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August 2015  
  
I recently got an email from a founder that helped me understand something
important: why it's safe for startup founders to be nice people.  
  
I grew up with a cartoon idea of a very successful businessman (in the cartoon
it was always a man): a rapacious, cigar-smoking, table-thumping guy in his
fifties who wins by exercising power, and isn't too fussy about how. As I've
written before, one of the things that has surprised me most about startups is
how few of the most successful founders are like that. Maybe successful people
in other industries are; I don't know; but not startup founders.   
  
I knew this empirically, but I never saw the math of why till I got this
founder's email. In it he said he worried that he was fundamentally soft-
hearted and tended to give away too much for free. He thought perhaps he
needed "a little dose of sociopath-ness."  
  
I told him not to worry about it, because so long as he built something good
enough to spread by word of mouth, he'd have a superlinear growth curve. If he
was bad at extracting money from people, at worst this curve would be some
constant multiple less than 1 of what it might have been. But a constant
multiple of any curve is exactly the same shape. The numbers on the Y axis are
smaller, but the curve is just as steep, and when anything grows at the rate
of a successful startup, the Y axis will take care of itself.  
  
Some examples will make this clear. Suppose your company is making $1000 a
month now, and you've made something so great that it's growing at 5% a week.
Two years from now, you'll be making about $160k a month.  
  
Now suppose you're so un-rapacious that you only extract half as much from
your users as you could. That means two years later you'll be making $80k a
month instead of $160k. How far behind are you? How long will it take to catch
up with where you'd have been if you were extracting every penny? A mere 15
weeks. After two years, the un-rapacious founder is only 3.5 months behind the
rapacious one.   
  
If you're going to optimize a number, the one to choose is your growth rate.
Suppose as before that you only extract half as much from users as you could,
but that you're able to grow 6% a week instead of 5%. Now how are you doing
compared to the rapacious founder after two years? You're already ahead—$214k
a month versus $160k—and pulling away fast. In another year you'll be making
$4.4 million a month to the rapacious founder's $2 million.  
  
Obviously one case where it would help to be rapacious is when growth depends
on that. What makes startups different is that usually it doesn't. Startups
usually win by making something so great that people recommend it to their
friends. And being rapacious not only doesn't help you do that, but probably
hurts.   
  
The reason startup founders can safely be nice is that making great things is
compounded, and rapacity isn't.  
  
So if you're a founder, here's a deal you can make with yourself that will
both make you happy and make your company successful. Tell yourself you can be
as nice as you want, so long as you work hard on your growth rate to
compensate. Most successful startups make that tradeoff unconsciously. Maybe
if you do it consciously you'll do it even better.  
  
  
  
  
  
  
  
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