Mind the Gap

Saturday, November 11th, 2006

Paul Graham has just put his Mind the Gap essay up on-line:

When people care enough about something to do it well, those who do it best tend to be far better than everyone else. There’s a huge gap between Leonardo and second-rate contemporaries like Borgognone. You see the same gap between Raymond Chandler and the average writer of detective novels. A top-ranked professional chess player could play ten thousand games against an ordinary club player without losing once.

Like chess or painting or writing novels, making money is a very specialized skill. But for some reason we treat this skill differently. No one complains when a few people surpass all the rest at playing chess or writing novels, but when a few people make more money than the rest, we get editorials saying this is wrong.
I think there are three reasons we treat making money as different: the misleading model of wealth we learn as children; the disreputable way in which, till recently, most fortunes were accumulated; and the worry that great variations in income are somehow bad for society.

Definitely read the whole essay.

OK, I can’t leave it at that. On his first point, he references The Daddy Model of Wealth:

When I was five I thought electricity was created by electric sockets. I didn’t realize there were power plants out there generating it. Likewise, it doesn’t occur to most kids that wealth is something that has to be generated. It seems to be something that flows from parents.
Because kids are unable to create wealth, whatever they have has to be given to them. And when wealth is something you’re given, then of course it seems that it should be distributed equally.

OK, now go read the whole essay.

For Start-Ups, Web Success on the Cheap

Thursday, November 9th, 2006

None of this is new for fans of Paul Graham and Y Combinator, but it’s good to see it in the New York Times. For Start-Ups, Web Success on the Cheap:

When Seth J. Sternberg and two colleagues started Meebo, a Web-based instant-messaging service, they didn’t go looking for venture capitalists. Using their credit cards, they financed the company themselves to the tune of $2,000 apiece. It was enough to cover their biggest expense — leasing a few computer servers at $120 a month each.

Within a month of its introduction in September 2005, Meebo was getting as many as 50,000 log-ins a day, and it needed more servers. It decided to take a modest $100,000 from three angel investors, wealthy individuals who typically contribute small amounts but do not get involved in management decisions.

“We had a bunch of V.C.’s talking to us about potentially putting more money in,” Mr. Sternberg said. “We said no. A lot of things happen when you raise a V.C. round, and they really slow you down.”

Eventually, Meebo did raise money from venture investors — about $3.5 million from Sequoia Capital. But that was after the company was well on its way to showing that its service was a hit; Meebo had about 200,000 daily log-ins.

In the last couple of years, hundreds of other Internet start-up companies in Silicon Valley and elsewhere have followed a similar trajectory. Unlike most companies formed during the first Internet boom, which were built on costly technology and marketing budgets, many of the current crop of Internet start-ups have gone from zero to 60 on a shoestring.

Some have gone without venture capital altogether or have raised far smaller sums than venture investors would have liked. Many were sold for millions before venture capitalists could even get in. That has been a challenge for venture capitalists, who have raised record amounts in recent years and need places to put that money to work.

“V.C.’s hate it; they want you to take big money,” said Jay Adelson, who is the chief executive of two start-ups, Digg and Revision3. Digg took some venture money, but far less than backers offered, and Revision3 has been running on about $850,000 raised from a group of angel investors.

The 18 Mistakes That Kill Startups

Tuesday, October 17th, 2006

Paul Graham lists The 18 Mistakes That Kill Startups:

  1. Single Founder
  2. Bad Location
  3. Marginal Niche
  4. Derivative Idea
  5. Obstinacy
  6. Hiring Bad Programmers
  7. Choosing the Wrong Platform
  8. Slowness in Launching
  9. Launching Too Early
  10. Having No Specific User in Mind
  11. Raising Too Little Money
  12. Spending Too Much
  13. Raising Too Much Money
  14. Poor Investor Management
  15. Sacrificing Users to (Supposed) Profit
  16. Not Wanting to Get Your Hands Dirty
  17. Fights Between Founders
  18. A Half-Hearted Effort

A Student’s Guide to Startups

Friday, October 6th, 2006

In A Student’s Guide to Startups, Paul Graham points out another big distinction between real life and school:

We noticed a lot of similarities between the startups that seemed to be falling behind, but we couldn’t figure out how to put it into words. Then finally we realized what it was: they were building class projects.
Often the only value of most of the stuff you build in the first six months is that it proves your initial idea was mistaken. And that’s extremely valuable. If you’re free of a misconception that everyone else still shares, you’re in a powerful position. But you’re not thinking that way about a class project. Proving your initial plan was mistaken would just get you a bad grade. Instead of building stuff to throw away, you tend to want every line of code to go toward that final goal of showing you did a lot of work.

That leads to our second difference: the way class projects are measured. Professors will tend to judge you by the distance between the starting point and where you are now. If someone has achieved a lot, they should get a good grade. But customers will judge you from the other direction: the distance remaining between where you are now and the features they need. The market doesn’t give a shit how hard you worked. Users just want your software to do what they need, and you get a zero otherwise. That is one of the most distinctive differences between school and the real world: there is no reward for putting in a good effort. In fact, the whole concept of a “good effort” is a fake idea adults invented to encourage kids. It is not found in nature.

Spam Goes Literary

Tuesday, August 8th, 2006

Spam Goes Literary notes the latest spam tactic: including passages of classic works — like those posted on Project Gutenberg — in ads. And people have complained to Greg Newby, the director of Project Gutenberg:

“No we don’t send spam,” he says. “We’re not doing anything other than trying to give away good literature.”

A better person to blame (or thank) would be Paul Graham. He’s not a spammer; he’s a programmer famous for creating one of the first really good spam filters.

In 2002, he was trying to write a little program to separate spam from ordinary e-mail. It did what you’d expect; it looked for keywords like “click” as in “click here to buy our product.” Graham says the results were less than spectacular.

“For one thing, spammers could just replace the ‘I’ in click with a ’1′ and you’d be out of luck,” he says. “And they did in fact start doing that.”

Graham tried something different. He wrote a program to find out how to best separate spam from real e-mail. To train it, he fed it a good helping of spam and a separate sample of real e-mail.

The program looked at each word and counted how many times it appeared in spam or legitimate mail. It found, for instance that words like “lunch” tend to be in legitimate e-mails. And words like “Viagra” or “cl1ck” are more likely to be in spam.

“This was 50 lines of code,” Graham said, “it took me a day to write.”

He ran this simple filter on his incoming e-mail. It evaluated all the words in each e-mail, and calculated an overall probability that the e-mail was spam.

Remarkably, it caught more than 99 percent of new spam, and let all his real e-mail through.

“I was so delighted,” Graham said. “It got practically all my spam the first time try.”

And this is why the spammers have had to resort to literature. Filters like the one Graham wrote are everywhere now. In order to get past them, spammers try to make the text of their e-mails look more like something you’d actually write.

How to Present to Investors

Monday, August 7th, 2006

Paul Graham explains How to Present to Investors:

  1. Explain what you’re doing.
  2. Get rapidly to demo.
  3. Better a narrow description than a vague one.
  4. Don’t talk and drive.
  5. Don’t talk about secondary matters at length.
  6. Don’t get too deeply into business models.
  7. Talk slowly and clearly at the audience.
  8. Have one person talk.
  9. Seem confident.
  10. Don’t try to seem more than you are.
  11. Don’t put too many words on slides.
  12. Specific numbers are good.
  13. Tell stories about users.
  14. Make a soundbite stick in their heads.

Interview About Web 2.0

Sunday, July 9th, 2006

Paul Graham has posted his responses to an Interview About Web 2.0:

The idea of building something popular then figuring out how to make money from it was born in the Bubble. It sounds irresponsible, but it works. Requiring founders to have a carefully worked out plan for making money is not hard-headed business sense. It’s what hackers call “premature optimization.” The really important thing is to make something people want.

Most startups that failed during the Bubble failed because no one wanted what they built. There may also have been a few that were building something good, but failed because they burned through their funding too fast. So that’s rule number two: don’t spend money.

If you can make something people want and not spend money, you’re 90% of the way there.

The Island Test

Tuesday, July 4th, 2006

Paul Graham describes The Island Test — and his answer:

I’ve discovered a handy test for figuring out what you’re addicted to. Imagine you were going to spend the weekend at a friend’s house on a little island off the coast of Maine. There are no shops on the island and you won’t be able to leave while you’re there. Also, you’ve never been to this house before, so you can’t assume it will have more than any house might.

What, besides clothes and toiletries, do you make a point of packing? That’s what you’re addicted to. For example, if you find yourself packing a bottle of vodka (just in case), you may want to stop and think about that.

For me the list is four things: books, earplugs, a notebook, and a pen.

This reminds me of the Getting Things Done methodology:

The notebook and pen are professional equipment, as it were. Though actually there is something druglike about them, in the sense that their main purpose is to make me feel better. I hardly ever go back and read stuff I write down in notebooks. It’s just that if I can’t write things down, worrying about remembering one idea gets in the way of having the next. Pen and paper wick ideas.

The Power of the Marginal

Tuesday, June 27th, 2006

I love the opening anecdote to Paul Graham’s The Power of the Marginal:

A couple years ago my friend Trevor and I went to look at the Apple garage. As we stood there, he said that as a kid growing up in Saskatchewan he’d been amazed at the dedication Jobs and Wozniak must have had to work in a garage. “Those guys must have been freezing!”

That’s one of California’s hidden advantages: the mild climate means there’s lots of marginal space. In cold places that margin gets trimmed off. There’s a sharper line between outside and inside, and only projects that are officially sanctioned — by organizations, or parents, or wives, or at least by oneself — get proper indoor space. That raises the activation energy for new ideas. You can’t just tinker. You have to justify.

Graham goes through a list of advantages to being an outsider rather than an insider. One “advantage” to being an outsider is that becoming an insider often involves an “anti-test” — “filtering out the people it should select by making them to do things only the wrong people would do”:

For example, rising up through the hierarchy of the average big company demands an attention to politics few thoughtful people could spare. Someone like Bill Gates can grow a company under him, but it’s hard to imagine him having the patience to climb the corporate ladder at General Electric — or Microsoft, actually.
I think that’s one reason big companies are so often blindsided by startups. People at big companies don’t realize the extent to which they live in an environment that is one large, ongoing test for the wrong qualities.

Read the whole essay.

Re: What You Can’t Say

Saturday, June 17th, 2006

Paul Graham answers some reader letters about his What You Can’t Say in Re: What You Can’t Say:

I disagree with your generalization that physicists are smarter than professors of French Literature.

Actually, for illustrative purposes I did include a few things you can’t say, but I stuck to domain-specific ones. Within university faculties, this is the great unmentionable. And look at how much trouble I got in for bringing it up.

Try this thought experiment. A dictator takes over the US and sends all the professors to re-education camps. The physicists are told they have to learn how to write academic articles about French literature, and the French literature professors are told they have to learn how to write original physics papers. If they fail, they’ll be shot. Which group is more worried?

We have some evidence here: the famous parody that physicist Alan Sokal got published in Social Text. How long did it take him to master the art of writing deep-sounding nonsense well enough to fool the editors? A couple weeks?

What do you suppose would be the odds of a literary theorist getting a parody of a physics paper published in a physics journal?

How can you dismiss socialism so casually

I’ve thought a lot about this, actually; it was not a casual remark. I think the fundamental question is not whether the government pays for schools or medicine, but whether you allow people to get rich.

In England in the 1970s, the top income tax rate was 98%. That’s what the Beatles’ song “Tax Man” is referring to when they say “one for you, nineteen for me.”

Any country that makes this choice ends up losing net, because new technology tends to be developed by people trying to make their fortunes. It’s too much work for anyone to do for ordinary wages. Smart people might work on sexy projects like fighter planes and space rockets for ordinary wages, but semiconductors or light bulbs or the plumbing of e-commerce probably have to be developed by entrepreneurs. Life in the Soviet Union would have been even poorer if they hadn’t had American technologies to copy.

Finland is sometimes given as an example of a prosperous socialist country, but apparently the combined top tax rate is 55%, only 5% higher than in California. So if they seem that much more socialist than the US, it is probably simply because they don’t spend so much on their military.

Why Startups Condense in America

Monday, June 5th, 2006

Paul Graham explains Why Startups Condense in America:

1. The US Allows Immigration.
2. The US Is a Rich Country.
3. The US Is Not (Yet) a Police State.
4. American Universities Are Better.
5. You Can Fire People in America.
6. In America Work Is Less Identified with Employment.
7. America Is Not Too Fussy.
8. America Has a Large Domestic Market.
9. America Has Venture Funding.
10. America Has Dynamic Typing for Careers.

He then looks at how to do better, starting with a better urban (or New Urbanist) environment:

To start with, Silicon Valley is too far from San Francisco. Palo Alto, the original ground zero, is about thirty miles away, and the present center more like forty. So people who come to work in Silicon Valley face an unpleasant choice: either live in the boring sprawl of the valley proper, or live in San Francisco and endure an hour commute each way.

The best thing would be if the silicon valley were not merely closer to the interesting city, but interesting itself. And there is a lot of room for improvement here. Palo Alto is not so bad, but everything built since is the worst sort of strip development. You can measure how demoralizing it is by the number of people who will sacrifice two hours a day commuting rather than live there.

Another area in which you could easily surpass Silicon Valley is public transportation. There is a train running the length of it, and by American standards it’s not bad. Which is to say that to Japanese or Europeans it would seem like something out of the third world.

The kind of people you want to attract to your silicon valley like to get around by train, bicyle, and on foot. So if you want to beat America, design a town that puts cars last. It will be a while before any American city can bring itself to do that.

Another potential improvement is in capital gains taxes:

There are also a couple things you could do to beat America at the national level. One would be to have lower capital gains taxes. It doesn’t seem critical to have the lowest income taxes, because to take advantage of those, people have to move. But if capital gains rates vary, you move assets, not yourself, so changes are reflected at market speeds. The lower the rate, the cheaper it is to buy stock in growing companies as opposed to real estate, or bonds, or stocks bought for the dividends they pay.

He makes an interesting point about immigration:

If you don’t have a college degree you can’t get an H1B visa, the type usually issued to programmers. But a test that excludes Steve Jobs, Bill Gates, and Michael Dell can’t be a good one. Plus you can’t get a visa for working on your own company, only for working as an employee of someone else’s. And if you want to apply for citizenship you daren’t work for a startup at all, because if your sponsor goes out of business, you have to start over.

American immigration policy keeps out most smart people, and channels the rest into unproductive jobs.

How to Be Silicon Valley

Thursday, May 25th, 2006

In How to Be Silicon Valley, Paul Graham asks, “Could you reproduce Silicon Valley elsewhere, or is there something unique about it?”

What it takes is the right people. If you could get the right ten thousand people to move from Silicon Valley to Buffalo, Buffalo would become Silicon Valley.
I think you only need two kinds of people to create a technology hub: rich people and nerds. They’re the limiting reagents in the reaction that produces startups, because they’re the only ones present when startups get started. Everyone else will move.

Some near misses:

Few startups happen in Miami, for example, because although it’s full of rich people, it has few nerds. It’s not the kind of place nerds like.

Whereas Pittsburgh has the opposite problem: plenty of nerds, but no rich people. The top US Computer Science departments are said to be MIT, Stanford, Berkeley, and Carnegie-Mellon. MIT yielded Route 128. Stanford and Berkeley yielded Silicon Valley. But Carnegie-Mellon? The record skips at that point. Lower down the list, the University of Washington yielded a high-tech community in Seattle, and the University of Texas at Austin yielded one in Austin. But what happened in Pittsburgh? And in Ithaca, home of Cornell, which is also high on the list?

I grew up in Pittsburgh and went to college at Cornell, so I can answer for both. The weather is terrible, particularly in winter, and there’s no interesting old city to make up for it, as there is in Boston. Rich people don’t want to live in Pittsburgh or Ithaca. So while there are plenty of hackers who could start startups, there’s no one to invest in them.

Read the whole essay.

The Hardest Lessons for Startups to Learn

Tuesday, May 2nd, 2006

Paul Graham goes over The Hardest Lessons for Startups to Learn — the ones he finds he has to keep repeating:

  1. Release Early.
  2. Keep Pumping Out Features.
  3. Make Users Happy.
  4. Fear the Right Things.
  5. Commitment Is a Self-Fulfilling Prophecy.
  6. There Is Always Room.
  7. Don’t Get Your Hopes Up.

The Future of Programming: An Interview with Paul Graham

Tuesday, April 25th, 2006

In The Future of Programming: An Interview with Paul Graham, he gives his opinion on outsourcing — which is the same opinion I came to years ago:

In any case, I don’t think outsourcing per se is much of a threat. I bet much of the time it’s just a symptom of using a language that’s not abstract enough. In effect you’re using the programmers in India or wherever as human compilers.

Paul Graham Eats Breakfast (Director’s Cut)

Monday, April 24th, 2006

Paul Graham Eats Breakfast (Director’s Cut) isn’t actually about his breakfast. It’s about his experiences living around the country:

I find every ambitious town sends you a message. New York tells you “you should make more money.” LA tells you “you should be better looking.” Rome tells you “you should dress better.” London tells you “you should be hipper.” The Bay Area tells you “you should live better.” And Cambridge tells you “you should read some of those books you’ve been meaning to.”