is that you were depending on a false assumption. And when
you discard it, the answer turns out to be completely different.
[
3
]
Ideally the response to a question is two things: the first step
in a process that converges on the truth, and a source of additional
questions (in my very general sense of the word). So the process
continues recursively, as response spurs response.
[
4
]
Usually there are several possible responses to a question, which
means you're traversing a tree. But essays are linear, not tree-shaped,
which means you have to choose one branch to follow at each point.
How do you choose? Usually you should follow whichever offers the
greatest combination of generality and novelty. I don't consciously
rank branches this way; I just follow whichever seems most exciting;
but generality and novelty are what make a branch exciting.
[
5
]
If you're willing to do a lot of rewriting, you don't have to guess
right. You can follow a branch and see how it turns out, and if it
isn't good enough, cut it and backtrack. I do this all the time.
In this essay I've already cut a 17-paragraph subtree, in addition
to countless shorter ones. Maybe I'll reattach it at the end, or
boil it down to a footnote, or spin it off as its own essay; we'll
see.
[
6
]
In general you want to be quick to cut. One of the most dangerous
temptations in writing (and in software and painting) is to keep
something that isn't right, just because it contains a few good bits
or cost you a lot of effort.
The most surprising new question being thrown off at this point is
does it really matter what the initial question is?
If the space
of ideas is highly connected, it shouldn't, because you should be
able to get from any question to the most valuable ones in a few
hops. And we see evidence that it's highly connected in the way,
for example, that people who are obsessed with some topic can turn
any conversation toward it. But that only works if you know where
you want to go, and you don't in an essay. That's the whole point.
You don't want to be the obsessive conversationalist, or all your
essays will be about the same thing.
[
7
]
The other reason the initial question matters is that you usually
feel somewhat obliged to stick to it. I don't think about this when
I decide which branch to follow. I just follow novelty and generality.
Sticking to the question is enforced later, when I notice I've
wandered too far and have to backtrack. But I think this is
the optimal solution. You don't want the hunt for novelty and
generality to be constrained in the moment. Go with it and see what
you get.
[
8
]
Since the initial question does constrain you, in the best case it
sets an upper bound on the quality of essay you'll write. If you
do as well as you possibly can on the chain of thoughts that follow
from the initial question, the initial question itself is the only
place where there's room for variation.
It would be a mistake to let this make you too conservative though,
because you can't predict where a question will lead. Not if you're
doing things right, because doing things right means making
discoveries, and by definition you can't predict those. So the way
to respond to this situation is not to be cautious about which
initial question you choose, but to write a lot of essays. Essays
are for taking risks.
Almost any question can get you a good essay. Indeed, it took some
effort to think of a sufficiently unpromising topic in the third
paragraph, because any essayist's first impulse on hearing that the
best essay couldn't be about x would be to try to write it. But if
most questions yield good essays, only some yield great ones.
Can we predict which questions will yield great essays? Considering
how long I've been writing essays, it's alarming how novel that
question feels.
One thing I like in an initial question is outrageousness. I love
questions that seem naughty in some way — for example, by seeming
counterintuitive or overambitious or heterodox. Ideally all three.
This essay is an example. Writing about the best essay implies there
is such a thing, which pseudo-intellectuals will dismiss as reductive,
though it follows necessarily from the possibility of one essay
being better than another. And thinking about how to do something
so ambitious is close enough to doing it that it holds your attention.
I like to start an essay with a gleam in my eye. This could be just
a taste of mine, but there's one aspect of it that probably isn't:
to write a really good essay on some topic, you have to be interested
in it. A good writer can write well about anything, but to stretch
for the novel insights that are the raison d'etre of the essay, you
have to care.
If caring about it is one of the criteria for a good initial question,
then the optimal question varies from person to person. It also
means you're more likely to write great essays if you care about a
lot of different things. The more curious you are, the greater the
probable overlap between the set of things you're curious about and
the set of topics that yield great essays.
What other qualities would a great initial question have? It's
probably good if it has implications in a lot of different areas.
And I find it's a good sign if it's one that people think has already
been thoroughly explored. But the truth is that I've barely thought
about how to choose initial questions, because I rarely do it. I
rarely
choose
what to write about; I just start thinking about
something, and sometimes it turns into an essay.
Am I going to stop writing essays about whatever I happen to be
thinking about and instead start working my way through some
systematically generated list of topics? That doesn't sound like
much fun. And yet I want to write good essays, and if the initial
question matters, I should care about it.
Perhaps the answer is to go one step earlier: to write about whatever
pops into your head, but try to ensure that what pops into your
head is good. Indeed, now that I think about it, this has to be the
answer, because a mere list of topics wouldn't be any use if you
didn't have edge with any of them. To start writing an essay, you
need a topic plus some initial insight about it, and you can't
generate those systematically. If only.
[
9
]
You can probably cause yourself to have more of them, though. The
quality of the ideas that come out of your head depends on what goes
in, and you can improve that in two dimensions, breadth and depth.
You can't learn everything, so getting breadth implies learning
about topics that are very different from one another. When I tell
people about my book-buying trips to Hay and they ask what I buy
books about, I usually feel a bit sheepish answering, because the
topics seem like a laundry list of unrelated subjects. But perhaps
that's actually optimal in this business.
You can also get ideas by talking to people, by doing and building
things, and by going places and seeing things. I don't think it's
important to talk to new people so much as the sort of people who
make you have new ideas. I get more new ideas after talking for an
afternoon with Robert Morris than from talking to 20 new smart
people. I know because that's what a block of office hours at Y
Combinator consists of.
While breadth comes from reading and talking and seeing, depth comes
from doing. The way to really learn about some domain is to have
to solve problems in it. Though this could take the form of writing,
I suspect that to be a good essayist you also have to do, or have
done, some other kind of work. That may not be true for most other
fields, but essay writing is different. You could spend half your
time working on something else and be net ahead, so long as it was
hard.
I'm not proposing that as a recipe so much as an encouragement to
those already doing it. If you've spent all your life so far working
on other things, you're already halfway there. Though of course to
be good at writing you have to like it, and if you like writing
you'd probably have spent at least some time doing it.
Everything I've said about initial questions applies also to the
questions you encounter in writing the essay. They're the same
thing; every subtree of an essay is usually a shorter essay, just
as every subtree of a Calder mobile is a smaller mobile. So any
technique that gets you good initial questions also gets you good
whole essays.
At some point the cycle of question and response reaches what feels
like a natural end. Which is a little suspicious; shouldn't every
answer suggest more questions? I think what happens is that you
start to feel sated. Once you've covered enough interesting ground,
you start to lose your appetite for new questions. Which is just
as well, because the reader is probably feeling sated too. And it's
not lazy to stop asking questions, because you could instead be
asking the initial question of a new essay.
That's the ultimate source of drag on the connectedness of ideas:
the discoveries you make along the way. If you discover enough
starting from question A, you'll never make it to question B. Though
if you keep writing essays you'll gradually fix this problem by
burning off such discoveries. So bizarrely enough, writing lots of
essays makes it as if the space of ideas were more highly connected.
When a subtree comes to an end, you can do one of two things. You
can either stop, or pull the Cubist trick of laying separate subtrees
end to end by returning to a question you skipped earlier. Usually
it requires some sleight of hand to make the essay flow continuously
at this point, but not this time. This time I actually need an
example of the phenomenon. For example, we discovered earlier that
the best possible essay wouldn't usually be timeless in the way the
best painting would. This seems surprising enough to be
worth investigating further.
There are two senses in which an essay can be timeless: to be about
a matter of permanent importance, and always to have the same effect
on readers. With art these two senses blend together. Art that
looked beautiful to the ancient Greeks still looks beautiful to us.
But with essays the two senses diverge, because essays
teach, and you can't teach people something they already know.
Natural selection is certainly a matter of permanent importance,
but an essay explaining it couldn't have the same effect on us that
it would have had on Darwin's contemporaries, precisely because his
ideas were so successful that everyone already knows about them.
[
10
]
I imagined when I started writing this that the best possible essay
would be timeless in the stricter, evergreen sense: that it would
contain some deep, timeless wisdom that would appeal equally to
Aristotle and Feynman. That doesn't seem to be true. But if the
best possible essay wouldn't usually be timeless in this stricter
sense, what would it take to write essays that were?
The answer to that turns out to be very strange: to be the evergreen
kind of timeless, an essay has to be ineffective, in the sense that
its discoveries aren't assimilated into our shared culture. Otherwise
there will be nothing new in it for the second generation of readers.
If you want to surprise readers not just now but in the future as
well, you have to write essays that won't stick — essays that,
no matter how good they are, won't become part of what people in
the future learn before they read them.
[
11
]
I can imagine several ways to do that. One would be to write about
things people never learn. For example, it's a long-established
pattern for ambitious people to chase after various types of prizes,
and only later, perhaps too late, to realize that some of them
weren't worth as much as they thought. If you write about that, you
can be confident of a conveyor belt of future readers to be surprised
by it.
Ditto if you write about the tendency of the inexperienced to overdo
things — of young engineers to produce overcomplicated solutions,
for example. There are some kinds of mistakes people never learn
to avoid except by making them. Any of those should be a timeless
topic.
Sometimes when we're slow to grasp things it's not just because
we're obtuse or in denial but because we've been deliberately lied
to. There are a lot of things adults
lie
to kids about, and when
you reach adulthood, they don't take you aside and hand you a list
of them. They don't remember which lies they told you, and most
were implicit anyway. So contradicting such lies will be a source
of surprises for as long as adults keep telling them.
Sometimes it's systems that lie to you. For example, the educational
systems in most countries train you to win by
hacking the test
. But
that's not how you win at the most important real-world tests, and
after decades of training, this is hard for new arrivals in the real
world to grasp. Helping them overcome such institutional lies will
work as long as the institutions remain broken.
[
12
]
Another recipe for timelessness is to write about things readers
already know, but in much more detail than can be transmitted
culturally. "Everyone knows," for example, that it can be rewarding
to have
kids
. But till you have them you don't know precisely what
forms that takes, and even then much of what you know you may never
have put into words.
I've written about all these kinds of topics. But I didn't do it
in a deliberate attempt to write essays that were timeless in the
stricter sense. And indeed, the fact that this depends on one's ideas
not sticking suggests that it's not worth making a deliberate attempt
to. You should write about topics of timeless importance, yes, but
if you do such a good job that your conclusions stick and future
generations find your essay obvious instead of novel, so much the
better. You've crossed into Darwin territory.
Writing about topics of timeless importance is an instance of
something even more general, though: breadth of applicability. And
there are more kinds of breadth than chronological — applying to
lots of different fields, for example. So breadth is the ultimate
aim.
I already aim for it. Breadth and novelty are the two things I'm
always chasing. But I'm glad I understand where timelessness fits.
I understand better where a lot of things fit now. This essay has
been a kind of tour of essay writing. I started out hoping to get
advice about topics; if you assume good writing, the only thing
left to differentiate the best essay is its topic. And I did get
advice about topics: discover natural selection. Yeah, that would
be nice. But when you step back and ask what's the best you can do
short of making some great discovery like that, the answer turns
out to be about procedure. Ultimately the quality of an essay is a
function of the ideas discovered in it, and the way you get them
is by casting a wide net for questions and then being very exacting
with the answers.
The most striking feature of this map of essay writing are the
alternating stripes of inspiration and effort required. The questions
depend on inspiration, but the answers can be got by sheer persistence.
You don't have to get an answer right the first time, but there's
no excuse for not getting it right eventually, because you can keep
rewriting till you do. And this is not just a theoretical possibility.
It's a pretty accurate description of the way I work. I'm rewriting
as we speak.
But although I wish I could say that writing great essays depends mostly
on effort, in the limit case it's inspiration that makes the
difference. In the limit case, the questions are the harder thing
to get. That pool has no bottom.
How to get more questions? That is the most important question of
all.
Notes
[
1
]
There might be some resistance to this conclusion on the
grounds that some of these discoveries could only be understood by
a small number of readers. But you get into all sorts of difficulties
if you want to disqualify essays on this account. How do you decide
where the cutoff should be? If a virus kills off everyone except a
handful of people sequestered at Los Alamos,
could an essay that had been disqualified now be eligible? Etc.
Darwin's 1844 essay was derived from an earlier version written in 1839.
Extracts from it were published in 1858.
[
2
]
When you find yourself very curious about an apparently minor
question, that's an exciting sign. Evolution has designed you to
pay attention to things that matter. So when you're very curious
about something random, that could mean you've unconsciously noticed
it's less random than it seems.
[
3
]
Corollary: If you're not intellectually honest, your writing
won't just be biased, but also boring, because you'll miss all the
ideas you'd have discovered if you pushed for the truth.
[
4
]
Sometimes this process begins before you start writing.
Sometimes you've already figured out the first few things you want
to say. Schoolchildren are often taught they should decide
everything
they want to say, and write this down as an outline before they
start writing the essay itself. Maybe that's a good way to get them
started — or not, I don't know — but it's antithetical to the
spirit of essay writing. The more detailed your outline, the less
your ideas can benefit from the sort of discovery that essays are for.
[
5
]
The problem with this type of "greedy" algorithm is that you
can end up on a local maximum. If the most valuable question is
preceded by a boring one, you'll overlook it. But I can't imagine
a better strategy. There's no lookahead except by writing. So use
a greedy algorithm and a lot of time.
[
6
]
I ended up reattaching the first 5 of the 17 paragraphs, and
discarding the rest.
[
7
]
Stephen Fry confessed to making use of this phenomenon when
taking exams at Oxford. He had in his head a standard essay about
some general literary topic, and he would find a way to turn the
exam question toward it and then just reproduce it again.
Strictly speaking it's the graph of ideas that would be highly
connected, not the space, but that usage would confuse people who
don't know graph theory, whereas people who do know it will get
what I mean if I say "space".
[
8
]
Too far doesn't depend just on the distance from the original
topic. It's more like that distance divided by the value of whatever
I've discovered in the subtree.
[
9
]
Or can you? I should try writing about this. Even if the
chance of succeeding is small, the expected value is huge.
[
10
]
There was a vogue in the 20th century for saying that the
purpose of art was also to teach. Some artists tried to justify
their work by explaining that their goal was not to produce something
good, but to challenge our preconceptions about art. And to be fair,
art can teach somewhat. The ancient Greeks' naturalistic sculptures
represented a new idea, and must have been extra exciting to
contemporaries on that account. But they still look good to us.
[
11
]
Bertrand Russell caused huge controversy in the early 20th
century with his ideas about "trial marriage." But they make boring
reading now, because they prevailed. "Trial marriage" is what we
call "dating."
[
12
]
If you'd asked me 10 years ago, I'd have predicted that schools
would continue to teach hacking the test for centuries. But now it
seems plausible that students will soon be taught individually by
AIs, and that exams will be replaced by ongoing, invisible
micro-assessments.
Thanks
to Sam Altman, Trevor Blackwell,
Jessica Livingston, Robert
Morris, Courtenay Pipkin, and Harj Taggar for reading drafts of
this.


Why There Aren't More Googles
Want to start a startup?
Get funded by
Y Combinator
.
April 2008
Umair Haque
wrote
recently that the reason there aren't more Googles is
that most startups get bought before they can change the world.
Google, despite serious interest from Microsoft and Yahoo—what
  must have seemed like lucrative interest at the time—didn't
  sell out. Google might simply have been nothing but Yahoo's or
  MSN's search box.
Why isn't it? Because Google had a deeply felt sense of purpose:
  a conviction to change the world for the better.
This has a nice sound to it, but it isn't true.
Google's founders were willing to sell early on.
They just wanted more than acquirers were willing to pay.
It was the same with Facebook.  They would have sold, but Yahoo blew it
by offering too little.
Tip for acquirers: when a startup turns you down, consider raising
your offer, because there's a good chance the outrageous price they
want will later seem a bargain.
[
1
]
From the evidence I've seen so far,
startups that turn down acquisition offers usually end up doing better.
Not always, but usually there's a bigger offer coming, or
perhaps even an IPO.
Of course, the reason startups do better when they turn down
acquisition offers is not necessarily that all such offers undervalue
startups.  More likely the reason is that the kind of founders who
have the balls to turn down a big offer also tend to be very
successful.  That spirit is exactly what you want in a startup.
While I'm sure Larry and Sergey do want to change the world, at
least now, the reason Google survived to become a big, independent
company is the same reason Facebook has so far remained independent:
acquirers underestimated them.
Corporate M&A is a strange business in that respect.  They consistently
lose the best deals, because turning down reasonable offers is the
most reliable test you could invent for whether a startup will make
it big.
VCs
So what's the real reason there aren't more Googles?  Curiously
enough, it's the same reason Google and Facebook have remained
independent: money guys undervalue the most innovative startups.
The reason there aren't more Googles is not that investors encourage
innovative startups to sell out, but that they won't even fund them.
I've learned a lot about VCs during the 3 years we've been doing Y
Combinator, because we often have to work quite closely with them.
The most surprising thing I've learned is how conservative they
are.  VC firms present an image of boldly encouraging innovation.
Only a handful actually do, and even they are more conservative in
reality than you'd guess from reading their sites.
I used to think of VCs as piratical: bold but unscrupulous.  On
closer acquaintance they turn out to be more like bureaucrats.
They're more upstanding than I used to think (the good ones, at
least), but less bold.  Maybe the VC industry has changed.  Maybe
they used to be bolder.
But I suspect it's the startup world that has
changed, not them.  The low cost of starting a startup means the
average good bet is a riskier one, but most existing VC firms still
operate as if they were investing in hardware startups in 1985.
Howard Aiken said "Don't worry about people stealing your ideas.
If your ideas are any good, you'll have to ram them down people's
throats." I have a similar feeling when I'm trying to convince VCs
to invest in startups Y Combinator has funded.  They're terrified
of really novel ideas, unless the founders are good enough salesmen
to compensate.
But it's the bold ideas that generate the biggest returns.  Any
really good new idea will seem bad to most people; otherwise someone
would already be doing it.  And
yet most VCs are driven by consensus, not just within their firms,
but within the VC community.  The biggest factor determining how a
VC will feel about your startup is how other VCs feel about it.  I
doubt they realize it, but this algorithm guarantees they'll miss
all the very best ideas.  The more people who have to like a new
idea, the more outliers you lose.
Whoever the next Google is, they're probably being told right now
by VCs to come back when they have more "traction."
Why are VCs so conservative?  It's probably a combination of factors.
The large size of their investments makes them conservative.
Plus they're investing other people's money, which makes
them worry they'll get in trouble if they do something risky and
it fails.  Plus most of them are money guys rather than technical
guys, so they don't understand what the startups they're investing
in do.
What's Next
The exciting thing about market economies is that stupidity equals
opportunity.  And so it is in this case.  There is a huge, unexploited
opportunity in startup investing.  Y Combinator funds startups at
the very beginning.  VCs will fund them once they're already starting
to succeed.  But between the two there is a substantial gap.
There are companies that will give $20k to a startup that has nothing
more than the founders, and there are companies that will give $2
million to a startup that's already taking off,
but there aren't enough investors who will give $200k to a startup
that seems very promising but still has some things to figure out.
This territory is occupied mostly by
individual angel investors—people like Andy Bechtolsheim, who
gave Google $100k when they seemed promising but still had some
things to figure out. I like angels, but there just aren't enough
of them, and investing is for most of them a part time job.
And yet as it gets cheaper to start startups, this sparsely occupied
territory is becoming more and more valuable.   Nowadays a lot of
startups don't want to raise multi-million dollar series A rounds.
They don't need that much money, and they don't want the hassles
that come with it.  The median startup coming out of Y Combinator
wants to raise $250-500k.  When they go to VC firms they have to
ask for more because they know VCs aren't interested in such small
deals.
VCs are money managers.  They're looking for ways to put large sums
to work.  But the startup world is evolving away from their current
model.
Startups have gotten cheaper.  That means they want less money, but
also that there are more of them.  So you can still get large returns
on large amounts of money; you just have to spread it more broadly.
I've tried to explain this to VC firms.  Instead of making one $2
million investment, make five $400k investments.  Would that mean
sitting on too many boards?  Don't sit on their boards.  Would that
mean too much due diligence?  Do less.  If you're investing at a
tenth the valuation, you only have to be a tenth as sure.
It seems obvious.  But I've proposed to several VC firms that they
set aside some money and designate one partner to make more, smaller
bets, and they react as if I'd proposed the partners all get nose
rings.  It's remarkable how wedded they are to their standard m.o.
But there is a big opportunity here, and one way or the other it's
going to get filled.  Either VCs will evolve down into this gap or,
more likely, new investors will appear to fill it.  That will be a
good thing when it happens, because these new investors will be
compelled by the structure of the investments they make to be ten
times bolder than present day VCs.  And that will get us a lot more
Googles.  At least, as long as acquirers remain stupid.
Notes
[
1
]
Another tip: If you want to get all that value, don't destroy the
startup after you buy it.  Give the founders enough autonomy that
they can grow the acquisition into what it would have become.
Thanks
to Sam Altman, Paul Buchheit, David Hornik, Jessica
Livingston, Robert Morris, and Fred Wilson for reading drafts of this.
Russian Translation