Can You Buy a Silicon Valley? Maybe.

Saturday, February 28th, 2009

Can you buy a Silicon Valley? Maybe, says Paul Graham:

A lot of cities look at Silicon Valley and ask “How could we make something like that happen here?” The organic way to do it is to establish a first-rate university in a place where rich people want to live. That’s how Silicon Valley happened. But could you shortcut the process by funding startups?
[...]
People sometimes think they could improve the startup scene in their town by starting something like Y Combinator there, but in fact it will have near zero effect. I know because Y Combinator itself had near zero effect on Boston when we were based there half the year. The people we funded came from all over the country (indeed, the world) and afterward they went wherever they could get more funding — which generally meant Silicon Valley.

The seed funding business is not a regional business, because at that stage startups are mobile. They’re just a couple founders with laptops.

If you want to encourage startups in a particular city, you have to fund startups that won’t leave. There are two ways to do that: have rules preventing them from leaving, or fund them at the point in their life when they naturally take root. The first approach is a mistake, because it becomes a filter for selecting bad startups. If your terms force startups to do things they don’t want to, only the desperate ones will take your money.

Good startups will move to another city as a condition of funding. What they won’t do is agree not to move the next time they need funding. So the only way to get them to stay is to give them enough that they never need to leave.
[...]
Suppose to be on the safe side it would cost a million dollars per startup. If you could get startups to stick to your town for a million apiece, then for a billion dollars you could bring in a 1000 startups. That probably wouldn’t push you past Silicon Valley itself, but it might get you second place.

For the price of a football stadium, any town that was decent to live in could make itself one of the biggest startup hubs in the world.

What’s more, it wouldn’t take very long. You could probably do it in five years. During the term of one mayor. And it would get easier over time, because the more startups you had in town, the less it would take to get new ones to move there. By the time you had a thousand startups in town, the VCs wouldn’t be trying so hard to get them to move to Silicon Valley; instead they’d be opening local offices. Then you’d really be in good shape. You’d have started a self-sustaining chain reaction like the one that drives the Valley.

Startups in 13 Sentences

Monday, February 23rd, 2009

Paul Graham offers 13 sentences of wisdom for startups:

  1. Pick good cofounders.
    Cofounders are for a startup what location is for real estate. You can change anything about a house except where it is.
  2. Launch fast.
  3. Let your idea evolve.
  4. Understand your users.
  5. Better to make a few users love you than a lot ambivalent.
  6. Offer surprisingly good customer service.
  7. You make what you measure.
  8. Spend little.
  9. Get ramen profitable.
    “Ramen profitable” means a startup makes just enough to pay the founders’ living expenses.
  10. Avoid distractions.
    Nothing kills startups like distractions. The worst type are those that pay money: day jobs, consulting, profitable side-projects.
  11. Don’t get demoralized.
  12. Don’t give up.
  13. Deals fall through.

Keep Your Identity Small

Tuesday, February 10th, 2009

Keep your identity small, Paul Graham advises, to avoid “religious wars”:

Politics, like religion, is a topic where there’s no threshold of expertise for expressing an opinion. All you need is strong convictions.

Do religion and politics have something in common that explains this similarity? One possible explanation is that they deal with questions that have no definite answers, so there’s no back pressure on people’s opinions. Since no one can be proven wrong, every opinion is equally valid, and sensing this, everyone lets fly with theirs.

But this isn’t true. There are certainly some political questions that have definite answers, like how much a new government policy will cost. But the more precise political questions suffer the same fate as the vaguer ones.

I think what religion and politics have in common is that they become part of people’s identity, and people can never have a fruitful argument about something that’s part of their identity. By definition they’re partisan.

Which topics engage people’s identity depends on the people, not the topic. For example, a discussion about a battle that included citizens of one or more of the countries involved would probably degenerate into a political argument. But a discussion today about a battle that took place in the Bronze Age probably wouldn’t. No one would know what side to be on. So it’s not politics that’s the source of the trouble, but identity. When people say a discussion has degenerated into a religious war, what they really mean is that it has started to be driven mostly by people’s identities.

His conclusion:

The more labels you have for yourself, the dumber they make you.

The Other Half of "Artists Ship"

Monday, December 1st, 2008

Steve Jobs has said that real artists ship. Paul Graham looks at the other half of that maxim:

One of the differences between big companies and startups is that big companies tend to have developed procedures to protect themselves against mistakes. A startup walks like a toddler, bashing into things and falling over all the time. A big company is more deliberate.

The gradual accumulation of checks in an organization is a kind of learning, based on disasters that have happened to it or others like it. After giving a contract to a supplier who goes bankrupt and fails to deliver, for example, a company might require all suppliers to prove they’re solvent before submitting bids.

As companies grow they invariably get more such checks, either in response to disasters they’ve suffered, or (probably more often) by hiring people from bigger companies who bring with them customs for protecting against new types of disasters.

It’s natural for organizations to learn from mistakes. The problem is, people who propose new checks almost never consider that the check itself has a cost.

Every check has a cost. For example, consider the case of making suppliers verify their solvency. Surely that’s mere prudence? But in fact it could have substantial costs. There’s obviously the direct cost in time of the people on both sides who supply and check proofs of the supplier’s solvency. But the real costs are the ones you never hear about: the company that would be the best supplier, but doesn’t bid because they can’t spare the effort to get verified. Or the company that would be the best supplier, but falls just short of the threshold for solvency — which will of course have been set on the high side, since there is no apparent cost of increasing it.

Whenever someone in an organization proposes to add a new check, they should have to explain not just the benefit but the cost. No matter how bad a job they did of analyzing it, this meta-check would at least remind everyone there had to be a cost, and send them looking for it.

If companies started doing that, they’d find some surprises. Joel Spolsky recently spoke at Y Combinator about selling software to corporate customers. He said that in most companies software costing up to about $1000 could be bought by individual managers without any additional approvals. Above that threshold, software purchases generally had to be approved by a committee. But babysitting this process was so expensive for software vendors that it didn’t make sense to charge less than $50,000. Which means if you’re making something you might otherwise have charged $5000 for, you have to sell it for $50,000 instead.

The purpose of the committee is presumably to ensure that the company doesn’t waste money. And yet the result is that the company pays 10 times as much.

Let’s get to where he addresses Jobs’ maxim:

At big companies, software has to go through various approvals before it can be launched. And the cost of doing this can be enormous — in fact, discontinuous. I was talking recently to a group of three programmers whose startup had been acquired a few years before by a big company. When they’d been independent, they could release changes instantly. Now, they said, the absolute fastest they could get code released on the production servers was two weeks.

This didn’t merely make them less productive. It made them hate working for the acquirer.

Here’s a sign of how much programmers like to be able to work hard: these guys would have paid to be able to release code immediately, the way they used to. I asked them if they’d trade 10% of the acquisition price for the ability to release code immediately, and all three instantly said yes. Then I asked what was the maximum percentage of the acquisition price they’d trade for it. They said they didn’t want to think about it, because they didn’t want to know how high they’d go, but I got the impression it might be as much as half.

They’d have sacrificed hundreds of thousands of dollars, perhaps millions, just to be able to deliver more software to users. And you know what? It would have been perfectly safe to let them. In fact, the acquirer would have been better off; not only wouldn’t these guys have broken anything, they’d have gotten a lot more done. So the acquirer is in fact getting worse performance at greater cost. Just like the committee approving software purchases.

And just as the greatest danger of being hard to sell to is not that you overpay but that the best suppliers won’t even sell to you, the greatest danger of applying too many checks to your programmers is not that you’ll make them unproductive, but that good programmers won’t even want to work for you.

Steve Jobs’s famous maxim “artists ship” works both ways. Artists aren’t merely capable of shipping. They insist on it. So if you don’t let people ship, you won’t have any artists.

Why to Start a Startup in a Bad Economy

Thursday, October 16th, 2008

I enjoyed the opening to Paul Graham’s Why to Start a Startup in a Bad Economy:

The economic situation is apparently so grim that some experts fear we may be in for a stretch as bad as the mid seventies.

When Microsoft and Apple were founded.

Public schools aren’t designed to be bad

Monday, June 30th, 2008

Public schools aren’t designed to be bad, Paul Graham notes; they just seem that way:

There is an idea floating around that public schools are deliberately designed to turn out brainless conformists. I don’t believe this. I think public schools are just what you get by default. If you build a giant building out in the suburbs and lock the kids in it during weekdays in the care of a few overworked and mostly uninspired adults, you’ll get brainless conformists. You don’t need to posit a conspiracy.

I think nearly everything that’s wrong in schools can be explained by the lack of any external force pushing them to be good. They don’t compete with one another, except in sports (at which they do become good). Parents, though they may choose where to live based on the quality of the schools, never presume to demand more of a given school. College admissions departments, instead of demanding more of high schools, actively compensate for their flaws; they expect less from students from inferior schools, and this is only fair. Standardized tests are explicitly (though unsuccessfully) designed to be a test of aptitude rather than preparation.

Form follows function. Everything evolves into a shape dictated by the demands placed on it. And no one demands more of schools than that they keep kids off the streets till they’re old enough for college. So that’s what they do. At my school, it was easy not to learn anything, but hard to get out of the building without getting caught.

Markov and Paul Graham Parodies

Wednesday, June 11th, 2008

Jeff Atwood fed the text of the last twelve Paul Graham essays into an online Markov generator, using two word groupings — what Bentley refers to as “Order-2″ — and got this back:

You can feel the need to take advantage of increased cheapness, however. You’re not all playing a zero-sum game. There’s not some fixed number of startups; we fund startups we fund to work on matters of passing importance. But I’m uncomfortably aware that this is part of any illusions about the problem of overeating by stopping eating. I couldn’t simply avoid the Internet had become, because the company is the new trend of worrying obsessively about what it meant for someone, usually an outsider, who deliberately stirred up fights in a startup than just start it. You know how the A List is selected. And even that is more work.

Disconnecting Distraction

Monday, May 19th, 2008

Paul Graham shares one of his tricks for Disconnecting Distraction:

Maybe in the long term the right answer for dealing with Internet distractions will be software that watches and controls them. But in the meantime I’ve found a more drastic solution that definitely works: to set up a separate computer for using the Internet.

I now leave wifi turned off on my main computer except when I need to transfer a file or edit a web page, and I have a separate laptop on the other side of the room that I use to check mail or browse the web. (Irony of ironies, it’s the computer Steve Huffman wrote Reddit on. When Steve and Alexis auctioned off their old laptops for charity, I bought them for the Y Combinator museum.)

My rule is that I can spend as much time online as I want, as long as I do it on that computer. And this turns out to be enough. When I have to sit on the other side of the room to check email or browse the web, I become much more aware of it. Sufficiently aware, in my case at least, that it’s hard to spend more than about an hour a day online.

And my main computer is now freed for work. If you try this trick, you’ll probably be struck by how different it feels when your computer is disconnected from the Internet. It was alarming to me how foreign it felt to sit in front of a computer that could only be used for work, because that showed how much time I must have been wasting.

Wow. All I can do at this computer is work. Ok, I better work then.

Lies We Tell Kids

Thursday, May 15th, 2008

Paul Graham notes that adults lie constantly to kids, and whether we stop or not, we should at least examine which lies we tell kids and why:

One of the most remarkable things about the way we lie to kids is how broad the conspiracy is. All adults know what their culture lies to kids about: they’re the questions you answer “Ask your parents.” If a kid asked you who won the World Series in 1982 or what the atomic weight of carbon was, you could just tell him. But if a kid asks you “Is there a God?” or “What’s a prostitute?” you’ll probably say “Ask your parents.”

Since we all agree, kids see few cracks in the view of the world presented to them. [...] The conspiracy is so thorough that most kids who discover it do so only by discovering internal contradictions in what they’re told. It can be traumatic for the ones who wake up during the operation. [...] I remember that feeling. By 15 I was convinced the world was corrupt from end to end. That’s why movies like The Matrix have such resonance. Every kid grows up in a fake world.

The most common reason adults give for lying to children is to protect them, which can backfire when 15-year-olds are still treated like 10-year-olds:

But few tell their kids about the differences between the real world and the cocoon they grew up in. Combine this with the confidence parents try to instill in their kids, and every year you get a new crop of 18 year olds who think they know how to run the world.

Don’t all 18 year olds think they know how to run the world? Actually this seems to be a recent innovation, no more than about 100 years old. In preindustrial times teenage kids were junior members of the adult world and comparatively well aware of their shortcomings. They could see they weren’t as strong or skillful as the village smith. In past times people lied to kids about some things more than we do now, but the lies implicit in an artificial, protected environment are a recent invention. Like a lot of new inventions, the rich got this first. Children of kings and great magnates were the first to grow up out of touch with the world. Suburbia means half the population can live like kings in that respect.

Instilling kids with confidence has its downsides:

One thing adults conceal about sex they also conceal about drugs: that it can cause great pleasure. That’s what makes sex and drugs so dangerous. The desire for them can cloud one’s judgement — which is especially frightening when the judgement being clouded is the already wretched judgement of a teenage kid.

Here parents’ desires conflict. Older societies told kids they had bad judgement, but modern parents want their children to be confident. This may well be a better plan than the old one of putting them in their place, but it has the side effect that after having implicitly lied to kids about how good their judgement is, we then have to lie again about all the things they might get into trouble with if they believed us.

If parents told their kids the truth about sex and drugs, it would be: the reason you should avoid these things is that you have lousy judgement. People with twice your experience still get burned by them. But this may be one of those cases where the truth wouldn’t be convincing, because one of the symptoms of bad judgement is believing you have good judgement. When you’re too weak to lift something, you can tell, but when you’re making a decision impetuously, you’re all the more sure of it.

Another reason we lie to children is to keep them innocent — but why?

It’s not surprising we’d have an inborn desire to love and protect helpless creatures, considering human offspring are so helpless for so long. Without the helplessness that makes kids cute, they’d be very annoying. They’d merely seem like incompetent adults. But there’s more to it than that. The reason our hypothetical jaded 10 year old bothers me so much is not just that he’d be annoying, but that he’d have cut off his prospects for growth so early. To be jaded you have to think you know how the world works, and any theory a 10 year old had about that would probably be a pretty narrow one.

Innocence is also open-mindedness. We want kids to be innocent so they can continue to learn. Paradoxical as it sounds, there are some kinds of knowledge that get in the way of other kinds of knowledge. If you’re going to learn that the world is a brutal place full of people trying to take advantage of one another, you’re better off learning it last. Otherwise you won’t bother learning much more.

Read the whole thing.

The secret to making money online

Wednesday, May 7th, 2008

David Heinemeier Hansson of 37signals — that’s the guy behind Ruby on Rails — explains the secret to making money online at Paul Graham’s Startup School:

Be Good

Sunday, April 20th, 2008

Paul Graham says, Be Good:

When you’re small, you can’t bully customers, so you have to charm them. Whereas when you’re big you can maltreat them at will, and you tend to, because it’s easier than satisfying them. You grow big by being nice, but you can stay big by being mean.

You get away with it till the underlying conditions change, and then all your victims escape. So “Don’t be evil” may be the most valuable thing Paul Buchheit made for Google, because it may turn out to be an elixir of corporate youth. I’m sure they find it constraining, but think how valuable it will be if it saves them from lapsing into the fatal laziness that afflicted Microsoft and IBM.

Why There Aren’t More Googles

Wednesday, April 16th, 2008

Paul Graham explains why there aren’t more Googles — money guys undervalue the most innovative startups:

The reason there aren’t more Googles is not that investors encourage innovative startups to sell out, but that they won’t even fund them. I’ve learned a lot about VCs during the 3 years we’ve been doing Y Combinator, because we often have to work quite closely with them. The most surprising thing I’ve learned is how conservative they are. VC firms present an image of boldly encouraging innovation. Only a handful actually do, and even they are more conservative in reality than you’d guess from reading their sites.

I used to think of VCs as piratical: bold but unscrupulous. On closer acquaintance they turn out to be more like bureaucrats. They’re more upstanding than I used to think (the good ones, at least), but less bold. Maybe the VC industry has changed. Maybe they used to be bolder. But I suspect it’s the startup world that has changed, not them. The low cost of starting a startup means the average good bet is a riskier one, but most existing VC firms still operate as if they were investing in hardware startups in 1985.

Howard Aiken said “Don’t worry about people stealing your ideas. If your ideas are any good, you’ll have to ram them down people’s throats.” I have a similar feeling when I’m trying to convince VCs to invest in startups Y Combinator has funded. They’re terrified of really novel ideas, unless the founders are good enough salesmen to compensate.

And yet it’s the bold ideas that generate the biggest returns. Any really good new idea will seem bad to most people; otherwise someone would already be doing it. And yet most VCs are driven by consensus, not just within their firms, but within the VC community. The biggest factor determining how a VC will feel about your startup is how other VCs feel about it. I doubt they realize it, but this algorithm guarantees they’ll miss all the very best ideas. The more people who have to like a new idea, the more outliers you lose.

Whoever the next Google is, they’re probably being told right now by VCs to come back when they have more “traction.”

How to Disagree

Saturday, March 29th, 2008

Paul Graham notes that “the web is turning writing into a conversation” and discusses how to disagree — which leads him to produce a disagreement hierarchy, from DH0 – Name-calling through DH6 – Refuting the Central Point.

Trolls

Sunday, February 17th, 2008

Paul Graham compares Internet trolls to graffiti taggers:

Graffiti happens at the intersection of ambition and incompetence: people want to make their mark on the world, but have no other way to do it than literally making a mark on the world.

Six Principles for Making New Things

Saturday, February 16th, 2008

Paul Graham shares his Six Principles for Making New Things:

I like to find (a) simple solutions (b) to overlooked problems (c) that actually need to be solved, and (d) deliver them as informally as possible, (e) starting with a very crude version 1, then (f) iterating rapidly.

When I first laid out these principles explicitly, I noticed something striking: this is practically a recipe for generating a contemptuous initial reaction. Though simple solutions are better, they don’t seem as impressive as complex ones. Overlooked problems are by definition problems that most people think don’t matter. Delivering solutions in an informal way means that instead of judging something by the way it’s presented, people have to actually understand it, which is more work. And starting with a crude version 1 means your initial effort is always small and incomplete.