Be Good
paulgraham.com
paulgraham.com
There are a lot of people out there who spend an enormous amount of time coming up with rationalizations to justify doing bad things. What I realized after spending a lot of time around Paul Graham is that he's actually the opposite: He spends an enormous amount of time coming up with rationalizations to justify doing good things. However bad he may want to be, his fundamental good nature always seems to win out in the end.
Up until the 1970s, it was common for corporations to be managed "to balance the interests of all stakeholders - employees, customers, shareholders, and the community." You can blame Milton Friedman for changing that: he popularized the notion of a corporation existing purely to maximize shareholder value, enshrining it so deeply in American culture that it's become law, and corporate directors can now be sued if they consider anything other than the interests of shareholders. It is important that companies pay attention to shareholder value, but it was a huge mistake to make that the only mission of a corporation. Score one for market fundamentalism...
(To be honest, all the business books I read kinda run together in my head, and I'm lucky if I can even remember who said what, let alone where they said it.)
Although Octopart and its investors may be frustrated, it does Digi-Key a disservice to characterize it as "evil", not "good" or a company that isn't concerned with its customers - it is extremely concerned with customer satisfaction and I have been very pleased with every interaction I have had with it.
Sure it would be great if Digi-Key facilitated Octopart's objective, but that doesn't justify conflating it with the all-star "evil" hall-of-famers.
Also, the most interesting thing about Octopart is the line item that says how many parts are in stock, not the pricing.
I agree with your point about prices. Most people using Octopart, Digi-Key and Mouser aren't too concerned with pricing. Life would actually be easier for us if we hid Digi-Key's prices but we don't because we want to display all the information we have and because some of our users do find it useful.
It's the law of unintended consequences: by creating a directory of parts where the only organizational information is price, you indirectly encourage people to buy from the cheapest distributor. The cheapest distributor will tend to be the company with the deepest pockets, biggest warehouses, and crummiest customer service.
Let me give a real-world example: I've worked part-time for an internet service provider for a while. Our customers can call us up and (usually) reach a person right away. The tech support guys also happen to have sysadmin privileges, so if there's something wrong with their maildir, it can get fixed right away. We spend the rest of our remaining energy constantly working on new services and upgrading existing ones. So, we have decided to compete in the customer service and innovation arenas.
However, we can't compete on price. We've had several customers cancel service with us and move on to services like NetZero or PeoplePC. Sometimes we get a call back a few months later from the customer, all in a panic, because they can't get help with their computer anymore or the installware is behaving badly.
Nobody at the ISP is getting rich. We all work pretty hard to provide a service in the community. I think that given PG's definitions of "goodness", we'd mostly qualify.
Now let's say somebody comes up with a way to shop for internet service providers by going through a directory. The customer selects their region or city, and gets a list of possible internet service providers, along with the prices for service.
We'd stop getting phone calls from prospective customers, which costs us the opportunity to show prospective customers how easy we are to deal with. Customers would tend to buy the cheapest services, maybe without ever realizing that for just a couple dollars more a month they might have an option that's better for them.
We would be forced to either cut our prices, at the expense of our other services, or we'd be forced to scale back operations a lot (which would again cut into our ability to develop other services), or we'd go away altogether and customers really would lose an opportunity.
Without defending them, I can see that this might be where Digi-Key is coming from. If they're not interested in competing purely on price, they could see it as unfair to be forced to do so.
For your part, it sounded at the conference like your goal at first was just to make it easy to find parts. Then, you figured that having price information would be useful too. But, if your goal is to provide a "good" service for people, I don't think you can stop there. I think you're going to have to come up with a way to list customer service reputations for the various distributors, as well as their ability to have the parts on hand, ship them out quickly, handle returns or other problems, deal with hobbyists with smaller quantity orders, etc.
I think that what frustrates Paul is that Digi-Key is actively trying to block innovation in part search because they don't want price competition. Part search today is like travel search in 1995. I used to go straight to American Airlines to buy tickets and that was fine but how much nicer is it to buy tickets online now? I even travel more because it is easier to find things.
The only thing that Octopart is trying to do is make it easier for people to find parts and Digi-Key has said that they don't want that to happen. They have specifically told us that they don't want us to exist because they don't want price comparison. We keep Digi-Key on the site because it makes our users happy. You'll have to ask Digi-Key how getting rid of Octopart helps their users.
It is definitely nicer to buy tickets, but the race to the bottom in pricing has made the flying experience itself (not just the airport) a misery. There are predominately two options - be miserable with everyone for whom price trumps all (see also Walmart) or spend much, much more for a decent experience. There is no choice of spending 20% more to have a 20% better experience.
So while I value the ease of search and the low prices it precipitates, I am concerned that price competition will force a decline (or a polarization) in customer service. And maybe it is unavoidable.
As the joke goes, to become a millionaire is simple. Start as a billionaire and buy an airline.
Your comparison to travel is an interesting one, because despite Travelocity/Orbitz/Kayak/etc. some airlines (Southwest) can still only be searched via their site. Ironically (despite the recent fiasco) I would consider Southwest to be a very innovative, pleasurable-to-fly airline.
Any claim that the desire to maintain control is only for entirely selfless reasons should always be met with the highest suspicion, as would any other claims that something superficially self-serving is actually done for selfless reasons.
Note that 'highest suspicion' != 'immediate condemnation'.
It is always possible that the superficially self-serving motivation is not what is truly driving a decision, but it's usually the way to bet (and you can be sure that it doesn't hurt), most especially at the emergent organizational/institutional level, rather than the personal.
Even if I had no evidence, my default assumption would be that they were good until confronted with significant evidence that they were evil. And between good and evil there's a nice-sized neutral middle area which it appears you have transited in one fell swoop based on your sole piece of evidence.
I'm not sure what other evidence of goodness you seek than customers' experiences with them. I have found their prices competitive - as another poster said - lower on some items and higher on others. They have treated me fairly. I don't believe that they are engaged in any immoral enterprises. I agree it would be nice if they cooperated with Octopart but to say that makes them evil is absurdly hyperbolic.
I can immediately think of some (non-evil) reasons for Digi-Key to prefer not to have Octopart include its pricing. It has invested in a web site which provides an excellent user experience and they would prefer not to make it easier for customers to use Digi-Key's web site as a reference manual for lower cost competitors (whether or not you believe this is inevitable). They would like to avoid doing business with customers who are concerned solely about price. They would like customers to purchase their higher-margin items based on past experience purchasing lower-margin items even though the higher-margin items might be cheaper elsewhere.
Your theories about why Digi-Key wouldn't want their prices to be publicly known are very inventive, but Occam's razor suggests the explanation is what is usually is in such situations: They are trying to suppress competition.
First, bodega and convenience store owners don't order smokes from Philip Morris, they get all their stuff from various distributors. The stores themselves are usually locked into one distributor for junk food/smokes and another for liquor. Depending on how low you go on the convenience store food chain, often times the "distributor" is just a guy with a truck. Thus I'm not sure a good online business could be made aggregating the various prices of cigarette distributors. A useful startup idea would be a location-based mobile app that would tell you which bodega nearest you carries the cheapest cigarettes. You could make it non-evil by selling ads for nicotine replacement therapy that you would have to click through before getting the price for a hardpack.
As far as Digi-Key goes, they aren't the biggest distributor of electronic components... maybe in the top 20, or maybe top 10. However,they probably ARE the biggest distributor that will sell small lots to hobbyists. They are also one of the major employers in a small town in a rural area that has had a flat economy for decades. The only other employer of note is the snowmobile factory. Most of the money in the area is made by landowners who are paid your tax dollars to not farm their land, or else grow sugarbeets, one of the least efficient ways of obtaining sugar. Since they would have had to pay the most, those same farmers voted against school improvement bonds every year I lived there...so I'm going to have to go with "evil" on stupid farm subsidies but now I'm really digressing...
I'm going to have to vote "not evil" for Digi-Key. They know they are competing on price and are doing what they can to avoid losing business. If sales go south, they have to lay people off. Most of the employees don't have anywhere else to go find work. From my limited personal experience, there isn't a CEO caste at Digi-Key with golden parachutes who all stay rich whether or not the company does well. If they lose business, everyone gets fucked. I'm guessing they are cockblocking Octopart out of fear. This sucks for Octopart and is inconvenient for people prototyping electronics, but is it evil?
EDIT: what's really evil is that unknown or expired link error!
When Microsoft accused Linux of violating 50 software patents, most people thought they were pretty evil. The claims were frivolous and their aim was to preserve their market share at the expense of consumers. Likewise, Digi-Key makes the frivolous claim that by displaying their public information and linking to their webpage, Octopart is acting illegally.
This is not a debate about whether Digi-Key is good for the town of Thief River Falls or if Digi-Key should be making money. They have as much right to make money and keep their employees happy as Microsoft does, but when they use their muscle to wrongfully stifle innovation at the expense of consumers, it shouldn't be surprising that some people would call them 'evil'.
What is public about it?
It looks like there is a larger back story to this than was originally obvious to me from your essay and that has loomed very large in your estimation of Digikey's character. Framing it as a David and Goliath morality play is good marketing but I think a more nuanced view is reasonable - they're somewhat less good than I originally believed.
The parts supply industry is not an industry of monopolies. There are a few large names--Grainger, McMaster-Carr, MSC, Digi-Key--that probably account for 25% of the market, and then a very, very, very long list of names most people have never heard of.
Ironically, Ma & Pa Electronics are frequently the ones with the highest prices. Large distributors like Digi-Key are often less expensive than small local shops.
You make a good point; I don't think I can argue against what Octopart is trying to do from any kind of good vs. evil ethical standpoint. However, I can understand a business such as Digi-Key wanting to maintain control, and they could easily argue it is for the benefit of the customer. For example, when a customer searches Octopart, are they going to also get a list of complementary parts from each supplier? I doubt it. What about helpful charts, material safety data sheets, and CAD schematics? If someone was just scraping my site and hijacking the search functionality but failing to deliver the rest, I'm not sure I'd want my name attached either.
Of course this is really coming at it from the wrong level. The truth is that Digi-Key can simply ignore you, and it doesn't hurt them in the slightest. And while doing so, they can be sure they aren't reaping any of the negative consequences of being associated with you either.
Yes, some companies are running about doing things that are obviously good (feeding the hungry, clothing the poor), but for everyone else, I think 'good customer service' is the rarest and best compliment, because it implies a positive relationship.
http://omnisio.com/startupschool08/paul-graham-at-startup-sc...
(apologies for link dup)
One possible way to address this would be to incorporate some kind of a service metric into Octopart, similar to the way that pricewatch evolved.
Basically, Digi-Key is using their size in order to prevent free market competition in their industry.
I don't really understand the legal position of scraping (and I'd love to see an accessible semi-authoritative explanation of the current state), but I do read lots of TOS's that basically say that that information is _not_ "public domain".
I'm in spiritual agreement with you as to what benefits part buyers the most (I think most people are wise enough to factor in some level of service into cost), but I think it's useful to think about Digi-Key's motivations in more dimensions than just good/evil. Again, I offer the pricewatch feedback/stars as an initial step that might address at least one apparent grievance. Not that that would stop them from fighting you (and good luck on that).
There is no difference between what Octopart is doing and what Google is doing. Both companies crawl the web and mine their data sets for useful information. Typically, the word "scraping" is used to imply mal intent but I don't think it has a good technical definition.
At the same time, I can't help but think some of this is an overreaction. Microsoft beat Apple as well as IBM in the market the first time by letting users pick their hardware vendor. And, even today, they still do that, and that's still Apple's achilles heel in gaining market share -- if someone wants more choice than a half a dozen or so models, they're going to have to buy a system running a different OS.
Yes, Vista sucks. Microsoft has come out with a completely crappy version of it's most important product. But other companies have released crappy products before and have lived on past their mistakes. Intel has released some horrible products before -- i860, Itanium, and the P4 all come to mind -- and pretty much all of them happened because they thought it was more important to keep their profits skyrocketing by controlling the market than it was to give customers what they wanted. But Intel has recovered from all of those debacles and once again makes the best CPUs around -- Core 2 Duo is great.
The fact that people are clinging to XP says that people at least perceive Microsoft operating systems to have value. The real test for Microsoft is whether they can learn from the Vista debacle and focus on making a better product the next time out with Windows 7. Having one failed product cycle isn't likely to sink them, but a second one could.
I run Ubuntu and I don't regret it for a second. It's a great system, and I like it better than Windows (or OS X, for that matter). But I think it's silly to say that Microsoft should just pack up and surrender because they shipped something that sucked.
it's very painful to switch operating systems, due to network effects. all your friends use windows, you've spent a lot of money on windows software, people you know pass around windows-centric .xls and .doc files, you've been using windows long enough to have become familiar with it, etc. if it wasn't for all that, i think apple would have already eaten about half of microsoft's lunch.
Microsoft gave people a clear transition to a windowing environment -- back when people weren't even sure they wanted one -- that allowed them to run hardware from any vendor they wanted, with software from the vendors they were used to using, and allowed them to load a windowing environment only when they wanted to. It was a nice, safe, incremental step. Going to Mac meant throwing everything away and starting over.
"it's very painful to switch operating systems, due to network effects."
Agreed. And don't forget: when you get there, you have a limited selection of hardware (and none at the entry level), you can't play most computer games even if you were willing to buy them all over again, and if your company has custom apps, they probably only run if you load up Parallels, which is a daunting prospect for most people.
There's no question that network effects drive Microsoft adoption. But Apple also isn't behaving like a company that wants to attract all of Microsoft's customers. It's behaving like a company that's perfectly happy skimming off the most profitable customers and collecting a premium for it.
Actually, if you want to take a look at someone that fits Paul's criteria for a company that tries to grow by acting like a nonprofit and going out of it's way to look for ways to benefit its customers, you could do worse than to look at Ubuntu. Ubuntu looks like a company that could start eating Microsoft's lunch at some point.
i'm up at the other end of the spectrum: i know all the tradeoffs, i'm as technically savvy as computer buyers get ... yet i don't want to make that choice, either. i haven't had to worry about what type of hard disk controller i've got for ten years or more, and i'm glad to be rid of dealing with piddly issues like that.
the only people who care about the low-level hardware they're using are gamers, tinkerers, and cheapskates. probably a tiny percentage of the total computer-using population.
well, i guess i do care about what hardware i'm using -- to the extent that i want it to be pleasant to use. once again, apple's interests are exactly aligned with my own.
For casual consumers, hardware choice mostly only matters in that you can go buy a variety of Windows computers at Best Buy for under $500 bundled with a monitor and a printer. There are also laptops in that range, as well.
This is important for two reasons. First, because some people just don't have a lot of money. If you are living in poverty, all the nifty extra features a Mac might have don't really matter. Second, because there are more multiple-PC homes. If you're buying a second computer for the kids or checking email or whatever, a simple, cheap system may do everything you want.
For less casual users, there are HTPCs, tablet PCs, sub-$500 ultralight notebooks like the Eee, gaming notebooks, and other segments that Apple doesn't compete in.
I was in the camp of "the Wii is definitely going to be successful", but the market at large obviously wasn't. From what I heard at the time, the Nintendo DS was very successful in "niche markets" (or "casual gamers", choose the label that suits you), which could be taken as an indication that the Wii, with its promised novel control scheme, would be very popular at least among non-gamers. For contrarian investing, there were a lot of things pointing towards Nintendo being undervalued in early 2005. The prevalent opinion of "graphics capabilities is the most important aspect of a computer game" and "gamers want predictability, not a novel control scheme" and "Nintendo sales have been falling since the NES" should have set off lots of red lights among people who actually play games.
Market-leading is actually an irrelevant label in this regard, the important thing is that Nintendo released a console that made them more profitable than they were. In sales, the GameCube did about as well as the XBOX..not the market leader by a factor of 6, but definitely not something that would kill the company by itself. Any console doing better than that would drive up the stock price of Nintendo ("break the negative trend canal in sales", as an annoying stock market analyst would say)
I started bugmenot.com years ago to help people. And then I started retailmenot.com with much the same end in mind.
Because people dug bugmenot I got the critical mass I needed for retailmenot to work. Then it turns out you can make money off online shopping stuff.
Fast forward to now, we've got 5 staff still building cool stuff (that helps people), having fun and making money.
And curiously enough the business is called StatelessSystems.com
:)
What kind of conversion do you get when a person looks up a site, doesn't find a working account, leading to a new user submission for the site in question?
Numbers I do know: * around 100k visitors per day * 1,021,791 logins * 187,047 sites
A certain percentage of those logins will be invalid though.
Although I agree with pg's main point about scale and about trustafarians, an organic farmer seems to resemble a founder of a tech company more than he or she resembles a founder of an ineffectual or parasitic charity, foundation or NGO: a friend of mine knows countercultural types who dropped out of the rat race in the 1970s to start organic farms in Mendocino[1] for reasons other than financial, and she says they all seem to have become millionaires. (If there is interest I could ask this friend exactly how many people she knows who started organic farms.)
[1]: Mendocino County is the closest place to San Francisco that in the 1970s had aesthetically pleasing terrain and cheap farm land.
"Why did Greg and I do something so ludicrous as sneaking into an eight-billion-dollar corporation to do volunteer work? Apple was having financial troubles then, so we joked that we were volunteering for a nonprofit organization." -- http://www.pacifict.com/Story/
Which idea?
Graham is saying that as a business, you'll be most successful if you spend your energy trying to be good to your customers, rather than, say, trying to squeeze a little more money from them.
Smith: greed => good service => profit & happy customers
Graham: benevolence => wonderful service => happy customers & happy entrepreneurs & profit
Very different ideas.
Benevolent people either think their benevolence benefits them materially, or gain satisfaction from altruism. Both are forms of self interest.
(egoism is an easy card play, we could pull the appartus down and have a look at it though, but we might not get much farther than those that have gone before us.)
What am I missing?
The problem is that people either never learn this, or they forget it somewhere along the line.
* "moral" may be too broad here, but "honest" is too narrow
But I'm not sure that this holds outside the Internet realm. In other industries, you cannot be too benevolent and non-profit-like. I can't think of many examples that have succeeded via this route. I'm not sure I agree with your idea that Microsoft started out as benevolent. I think the profit motive was there from day one. To back this up, look at this letter written in 1976 by BillG:
"As the majority of hobbyists must be aware, most of you steal your software...The fact is, no one besides us has invested a lot of money in hobby software...Most directly, the thing you do is theft...I would appreciate letters from any one who wants to pay up."
(http://www.blinkenlights.com/classiccmp/gateswhine.html)
So acting like a non-profit is important in the Internet world where scale is key, but I think in other industries the non-profit strategies should be left to the non-profits.
The problem with that is that there is one supplier of hardware for Mac OS X: Apple. And they charge a significant premium for that hardware. Kinda like IBM back before Microsoft pulled a fast one and licensed their OS to all comers and (benevolently) changed the face of personal computing. pg recognized the evil that was IBM, but fails to recognize the same evil in Apple, because the facade is so much nicer to look at.
A Powerbook G4 like the one I use for everything seems to cost around $500 on eBay, and I suspect that offers a net better experience than the average Vista user gets.
e.g the statement "you should switch from [cheap car] to [expensive car] because expensive car is much more comfortable" does NOT carry the "I meant a used [expensive car]" implication.
Most people would understand that the first statement implies you should pony up the price differential because the extra comfort is worth it.
It is bad enough that Windows has a monopoly and uses it to gouge customers. Why would anyone want to replace a software monopoly with a software and hardware monopoly?
Apple isn't quite in the position of dangerous strength that IBM almost had, but IBM also had competitors (Commodore, Apple, Atari). I merely think that a Mac system (even a three year old one) is not the ideal computing option for the average consumer. Additionally, I think an Apple monopoly would be every bit as dangerous as a Microsoft monopoly. Apple has a long history of taking advantage of the dedication of their users.
I come down on the side of Open Source solutions to this problem, though Linux also has problems of its own, it does solve the problem of having a single supplier for any element of the system. With things like the Asus eee lowering the price of a laptop dramatically, while avoiding reliance on Microsoft (or Apple), I think things are looking up.
In short, I think your IBM vs. Microsoft as Robin Hood analogy should be applied equally to Apple, though Apple has managed to hold tight the reigns such that no Robin Hood can spring into existence to bust up the control Apple has over the Mac market. Note that I don't have a problem, in particular, with Apple or Mac machines or Apple making money...just like I didn't have particular problems with IBM back in the day. I just think it's amusing that Apple gets a pass, while Microsoft is Robin Hood for cleverly thwarting the IBM monopoly on the PC. Pot, kettle, yada yada yada.
The comparison is clearer between Apple in 1983 and Apple today. Not surprisingly.
I never said that it was better for consumers to have a single supplier of hardware and software. All I said was that users would be better off running OSX than Vista. It happens that OSX is made by a company that also makes the hardware, but that wasn't the reason I was saying people would be better off using it. I wasn't saying that Apple won't, if they get dominant market share, turn into an evil monopoly, or that a company who broke said monopoly wouldn't be Robin Hood. All I was saying was what I actually said.
But, all that I actually said to start with was that I was amused that you praised Apple...the earlier criticism of IBMs abuse of power and the benevolence of Microsoft in breaking down the IBM monopoly made for an amusing contrast to me, an outsider who generally uses neither Apple nor Microsoft products and doesn't really consider Mac OS X a significantly superior OS to Windows Vista or XP. I don't really care which is "better" in this discussion, as "better" wasn't a qualification for Microsoft's benevolence.
I found it amusing, that's all. I really didn't mean to stir up so much argument about it. If I were the type that used smileys, I would have included one in my first post...but I figured "amusing" would cover it. ;-)
He didn't praise, or otherwise judge, Apple.
He made a passing remark on the utility of two particular products. He didn't compare companies, and he didn't compare goodnesses.
For $500 I'd rather be working on 1 year old ThinkPad T60 (2MB of RAM, Core Duo 2) with Ubuntu on it.
I got this idea from Buckminster Fuller. He failed miserably until he had an epiphany that he would not concentrate on success, but rather on making himself a servant to the universe. Ultimately this meant that he would just start working on good and useful things. As a result, he became a controversial figure but also pretty successful.
:-\
Could you, for example, grow a successful startup out of curing an unfashionable but deadly disease like malaria?
Is it just me, or are pg's many draft-readers (and presumably fact-checkers) sleeping on the job here? I mean, c'mon,
http://biz.yahoo.com/ic/510.html
or, specifically, the company that more-or-less cured malaria (indirectly), until the efforts were quashed by goody-two-shoeses,
I think the essay covers different ground than Mr. Smith by explicity stating it is in your self-interest to be good.
OUR I. B. M. SALESMEN
Tune: "Jingle Bells"
I. B. M., Happy men, smiling all the way.
Oh what fun it is to sell our products night and day.
I. B. M., Watson men, partners of T. J.
In his service to mankind-that’s why we are so gay.
So, the question in my mind is whether most of the do gooders are providing their own efforts for free or the efforts of others. Making money by giving away someone else's hard work and calling it good because it is free is distasteful.
But, I don't want to be too cynical. I do definitely agree that the fundamental purpose of business is to do good, i.e. create true wealth. Optimistically, if such an ideology can be spread effectively we could eliminate money, since computer technology gives us much more efficient ways to quantify transactions. This in turn would increase wealth significantly, since money is a big overhead.
For example?
Does this not worry anyone? It's basically a statement justifying investment based on confidence, not that an investor is able to reliably guess whether a company will be able to generate PROFIT or not, but that it will be able to generate EARNINGS at all!
this is not investing in two birds in a bush (likely to be profitable). It's investing on the basis of four in the nest (potentially earning money at all!).
that's astoundingly risky. Now, either you believe investors are stupid and risk-insensitive (or risk-blind! not uncommon in a bubble) and will keep investing the same sums of money as they ever have, or you believe they are clever, credit strapped and most certainly not risk insensitive. Option A means a world of pain up ahead for investors and their backers, because we're in a mighty bubble. Option B means PG is wrong (though doubtless he'd like to be right, because it makes flipping seedstage companies from the YC stable a hell of a lot easier)
Based on the total inability of even the biggest players on the scene - e.g.YouTube, Facebook and Bebo - to monetise, I really don't see how the confidence to move to an earning-optimistic (from profit-optimistic) investing mode is at all justified. If anything, earnings are less certain than they ever have been, the slide should be the other way.
But remember - there's more than just blind hope at work here. These companies are delivering real value to customers, they just don't know how to capture that value. The whole field of finance is based on providing capital to people who deliver real value but do not yet have the means to capture that value. If that weren't a necessary function, we'd have no need for loans - every business would be able to finance itself from retained earnings. People pay back loans all the time, even though they don't have the money on hand at the time the loan is written.
They just have to watch out for what happened with the subprime market. Statistically, this was a really solid bet: a certain proportion of mortgages default in any given year, that proportion is relatively constant, and so by dividing these mortgage pools into tranches, you could get predictable risk & reward streams. The problem was that by securitizing the mortgages, they changed the market. Since banks no longer had to live with the consequences of bad loans, they started writing loans to riskier borrowers, which threw all the statistical models out the window. Graham risks a similar problem if, by letting more marginal startups get funded, he changes the assumptions that let him be reasonably confident that any startup that builds things people want will be able to make money off it.
BTW, this doesn't always end badly. Fractional reserve banking is based on a similar principle - it's statistically very improbable that all of a bank's customers will want their money back at once, and so it's fine to loan out 90% of the money. Or the logic behind retained earnings vs. dividends: if a firm is reinvesting its capital wisely into the business, then it should create just as much shareholder value as if it's been paid out in dividends.
However, PG doesn't mention the incredibly successful startups that start out with evil/crime and then later go good: ones that start with spammy & unethical means to get initial users and pirated content startups.
I think most people strive to do good, but the world itself is a very evil place that sometimes needs adapting to.
What's wrong with Jimmy Wales operating a porn site? I don't see how that's related to Wikipedia.
Here's something I found by a quick google:
http://www.msnbc.msn.com/id/11640411/
Even without stats, it just seems like something that's blatantly obvious. It's a very common problem with couples for the guy to be lusting after other women. We, as a culture, are inundated with erotica. The internet allows people to look at pretty much anything they want in privacy. There are loads of adds for web history cleaners. Etc.
It just doesn't seem like a hard conclusion to draw...
Porn makes money therefore it is abused? Lusting after other women predates the modern porn industry. For example, "Thou shalt not covet thy neighbors wife."
Very often our assumptions about what "must be" are wrong.
"Porn makes money therefore it is abused"
That isn't what I'm saying. Porn makes so much more money than any other online industry that it seems very likely the money comes from abuse. Similar to why the drug trade is so lucrative.
Also, I did not say lust is a new phenomena. In fact, you agree with my point. Since it is such a common aspect of being a male throughout history, then it seems easy to infer men are likely to indulge in an easy outlet for eroticism.
Despite it being a conservative claim, and consequently people don't like it, the breakdown of the family is a very big problem.
Why assume that "the family" is perfect as it is? If the freedom to trade money for videos is detrimental to a social structure, to limit freedom to preserve a social structure seems regressive.
But they haven't switched to doing good.
Those are obviously the biggest, most well known. Beneath the surface, a ton of companies are doing similar things, at a lesser level, but it often goes unseen. Many cams and dating sites started out spamming and fake profiles/female profiles. Most startups that require a "network effect" often create a lot of fake users at the start.
Then they put together a program with the US government that made them money when they prevented people from defaulting, thus reversing the incentive. They built out reminder programs, tested, iterated and improved their default rate to one of the lowest in the industry.
Of course, the bush administration is ending the "Voluntary Flexible Agreement" program which made this possible.
Thanks for this piece. It's something that's been kicking around in my head since Nov. '06 or so when I discovered Newsvine. I found a community and community genuinely interested in promoting quality news discussion and content, AND in making money. There's something powerful happening now, with the profit-motive acting in a socially-beneficial way.
Your blurb about the malaria company inspired me to do a little thought exercise about whether it'd be possible for a for-profit company to successfully help pull people out of poverty, and what that company would look like. If you're interested in reading it, here is a link: http://www.tightwind.net/2008/04/mesh-networks-relationships... .
Thanks again for your great piece.
You would be correct:
http://www.news.com/Symantec-snaps-up-antispam-firm/2100-735...
The only difference between a non-profit and a company is that a non-profit cannot have equity investors. If a non-profit figures out a model to help people, there is no way to scale it. Thus, non-profits are the last entities that a country wants to subsidize through the tax code.
If we swallow Pauls line of reasoning that constitutes an oppurtunity: They could get even 'better' (i.e. profitable) by open-sourcing.
I'd be curious to read your thoughts on social entrepreneurship from a startup point of view.
As a cyclist, I often tell new cyclists: "if you see a rock in the middle of the road, focus on the clear road either side of the rock, focus where you want to go. If all you think is 'don't hit that rock' 'don't hit that rock' 'don't hit that rock' guess where your focus is? Guess what you will likely end up doing?"
I see Google's mantra in the same light. It is far better to focus on DOING something than NOT DOING something. "Be good" is a far better mantra to have, and that's before all the good reasons you cited, Paul.
Thanks for the essay, have been looking for some inspiration lately and had forgotten about YC and your essays.
I enjoyed the essay, but found the video communicated the idea much better somehow.
I also agree with the concept of being good and idealistic programmers. My blog is basically a development journal to record my progress and thinking as I write an open source wireless (Zigbee) protocol stack. Many companies charge large amounts for these embedded stacks, but I figure that hobbyists should have access to the same things that large companies do. Only good ideas can come out of it.
If anyone is interested, you can check out my dev journal and blog here: http://www.freaklabs.org
http://www.forbes.com/columnists/forbes/2008/0310/030.html
Here's hoping the idea takes off -- and not just for startups! Sincerely, Dr. Ernie http://ihack.us/2005/10/07/capitalism-20/
To be fair, PG makes the same connection in the essay, albeit in the opposite direction: "Make something people want. Don't worry too much about making money. What you've got is a description of a charity." And charity = good.
Arguably, tobacco companies make something people really, really want, but they do not fit the definition of charity or good, probably because while people really want tobacco, it's not in their long-term interests. In other words, there's a gap between what people want and what they should want, and the tobacco companies exploit this gap. So PG's description fits more things than just charities -- and he really doesn't argue otherwise; he simply chooses not to consider it in the essay.
There have been plenty of successful startups that similarly satisfy "Make something people want" but are of questionable benefit to their users' long-term interests: gambling, adult sites, online games, etc. Whether or not these endeavors constitute "evil" is, of course, a value judgment and depends on what you consider a long-term benefit. (The very idea that "good" and "evil" could be phrased in terms of short- and long-term benefits is interesting...)
It's the last step on a good path, and I was worried you would never take it. I'd been quite enamored of YC for a while, but I had my doubts about its ability to do good things.
It's also something I never thought of. I just always mentally separated "good, charitable" and "successful company" in much the same way as people generally separate "work" and "what you love".
Web guru targets malaria with social network site http://news.yahoo.com/s/nm/20080420/tc_nm/britain_malaria_dc...
I admit some skepticism but haven't read beyond the article. Maybe it is possible to "Facebook" malaria out of existence...
Il faut bonne mémoire après qu'on a menti (A good memory is needed after one has lied). [ Le Menteur, IV, 5, Cliton ] Pierre Corneille
http://omnisio.com/startupschool08/paul-graham-at-startup-sc...
Many bad deeds are done with good intentions (by charities and NGOs), and many profit-seeking deeds are done competently (by corporations), bringing wider benefits
But start-ups can fall into the rare category of performing good deeds with good intentions. The founders genuinely want to make the world a better place, and they're prepared to take risks in order to bring it about.
I'll sell it to you for $5M ;-)
Hold on to the center. -- Lao-tzu
I've heard PG repeat this but I think it's fallacious. A lot of up-and-coming hackers can't pick and choose where to work except in the sense that any person can quit one job and apply for another one. They can't unilaterally get themselves into Google, for example.
Established hackers also may have constraints, such as time and family commitments, that keep them working a stable job instead of a startup, or keep them where they are rather than uprooting to go work at e.g. Google for a lower standard of living (possibly less salary and almost certainly higher cost-of-living, if you work at the HQ) even if they'd prefer to work there.
Or your company may fold and you may have trouble finding an awesome job right away and have to settle for a tolerable one instead. Considering that so many start-up founders live hand to mouth, they are quite likely to be "desperate for a job" at various points, or at least unable to work "wherever they want".
They might also find that the startup they want to do is just not as profitable or likely to succeed as some other one, and end up working on the other one instead. Scratching your own itch does not necessarily coincide with "making something people want" on a commercial scale.
"Up-and-coming" != "the very best".
Maybe they'll get to be the some of the very best with some experience (work or project) under their belt, and at that point, if it's great code/work, they can absolutely get a job (almost) anywhere.
I'm not sure what the rest of your points have to do with the PG quote exactly. Yes there are many factors around what job works for you given your current situation. You still have options, they may just be options that don't make sense for you, or that carry more risk than you're personally happy to take on, etc...
I'm not talking about up-and-coming skill-wise, I'm referring to level of fame or notoriety. What it really boils down to is whether you have enough money to just work on what interests you vs. what pays the bills.
"they can absolutely get a job (almost) anywhere."
Not really. There are far more jobs that require skills you don't have than skills you do.
I don't consider myself to be in the category of very best hackers, but I am pretty good, and I have never worried about money. If you have a decent reputation there will always be somebody practically begging for you to take their money to do some work for them.
While you're probably correct that no one person can just unilaterally walk into Google and give themselves a job, the very best hackers can get pretty close to that. I'm sure they're probably an email or a phone call away from getting an interview. If you haven't tried to find good programmers, it'll be difficult to grasp just how very difficult it is to find good programmers. I have interviewed programmers for a number of positions and, quite frankly, it is a bit disconcerting what I have seen. In the past 2 years I have interviewed about 20 programmers and only 1 blew me away. He was just brilliant. Roughly 4 were good. And the other 15 were kind of crappy. We were forced to hire more than 4...
When I think of great hackers, guys like Richard Stallman, Justin Frankel, or DHH come to mind. They're most certainly idealistic and only a couple of emails away from getting hired at Google.
But what if DHH wanted to get a job hacking the Linux kernel? Or Frankel wanted to get re-hired to AOL to work on the stuff they didn't like? And RMS doesn't even program anymore from what I understand.
What you're looking at is freedom due to financial independence. If you're financially independent, you don't have to work someplace you don't want to. It does not, however, mean you get to work wherever you DO want to.
That's pretty silly. Just because someone is famous for a Ruby project doesn't mean they'd know they first thing about low-level kernel code.
"it's pretty obvious they wouldn't want to work on that"
I'm not talking about working on something they DON'T want to work on. Obviously! I'm talking about working on something that is outside what they are known for, but which is an interest of theirs (hypothetical in this case).
My last job had two main projects - a Netbeans plugin and a JSF webapp. I had no JSF and no Netbeans experience, though I'd done Java Swing development before and written several PHP or Perl webapps. My coworker on the JSF project was a former COM and .NET developer who didn't know Java.
Microsoft used to say something very much like that.
But at the top of the application: "State your skillset".
...You use PHP, Perl, and Java? Not by choice, right?
We're talking about freedom in hacking abilities here. If you're severely financially strapped then, yes, you're restricted. No one is saying otherwise.
Might want to work on your reading comprehension then.
"We're talking about freedom in hacking abilities here."
We're talking about jobs, quite obviously, as a given from the PG quote that started off this thread.
Not ability -- of course if you have an ability for something you can work on that something on your own time, that's not remotely close to being under contention.
As for money, if you have money, you don't have to work anywhere you don't want to. Also not disputed.
PG's claim is the best hackers can work wherever they want. This claim is a fallacy. No amount of technical skill guarantees that you can get hired exactly where you want.
Instead, empirical evidence shows that knowing someone in the company is the most effective way to get a job.
Again, you're taking the "wherever they want" thing much too literally. I don't know if you're actually trying to make a point or just trying get the last word in, but judging from your other posts, you're just being pedantic.
PG is not saying that a guy like Peter Norvig is going to land a job as a neurosurgeon. But if there's an opening anywhere for anything that's even remotely technical, the probability that they would hire Norvig must be near 100%.
That's not the same as being able to make money working on anything you want to work on. Of course you can make money working for someone else on their boring stuff, that's never been a question.
"I have interviewed about 20 programmers and only 1 blew me away. "
...so why was he out of a job? You see... even brilliant programmers don't always get to work for themselves or exactly where they want.
"This is applicable to the very best in any profession."
Not really. If you're the very best plumber you can fix Bill Gates's clogged toilet instead of the worst toilet in Scotland but you're still dealing with someone else's crap. =D
What does that have to do with programming? A lot of programmers find the notion of management extremely distasteful. ;)
"They can move from attractive job to attractive job"
Then I guess they keep ending up in jobs that weren't what they really wanted to do after all!
These people usually like to make excuses, and refer to the Dilbert PHB effect as the root cause of the problem. That's a very cynical way to view the workplace. Although, Dilbert is quite funny I'll give it that. The Dilbert-style programmer is going the way of the do-do. It used to be that a programmer could be an asshole of a person and have no communication skills, because so few people understood computers. The market simply had to put up with these people. Circumstances have changed. There are people with great personalities that have compelling leadership traits that know how to program these days and they are finding the best jobs and exerting the greatest influence on the industry.
On another note, what makes you think that jobs are static experiences? Working at Google in 2001 would be far different from working there today in 2008. Good people move on from jobs because they out-grow them, the same way people move on from friendships but might never have had a falling out with the other people in those relationships.
Cheers, we'll just agree to disagree!
Sorry, you don't get to pre-empt all further discussion after saying what you want to say. :)
"Programming has a lot to do with people"
Everything people do has a lot to do with people.
"and convince others of your message is crucial to being an effective programmer and is very much what leadership is."
Once again, you are conflating leadership with programming. Two separate things. You can be good at either without being good at the other.
If you are working with other good programmers then they should be able to tell whether your design has the most technical merit, or whether some other design does. If you're politicking then the code is going to suffer.
"It used to be that a programmer could be an asshole of a person and have no communication skills"
I think that's a majorly incorrect stereotype. People with no communication skills tend to have social phobia. They are shy, not assholes. The assholes are the "Rockstar" types and the people who think they are amazing leaders. They like to communicate their perceived superiority to other people.
"Good people move on from jobs because they out-grow them"
Good point.
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