How to Make Wealth
Want to start a startup?
Get funded by
Y Combinator
.
May 2004
(This essay was originally published in
Hackers
& Painters
.)
If you wanted to get rich, how would you do it? I think your best
bet would be to start or join a startup.  That's been a
reliable way to get rich for hundreds of years.  The word "startup"
dates from the 1960s, but what happens in one is
very similar to the venture-backed trading voyages of the
Middle Ages.
Startups usually involve technology, so much so that the phrase
"high-tech startup" is almost redundant.  A startup is a small
company that takes on a hard technical problem.
Lots of people get rich knowing nothing more than that.
You don't have to know physics to be a good pitcher.  But
I think it could give you an edge to understand the underlying principles.
Why do startups have to be small?
Will a startup inevitably stop being a startup as it
grows larger?
And why do they so often work on
developing new technology?   Why are there so many startups
selling new drugs or computer software, and none selling corn oil
or laundry detergent?
The Proposition
Economically, you can think of a startup as a way to
compress your whole working life into a few years.  Instead
of working at a low intensity for forty years, you work as
hard as you possibly can for four.  This pays especially well
in technology, where you earn a premium for working fast.
Here is a brief sketch of the economic proposition.  If you're
a good hacker in your mid twenties, you can
get a job paying about $80,000 per year.  So on average
such a hacker must be
able to do at least $80,000 worth of work per year for the
company just to break even.  You could probably
work twice as many hours as a corporate employee, and if
you focus you can probably get three times as much done in
an hour.
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You should get another multiple of two, at
least, by eliminating the drag
of the pointy-haired middle
manager who would be your boss in a big company.
Then there is one more multiple: how much smarter are you
than your job description expects you to be?
Suppose another multiple of three.  Combine all these multipliers, and I'm
claiming you could be 36 times more
productive than you're expected to be in a random corporate
job.
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If a fairly good hacker is worth $80,000 a year at a
big company, then a smart
hacker working very hard without any corporate
bullshit to slow him down should be able to do work worth about
$3 million a year.
Like all back-of-the-envelope calculations, this one
has a lot of wiggle room.  I wouldn't try to
defend the actual numbers.  But I stand by the
structure of the calculation.  I'm not claiming
the multiplier is precisely 36, but it is certainly more
than 10, and probably rarely as high as 100.
If $3 million a year seems
high, remember that we're talking about the limit case:
the case where you not only have zero leisure time
but indeed work so hard that you endanger your health.
Startups are not magic.  They don't change the laws of
wealth creation.  They just represent a point at the far end of the curve.
There is a conservation law at work here: if
you want to make a million dollars, you have to endure a
million dollars' worth of pain.
For example, one way to
make a million dollars would be to work for the
Post Office your whole life, and save every penny of your
salary.  Imagine the stress of working for the Post
Office for fifty years.   In a startup you compress all
this stress into three or four years.  You do tend to get a
certain
bulk discount if you buy the economy-size pain,
but you can't evade the fundamental conservation law.
If starting a startup were easy, everyone would do it.
Millions, not Billions
If $3 million a year seems high to some people, it will seem
low to others.  Three
million?
How do I get to be a billionaire, like Bill Gates?
So let's get Bill Gates out of the way right now.  It's not
a good idea to use famous rich people
as examples, because the press only
write about the very richest, and these tend to be outliers.
Bill Gates is a smart, determined, and hardworking man,
but you need more than
that to make as much money as he has.  You also need to be
very lucky.
There is a large random
factor in the success of any company.  So the guys you end
up reading about in the papers are the ones who are very
smart, totally dedicated,
and
win the lottery.
Certainly Bill is smart and dedicated, but Microsoft also
happens to have been the beneficiary of one of the most spectacular
blunders in the history of business: the licensing deal for
DOS.  No doubt Bill did
everything he could to steer IBM into making that blunder,
and he has done an excellent job of exploiting it, but if
there had been one person with a brain on IBM's side,
Microsoft's future would have been very different.
Microsoft at that stage had little leverage over IBM.
They were effectively a component supplier.  If IBM had
required an exclusive license, as they should have, Microsoft
would still have signed the deal.  It would still have
meant a lot of money for them,  and IBM
could easily have gotten an operating system elsewhere.
Instead IBM ended up using all its power in the market
to give Microsoft control of the PC standard.  From
that point, all Microsoft had to do was execute.  They
never had to bet the company on a bold decision.  All they
had to do was play hardball with licensees and copy more
innovative products reasonably promptly.
If IBM hadn't made this mistake, Microsoft would
still have been a successful company, but it
could not have grown so big so fast.
Bill Gates would be rich, but he'd be somewhere
near the bottom of the Forbes 400 with the other guys his age.
There are a lot of ways to get
rich, and this essay is about only one of them.  This
essay is about how to make money by creating wealth and
getting paid for it.  There are plenty of other ways to
get money, including chance, speculation, marriage, inheritance,
theft, extortion, fraud, monopoly,
graft, lobbying,
counterfeiting, and prospecting.  Most of the greatest fortunes
have probably involved several of these.
The advantage of creating wealth, as a way to get rich,
is not just that it's more legitimate
(many of the other methods are now illegal)
but that it's more
straightforward.
You just have to do something people want.
Money Is Not Wealth
If you want to create wealth, it will help to understand what it is.
Wealth is not the same thing as money.
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Wealth is as old as
human history.  Far older, in fact; ants have wealth.
Money is a comparatively recent invention.
Wealth is the fundamental thing.  Wealth is stuff we want: food,
clothes, houses, cars, gadgets, travel to interesting places,
and so on.  You can have wealth without
having money.  If you had a magic machine that
could on command make you a car or cook you dinner or do your
laundry, or do anything else you wanted, you wouldn't need money.
Whereas if you were in the middle of Antarctica, where there is
nothing to buy, it wouldn't matter how much money you had.
Wealth is what you want, not money.  But if wealth is the important
thing, why does everyone talk about making money?   It is
a kind of shorthand: money is a way of moving wealth, and in practice
they are usually interchangeable.  But they are not the same thing,
and unless you plan to get rich by counterfeiting, talking about
making money
can make it harder to understand how to
make money.
Money is a side effect of specialization.
In a specialized society, most of the
things you need, you can't make for yourself.  If you want a potato
or a pencil or a place to live, you have to get it from someone
else.
How do you get the person who grows the potatoes to give you some?
By giving him something he wants in return.  But you can't get
very far by trading things directly with the people who
need them.  If you make violins, and none of the local
farmers wants one, how will you eat?
The solution societies find, as they get more specialized, is to
make the trade into a two-step process.  Instead of trading violins
directly for potatoes, you trade violins for, say, silver,
which you can then trade again for anything else you need.  The
intermediate stuff-- the
medium of exchange
-- can be anything that's
rare and portable.  Historically metals have been the most common,
but recently we've been using a medium of exchange, called the
dollar
,
that doesn't physically exist.  It works as a medium of exchange,
however, because its rarity
is guaranteed by the U.S. Government.
The advantage of a medium of exchange is that it makes trade work.
The disadvantage is that it tends to obscure what trade really
means.  People think that what a business does is make money.
But money is just the intermediate stage-- just
a shorthand-- for whatever people want.
What most businesses really do is make
wealth.  They do something people want.
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The Pie Fallacy
A surprising number of people retain from childhood the idea
that there is a fixed amount of wealth in the world.
There is, in any normal family, a fixed amount of
money
at
any moment.  But that's not the same thing.
When wealth is talked about in this context, it is often
described as a pie.  "You can't make the pie larger,"
say politicians.
When you're
talking about the amount of money in one family's bank
account, or the amount available to a government from one
year's tax revenue, this is true.
If one person gets more, someone else has to get less.
I can remember believing, as a child, that if a few
rich people had all the money, it left less for everyone else.
Many people seem to continue to believe something like this
well into adulthood.  This fallacy is usually there in the
background when you hear someone talking about how x percent
of the population have y percent of the wealth.  If you plan
to start a startup, then whether you realize it or not, you're
planning to disprove the Pie Fallacy.
What leads people astray here is the abstraction of
money.  Money is not wealth.  It's
just something we use to move wealth around.
So although there may be, in certain specific moments (like
your family, this month) a fixed amount of money available to
trade with other people for things you want,
there is not a fixed amount of wealth in the world.
You can make more wealth.
Wealth has been getting created and
destroyed (but on balance, created) for all of human history.
Suppose you own a beat-up old car.
Instead of sitting on your butt next
summer, you could spend the time restoring your car to pristine condition.
In doing so you create wealth.  The world is-- and
you specifically are-- one pristine old car the richer.  And not
just in some metaphorical way.  If you sell your car,
you'll get more for it.
In restoring your old car you have made yourself
richer.  You haven't made anyone else poorer.  So there is
obviously not a fixed pie.  And in fact, when you look at
it this way, you wonder why anyone would think there was.
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Kids know, without knowing they know, that they can create
wealth.  If you need to give someone a present and don't
have any money, you make one.  But kids are so bad at making
things that they consider home-made presents to be a distinct,
inferior, sort of thing to store-bought ones-- a mere expression
of the proverbial thought that counts.
And indeed, the lumpy ashtrays
we made for our parents did not have much of a resale market.
Craftsmen
The people most likely to grasp that wealth can be
created are the ones who are good at making things, the craftsmen.
Their hand-made objects become store-bought ones.
But with the rise of industrialization there are fewer and
fewer craftsmen.  One of the biggest remaining groups  is
computer programmers.
A programmer can sit down in front of a computer and
create wealth
.  A good piece of software is, in itself,
a valuable thing.
There is no manufacturing to confuse the issue.  Those
characters you type
are a complete, finished product.
If someone sat down and wrote a web
browser that didn't suck (a fine idea, by the way), the world
would be that much richer.
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Everyone in a company works together to create
wealth, in the sense of making more things people want.
Many of the employees (e.g. the people in the mailroom or
the personnel department) work at one remove from the
actual making of stuff.  Not the programmers.  They
literally think the product, one line at a time.
And so it's clearer to programmers that wealth is something
that's made, rather than being distributed, like slices of a
pie, by some imaginary Daddy.
It's also obvious to programmers that there are huge variations
in the rate at which wealth is created.  At Viaweb we had one
programmer who was a sort of monster of productivity.
I remember watching what he did one long day and estimating that
he had added several hundred thousand dollars
to the market value of the company.
A great programmer, on a roll, could
create a million dollars worth of wealth in a couple weeks.
A mediocre programmer over the same period will generate zero or
even negative wealth (e.g. by introducing bugs).
This is
why so many of the best programmers are libertarians.
In our world, you sink or swim, and there are no excuses.
When those far removed from the creation of wealth-- undergraduates,
reporters, politicians-- hear
that the richest 5% of the people have
half the total wealth, they tend to think
injustice!
An experienced programmer would be more likely to think
is that all?
The top 5% of programmers
probably write 99% of the good software.
Wealth can be created without being sold.  Scientists, till
recently at least, effectively donated the wealth they
created.  We are all richer for knowing about penicillin,
because we're less likely to die from infections.  Wealth
is whatever people want, and not dying is certainly something
we want.  Hackers often donate their work by
writing open source software that anyone can use for free.
I am much the richer for the operating system
FreeBSD, which I'm running on the computer I'm using now,
and so is Yahoo, which runs it on all their servers.
What a Job Is
In industrialized countries, people belong to one institution or
another at least until their twenties.  After all those years you get
used to the idea of belonging to a group of people who all get up
in the morning, go to some set of buildings, and do things that they
do not, ordinarily, enjoy doing.  Belonging to such a group becomes
part of your identity: name, age, role, institution.
If you have to introduce yourself, or
someone else describes you, it will be as something like, John
Smith, age 10, a student at such and such elementary school, or
John Smith, age 20, a student at such and such college.
When John Smith finishes school he is expected to get a job.  And
what getting a job seems to mean is joining another institution.
Superficially it's a lot like college.  You pick the companies you
want to work for and apply to join them.  If one likes you, you
become a member of this new group.  You get up in the morning and
go to a new set of buildings, and do things that you do not, ordinarily,
enjoy doing.  There are a few differences: life is not as much fun,
and you get paid, instead of paying, as you did in college.  But
the similarities feel greater than the differences.  John Smith is
now John Smith, 22, a software developer at such and such corporation.
In fact John Smith's
life has changed more than he realizes.  Socially, a company
looks much like college, but the deeper you go into the
underlying reality, the more different it gets.
What a company does, and has to do if it wants to continue to
exist, is earn money.  And the way most companies make money
is by creating wealth.  Companies can be so specialized that this
similarity is concealed, but it is not only manufacturing
companies that create wealth.  A big component of wealth is
location.
Remember that magic machine that could
make you cars and cook you dinner and so on?  It would not be
so useful if it delivered your dinner to a random location
in central Asia.
If wealth means what people want, companies that move
things also create wealth.  Ditto for
many other kinds of companies that don't make anything
physical.  Nearly all companies exist to do something people
want.
And that's what you do, as well, when you go to work for a company.
But here there is another layer that tends to obscure the underlying
reality.  In a company, the work you do is averaged together with
a lot of other people's.
You may not even be aware you're doing something people
want.  Your contribution may be indirect.  But the company as a
whole must be giving people something they want, or they won't make
any money.  And if they are paying you x dollars a year, then on
average you must be contributing at least x dollars a year worth
of work, or the company will be spending more than it makes,
and will go out of business.
Someone graduating from college thinks, and is told, that he needs
to get a job, as if the important thing were becoming a member of
an institution.  A more direct way to put it would be: you need to
start doing something people want.  You don't
need to
join a company to do that.  All a company is is a group of people
working together to do something people want.  It's doing something people
want that matters, not joining the group.
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For most people the
best plan probably is to go to work for some existing
company.  But it is a good idea to understand what's happening
when you do this.  A job means doing something people want,
averaged together with everyone else in that company.
Working Harder
That averaging gets to be a problem.
I think the single biggest problem afflicting large companies is the
difficulty of assigning a value to each person's work.
For the most part they punt.  In a
big company you get paid a fairly predictable salary for working
fairly hard.  You're expected not to be obviously incompetent or
lazy, but you're not expected to devote your whole life to your
work.
It turns out, though, that there are economies of scale in how much of your
life you devote to your work.  In the right kind of business,
someone who really devoted himself to work could generate ten or
even a hundred times as much wealth as an average
employee.  A programmer, for example, instead of chugging along
maintaining and updating an existing piece of software, could write
a whole new piece of software, and with it create a new source of
revenue.
Companies are not set up to reward people who want to do this.
You can't go to your boss and say, I'd like to start working ten
times as hard, so will you please pay me ten times as much? For
one thing, the official fiction is that you are already working as
hard as you can.  But a more serious problem is that the company
has no way of measuring the value of your work.
Salesmen are an exception.  It's easy
to measure how much revenue they generate, and they're
usually paid a percentage of it.  If a salesman wants to work harder,
he can just start doing it, and he will automatically
get paid proportionally more.
There is one other job besides sales where big companies can
hire first-rate people: in the top management jobs.
And for the same reason: their performance can
be measured.  The top managers are
held responsible for the performance of the entire company.
Because an ordinary employee's performance can't usually
be measured, he is not expected to do
more than put in a solid effort.  Whereas top management, like
salespeople, have to actually come up with the numbers.
The CEO of a company that tanks cannot plead that he put in
a solid effort.  If the company does badly, he's done badly.
A company that could pay all its employees so straightforwardly
would be enormously successful.  Many employees would work harder
if they could get paid for it.  More importantly,
such a company would attract people who wanted to work
especially hard.
It would crush its competitors.
Unfortunately, companies can't pay everyone like salesmen.  Salesmen
work alone.  Most employees' work is tangled together.  Suppose
a company makes some kind of consumer gadget.  The
engineers build a reliable gadget with all kinds of new features;
the industrial designers design a beautiful case for it; and then
the marketing people convince everyone that
it's something they've got to have.  How do you know how much of the
gadget's sales are due to each group's efforts?  Or, for that
matter, how much is due to the creators of past gadgets that gave
the company a reputation for quality?  There's no way to
untangle all their contributions.  Even if you could read the minds
of the consumers, you'd find these factors were all blurred together.
If you want to go faster, it's a problem to have your work
tangled together with a large number of other people's.  In a
large group, your performance is not separately measurable-- and
the rest of the group slows you down.
Measurement and Leverage
To get rich you need to get yourself in a situation with two
things, measurement and leverage.  You need to be in a
position where your performance can be measured, or there is
no way to get paid more by doing more.  And you have to
have leverage, in the sense that the decisions you make have
a big effect.
Measurement alone is not enough.  An example of a job with
measurement but not leverage is doing piecework in a
sweatshop.  Your performance is measured and you get paid
accordingly, but you have no scope for decisions.  The only
decision you get to make is how fast you work, and that
can probably only increase your earnings by a factor
of two or three.
An example of a job with both measurement and leverage would
be lead actor in a movie.  Your performance can be measured in the
gross of the movie.  And you have leverage in the sense that your
performance can make or break it.
CEOs also have both measurement and leverage.  They're measured,
in that the performance of the company is their performance.
And they have leverage in that their decisions
set the whole company moving in one direction or another.
I think everyone who gets rich by their own efforts will be
found to be in a situation with measurement and leverage.
Everyone I can think of does: CEOs, movie stars,
hedge fund managers, professional athletes.  A good hint to the
presence of leverage is the possibility of failure.
Upside must be balanced by downside, so if there is
big potential for gain there must also be a terrifying
possibility of loss.  CEOs, stars, fund managers, and athletes
all live with the sword hanging over their heads;
the moment they start to suck, they're out.  If you're in
a job that feels safe, you are not going to get rich,
because if there is no danger there is almost certainly no leverage.
But you don't have to become a CEO or a movie star to
be in a situation with measurement and leverage.  All you
need to do is be part of a small group working on a
hard problem.
Smallness = Measurement
If you can't measure the value of the work done by individual
employees, you can get close.  You can measure the value
of the work done by small groups.
One level at which you can accurately measure the revenue
generated by employees is at the level of the whole company.
When the company is small, you are thereby fairly close to
measuring the contributions of individual employees.  A viable
startup might only have ten employees, which puts you within a
factor of ten of measuring individual effort.
Starting or joining a startup is thus as close as most
people can get to saying to one's boss, I want to work ten times
as hard, so please pay me ten times as much.  There are two
differences: you're not saying it to your boss, but directly to the
customers (for whom your boss is only a proxy after all), and
you're not doing it individually, but along with a small group
of other ambitious people.
It will, ordinarily, be a group.  Except in a few unusual kinds
of work, like acting or writing books, you can't be a company
of one person.
And the people you work with had better be good, because it's their work that
yours is going to be averaged with.
A big company is like a giant galley driven by a thousand rowers.
Two things keep the speed of the
galley down.  One is that individual rowers don't see any
result from working harder.
The other is that, in a group of a
thousand people, the average rower is likely  to be
pretty average.
If you took ten people at random out of the big galley and
put them in a boat by themselves, they could probably go
faster.  They would have both carrot and stick to motivate
them.  An energetic rower would be encouraged by the thought
that he could have a visible effect on the speed of
the boat.  And if someone was lazy, the others would be more likely
to notice and complain.
But the real advantage of the ten-man boat shows when
you take the ten
best
rowers out of the big galley
and put them in a boat together.  They will have all
the extra motivation that comes from being in a small group.
But more importantly, by selecting that small a group
you can get the best rowers.  Each one will be in
the top 1%.  It's a much better deal for them to average
their work together with a small group of their peers than to
average it with everyone.
That's the real point of startups.  Ideally, you are getting
together with a group of other people who also want to work
a lot harder, and get paid a lot more, than they would in
a big company.  And because startups tend to get founded
by self-selecting groups of ambitious people who already
know one another (at least by reputation), the level of
measurement is more precise than you get from smallness alone.
A startup is not merely ten people, but ten people like you.
Steve Jobs once said that the success or failure of a startup
depends on the first ten employees.  I agree. If
anything, it's more like the first five.
Being small is not, in itself, what makes startups kick butt,
but rather that small groups can be select.
You don't want small in the sense of a
village, but small in the sense of an all-star team.
The larger a group, the closer its average member will be to the average
for the population as a whole.   So all other things being
equal, a very able person in a big company is probably
getting a bad deal, because his performance is dragged down by
the overall lower performance of the others.  Of course,
all other things often are not equal: the able person may
not care about money, or may prefer the stability of a large
company.  But a very able person who does care about money
will ordinarily do better to go off and work with a small
group of peers.
Technology = Leverage
Startups offer anyone a way to be in a situation with
measurement and leverage.
They allow measurement because they're small,
and they offer leverage because they
make money by inventing new technology.
What is technology?  It's
technique
. It's the way
we all do things.  And when
you discover a new way to do things, its value is multiplied
by all the people who use it.  It is the proverbial fishing
rod, rather than the fish.  That's the difference between a
startup and a restaurant or a barber shop.  You fry eggs or cut
hair one customer at a time.  Whereas if
you solve a technical problem that a lot of people care about,
you help everyone who uses your solution.
That's leverage.
If you look at history, it seems that most people
who got rich by creating wealth did it by developing
new technology.  You just can't fry eggs or cut hair fast enough.
What made the Florentines rich in 1200
was the discovery of new techniques for making the high-tech
product of the time, fine woven cloth.  What made the
Dutch rich in 1600 was the discovery of shipbuilding and
navigation techniques that enabled them to dominate the seas
of the Far East.
Fortunately there is a natural fit between smallness and
solving hard problems.  The leading edge of technology moves
fast.  Technology that's valuable today could be worthless
in a couple years.  Small companies are more at home in this
world, because they don't have layers of bureaucracy to
slow them down.
Also, technical advances tend to come from unorthodox approaches,
and small companies are less constrained by convention.
Big companies can develop technology.  They just can't do it
quickly.  Their size makes them slow and prevents
them from rewarding employees for the extraordinary
effort required.  So in practice big companies only get to develop
technology in fields where large capital requirements prevent startups from
competing with them, like microprocessors, power plants,
or passenger aircraft.  And even in those fields they depend heavily
on startups for components and ideas.
It's obvious that biotech or software startups exist to solve
hard technical problems, but
I think it will also be found to be true
in businesses that don't seem to be about technology.  McDonald's,
for example, grew big by designing a system, the McDonald's
franchise, that could then be reproduced at will all over the
face of the earth.  A McDonald's franchise is controlled by rules
so precise that it is practically
a piece of software.  Write once, run everywhere.
Ditto for Wal-Mart.  Sam Walton got rich not by being a
retailer, but by designing a new kind of store.
Use difficulty as a guide not just in selecting the overall
aim of your company, but also at decision points along the way.
At Viaweb one of our rules of thumb was
run upstairs.
Suppose you are a little, nimble guy being chased by a big,
fat, bully.  You open a door and find yourself in a
staircase.  Do you go up or down?  I say up.  The
bully can probably run downstairs as fast as you can.
Going upstairs his bulk will be more of a disadvantage.
Running upstairs is hard for you but even harder for him.
What this meant in practice was that we deliberately sought
hard problems.  If there were two features we could add to our
software, both equally valuable in proportion to their difficulty,
we'd always take the harder one.  Not just because it was
more valuable, but
because it was harder.
We delighted in forcing bigger, slower competitors
to follow us over difficult ground.
Like guerillas, startups prefer the difficult terrain of the
mountains, where the troops of the central government
can't follow.  I can remember times when we were just
exhausted after wrestling all day with some horrible technical
problem.  And I'd be delighted, because something that was
hard for us would be impossible for our competitors.
This is not just a good way to run a startup.  It's what
a startup is.
Venture capitalists know about this and have a phrase for it:
barriers to entry.
If you go to a VC with a new
idea and ask him to invest in it, one of the first things
he'll ask is, how hard would this be for someone else to
develop?  That is, how much difficult ground
have you put between yourself and potential pursuers?
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And you had better have a convincing explanation of why
your technology would be hard to duplicate.  Otherwise as
soon as some big company becomes aware of it, they'll make
their own, and with their brand name, capital, and
distribution clout, they'll take away your market overnight.
You'd be like guerillas caught in the open field by regular
army forces.
One way to put up barriers to entry is through patents.
But patents may not provide much protection.
Competitors commonly find ways to work around a patent.
And if they can't, they
may simply violate it and invite you to sue them.
A big company is not afraid to be sued; it's an everyday thing
for them.  They'll make sure that suing them is expensive and
takes a long time.
Ever heard of Philo Farnsworth?  He invented
television.  The reason you've never
heard of him is that his company was not the one to make
money from it.
[
8
]
The company that did was RCA, and
Farnsworth's reward for his efforts was a decade of
patent litigation.
Here, as so often, the best defense is a good offense.  If
you can develop technology that's simply too hard for
competitors to duplicate, you don't need to rely on other
defenses.  Start by picking a hard problem, and
then at every decision point, take the harder choice.
[
9
]
The Catch(es)
If it were simply a matter of working harder than
an ordinary employee and getting paid proportionately, it would
obviously be a good deal to start a startup.  Up to a point it
would be more fun. I don't think many people
like the slow pace of big companies, the interminable meetings,
the water-cooler conversations, the clueless middle managers,
and so on.
Unfortunately there are a couple catches.  One is that you
can't choose the point on the curve that you want to inhabit.
You can't decide, for example, that you'd like to work just
two or three times as hard, and get paid that much more.  When
you're running a startup, your competitors decide how
hard you work.  And they pretty much all make the same decision:
as hard as you possibly can.
The other catch is that the payoff is only on average proportionate
to your productivity.  There is, as I said before, a large
random multiplier in the success of any company.  So in
practice the deal is not that you're 30 times as productive and get
paid 30 times as much.  It is that you're 30 times as productive,
and get paid between zero and a thousand times as much.
If the mean is 30x, the median is probably zero.
Most startups tank, and not just the dogfood
portals we all heard about during
the Internet Bubble.  It's common for a startup
to be developing a genuinely good product, take slightly
too long to do it, run out of money, and have to shut down.
A startup is like a mosquito.  A bear can absorb a hit and a crab
is armored against one, but a mosquito is designed for one thing:
to score.  No energy is wasted on defense.  The defense of mosquitos,
as a species, is that there are a lot of them, but this is little
consolation to the individual mosquito.
Startups, like mosquitos, tend to be an all-or-nothing proposition.
And you don't generally know which of the two you're going to
get till the last minute.
Viaweb came close to tanking several times. Our trajectory
was like a sine wave.  Fortunately we got bought at
the top of the cycle, but it was damned close.   While we were
visiting Yahoo in California to talk about selling the company
to them, we had to borrow a conference room to reassure
an investor who was about to back out of a new round of funding
that we needed to stay alive.
The all-or-nothing aspect of startups was not something we wanted.
Viaweb's hackers were all extremely risk-averse.
If there had been some way just to work super hard and get
paid for it, without having a lottery mixed in, we would have
been delighted.  We would have much preferred a 100% chance of
$1 million to a 20% chance of $10 million, even though
theoretically the second is worth twice as much.   Unfortunately,
there is not currently any space in the business world where
you can get the first deal.
The closest you can get is by
selling your startup in the early stages, giving up upside
(and risk) for a smaller but guaranteed payoff.  We had a
chance to do this, and stupidly, as we then thought, let it slip by.
After that we became comically eager to sell.
For the next year or so,
if anyone expressed the slightest curiosity about Viaweb
we would try to sell them the company.  But there were no takers,
so we had to keep going.
It would have been a bargain to
buy us at an early stage, but companies doing acquisitions are not
looking for bargains.  A company big enough to acquire
startups will be big enough to be fairly conservative, and
within the company the people in charge of acquisitions will
be among the more conservative, because they are likely to be
business school types who joined the company late.
They would rather overpay for a safe choice.  So
it is easier to sell an established startup, even at a large
premium, than an early-stage one.
Get Users
I think it's a good idea to get bought, if you can.  Running a
business is different from growing one.
It is just as well to let a big company take over once you reach
cruising altitude.  It's
also financially wiser, because selling allows you to diversify.
What would you think of a financial advisor who put all his
client's assets into one volatile stock?
How do you get bought?  Mostly by doing the same things
you'd do if you didn't intend to sell the company.  Being
profitable, for example.   But getting bought is also an art
in its own right, and one that we spent a lot of time trying
to master.
Potential buyers will
always delay if they can.  The hard part about getting
bought is getting them to act.  For most people, the most powerful motivator
is not the hope of gain, but the fear of loss.  For potential
acquirers, the most powerful motivator is the prospect that
one of their competitors will buy you.  This, as we found,
causes CEOs to take red-eyes.
The second biggest is the worry that, if they don't buy you
now, you'll continue to grow rapidly and will cost more to
acquire later, or even become a competitor.
In both cases, what it all comes down to is users.
You'd think that a company about to buy you would do a lot of
research and decide for themselves how valuable your technology
was.  Not at all.  What they go by is the number of users you
have.
In effect, acquirers assume the customers know who has the
best technology.  And this is not as stupid as it sounds.  Users
are the only real proof that you've created wealth.  Wealth is
what people want, and if people aren't using your software,
maybe it's not just because you're bad at marketing.  Maybe it's
because you haven't made what they want.
Venture capitalists have a list of danger signs to watch out for.
Near the top is the company run by techno-weenies who are
obsessed with solving interesting technical problems, instead
of making users happy.  In a startup, you're not just trying to
solve problems.  You're trying to solve problems
that
users care about.
So I think you should make users the test, just as
acquirers do.  Treat a startup as an optimization problem
in which performance is measured by number of users.  As anyone
who has tried to optimize software knows, the key is measurement.
When you try to guess where your program is slow, and what would
make it faster, you almost always guess wrong.
Number of users may not be the perfect test, but it will
be very close.  It's what acquirers care about.  It's what
revenues depend on.
It's what makes competitors unhappy.
It's what impresses reporters, and potential
new users.  Certainly it's a better test than your a priori
notions of what problems are important to solve, no matter how
technically adept you are.
Among other things, treating a startup as an optimization
problem will help you avoid another
pitfall that VCs worry about, and rightly-- taking a long time
to develop a product.  Now we can recognize this as something
hackers already know to avoid: premature optimization.  Get a version
1.0 out there as soon as you can.  Until you have some users to
measure, you're optimizing based on guesses.
The ball you need to keep your eye on here is the underlying
principle that wealth is what people want.  If you plan to get
rich by creating wealth, you have to know what people want.
So few businesses really pay attention to making customers happy.
How often do you walk into a store, or call a company on the
phone, with a feeling of dread in the back of your mind?
When you hear "your call is important to us, please stay on
the line," do you think, oh good, now everything will be all right?
A restaurant can afford to serve the occasional burnt dinner.
But in technology, you cook one thing and that's what everyone
eats.  So any difference between what people want and what
you deliver is multiplied.
You please or annoy
customers wholesale.  The closer you can get to what they want,
the more wealth you generate.
Wealth and Power
Making wealth is not the only way to get rich.  For most of
human history it has not even been the most common.  Until
a few centuries ago,
the main sources of wealth were mines, slaves and serfs,
land, and cattle,
and the only ways to acquire these rapidly were by inheritance,
marriage, conquest, or confiscation.
Naturally wealth had a bad reputation.
Two things changed.  The first was the rule of law.  For most of the world's
history, if you did somehow accumulate a fortune, the ruler or his
henchmen
would find a way to steal it.
But in medieval Europe something new happened.
A new class of merchants and manufacturers
began to collect in towns.
[
10
]
Together they were able to withstand the local feudal
lord.  So
for the first time in our history, the bullies stopped stealing the
nerds' lunch money.
This was naturally a great incentive,
and possibly indeed the main cause of the second big change,
industrialization.
A great deal has been written about the causes of the Industrial
Revolution.  But surely a necessary, if not sufficient, condition
was that people who made fortunes be able to enjoy them in peace.
[
11
]
One piece of evidence is what happened to countries
that tried to return to the old model, like the Soviet
Union, and to a lesser extent Britain under the labor
governments of the 1960s and early 1970s.  Take away the incentive
of wealth, and technical innovation grinds to a halt.
Remember what a startup is, economically:
a way of saying, I want to work faster.  Instead of accumulating
money slowly by being paid a regular wage for fifty years, I
want to get it over with as soon as possible.  So governments
that forbid you to accumulate wealth are in effect decreeing
that you work slowly.  They're willing to let you earn $3 million over
fifty years, but they're not willing to let you work so hard that
you can do it in two.  They are like
the corporate boss that you can't go to and say, I want to work
ten times as hard, so please pay me ten times a much.
Except this is not a boss you can escape by starting your own
company.
The problem with working slowly is not just that technical
innovation happens slowly.  It's that it tends not to happen at all.
It's only when you're deliberately looking for hard problems,
as a way to use speed to the greatest advantage, that you take
on this kind of project.  Developing new technology is a
pain in the ass. It is, as Edison said, one percent
inspiration and ninety-nine percent perspiration.
Without the incentive of wealth, no one wants to do it.
Engineers will work on sexy projects like fighter planes and moon
rockets for ordinary salaries, but more mundane technologies
like light bulbs or semiconductors have to be developed by entrepreneurs.
Startups
are not just something that happened in Silicon Valley in
the last couple decades.  Since it became possible to
get rich by creating wealth, everyone who has done it has
used essentially the same recipe: measurement and leverage,
where measurement comes from working with a small
group, and leverage from developing new techniques.
The recipe was the same in Florence in 1200 as it is
in Santa Clara today.
Understanding this may help to answer an important question:
why Europe grew so powerful.
Was it something about the geography of
Europe?  Was it that Europeans are somehow racially superior?
Was it their religion?  The answer (or at least
the proximate cause) may be that the
Europeans
rode on the crest of a powerful new idea: allowing those who
made a lot of money to keep it.
Once you're allowed to do that,
people who want to get rich can do it by generating
wealth instead of stealing it.
The resulting technological growth translates not only
into wealth but into military power.  The theory that led to
the stealth plane was developed by a Soviet mathematician.
But because the Soviet Union didn't have a computer industry,
it remained for them a theory;
they didn't have hardware capable of executing the calculations
fast enough to design an actual airplane.
In that respect the Cold War teaches the same lesson as
World War II and, for that matter, most wars in recent history.
Don't let a ruling
class of warriors and politicians squash the entrepreneurs.
The same recipe that makes individuals rich
makes countries powerful.  Let the nerds keep their lunch
money, and you rule the world.
Notes
[
1
]
One valuable thing you tend to get only in startups is
uninterruptability
.  Different kinds of
work have different time quanta.  Someone proofreading a
manuscript
could probably be interrupted every fifteen minutes
with little loss of productivity.  But the time quantum for
hacking is very long: it might take an hour just to load
a problem into your head.  So the
cost of having someone from personnel
call you about a form you forgot to fill out can be huge.
This is why hackers give you such a baleful stare as they
turn from their screen to answer your question.  Inside
their heads a giant house of cards is tottering.
The mere possibility of being interrupted deters hackers
from starting hard projects.  This is why they
tend to work late at night, and why it's next to impossible
to write great software in a cubicle (except late at night).
One great advantage of startups is that they don't yet have
any of the people who interrupt you.  There is no personnel
department, and thus no form nor anyone to call you about it.
[
2
]
Faced with the idea that people working for startups might be
20 or 30 times as productive as those working for large companies,
executives at large companies will naturally wonder, how could
I get the people working for me to do that?  The answer is
simple: pay them to.
Internally most companies are run like Communist states.
If you believe in free markets, why not turn your company into one?
Hypothesis: A company will be maximally profitable when each
employee is paid in proportion to the wealth they generate.
[
3
]
Until recently even governments sometimes didn't grasp the
distinction between money and wealth.  Adam
Smith (
Wealth of Nations
, v:i) mentions several
that tried to preserve their
"wealth" by forbidding the export of gold or silver.
But having more of the medium of exchange would not make
a country richer; if you have more money chasing the same
amount of material wealth, the only result is higher prices.
[
4
]
There are many senses of the word "wealth," not all of
them material.  I'm not trying to make a deep philosophical
point here about which
is the true kind.  I'm writing about one specific,
rather technical sense of the word "wealth."  What
people will give you money for.
This is an interesting sort of wealth to study, because
it is the kind that prevents you from starving.
And what people will give you money for depends on them,
not you.
When you're starting a business,
it's easy to slide into thinking that customers
want what you do.  During the Internet Bubble I talked
to a woman who, because she liked the outdoors, was
starting an "outdoor portal." You know what
kind of business you should start if you like
the outdoors?  One to recover data from crashed hard disks.
What's the connection?  None at all.  Which is precisely my point.
If you want
to create wealth (in the narrow technical sense of not
starving) then you should be especially skeptical about any
plan that centers on things you like doing.
That is where your idea of what's valuable is least
likely to coincide with other people's.
[
5
]
In the average car restoration you probably do make everyone
else microscopically poorer, by doing a small amount of damage to
the environment.  While environmental costs should be taken
into account, they don't
make wealth a zero-sum game.  For example, if you repair
a machine that's broken because a part has come unscrewed,
you create wealth with no environmental cost.
[
5b
]
This essay was written before Firefox.
[
6
]
Many people feel confused and depressed in
their early twenties.  Life seemed so much more fun in college.
Well, of course it was.  Don't be fooled by the surface similarities.
You've gone from guest to servant.
It's possible to have fun in this new world.
Among other things, you now get to go behind the doors that say
"authorized personnel only."
But the change is a shock at first, and all the worse
if you're not consciously aware of it.
[
7
]
When VCs asked us how long it would take another startup
to duplicate our software, we used to reply that they probably
wouldn't be able to at all. I think this made us seem naive,
or liars.
[
8
]
Few technologies have one clear inventor.  So as
a rule, if you know the "inventor" of something
(the telephone, the assembly line, the airplane,
the light bulb, the transistor) it is because their
company made money from it, and the company's PR people worked
hard to spread the story.  If you don't know who invented
something (the automobile, the television, the computer,
the jet engine, the laser), it's because other companies
made all the money.
[
9
]
This is a good plan for life in general.
If you have two choices, choose the harder.
If you're trying to decide whether to go out running or
sit home and watch TV, go running.
Probably the reason this trick works so well is that
when you have two choices and one is harder, the
only reason you're even considering the other is laziness.
You know in the back of your mind what's the right thing
to do, and this trick merely forces you to acknowledge it.
[
10
]
It is probably no accident that the middle class
first appeared in northern Italy and the low countries,
where there were no strong central governments.   These two
regions were the richest of their time and became the twin
centers from which Renaissance civilization radiated.
If they no longer play that role, it is because
other places, like the United States, have been truer to the
principles they discovered.
[
11
]
It may indeed be a sufficient condition.  But if so, why didn't
the Industrial Revolution happen earlier?  Two possible (and
not incompatible) answers: (a) It did.
The Industrial Revolution was one in a series.
(b) Because in medieval towns, monopolies
and guild regulations initially slowed the development of new means
of production.
Comment
on this essay.
Russian Translation
Arabic Translation
Spanish Translation
You'll find this essay and 14 others in
Hackers & Painters
.


@McCormickProf Do you honestly think that he would have been capable of serving as president for 4 more years?

@JillFilipovic Isn't it forbidden now to say that men can never be pregnant?

@BW_Jones We hope...

@mattyglesias There's no new information. Everything in Biden's announcement was already priced in.

@Chris_arnade The voters will have a say in who wins the general election. So if they end up nominating someone that voters don't like, they'll be punished for it.

@Wealth_Theory @elonmusk @KanekoaTheGreat Once again, the simplest explanation is the true one. The members of his party saw the same thing that voters did, and they both decided he was too old.

@Wealth_Theory @elonmusk @KanekoaTheGreat Listen to yourself.

@KanekoaTheGreat Honestly, what bullshit. What else would you expect to happen if someone is declining due to old age, and in denial about it? His party rebels, and when enough of them urge him to drop out, he drops out.

@elonmusk @KanekoaTheGreat You don't have to assume that Biden was a puppet and the "real powers" have discarded him. This is how political parties work. The same thing happened with Nixon, when his party rebelled.

@elonmusk @KanekoaTheGreat You don't have to invent conspiracy theories to explain what happened here. The simplest explanation is also the true one. He was declining due to old age, and in denial about it. His party rebelled. When enough of them told him to drop out, he dropped out.


@Kukewilly You think you've got it bad? Almost all of mine are written by him.

@Rapahelz I generally agree with Mill, but I think his statement is tilted toward politics. The clash of ideas isn't what produces scientific truth. If anything it's a drag on the people who are right.

12 yo and I are sitting at breakfast. He's ready to leave. I'm reading a paper. So he pretends to be interested in something in the paper and asks for it, so that I'll get bored and go pay. I'd never have realized except that he smiled a little as I handed him the paper.

@robfoot His administration seems to have done a good job of getting Covid vaccines developed. So to the extent he was personally involved, that would have been an example.

@brucefenton They're not unrelated. It's a test of character, and character helps in solving most problems.

@structureship Whether there are other Republicans that they like.

@snowmaker Man does that get old quickly.

@yar_vol @nikitabier How else would you decide what to do?

@nikitabier Exception: At Viaweb we had a tour that caused users to create a small working online store. Whereupon the question switched from "Would you like to use our software to create a store?" to "Would you like to keep the store you've already made?" That converted way better.

@thejohnnystan It was the reaction to this tweet that made me write that. All I said was that this picture made me happy, and that that being able to read to a bunch of little kids would be a good threshold for politicians.


@ritendn Not only did I not say that, according to Google search, no one else has either. So feel free to say it, just don't attribute it to me.

@SyntaxAndChill @elivieira It seems like a lot of people would like to believe that, but if anything the people I've noticed leaving are less political than the average account I follow. Most of them are the kind of people who just want to nerd out about their special interest in peace.

@0xgnarea @santygegen I'm planning to try it out.

@promethurious @santygegen It's weird how determined you and the people liking this tweet seem to be to believe that. I sense a bit of panic there.

I'm neutral at this point. I don't even have a Bluesky account yet and have no idea what it's like. So I think the bias here is on your side.

@eulerfx On a social network I want interesting, not demographically balanced, and the two are not identical.

@santygegen The kind of comments you see on this thread explain one of the reasons. Another one is probably the deprioritization of links on Twitter. But ultimately it's simply that people go where interesting people are, and a lot of interesting people seem to be moving.

@elivieira Not particularly. If there's a pattern they tend to be more bookish types.

@raouldukelee Brian Lane's book Spitfire!

Every day I see this from a couple accounts I follow.

If you'd asked me I'd have guessed the word "ginormous" was invented in America in the 1970s, but it turns out it's British World War II slang. I just came across it in a book published in 1942.


@SantiagoSirvana @federicoantoni It makes me happy that it was that one.

@amasad Hah, we have that in common. I was YC's first chef.

"If you tap them and they're hard as rock, that's a bad sign."

— local bakery manager on their croissants

@Noahpinion Interesting. How do you think this time is being spent instead?

@Noahpinion How can that be if Bluesky usage is decreasing?

@samhogan If the other YC cos are legit users, that's great. In fact it's one of the reasons B2B startups do YC.

But if they form rings to do this, that's bad, and the partners crack down hard on it.

@John_Hanson_ I'm usually writing one. Some just take longer than others.

@aidenybai Around 20 it seems.

@ReichlinMelnick @DHSgov ChatGPT?

The Shape of the Essay Field: https://t.co/bVVbRx9JYS


Incidentally, this is a perfect example of why it's a mistake for Twitter to deprioritize links. Presumably Elon's justification is that he hopes all content will one day live here. But an app like this viewer is never going to.

This fascinating app lets you view the present-day British landscape in parallel with maps from about 1900. Here's the ghost of a huge country house that got demolished in 1959.

https://t.co/5ge2WvgNIO

The Python Paradox in the wild. (I knew when I chose it that this name wouldn't age well.) https://t.co/C1P8aOxj1w

@mhdempsey Unless of course you're talking about some other mysterious kind of goodness that won't ultimately be reflected in how well the companies do. In which case I invite you to describe in more detail what this fascinating new kind of goodness consists of.

@mhdempsey Surely as a VC you know the only thing that really affects returns is how well the companies eventually do.

And it has everything to do with your statement. You're implying YC startups aren't as good as they were in the past. I'm replying that we'll be able to measure that.

If people want to make woke movies, why don't they just write new scripts instead of "reimagining" the classics? This is not a rhetorical question. They want to overwrite the classics.

Authoritarians converge. They may start out on the far right or the far left, but they all end up with similar policies.

@mhdempsey People are always saying this. It's no more true now than it has been in the past. In fact it's probably less true. But the returns will show who's right, as they always do.

@ahistoryinart It is indeed. That rare and wonderful combination of still life and landscape.

@somewheresy I tried.


The phrase "your data" conflates two senses of "your": about you, and belonging to you, and data about you doesn't necessarily belong to you. If I observe, for example, that you're at place p at time t, you don't own that observation. https://t.co/tr8T1Apl1V

The puppy in question, taking a nap after his exertions yesterday. https://t.co/v5lHhKqikj

When I dropped 12 yo off at school, he was calculating exactly how many minutes it would be before he was back home with the new puppy.

I asked him if there was anything that made kids happier than a new puppy. He thought about it for a second and replied "No."

@Mentioum With Defender, I notice.

Today was the day we got Biscuit. https://t.co/fyUxuFKVoI

@Chris_arnade I don't mind it. Royal portraits are rarely great paintings. (Holbein and van Dyck were exceptions.)

@archived_videos I've never liked using a desk against the wall. I always face the door.

@dzstep The weather.

My old office in California. I wrote a lot of essays here. https://t.co/ZoA0SZBzGW

@bwertz @VersionOneVC Why do they have to be early? Google wasn't.

I'd leave it to the founders to decide whether a field still has room. They're the domain experts.


I talked to a startup today that was already doing everything right. We're only three days into the new YC batch. How could they be doing everything right already? It turned out the founders had spent several years working for another YC startup and learned what to do there.

Man, doing office hours with startups gives you a completely different view of the world from reading the news. The news is all disaster and decline, but more startups are doing more cool new things than ever before. Which is reality? Both are; that's the weird thing.

"When I was jaw-thrusting a little girl and I had three or four minutes until her intubation was set up, I was just thinking: 'Was it my tax dollars that put the shrapnel in this girl's brain, or was it my neighbor's?'"

@Chris_arnade How do you use the rain tarp?

@Chris_arnade What new gear did you get?

@chainsy Ah, but I tweeted it from America, so it didn't cross the border. Though of course I'd have to do a traceroute to be sure.

It's possible for ideas to cross the border illegally? https://t.co/SeVVMM1AbX

@AustinCarr The cereal wasn't what set off their growth. It just made a little money.

@AndreSobolewski That's an interesting question. They're both very unpredictable, but for different reasons. The effects of AI are unpredictable because intelligence is so fundamental. Trump is unpredictable because his ideas come randomly from outside.

@Big_Picture_89 You talk to the founders, and learn from that what they care about.


@DaivikGoel It's so valuable to have places where smart people congregate.

I don't mind letting NPR or the ACLU or the New York Times decline into irrelevance, but we should probably fight for the universities.

@bast_i Regulation isn't only policies, but also enforcement actions, and that's where the real abuses tend to happen.

@KarenAttiah That's why I took care to qualify my question as I did. I'll ask it again. Did any civil rights protests block traffic just for the sake of blocking traffic?

@KarenAttiah Obviously a big protest could block a road and thereby inconvenience people travelling on it. But that's different from a small group blocking a road *in order to* inconvenience the people travelling on it.

@JeffMcSweeny No one is more eager to learn that than Coinbase, but the SEC won't tell them.

What I've learned since is that there are motives even more powerful than money. Fame, political power, ideology, revenge. And these are all the more dangerous because they're so much more easily concealed.

I made a similar mistake about reporters when I was a kid. I thought that since reporters had no *financial* motive for lying, in a disagreement between a reporter and a business, the reporter must be telling the truth.

Coinbase and Bloom Tech illustrate the dangers of starting a startup in a regulated industry. When I was a kid I used to think that regulators (and prosecutors) were merely trying to protect everyone. What other motive could they have? But boy are they not.

@bugimane They explicitly rejected doing this. When someone suggested blocking traffic to the 1964 World's Fair, Martin Luther King called the idea a "tactical error."


Watch with the sound on.

@billclerico @RichAberman @jesslivingston @tlbtlbtlb @ycombinator That logo was and still is well into the top half.

@avocado4096 How is it that you have zero followers with insights like this?

@kaush_trip You'd have to give people more money (as YC does) but otherwise I wouldn't change anything.

"I want them to know what a loser I was. No other graduation speaker is going to tell them that."

— Jessica working on the commencement speech she's giving at Bucknell this year

So it should be. That's the point of ethics: to stop you from doing something you'd like to do, but that would be wrong.

@judegomila @ycombinator That's funny, I'm wearing shorts and smiling as I read this.

@marcelolima @jessesingal Do you have any evidence that he actually is a terrorist sympathizer, rather than just being called one, as everyone who speaks out on behalf of the Palestinians is?

Or is this simply an example of the latter?

@rauchg And here, underweighted.

@AshRust @jesslivingston @ycombinator Thanks Ash!


Why to Not Not Start a Startup
Want to start a startup?
Get funded by
Y Combinator
.
March 2007
(This essay is derived from talks at the 2007
Startup School and the Berkeley CSUA.)
We've now been doing Y Combinator long enough to have some data
about success rates.  Our first batch, in the summer of 2005, had
eight startups in it.  Of those eight, it now looks as if at least
four succeeded.  Three have been acquired:
Reddit
was a merger of
two, Reddit and Infogami, and a third was acquired that we can't
talk about yet.  Another from that batch was
Loopt
, which is doing
so well they could probably be acquired in about ten minutes if
they wanted to.
So about half the founders from that first summer, less than two
years ago, are now rich, at least by their standards.  (One thing
you learn when you get rich is that there are many degrees of it.)
I'm not ready to predict our success rate will stay as high as 50%.
That first batch could have been an anomaly.  But we should be able
to do better than the oft-quoted (and probably made
up) standard figure of 10%.  I'd feel safe aiming at 25%.
Even the founders who fail don't seem to have such a bad time.  Of
those first eight startups, three are now probably dead.  In two
cases the founders just went on to do other things at the end of
the summer.   I don't think they were traumatized by the experience.
The closest to a traumatic failure was Kiko, whose founders kept
working on their startup for a whole year before being squashed by
Google Calendar.  But they ended up happy.  They sold their software
on eBay for a quarter of a million dollars.  After they paid back
their angel investors, they had about a year's salary each.
[
1
]
Then they immediately went on to start a new and much more exciting
startup,
Justin.TV
.
So here is an even more striking statistic: 0% of that first batch
had a terrible experience.  They had ups and downs, like every
startup, but I don't think any would have traded it for a job in a
cubicle.  And that statistic is probably not an anomaly.  Whatever
our long-term success rate ends up being, I think the rate of people
who wish they'd gotten a regular job will stay close to 0%.
The big mystery to me is: why don't more people start startups?  If
nearly everyone who does it prefers it to a regular job, and a
significant percentage get rich, why doesn't everyone want to do
this?  A lot of people think we get thousands of applications for
each funding cycle.  In fact we usually only get several hundred.
Why don't more people apply?  And while it must seem to anyone
watching this world that startups are popping up like crazy, the
number is small compared to the number of people with the necessary
skills.  The great majority of programmers still go straight from
college to cubicle, and stay there.
It seems like people are not acting in their own interest.  What's
going on?   Well, I can answer that.  Because of Y Combinator's
position at the very start of the venture funding process, we're
probably the world's leading experts on the psychology of people
who aren't sure if they want to start a company.
There's nothing wrong with being unsure.  If you're a hacker thinking
about starting a startup and hesitating before taking the leap,
you're part of a grand tradition.  Larry and Sergey seem to have
felt the same before they started Google, and so did Jerry and Filo
before they started Yahoo.  In fact, I'd guess the most successful
startups are the ones started by uncertain hackers rather than
gung-ho business guys.
We have some evidence to support this.  Several of the most successful
startups we've funded told us later that they only decided to apply
at the last moment.  Some decided only hours before the deadline.
The way to deal with uncertainty is to analyze it into components.
Most people who are reluctant to do something have about eight
different reasons mixed together in their heads, and don't know
themselves which are biggest.  Some will be justified and some
bogus, but unless you know the relative proportion of each, you
don't know whether your overall uncertainty is mostly justified or
mostly bogus.
So I'm going to list all the components of people's reluctance to
start startups, and explain which are real.  Then would-be founders
can use this as a checklist to examine their own feelings.
I admit my goal is to increase your self-confidence.  But there are
two things different here from the usual confidence-building exercise.
One is that I'm motivated to be honest.  Most people in the
confidence-building business have already achieved their goal when
you buy the book or pay to attend the seminar where they tell you
how great you are.  Whereas if I encourage people to start startups
who shouldn't, I make my own life worse.  If I encourage too many
people to apply to Y Combinator, it just means more work for me,
because I have to read all the applications.
The other thing that's going to be different is my approach.  Instead
of being positive, I'm going to be negative.  Instead of telling
you "come on, you can do it" I'm going to consider all the reasons
you aren't doing it, and show why most (but not all) should be
ignored.  We'll start with the one everyone's born with.
1. Too young
A lot of people think they're too young to start a startup.  Many
are right.  The median age worldwide is about 27, so probably a
third of the population can truthfully say they're too young.
What's too young?  One of our goals with Y Combinator was to discover
the lower bound on the age of startup founders.  It always seemed
to us that investors were too conservative here—that they wanted
to fund professors, when really they should be funding grad students
or even undergrads.
The main thing we've discovered from pushing the edge of this
envelope is not where the edge is, but how fuzzy it is.  The outer
limit may be as low as 16.  We don't look beyond 18 because people
younger than that can't legally enter into contracts.  But the most
successful founder we've funded so far, Sam Altman, was 19 at the
time.
Sam Altman, however, is an outlying data point.  When he was 19,
he seemed like he had a 40 year old inside him.  There are other
19 year olds who are 12 inside.
There's a reason we have a distinct word "adult" for people over a
certain age.  There is a threshold you cross.  It's conventionally
fixed at 21, but different people cross it at greatly varying ages.
You're old enough to start a startup if you've crossed this threshold,
whatever your age.
How do you tell?  There are a couple tests adults use.  I realized
these tests existed after meeting Sam Altman, actually.  I noticed
that I felt like I was talking to someone much older.  Afterward I
wondered, what am I even measuring?  What made him seem older?
One test adults use is whether you still have the kid flake reflex.
When you're a little kid and you're asked to do something hard, you
can cry and say "I can't do it" and the adults will probably let
you off.  As a kid there's a magic button you can press by saying
"I'm just a kid" that will get you out of most difficult situations.
Whereas adults, by definition, are not allowed to flake.  They still
do, of course, but when they do they're ruthlessly pruned.
The other way to tell an adult is by how they react to a challenge.
Someone who's not yet an adult will tend to respond to a challenge
from an adult in a way that acknowledges their dominance.  If an
adult says "that's a stupid idea," a kid will either crawl away
with his tail between his legs, or rebel.  But rebelling presumes
inferiority as much as submission.  The adult response to
"that's a stupid idea," is simply to look the other person in the
eye and say "Really?  Why do you think so?"
There are a lot of adults who still react childishly to challenges,
of course.  What you don't often find are kids who react to challenges
like adults.  When you do, you've found an adult, whatever their
age.
2. Too inexperienced
I once wrote that startup founders should be at least 23, and that
people should work for another company for a few years before
starting their own.  I no longer believe that, and what changed my
mind is the example of the startups we've funded.
I still think 23 is a better age than 21.  But the best way to get
experience if you're 21 is to start a startup.  So, paradoxically,
if you're too inexperienced to start a startup, what you should do
is start one.  That's a way more efficient cure for inexperience
than a normal job.  In fact, getting a normal job may actually make
you less able to start a startup, by turning you into a tame animal
who thinks he needs an office to work in and a product manager to
tell him what software to write.
What really convinced me of this was the Kikos.  They started a
startup right out of college.  Their inexperience caused them to
make a lot of mistakes.  But by the time we funded their second
startup, a year later, they had become extremely formidable.  They
were certainly not tame animals.  And there is no way they'd have
grown so much if they'd spent that year working at Microsoft, or
even Google.  They'd still have been diffident junior programmers.
So now I'd advise people to go ahead and start startups right out
of college.  There's no better time to take risks than when you're
young.  Sure, you'll probably fail.  But even failure will get you
to the ultimate goal faster than getting a job.
It worries me a bit to be saying this, because in effect we're
advising people to educate themselves by failing at our expense,
but it's the truth.
3. Not determined enough
You need a lot of determination to succeed as a startup founder.
It's probably the single best predictor of success.
Some people may not be determined enough to make it.  It's
hard for me to say for sure, because I'm so determined that I can't
imagine what's going on in the heads of people who aren't.  But I
know they exist.
Most hackers probably underestimate their determination.  I've seen
a lot become visibly more determined as they get used to running a
startup.  I can think of
several we've funded who would have been delighted at first to be
bought for $2 million, but are now set on world domination.
How can you tell if you're determined enough, when Larry and Sergey
themselves were unsure at first about starting a company?  I'm
guessing here, but I'd say the test is whether you're sufficiently
driven to work on your own projects.  Though they may have been
unsure whether they wanted to start a company, it doesn't seem as
if Larry and Sergey were meek little research assistants, obediently
doing their advisors' bidding.  They started projects of their own.
4. Not smart enough
You may need to be moderately smart to succeed as a startup founder.
But if you're worried about this, you're probably mistaken.  If
you're smart enough to worry that you might not be smart enough to
start a startup, you probably are.
And in any case, starting a startup just doesn't require that much
intelligence.  Some startups do.  You have to be good at math to
write Mathematica.  But most companies do more mundane stuff where
the decisive factor is effort, not brains.  Silicon Valley can warp
your perspective on this, because there's a cult of smartness here.
People who aren't smart at least try to act that way.  But if you
think it takes a lot of intelligence to get rich, try spending a
couple days in some of the fancier bits of New York or LA.
If you don't think you're smart enough to start a startup doing
something technically difficult, just write enterprise software.
Enterprise software companies aren't technology companies, they're
sales companies, and sales depends mostly on effort.
5. Know nothing about business
This is another variable whose coefficient should be zero.  You
don't need to know anything about business to start a startup.  The
initial focus should be the product.  All you need to know in this
phase is how to build things people want.  If you succeed, you'll
have to think about how to make money from it.  But this is so easy
you can pick it up on the fly.
I get a fair amount of flak for telling founders just to make
something great and not worry too much about making money.  And yet
all the empirical evidence points that way: pretty much 100% of
startups that make something popular manage to make money from it.
And acquirers tell me privately that revenue is not what they buy
startups for, but their strategic value.  Which means, because they
made something people want.  Acquirers know the rule holds for them
too: if users love you, you can always make money from that somehow,
and if they don't, the cleverest business model in the world won't
save you.
So why do so many people argue with me?  I think one reason is that
they hate the idea that a bunch of twenty year olds could get rich
from building something cool that doesn't make any money.  They
just don't want that to be possible.  But how possible it is doesn't
depend on how much they want it to be.
For a while it annoyed me to hear myself described as some kind of
irresponsible pied piper, leading impressionable young hackers down
the road to ruin.  But now I realize this kind of controversy is a
sign of a good idea.
The most valuable truths are the ones most people don't believe.
They're like undervalued stocks.  If you start with them, you'll
have the whole field to yourself.  So when you find an idea you
know is good but most people disagree with, you should not
merely ignore their objections, but push aggressively in that
direction.  In this case, that means you should seek out ideas that
would be popular but seem hard to make money from.
We'll bet a seed round you can't make something popular that we
can't figure out how to make money from.
6. No cofounder
Not having a cofounder is a real problem.  A startup is too much
for one person to bear.  And though we differ from other investors
on a lot of questions, we all agree on this.  All investors, without
exception, are more likely to fund you with a cofounder than without.
We've funded two single founders, but in both cases we suggested
their first priority should be to find a cofounder.  Both did.  But
we'd have preferred them to have cofounders before they applied.
It's not super hard to get a cofounder for a project that's just
been funded, and we'd rather have cofounders committed enough to
sign up for something super hard.
If you don't have a cofounder, what should you do?  Get one.  It's
more important than anything else.  If there's no one where you
live who wants to start a startup with you, move where there are
people who do.  If no one wants to work with you on your current
idea, switch to an idea people want to work on.
If you're still in school, you're surrounded by potential cofounders.
A few years out it gets harder to find them.  Not only do you have
a smaller pool to draw from, but most already have jobs, and perhaps
even families to support.  So if you had friends in college you
used to scheme about startups with, stay in touch with them as well
as you can.  That may help keep the dream alive.
It's possible you could meet a cofounder through something like a
user's group or a conference.  But I wouldn't be too optimistic.
You need to work with someone to know whether you want them as a
cofounder.
[
2
]
The real lesson to draw from this is not how to find a cofounder,
but that you should start startups when you're young and there are
lots of them around.
7. No idea
In a sense, it's not a problem if you don't have a good idea, because
most startups change their idea anyway.  In the average Y Combinator
startup, I'd guess 70% of the idea is new at the end of the
first three months.  Sometimes it's 100%.
In fact, we're so sure the founders are more important than the
initial idea that we're going to try something new this funding
cycle. We're going to let people apply with no idea at all.  If you
want, you can answer the question on the application form that asks
what you're going to do with "We have no idea."  If you seem really
good we'll accept you anyway.  We're confident we can sit down with
you and cook up some promising project.
Really this just codifies what we do already.  We put little weight
on the idea.  We ask mainly out of politeness.  The kind of question
on the application form that we really care about is the one where
we ask what cool things you've made.  If what you've made is version
one of a promising startup, so much the better, but the main thing
we care about is whether you're good at making things.  Being lead
developer of a popular open source project counts almost as much.
That solves the problem if you get funded by Y Combinator.  What
about in the general case?  Because in another sense, it is a problem
if you don't have an idea.  If you start a startup with no idea,
what do you do next?
So here's the brief recipe for getting startup ideas.  Find something
that's missing in your own life, and supply that need—no matter
how specific to you it seems.  Steve Wozniak built himself a computer;
who knew so many other people would want them?  A need that's narrow
but genuine is a better starting point than one that's broad but
hypothetical.  So even if the problem is simply that you don't have
a date on Saturday night, if you can think of a way to fix that by
writing software, you're onto something, because a lot of other
people have the same problem.
8. No room for more startups
A lot of people look at the ever-increasing number of startups and
think "this can't continue."  Implicit in their thinking is a
fallacy: that there is some limit on the number of startups there
could be.  But this is false.  No one claims there's any limit on
the number of people who can work for salary at 1000-person companies.
Why should there be any limit on the number who can work for equity
at 5-person companies?
[
3
]
Nearly everyone who works is satisfying some kind of need.  Breaking
up companies into smaller units doesn't make those needs go away.
Existing needs would probably get satisfied more efficiently by a
network of startups than by a few giant, hierarchical organizations,
but I don't think that would mean less opportunity, because satisfying
current needs would lead to more.  Certainly this tends to be the
case in individuals.  Nor is there anything wrong with that.  We
take for granted things that medieval kings would have considered
effeminate luxuries, like whole buildings heated to spring temperatures
year round.  And if things go well, our descendants will take for
granted things we would consider shockingly luxurious.  There is
no absolute standard for material wealth.  Health care is a component
of it, and that alone is a black hole.  For the foreseeable future,
people will want ever more material wealth, so there is no limit
to the amount of work available for companies, and for startups in
particular.
Usually the limited-room fallacy is not expressed directly.  Usually
it's implicit in statements like "there are only so many startups
Google, Microsoft, and Yahoo can buy."  Maybe, though the list of
acquirers is a lot longer than that.  And whatever you think of
other acquirers, Google is not stupid.  The reason big companies
buy startups is that they've created something valuable.  And why
should there be any limit to the number of valuable startups companies
can acquire, any more than there is a limit to the amount of wealth
individual people want?  Maybe there would be practical limits on
the number of startups any one acquirer could assimilate, but if
there is value to be had, in the form of upside that founders are
willing to forgo in return for an immediate payment, acquirers will
evolve to consume it.  Markets are pretty smart that way.
9. Family to support
This one is real.  I wouldn't advise anyone with a family to start
a startup.  I'm not saying it's a bad idea, just that I don't want
to take responsibility for advising it.  I'm willing to take
responsibility for telling 22 year olds to start startups.  So what
if they fail?  They'll learn a lot, and that job at Microsoft will
still be waiting for them if they need it.  But I'm not prepared
to cross moms.
What you can do, if you have a family and want to start a startup,
is start a consulting business you can then gradually turn into a
product business.  Empirically the chances of pulling that off seem
very small. You're never going to produce Google this way.  But at
least you'll never be without an income.
Another way to decrease the risk is to join an existing startup
instead of starting your own.  Being one of the first employees of
a startup is a lot like being a founder, in both the good ways and
the bad.  You'll be roughly 1/n^2 founder, where n is your employee
number.
As with the question of cofounders, the real lesson here is to start
startups when you're young.
10. Independently wealthy
This is my excuse for not starting a startup.  Startups are stressful.
Why do it if you don't need the money?  For every "serial entrepreneur,"
there are probably twenty sane ones who think "Start another
company?  Are you crazy?"
I've come close to starting new startups a couple times, but I
always pull back because I don't want four years of my life to be
consumed by random schleps.  I know this business well enough to
know you can't do it half-heartedly.  What makes a good startup
founder so dangerous is his willingness to endure infinite schleps.
There is a bit of a problem with retirement, though.  Like a lot
of people, I like to work.  And one of the many weird little problems
you discover when you get rich is that a lot of the interesting
people you'd like to work with are not rich.  They need to work at
something that pays the bills.  Which means if you want to have
them as colleagues, you have to work at something that pays the
bills too, even though you don't need to.  I think this is what
drives a lot of serial entrepreneurs, actually.
That's why I love working on Y Combinator so much.  It's an excuse
to work on something interesting with people I like.
11.  Not ready for commitment
This was my reason for not starting a startup for most of my twenties.
Like a lot of people that age, I valued freedom most of all.  I was
reluctant to do anything that required a commitment of more than a
few months.  Nor would I have wanted to do anything that completely
took over my life the way a startup does.  And that's fine.  If you
want to spend your time travelling around, or playing in a band,
or whatever, that's a perfectly legitimate reason not to start a
company.
If you start a startup that succeeds, it's going to consume at least
three or four years.  (If it fails, you'll be done a lot quicker.)
So you shouldn't do it if you're not ready for commitments on that
scale.  Be aware, though, that if you get a regular job, you'll
probably end up working there for as long as a startup would take,
and you'll find you have much less spare time than you might expect.
So if you're ready to clip on that ID badge and go to that orientation
session, you may also be ready to start that startup.
12.  Need for structure
I'm told there are people who need structure in their lives.  This
seems to be a nice way of saying they need someone to tell them
what to do.  I believe such people exist.  There's plenty of empirical
evidence: armies, religious cults, and so on.  They may even be the
majority.
If you're one of these people, you probably shouldn't start a
startup.  In fact, you probably shouldn't even go to work for one.
In a good startup, you don't get told what to do very much.  There
may be one person whose job title is CEO, but till the company has
about twelve people no one should be telling anyone what to do.
That's too inefficient.  Each person should just do what they need
to without anyone telling them.
If that sounds like a recipe for chaos, think about a soccer team.
Eleven people manage to work together in quite complicated ways,
and yet only in occasional emergencies does anyone tell anyone else
what to do.  A reporter once asked David Beckham if there were any
language problems at Real Madrid, since the players were from about
eight different countries.  He said it was never an issue, because
everyone was so good they never had to talk.  They all just did the
right thing.
How do you tell if you're independent-minded enough to start a
startup?  If you'd bristle at the suggestion that you aren't, then
you probably are.
13. Fear of uncertainty
Perhaps some people are deterred from starting startups because
they don't like the uncertainty.  If you go to work for Microsoft,
you can predict fairly accurately what the next few years will be
like—all too accurately, in fact.  If you start a startup, anything
might happen.
Well, if you're troubled by uncertainty, I can solve that problem
for you: if you start a startup, it will probably fail.  Seriously,
though, this is not a bad way to think
about the whole experience.  Hope for the best, but expect the
worst.  In the worst case, it will at least be interesting.  In the
best case you might get rich.
No one will blame you if the startup tanks, so long as you made a
serious effort.  There may once have been a time when employers
would regard that as a mark against you, but they wouldn't now.  I
asked managers at big companies, and they all said they'd prefer
to hire someone who'd tried to start a startup and failed over
someone who'd spent the same time working at a big company.
Nor will investors hold it against you, as long as you didn't fail
out of laziness or incurable stupidity.   I'm told there's a lot
of stigma attached to failing in other places—in Europe, for
example.  Not here.  In America, companies, like practically
everything else, are disposable.
14. Don't realize what you're avoiding
One reason people who've been out in the world for a year or two
make better founders than people straight from college is that they
know what they're avoiding.  If their startup fails, they'll have
to get a job, and they know how much jobs suck.
If you've had summer jobs in college, you may think you know what
jobs are like, but you probably don't.  Summer jobs at technology
companies are not real jobs.  If you get a summer job as a waiter,
that's a real job.  Then you have to carry your weight.  But software
companies don't hire students for the summer as a source of cheap
labor.  They do it in the hope of recruiting them when they graduate.
So while they're happy if you produce, they don't expect you to.
That will change if you get a real job after you graduate.  Then
you'll have to earn your keep.  And since most of what big companies
do is boring, you're going to have to work on boring stuff.  Easy,
compared to college, but boring.  At first it may seem cool to get
paid for doing easy stuff, after paying to do hard stuff in college.
But that wears off after a few months.  Eventually it gets demoralizing
to work on dumb stuff, even if it's easy and you get paid a lot.
And that's not the worst of it.  The thing that really sucks about
having a regular job is the expectation that you're supposed to be
there at certain times.  Even Google is afflicted with this,
apparently.  And what this means, as everyone who's had a regular
job can tell you, is that there are going to be times when you have
absolutely no desire to work on anything, and you're going to have
to go to work anyway and sit in front of your screen and pretend
to.  To someone who likes work, as most good hackers do, this is
torture.
In a startup, you skip all that.  There's no concept of office hours
in most startups.  Work and life just get mixed together.  But the
good thing about that is that no one minds if you have a life at
work.  In a startup you can do whatever you want most of the time.
If you're a founder, what you want to do most of the time is work.
But you never have to pretend to.
If you took a nap in your office in a big company, it would seem
unprofessional.  But if you're starting a startup and you fall
asleep in the middle of the day, your cofounders will just assume
you were tired.
15. Parents want you to be a doctor
A significant number of would-be startup founders are probably
dissuaded from doing it by their parents.  I'm not going to say you
shouldn't listen to them.  Families are entitled to their own
traditions, and who am I to argue with them?  But I will give you
a couple reasons why a safe career might not be what your parents
really want for you.
One is that parents tend to be more conservative for their kids
than they would be for themselves.  This is actually a rational
response to their situation.  Parents end up sharing more of their
kids' ill fortune than good fortune.  Most parents don't mind this;
it's part of the job; but it does tend to make them excessively
conservative.  And erring on the side of conservatism is still
erring.  In almost everything, reward is proportionate to risk.  So
by protecting their kids from risk, parents are, without realizing
it, also protecting them from rewards.  If they saw that, they'd
want you to take more risks.
The other reason parents may be mistaken is that, like generals,
they're always fighting the last war.  If they want you to be a
doctor, odds are it's not just because they want you to help the
sick, but also because it's a prestigious and lucrative career.
[
4
]
But not so lucrative or prestigious as it was when their
opinions were formed.  When I was a kid in the seventies, a doctor
was
the
thing to be.  There was a sort of golden triangle involving
doctors, Mercedes 450SLs, and tennis.  All three vertices now seem
pretty dated.
The parents who want you to be a doctor may simply not realize how
much things have changed.  Would they be that unhappy if you were
Steve Jobs instead?  So I think the way to deal with your parents'
opinions about what you should do is to treat them like feature
requests.  Even if your only goal is to please them, the way to do
that is not simply to give them what they ask for.  Instead think
about why they're asking for something, and see if there's a better
way to give them what they need.
16.  A job is the default
This leads us to the last and probably most powerful reason people
get regular jobs: it's the default thing to do.  Defaults are
enormously powerful, precisely because they operate without any
conscious choice.
To almost everyone except criminals, it seems an axiom that if you
need money, you should get a job.  Actually this tradition is not
much more than a hundred years old.  Before that, the default way
to make a living was by farming.  It's a bad plan to treat something
only a hundred years old as an axiom.  By historical standards,
that's something that's changing pretty rapidly.
We may be seeing another such change right now.  I've read a lot
of economic history, and I understand the startup world pretty well,
and it now seems to me fairly likely that we're seeing the beginning
of a change like the one from farming to manufacturing.
And you know what?  If you'd been around when that change began
(around 1000 in Europe) it would have seemed to nearly everyone
that running off to the city to make your fortune was a crazy thing
to do.  Though serfs were in principle forbidden to leave their
manors, it can't have been that hard to run away to a city.  There
were no guards patrolling the perimeter of the village.  What
prevented most serfs from leaving was that it seemed insanely risky.
Leave one's plot of land?  Leave the people you'd spent your whole
life with, to live in a giant city of three or four thousand complete
strangers?  How would you live?  How would you get food, if you
didn't grow it?
Frightening as it seemed to them, it's now the default with us to
live by our wits.  So if it seems risky to you to start a startup,
think how risky it once seemed to your ancestors to live as we do
now.  Oddly enough, the people who know this best are the very ones
trying to get you to stick to the old model.  How can Larry and
Sergey say you should come work as their employee, when they didn't
get jobs themselves?
Now we look back on medieval peasants and wonder how they stood it.
How grim it must have been to till the same fields your whole life
with no hope of anything better, under the thumb of lords and priests
you had to give all your surplus to and acknowledge as your masters.
I wouldn't be surprised if one day people look back on what we
consider a normal job in the same way.  How grim it would be to
commute every day to a cubicle in some soulless office complex, and
be told what to do by someone you had to acknowledge as a boss—someone
who could call you into their office and say "take a seat,"
and you'd sit!  Imagine having to ask
permission
to release
software to users.  Imagine being sad on Sunday afternoons because
the weekend was almost over, and tomorrow you'd have to get up and
go to work.  How did they stand it?
It's exciting to think we may be on the cusp of another shift like
the one from farming to manufacturing.  That's why I care about
startups.  Startups aren't interesting just because they're a way
to make a lot of money.  I couldn't care less about other ways to
do that, like speculating in securities.  At most those are interesting
the way puzzles are.  There's more going on with startups.  They
may represent one of those rare, historic shifts in the way
wealth
is created.
That's ultimately what drives us to work on Y Combinator.  We want
to make money, if only so we don't have to stop doing it, but that's
not the main goal.  There have only been a handful of these great
economic shifts in human history.  It would be an amazing hack to
make one happen faster.
Notes
[
1
]
The only people who lost were us.  The angels had convertible
debt, so they had first claim on the proceeds of the auction. Y
Combinator only got 38 cents on the dollar.
[
2
]
The best kind of organization for that might be an open source
project, but those don't involve a lot of face to face meetings.
Maybe it would be worth starting one that did.
[
3
]
There need to be some number of big companies to acquire the
startups, so the number of big companies couldn't decrease to zero.
[
4
]
Thought experiment: If doctors did the same work, but as
impoverished outcasts, which parents would still want their kids
to be doctors?
Thanks
to Trevor Blackwell, Jessica Livingston, and Robert
Morris for reading drafts of this, to the founders of Zenter
for letting me use their web-based PowerPoint killer even though
it isn't launched yet, and to Ming-Hay Luk
of the Berkeley CSUA for inviting me to speak.
Comment
on this essay.
Russian Translation
Japanese Translation
Korean Translation


@MarkLambeWrites The back button does this.

@FilippoAlimonda @growing_daniel Not because of this. The graphic design of VC firms is random; there's no signal in it.

@kelvinhk1987 @ravroberts More vocal than other VCs, but not more powerful.

@jameskjx @ravroberts Not at all. We have midterm elections coming up.

@jameskjx We can't have been, because this surprised me.

@johnjhorton Not just academic writing. Dividing anything into sections fixes this problem, because it eliminates the expectation of continuity at the section boundary.

@pickover @ganeshuor Is the paper triangular?

@sama If you had them etched on a piece of metal in the most compressed form, how big would the piece of metal have to be? This is a mostly serious question. These models are history, and by default digital data evaporates.

@ahistoryinart It's an interesting exercise to imagine what that would look like if Holbein had actually done it. My guess: more emphasis on essential lines (= the ones face recognition software would care about) and less on random ones like individual hairs.

@Austen I got it wrong because I forgot to divide by a hundred.