PayPal Never Could Have Been Built Lean
leehower.com
leehower.com
There's the fact that this all happened a decade ago. PayPal launched at a time when the internet was effectively undergoing a Western Expansion and many claims were being staked to build essential infrastructure. Very few ecompanies really understood the internet, there were very few incumbents in the online space and huge opportunities for first movers.
I can't imagine any VC today allowing a startup to spend in the way PayPal did. As we all know, back then it just wasn't realistically possible to be properly lean because building stuff was so much more expensive. I'm sure the idea of YCombinator would seem as nonsensical to the founders of the nineties as multimillion first rounds seem to us today.
The article alluded to the fact that payment transfer is exceptional in structure. I struggle to think of other startups that required such enormous network effects to become sustainable and had such extraordinary cashflow issues.
I think that there's a strong case that a PayPal-like business could be built lean today, but I'm not sure it's relevant - I don't think any of us are trying to build those businesses and I don't think any of us would succeed in doing so. Looking at the likes of Facebook, I think it's clear that the biggest, most network-dependent businesses really can be built out of dorm rooms these days.
Usain Bolt is the fastest man in history. We understand that he's a genetic freak who happened to try out for the best track team in the world. Exactly the right man in exactly the right place at exactly the right time. We understand that he's so far outside the norm that he can eat 40 chicken nuggets and run 100m in 9.69 seconds on the same day. We understand that what he does teaches us nothing about what we should do if we want to run faster.
YouTube was founded by three guys working for PayPal who were likewise exactly the right men in exactly the right place at exactly the right time. What they did is very informative if you happen to be well-connected guys in the valley who chance upon perfect timing. For the rest of us, "sell out to Google" is not a business plan. It seems to me that the whole point of what we're doing here at HN is to upend the old notions about what it means to start up. The discourse has long been dominated by VCs who are only interested in billion-dollar companies, but I for one am far more interested in the idea of ten thousand people becoming millionaires than ten people becoming billionaires.
Patrick of BCC is for me the prime example of the new startup logic. Absolutely any of us could realistically aspire to do what he has done. He's not making 'fuck you money', but he's making a good living from a couple of evenings a week. How much happier would he be if he were a billionaire? In utilitarian terms, what is the net benefit of a million Patio11s vs one Chad Hurley?
These sorts of articles really bug me, because they seem to me to be part of this age-old cultural notion about what geeks ought to be doing with their lives. For the rest of the human race, it's perfectly acceptable to pursue your own happiness, but if you're really smart you're expected to change the world. I'm sure there are plenty of people who really do want to change the world, but I'm also fairly confident that most of us just want to do cool things and have enough money to be comfortable.
It seems to me that the dialogue about startups is warped by a particular kind of charming, eloquent VC. I think there are a number of very influential people out there who are using our sense of public service, our avarice and our ego to manipulate our expectations of success. I think we as smart people are pressured enough without our own community distorting our sense of what constitutes a good day's work.
I think that talking about mega-companies is just as harmful as our cultural fixation on size zero models, or the sense amongst some young men that the only good jobs are playing ball or rapping. I think paying much attention to outliers is inherently harmful as it warps our sense of what is normal and reasonable and realistic.
I think that startup culture has a sickness - a disease that we caught in High School and that we have incubated since. I think we expect far too much from ourselves and have an unrealistic sense of the threshold for success. DHH is considered a radical, in no small part because he has a very specific scope to his ambition. He is noteworthy in the startup community for saying that there are such things as 'enough revenue' and 'enough customers. We forget that to most ordinary people, DHH has wealth and freedom beyond their imagination. I think the schoolroom sense of "I expected better of you, you're a bright boy" has evolved into this sense that we are in it to serve shareholders and VCs, that we are in it to do something superhuman. Why is there a sense of shame to say in our community that we just want to pay the bills and have fun doing it? Why do so many people seem to sneer at the likes of Tim Ferriss? Why can't we be happy to do things just for ourselves and our customers?
More specifically, people sneer at "ramen profitable" because its a dead end - because you end up squandering the most important years of your career on low-end jobs when you could be playing the standard career game of your twenties that lead to careers that pay sufficient salaries in your thirties that let you have a family, own a house, a car, a health-care plan, so that if (when) someone in your family suffers a health problem you have sufficient cushion to deal with it. Most of the people on HN could (and probably many of them do, you just don't hear about them) walk away from the startup culture for _real_ jobs.
Or to summarize, "startup culture" actually has to compete with the "salary man culture" to be something other than a big scam. And Ycombinator is mostly about the big exits.
Somehow people spin it into 'chase a shit opportunity for years with no sizable revenue.'
Again, debating the name of a thing, and not its meaning.
Decidedly less happy, I think. For one thing, it would be virtually impossible for me to find Ms. Right without the money thing creating an adverse selection problem. I'd also virtually have to have People, because you simply can't be a billionaire without having People, and I prefer to spend my time with people rather than People if you catch my drift. I don't want to ever have my own accounting office.
I've been doing sit-down-think-this-year-through budgeting for the first time in several years (because a salaryman has virtually no need of budgeting: you're paid exactly enough to live the salaryman lifestyle and since you don't have time to do anything else what the heck would you need money for). There is a gap between my new means and my desire (e.g. I'd like to be able to travel abroad three or four times this year and my current income will not support it), but it isn't a ginormous gap and I expect to close it fairly quickly. So there's a marginal happiness return on income for me up to, oh, call it $80k a year. Throw in a nice young lady and a bit of support for my family and I might even have a marginal happiness return up to $200k a year. After that, it might as well be WoW gold for me: having the number increase over last year makes me happy because it means I'm doing well at the game, but it won't have a significant impact on my life.
The highest-paid person I know makes about $700k/yr and to listen to him you'd think that making only seven tenths of a million dollars every year was the most miserable burden any man ever had to carry. My kind offers to relieve the load, needless to say, go yet untaken ..
This is also a big pet peeve of mine, but not just that you are supposed to change the world but god forbid if you benefit yourself from your "gifts" (think how many people vilify Bill Gates simply for being so wealthy -- clearly, he's the devil. sheesh). I have two very bright sons. I explicitly told them "Your job as kids is to learn to properly meet your own needs, including keeping your intellectual hunger adequately fed in a non-destructive fashion." I listed a few historical figures (such as Hitler) who were clearly intelligent and did "change the world" but not in a way I would want to encourage anyone to do. I told them "If you really are that smart, you will be unable to not have an impact. If you are psychologically healthy, that impact will be healthy. If you are all screwed in the head, that impact will not be healthy. Your first and foremost responsibility to The World is to make sure you are healthy so that the consequences of the work you end up doing are also healthy."
Enlightened self interest is a wonderful thing, far better than the self-sacrificing bill of goods so many smart kids are sold in school.
From my knowledge, PayPal followed some what of a lean approach. Their initial product was about sending money between palm devices. When they tested it and figured out that no one would use it, they just pivoted to online money transaction, which more people found useful. That's when they started to scale.
Now that sounds pretty lean to me.
Assuming a good business case (which PayPal had: bootstrap network effect with pure money), could a web startup ever get funded to do something like that today?
1. It needed a critical mass of both buyers and sellers
2. Customer service in financial industry is expensive
3. The 2 main competitors (Billpoint & C2it) had bottomless pockets.
(4.) Web 1.0 technology was expensive.
Therefore 'Lean' in this case means 'Tons of Money.' Its a theory that means more than its title. Maybe its wrong, but this article fails to even discuss it.
Lean doesn't mean cheap. It can mean more expensive. It simply means recognizing the cost of entering different markets and not spending too early, to optimize funding around finding a business model instead of the product development cycle.
Hadn't heard of Venmo before this. But yeah, that sounds like it could be pretty disruptive.
They're a company that I'm excited about, because I've found them useful a ton of times since I've heard of the idea. One of those "you never knew how useful it was until you had it" kind of things.