Y Combinator and Power in Silicon Valley | Hacker News Reader

Y Combinator and Power in Silicon Valley

commoncog.com

300 pointsnsoonhui164 comments

> This changed in the early 2010s, in part due to the emergence of the tech bubble of that decade (propped up, no doubt, by low interest rates). But it was also changed by the emergence of a new generation of rich ex-founders and early-employees — the result of the Google IPO, and also a smattering of startup acquisitions over the course of the late 1990s and 2000s. These newly rich individuals became investors, and some of these folks — such as ex-Googler and prominent angel Chris Sacca — raised small funds in the $20 million to $40 million range. This meant that the angels now had enough firepower to invest $200,000 checks instead of $20,000 checks — and early stage startups could go longer without talking to VC firms.

I feel like this timeline is off. I lived in San Francisco in the first half of the 2010s and the big turning point wasn't Google's IPO but Facebook's. Cost of living was already inflated by then ($2-3k/mo for a SoMa studio) but after end of the lockout period, the property prices started to really grow out of control and the number of luxury cars driving around SF exploded. Angel groups that invested collectively as a mini-VC firm also became much more popular at that point.

Googlers were plenty involved at the time but the FB IPO is when the character of the whole Bay Area seemed to change.

I agree with this. And once that kinda tailed off a bit, it was time for the cloud firms (plus Nvidia, and for a time, Zoom, Tesla & Netflix) to create renewed demand.

> Adchemy named each of AdGrok’s co-founders personally in the suit, meaning that if they lost, the founders would be personally liable. The amounts involved in the suit effectively meant that all three co-founders would have been financially ruined.

I've been there too. Named personally. I think most people don't realize how stressful and damaging this is. In most cases it's because there's some kind of well-intentioned but vaguely formulated law or act that, if real events are twisted by just the right amounts, would apply and imply personal liability.

From that point on the game that the litigators play is to try and shoehorn each and every of your past statements or actions to fit the law in question and your job is to find as much evidence to the contrary, which might go many years back. In records that you almost certainly no longer have. While running a company.

This practice of putting founders personally in a lawsuit is an absolute disgrace and it needs to stop. The damage done by vague laws and litigators who ruthlessly exploit them are a very large multiple higher than any of the benefits that could possibly be derived from them. The only winners in this game are the law firms.

Early in my career I was named personally in a lawsuit against my employer (filed by a customer who’d been promised features that hadn’t been delivered) and it was a powerful lesson to me to be circumspect in my email and careful of my reputation. Fortunately the lawsuit went away and didn’t cause me much stress after that initial shock.

> > Y Combinator was the sort of unforgiving power player that remembered the names of investors who had crossed portfolio companies in the past, or who had disseminated unflattering portraits of YC, and blacklisted them from any YC dealings, or from the minds of YC founders.

Do we have to be careful what we say on HN?

Not any more than you need to in any public forum

Not the point. One should be allowed to be critical of the institutions of the valley without getting their name written down in a secret blacklist.

YC will fund anyone who is building a company that looks like it could be highly successful.

There's one case I'm thinking of now where someone was as critical of YC (both the org and individual leaders) as anyone could possibly be, in a highly public and sustained way, and their startup later got funded by YC.

Well that is contrary to what is stated in the article/book.

What in the article (sentence or paragraph) contradicts what I wrote?

The article is about how YC defended one of its funded companies against a legal attack. It doesn’t say anything about YC refusing to fund someone who criticized it.

> Y Combinator was the sort of unforgiving power player that remembered the names of investors who had crossed portfolio companies in the past, *or who had disseminated unflattering portraits of YC*, and blacklisted them from any YC dealings, or from the minds of YC founders

If you said something unflattering about YC once and got uninvited from demo day, that's on you. But being black listed from ever investing in any YC-backed startup even if you reach out to founders directly is taking things too far. And potentially an antitrust issue. Cabals are illegal, after all.

The quoted book was being purposefully colorful and inflammatory for literary effect, but it still doesn’t make any claims of investors being “blacklisted” just because they said something unflattering about YC. (“Disseminating unflattering portraits” implies some kind of organised campaign to damage YC, and I have no idea if that really happened or if it’s just part of the colorful/exaggerated writing).

The only cases I know of where an investor was banished from Demo Day/YC’s network was for acting in bad faith towards founders. If YC banished investors who had a track record of being great to founders, they would be doing a disservice to founders, and therefore acting against YC’s own interests.

That aside, my original comment doesn’t contradict anything in the article (I can’t speak for the entire book - honestly when I tried reading it I couldn’t get past the first few pages).

That's good to know, thanks.

Which case was that?

That’s an ideal but how would that work short of stringent government regulation? It’s never been easier to mine text and since YC is giving people large sums of money they have both a valid reason and broad deference to their assessment of applicants. VC isn’t like a car or home loan so I don’t think there’s anyway you could cut out bias less blatant than circulating a list of racial slurs or explicit threats of retaliation for funding people: since they’re basically making a large unsecured loan there’s simply too much justifiable discretion to exclude something like reviewing posting history.

This is the traditional role of regulation, yes. Note that if what they were filter out for were things like union sympathies, it would be illegal.

Yes, but how would you tell? Unless they straight up tell you why you were turned down it’s really hard to know what someone was thinking when they say “I just didn’t think they had the right idea”.

Not because of YC. I think that what people say here, is only a fairly small data point, for them.

But I would encourage folks to consider their approach, in general, whenever we are in a professional context (and, despite the casual nature of HN, this is very much a “professional context”).

I think that some few people here, are able to post in a truly anonymous fashion, but most folks could be doxxed fairly easily, if they piss off the wrong people (not always movers and shakers; we have some truly amazing talent, hereabouts).

In my case, I just make it clear who I am, and post carefully (I know it may not seem so, but look closer). I learned, long ago, that I’m not actually able to maintain true anonymity, so I don’t even try.

I think it's important to distinguish between two directions here: 1) can someone figure out who I am based on my profile and 2) can someone find my profile if they know who I am. I care much more about the second, because the odds of someone attempting the second are much higher.

Well, back when I was looking for work, a couple of companies asked for my HN handle (actually, it's one of the reasons that I got an account, here).

It was fairly obvious, that I would not be considered, if I didn't have one.

That explains a lot.

Eh. We all have our origin stories.

Turned out that I didn't really feel like working with companies that require HN handles, and they didn't feel like working with past-their-prime engineers, so it's all good.

I stuck around, and folks generally seem to feel I'm a decent member, here. A few curmudgeons don't like me, but, when you're "on the spectrum," you get pretty used to folks not liking you, for no discernible reason. I've found that being true to myself, means that it doesn't really matter, all that much. I've had really dangerous people not like me, IRL, so this joint is Amateur Hour.

I try to be a decent member here, and not bring darkness (I'm quite capable of it). Some folks think that makes me "stuffy," or "snobby."

Whatever creams your Twinkie. I'm actually a pretty decent person, and it's probably worth it, to get to know me. I won't make you rich, but I'm also no threat to anyone (and have no desire to be). I believe in helping folks, and trying to keep humanity first and foremost. HN handles are people, not NPCs (for the most part -Ed.), and I try to keep that in mind, when I post, here.

> a couple of companies asked for my HN handle

That's kind of shitty. I'm writing this down as in the last 2-3 years I've started to care less and less about any perceived veil (or hypocrisy, to be more honest) on websites like this one but it's still interesting to see that companies filter out potential employees based on that manifested hypocrisy. That explains a lot of how come SV is in the slump that it is right now (ignoring the AI bubble), but that's matter for a different discussion.

We all have to be well-behaved hackers and painters, or else. That's not how it worked in the past, and it will never work like that.

Well, behaving well (even "fake nice") isn't necessarily "hypocrisy."

All of us, and I mean ALL OF US have dark fantasy lives. Freud called it our "Id."

It's not meant to be worn outside our heads.

One of the common refrains that you'll hear from fans of "hatemongers," like Alex Jones and Rush Limbaugh, is "They're just saying what everyone is thinking!".

There's a reason that we don't say everything that we think.

That's not hypocrisy. That's being a good member of society.

I have good friends -like, actually really good friends, who hold beliefs that I disagree with -sometimes, quite strongly.

We don't talk about that stuff, when we're together.

That's not hypocrisy, either. That's being friends. We find that there are a lot more values that we hold in common, than in opposition.

Modern social media has made it fashionable to use society as a public toilet for our Ids. I don't think that it has improved things.

It is my belief that when it comes to politics, i.e. the life of the polis, it is in the best interest of said polis for its citizens to speak up their mind as closer to (their inner) truth as possible, otherwise it won’t be said citizens conducting the life of their polis.

The Freud/id stuff I can understand (and I agree with), but that’s related to a person’s inner “psychological” life, not to the polis as a whole.

I think when it comes to workplaces, it isn't really the same thing as the political arena (office "politics" aside). Personal restraint is fairly important. I have worked very closely, with people I desperately wanted to strangle, and we did good work.

Also, even in the political arena, there's often a need for personal restraint. My family has been in international diplomacy for decades (I'm the redneck engineer).

My father[0] used to constantly pop my "Simple wrong answer" balloons, on a regular, by explaining that nothing that involves humans, is ever actually simple, and that there are always dozens of competing forces at work; much of it sloppy emotions, pride, poverty, insecurity, tribalism, ignorance, religion, greed, and whatnot.

I have other family that has worked for decades, trying to get different faiths to work together, to address issues like poverty, lack of education, etc.

Talk about "herding cats."

Someone (I think Will Rogers) used to say "Diplomacy is the art of saying 'Nice doggie,' while reaching for a rock."

[0] https://cmarshall.com/miscellaneous/MikeMarshall.htm

So they won't do business with people that have crossed them or insulted them in the past? Regardless of whether they were in the right that's kind of just how people act, but phrased in a way to sound dramatic. You are not entitled to invest in whatever company you want.

If you want to associate with the people at YC, it probably makes some sense to behave like the kind of person that people at YC are likely to want to associate with.

The Adchemy’s investors were funding a lawsuit against a startup. I imagine from YC’s perspective, that kind of thing was considered bad for the ecosystem.

By which I mean nobody involved was going to make money. There’s no blood in a stone. The lawsuit was not in anyone’s business interest. The article states it was even contrary to an unwritten rule of the startup culture.

Commoncog hits a home run again. This is fascinating. It is more Suits than Suits. Showing how strategy > law when fighting a case. But also the interesting fraternity (not all boys of course) that YC is. Feels like the only other place you would see it is organized crime or corrupt politics where you then owe a favour. But that isn't what it is here. I guess it is about honour.

Perhaps and it makes both excellent marketing as well as fantastic word of mouth.

It is legendary. Trying to think is anything else like it? Freemasons? Hells angels? Donald Trump's cabinet?!

Does YC do this consistently though. Even they have to choose battles.

Initially I thought, “Hey now, That’s not fair to the law.”, but I got what you meant - yes.

There’s norms, case history, and the actual written law.

This reads like a violation of social norms where a smaller startup faced retaliation ( repercussions? ), and then had the ability to counter the pressure.

It's not particularly interesting. YC relies on people who leave their employers to found startups. Companies tend not to like employees leaving to start their own companies and often sue them over it, which is 99% of the time meritless and nothing more than bullying. It is in YC's interest to use its resources to prevent this bullying because it both sends the signal to other companies that they would be unwise to try to bully a YC startup and to potential founders that if they join YC they will be protected.

That is what makes it very interesting! I think you have said not interesting when you may have meant explainable. If it is boring, who else does this?

The open source ecosystem needs this kind of "wasta".

AI solutions nowadays are working to automate all sorts of services, partly using adversarial interoperability tools built by open source developers to extract functionality from services that have insanely worded TOS/T&Cs. Some of these megacorps are going after the maintainers and not the (potentially funded/protected) consumers with legal threats.

In this case the two parties are within 10's of millions of dollars of net worth, yet still it's not a fair fight when an incumbent tries to strangle a newborn in it's cott. Now think about the insane situation of megacorp vs maintainer with a delta of a few trillion dollars of net worth. I don't know if even a few phone calls would save a yc startup in that case.

I recently read 'The Power Broker', Robert Caro, which describes how Robert Moses came to acquire power over park, road, bridge, and tunnel construction in New York City and State for over 40 years. There are strong parallels with the story here.

The Power Broker is supposed to be a story of moral failure and how power corrupts, and it is, but it’s also the absolute best how-to guide.

In an interview, Michael Lewis has said that he wrote 'Liar's Poker' as a cautionary tale, but it was taken as a 'How To' manual. Robert Caro has said (e.g. in 'Working') that he writes to expose how power is acquired and used in the US... which, as you say, also cuts both ways.

Oh man, glad I'm not the only person who won't shut up about the Power Broker. I think the best takeaway is that a bubble forms around the powerful where they cease to have to engage with the world as it is.

Hear, hear.

It's interesting to me how Moses, per Caro, moved from being idealistic to being pragmatic in ways that look like corruption to those outside the 'bubble' but look like appropriate means and measures for accomplishing one's goals if you're inside the bubble.

He came to be in possession of a great many opportunities to build, and so, to spend money, and he, using these opportunities and the money flow, over time, built a political machine for doing so in a way that benefited those who helped him, and punished those who didn't.

One could even argue (and Caro implies this) that it's a worse form of corruption because all the beneficiaries are already powerful wealthy people being further enriched. At least Tammany corruption was democratic: they needed votes, so new Irish immigrants to the Lower East Side would get a turkey, and if they were loyal, they could get a cushy job. It was a subversion of democracy, but one that required spreading the wealth around.

Because Moses never had to run for office (and the one time he did, he failed spectacularly), he pioneered a purely bureaucratic form of corruption that conspired to extract as much money from the federal and state governments as possible and pour all of it into this ever turning hamster wheel of massive public works that weren't really for the public and didn't work, but did enrich the powerful people who took part in it.

But of course you know all this already, because you read the book. Which means you also know, damn, what a good book. It's very hard not to just talk about it all the time, and drive other people crazy.

My 'trick' is to recommend his relatively short 'Working', which was the gateway drug to get me reading his longer works.

So 3 employees of a company (with "Ad" in the name) decided to leave and found a startup (also with "Ad" in the name). The (failing by all accounts) company they left got butt hurt over this and decided to bully them by using their larger size to sue them out of existence.

Their plan was to win by exhausting the funds of the smaller company, not to win on the merits of the case (which was obviously dead in the water in California). But the smaller company was able to prevail because its investor was larger than the company suing them and decided to in turn bully them into dropping the lawsuit. Both startups, to nobody's surprise, ended up failing and the founders of both companies, also to no one's surprise, felt bitter about the whole episode.

Sounds to me like the good guys won here (to the extent that a company with "Ad" in the name can be considered a good guy). Not really sure what I'm supposed to take away from this. Just a typical ego driven business spat where the only winners are the lawyers.

Meritocracy in action.

Hopefully they never used this power to ruin people's businesses with a phone call for anything less noble than * checks notes * protecting their investment in a rival business.

If you’re wondering what to take away from this article: the simple take away is that YC has the power to get what it wants, for the companies it wants.

If you happen to be in YC’s good graces, they will reward you in ways described in the article. If you’re not, they won’t take the time.

I was in YC in 2012 (2 yrs after the founder writing this article, and one of the last years PG was directly involved). By that time it was clear that YC had turned into a “spray and pray” accelerator, meaning they started favoring volume of investments over everything else.

When they did that, it also required that they split their attention between more companies, which inevitably meant that the sort of anecdotes described in the article still happen, but only for companies YC likes and believes in post-accelerator. YC definitely discriminates from that perspective- they choose which startups they think have the most promise during any given batch, and they give those founders preferential treatment.

Which is to be expected. How else can you scale an accelerator?

> How else can you scale an accelerator?

I mean, you could delegate the scaling to the startups you're investing in.

If I'm gambling at the horse races, should I bet $100 on every horse to make my gambling scalable and diversified, because I don't feel I can pick winners with any reliability?

That is the game though. If I bet $100k on each of 10 contestants. That’s $1m total. With odds of 1000:1, a single win pays $100m enough to cover all bets and leave a huge profit.

If the horse race has 10 contestants why would the odds be 1000:1?

Because it's an imperfect metaphor for how VC investing works to further enrich the wealthy.

Not everyone is competing.

In the economy as a whole how many people are even business owners? Most people go to work and price take at their job without negotiating, without even moving area, without even studying, etc.

You also have multi-company-monopoly effects for lack of a better term, e.g. if there are 10 competitors that make semiconductors - _everyone_ needs semiconductors, then if you pick the appropriate balance and don't buy in at an overvalued time you can invest in all ten and still make money because there is a net flow of funds into the system from outside of it.

Is "oligopoly" the word you were looking for?

Even on their best day a punter is still a punter. The money in horse racing is in breeding.

I'd love to know who "wins" in a scaled YC vs. the oceanic tide that is the SP500 and it's capital sucking and brain sucking ways. A Google can stop 10000 potential startups simply with RSUs and cap another 10000 by buying them out (which is kinda good for YC but not really... they'd rather own a chunk of a Google).

I think you’re vastly underestimating how hard it is to pick winners and stifle competition.

Using your logic, if it was so easy why didn’t Google stop OpenAI? Meta? Perplexity?

Maybe they killed a hundred similar companies and those three slipped through?

Hundreds of Facebooks?

Very unlikely

https://en.wikipedia.org/wiki/List_of_mergers_and_acquisitio...

I think that maybe we underestimate how hard it is to choose the right companies to “kill” when you’re a competitor. The default mode is to say that they won’t go anywhere because of many factors (they don’t have the resources, the access, the capability, etc). But sometimes they do. And in restrospect it’s obvious, but it’s not by the time you had the chance to stop it. And I think it’s probably good.

Also hard to marshal the resources you need internally to "kill" a competitor. Sometimes the way to handicap a startup rival is to build the feature / product yourself, but then the bigtech firm runs into the challenges of moving a large org quickly.

> why didn’t Google

Because hubris.

One glaring flaw of well-capitalized large tech (perhaps the only one) is thinking they can build something better internally, when they have enough cash to simply buy best of breed off the market.

At times Google understood this: Android 2005, YouTube 2006, Writely/GoogleDocs 2006, DoubleClick 2007, Motorola Mobility 2012, Waze 2013, DeepMind 2014

Either thinking they can build something better internally, thinking the new thing doesn't matter, or realizing that it does matter but not having the ability to move fast and commercialize it.

e.g. Microsoft circa 2000 didn't think they could build a better internet. They just thought that the internet didn't really matter that much. Google in 2022 knew that LLMs mattered, and had spent a ton of money, but OpenAI just got a better product to market faster.

I'd add HTC's mobile phone unit to the list of strategically important Google acquisitions (and prehaps Dropcam, too). Without either of those -- even with all the fits & starts, they'd never have gotten to where they are today, building pretty great hardware with pretty good support and a decent supply chain, and largely with "good" software on top.

I think they are both winning. Googling gives "The 2024 Y Combinator (YC) top companies have a combined valuation of $458 billion. In 2023, these companies generated a total revenue of $57.2 billion." Which is not bad starting from basically nothing 20 years ago. I don't think the S&P is doing badly either.

Plot a graph of the companies against their revenue and profit numbers and you'll end up with 2 massively skewed incline curves. Plot a graph of their companies which are public, and they're mostly trading below their debut.

YC did do the right thing (investing in super early stage startups) at the right time (ZIRP environment), but now with the proliferation of too many startups and applicants, I'm not so certain on how much of a future it has with getting the next best thing. Already seeing quite a few startups that either bootstrapped or raised without YC, while a number of YC companies are stuck in pivot loops.

I like this metric. YC doesn't own all of that but that doesn't matter for this exercise. That $458 billion is disjointed. It cannot move as one (when needed) like say Microsoft can. It cannot buy GitHub or OpenAI. But then it wont self distruct either. That is both a plus and minus.

Yeah. I think YC's ownership is of the order of 3%.

If you make buyout offers to 10000 startups, how many of those say "no" to those offers? Not everybody is willing to send an "our incredible journey" post to all their users.

> A Google can stop 10000 potential startups simply with RSUs

The real killer here is the Bay Area housing market. You need those RSUs to pay for a place to stay.

If the engineers are just middlemen for plumbing that money to property owners, seems like owning property in the Bay Area might be a good idea.

older generations did just that. In the Internet boom, people commonly talked about "place being obsolete" and other detached thinking.. perhaps lessening the emphasis on buying real property nearby. Of course, not everyone played by the same rule book. Observe the result.

That was the policy intention in the 70s. Prop 13 plus zoning most land area for SFH ensured that boomer property owners could get rich. Back then it wasn't clear just how rich, though.

It seems there is the opportunity to disrupt that market, so that tech companies can pay property owners directly, without the middlemen.

That's not nearly disruptive enough. I'm raising seed rounds for HackerRV - a high end, compact RV rentals for knowledge workers that does away with the need for houses. Starlink comes standard, with additional subscriptions available for showers at aelect locations, and mail delivery addresses. Our previous venture (BackyardBnB) was scuttled by literal NIMBYs.

Or they can disrupt the actual middleman, which is the property owners. The land is there regardless of who owns it, it turns out.

Sure I'd rather have $1m in FAANG shares than SF real estate over 10 years but maybe I am wrong.

Especially as SF real estate relies on NIMBYism that might change whereas FAANG relies on an enormous brain trust, branding and monopolies.

You don't have to live in Bay Area to run startup?..

I think it massive improves your odds of a unicorn. But a regular old business aiming for a humble $10m valuation based on profits, of course not.

for companies YC likes and believes in post-accelerator. YC definitely discriminates from that perspective- they choose which startups they think have the most promise during any given batch, and they give those founders preferential treatment.

Based on what I’ve read, this seems backwards, I think YC chooses founders with the most promise and gives their companies preferential treatment because promise is only the ability to do things.

But I could be wrong and probably am.

IME the earlier a company is in their lifecycle the more the team matters than the idea. So, choosing founders seems The Right Way

I do agree. But the thing I would add though is that at least when I was there (W2012 - we were in the same batch!) YC and PG in particular were vocal about principles they believed in, especially the idea that naive young founders get kicked around in Silicon Valley and ought to be treated fairly. PG talked about this constantly and of course it’s a big theme of his essays. I remember one particular instance where a potential investor was behaving questionably and PG offered to step in and talk to them if they crossed a certain line (which they did not in the end). He was clear about what he concerned acceptable and unacceptable and why. And we were nowhere near the cool end of the batch.

Yes YC acts in its interests but in my experience they live by good principles and that makes all the difference. The Chaos Monkeys anecdote is an example of that. So I don’t agree with the article’s framing that they throw their weight around to simply exercise whatever power they have over others for financial gain.

Scaling is not a right, nor a duty, nor an inevitability.

Why does everything need to scale? Why couldn't they stick to taking a few high quality companies every year? There was enough money to be made that way. Seems the belief is that everything needs to scale until it doesn't work anymore.

So you're saying the "Peter principle" extends beyond tech employee performance and to tech company funding.

If the Peter principle is just “you succeed until you don’t” then it’s tautological and applies in all contexts.

no, it's not the Peter Principle.

The Peter Principle is pointing out that if you keep getting promoted by doing an exceptional job, and you stop getting promoted when you stop, that you have ended up leaving a job you were exceptional at, and landing in a job you are not good at. In a certain sense it's saying "you should be demoted back to your last job that you were exceptional at"; it's not suggesting that, it's suggesting a sort of snarky "this whole system is set up to fail" because it's from a "isn't capitalism grubby" perspective.

None of this flavor is in the general YC scaling case, though you may be able to find it in various places within that.

I think you'd be hard-pressed to make a case that VC-motivated business scaling does not consistently overinflate the businesses which are artificially propped up by investor cash. There are a bunch of companies, existing and dead, that show the folly of growth-at-high-cost.

that's not the Peter Principle

As much as I resonate with your sentiment, it's the incentives that investors have that cause them to behave this way, not an inherent belief in scale at all costs.

Keep in mind, YC is very early stage. Asking them to pick only winners based on an application and short interview process would be a fool's errand. I believe their acceptance rates tend to be around 2%, so it's not like they aren't being selective up front—it just takes time to really get signal on who is executing and finding traction. Startup investment is high risk and justified by the outliers, so they have every incentive to find them early, it only makes sense that they would give more support to their winners as they emerge.

As the article states, YC’s key asset is their deal flow. You simply don’t get that if you only write 1% of the best seed checks.

If you don’t eat the pie, someone else will. If someone else eats more pie than you, they will be stronger than you and eat your pie.

Switching analogies, unless you have a defensible niche with a wide moat, your position of power is an unstable equilibrium; in the open market only a monopoly is a stable attractor state.

>Why couldn't they stick to taking a few high quality companies every year?

Because they don't actually have the ability to pick high-quality companies.

The need to scale is inevitable if you consider 2 trends: startups have become mainstream and the internet is orders of magnitude bigger. When YC applications consisted mostly of PG essay readers the chance of success per company was higher. Also some niche ideas can now work because of a more developed communications infrastructure, easy payments, better targeting, etc.

And knowing which companies are high quality is almost impossible at the early stages.

Neither of those lead to a need to scale. Those are enabling factors, at best.

There needs to be an ROI, YC isn't funding companies out of the goodness of their hearts. So the additional size means they have to bet on Uber and Lyft and Flywheel and every other competitor in that space in order to guarantee a return, because they only win if they bet on every horse. You can't do that if you keep small since the number of entrants got bigger. Hence scaling is necessary for them.

Sure, but that's not the argument that was being made. This is just generically: VC works by power laws so larger portfolios are generally preferable to smaller ones.

To venture capitalists, “enough money” is a nonsense phrase, much in the same way that a typical computer enthusiast would see the phrase “enough RAM.”

It wouldn’t have to scale, but I’m glad that it did. It’s likely that there’s been somewhat more innovation and economic growth in the world over the last ~decade than there would have been if YC stayed smaller.

Capitalism baby, you always need to grow to increase share holder value.

I think they do this for any portfolio company and nothing is special about AdGrok here, if that’s what you imply with “good graces”. It’s a total power flex move that keeps the valley in check. If they allow this to take place they will have all their portfolio companies consumed in legal disputes in no time. They went after both the company and the VCs to send a message that this behavior won’t be tolerated. Word like this spreads.

I always wonder how it feels to be in one of the companies who compete against each other in the same domain. I think they funded 3 AI code editors as once, how do you know the others aren't getting preferential help

agreed, this is not too controversial; it is the only way to scale. Time is a big investment for such accelerators and as such, diligently choosing which companies to invest time into is their most valuable decision.

I was in the S12 batch. A couple years later we were demonstrably failing. I emailed the general YC advice line or something similar with a question, and pg responded with a thoughtful comment that was genuinely useful

I don’t think there’s any chance he saw any economic value in us, he took that time because he cared about startups and well-meaning failures like us

It’s a small thing, yes, but I’ve always thought it said a lot about him

Agreed. In a similar vein, when our YC company was failing I had a great call with Jessica Livingston, and looking back it was purely moral support and not anything economically motivated.

This is a really interesting story. I wonder if this YC power dynamic still exists today.

The way YC closed ranks was my favorite anecdote from Chaos Monkey’s.

I always find it interesting though YC leaders are extremely against cancel culture, but when it comes to business, its okay to threaten that someone will never work in the valley again if they don’t accede to their demands.

Standing against cancel culture is not the same as standing against social sanctions in any way, shape, or form. The problem with cancel culture is not that it's a social sanction. The problem is it's a particularly dysfunctional sort.

"They're against cancel culture... so why didn't they invite me to their house party? What hypocrites!"

I disagree. There's no principle involved. It's all polarized partisan politics. Your "particularly dysfunctional" is extremely in the eye of the beholder. The rich and powerful silicon valley CEO/VC guys tearing the country apart over their woke crusade are just as ideologically irrational as the next twitter blue check.

This. If you believe for one second that money and power hungry people have any kind of principles, you have not been paying attention. Cancel culture, woke, left, right, center, free speech – they will say whatever to get what they want on these topics, and change their opinion the next day without any real consequences. Welcome to late-stage capitalism.

> Welcome to late-stage capitalism.

Good reads/resources about this? I started reading "What's Our Problem" [1] but find it difficult to find "non-partisan" resources nowadays.

[1] https://www.goodreads.com/book/show/102146148-what-s-our-pro...

I don't think there is any scholarly basis for the term "late-stage capitalism". It's just a meme that kids started using. Power-hungry, unprincipled people will exist regardless of a country's economic system. But people are very imaginative in attributing various social ills to capitalism in particular.

Beyond the specific term, there is a "sign of the times" we are living. Nowadays the issue with political sciences and philosophy is the partisan, left-right spectrum view that it is difficult to break in in discussions (including HN).

quick Google search shows that the term has been in scholarly use for at least 50 years now and means pretty much exactly what "the kids" are talking about.

So we've been in the "late stages" for at least 50 years? Is there any sort of falsifiable hypothesis there?

https://books.google.com/ngrams/graph?content=late-stage+cap...

You can see from Google Ngram Viewer that there's almost no usage before the year 2000, and the vast majority of usage is post-2015. My guess would be that recent usage has only a tenuous connection, at best, to scholarly usage from 50+ years ago.

"Late-stage capitalism" is just "reimposing feudalism[0]" - i.e. going back to an economic system in which the vast majority of an economy's wealth is rents charged on the use of valuable property. "Capitalism" as is propagandized in capitalist societies is an economy in which the majority of wealth is profits earned as the return on a risk-bearing investment. Being beholden to a free market economy means you have limits to your power - not great limits, but limits none-the-less.

In other words, capitalism is a necessary transition between feudalism and feudalism.

[0] Insamuch as the term even has meaning. Medievalists and historical researchers will correctly call this out as an overloaded term.

I'd read things written ~1880, which was the last time economic concentration in the US was generally recognized as toxic.

Different technologies and world economy but same underlying issue: concentration of capital being leveraged to artificially protect profit from competition.

Not specificially about this. But I'm trying to read some of the classic philosophy books. Anything by Bertrand Russel and Erich Fromm I like. If you want to learn more about human behavior, I can recommend reading Robert Sapolsky. His new book about (the lack of) free will is great! Furthermore, I enjoyed Homo Sapiens by Yuval Noah Harari. Certainly goes into the topic a bit how we ended where we are not with society.

I think it depends on the person. Elon Musk changes his mind a lot, but PG generally seems pretty consistent.

It's not necessarily a bad thing to change your mind, either.

My guess is that if you carefully read PG's criticisms of woke culture, they are narrow enough that they wouldn't apply to what YC does against misbehaving VCs. For example, if you read between the lines, this essay does a good job of explaining some problems with woke culture: https://paulgraham.com/conformism.html But it doesn't really apply to misbehaving VCs as much.

What's the specific critique of cancel culture PG made, that he's being hypocritical with? Can you give a verbatim quote that displays the supposed hypocrisy, to ensure that you're not misrepresenting his position?

My takeaway that I'll bluntly admit is based on being another one of those people who won't shut up about Robert Caro's book The Power Broker is this: the mark of true political genius is the ability to constantly take in new information that challenges your existing viewpoints, while also having the force of will to try and make your values manifest despite knowing that your views on the best way to do that will change over time. Robert Moses (the subject of the book) was an unparalleled genius when it came to enacting his will, but he was a complete idiot when it came to actually observing the world to see what the impact of his will would be. I think democracy at its best should prevent those kind of people from gaining power (but of course it doesn't).

Elon Musk can be easily dismissed as someone who seems to be constantly changing his mind, but is actually deeply unwell, addicted to drugs, and surrounded by sycophants. His mind is about as interesting as his friends Kanye West and Donald Trump: he was very good at one thing, it made him extremely successful, it entirely broke his brain. Graham and his cadre of Silicon Valley pseudo-philosophers are more like Moses: I don't trust them to have enough contact with life outside a rarified bubble to be able to speak to issues that concern normal people.

To your point: Moses never learned to drive, was chauffered everywhere. So he never directly experienced the horrors he wrought.

My favorite fact from the book is that the windows in his limo did not even go all the way to the back seat, so he didn't even have to look at what he'd wrought unless he chose to. And the horrible traffic jams that were his legacy were something he likely enjoyed, because it meant more time to work in his limo office uninterrupted.

Yup. It's just another moral panic.

I think the difference between cancel culture and just freedom of association is the difference between "I don't want to work with you because of X" and "I'm going to influence others not to work with you because of X". Whether that be anons on twitter calling up your employer to get you fired, or PG having a quiet work with his friends over at some VC firm, they're both the same strain of toxic.

I think there may be a few other differences. For example, are people ever given the opportunity to change their behavior before the sanction gets applied? Does the punishment fit the crime? Is there public shaming involved? Do we default to public shaming anyone who says a word in defense of the person who is being sanctioned? (I would say that's the single most pathological feature of cancel culture, actually.) Are the rules constantly shifting in line with social media fashions? Are our judgments carefully considered, or are they based on shallow pattern matching?

Cancel culture applies to discussions of policy in the public square. The idea is that certain views should be silenced. You can be a believer in free speech, and disagree that those views should be silenced. And then you can work to punish malicious actors in Silicon Valley who violate important investing norms. I just don't think there's a contradiction!

> Do we default to public shaming anyone who says a word in defense of the person who is being sanctioned?

Defaulting to public debate on the matter isn't as stark a difference from this behavior as we want to believe, especially when the community in which you engage these points is so heavily biased in one direction. Discussions around "cancel culture" rarely take into account that the conversations being had are happening within a particular cultural context, one that depends on the venue in which it takes place. Too often I see public shaming framed as reasoned debate on this forum when the intention is otherwise abundantly clear.

An amusing corrollary to this is that cancel culture as normally defined is implied to be the majority opinion. I don't think that's true, though, the nature of news media definitely amplifies certain voices over others, getting back to the point about venues above.

> And then you can work to punish malicious actors in Silicon Valley who violate important investing norms.

That's a pretty generous way of framing it. It's not like this was a concerted effort to protect all small start ups or change employment law to protect founders from legal action from former employers. The article pretty clearly posits that it was a retaliatory exercise of power that was executed to serve the interests of YC. I would argue that the kinds of anticompetitive tactics described in this article are not economically healthy and are thus ethically, if not legally wrong.

It's possible an action is in YC's self-interest, and also that action is the right thing to do. Just because you're acting in your self-interest doesn't mean you're doing wrong.

>It's not like this was a concerted effort to protect all small start ups or change employment law to protect founders from legal action from former employers.

Imagine you volunteer at a local soup kitchen feeding homeless people. My response: "It's not like this was a concerted effort to feed all homeless people or end the problem of homelessness."

> Do we default to public shaming anyone who says a word in defense of the person who is being sanctioned? (I would say that's the single most pathological feature of cancel culture, actually.)

From the article:

> PG shared his anti-Adchemy game plan. In a nutshell: YC would anathematize Adchemy’s VCs, and declare that they’d never do business with YC again unless they straightened this out. Knowing PG, not only would they be disinvited from Demo Day, but PG would probably also steer companies to take money from other funds instead. Given that many if not most YC funding rounds were oversubscribed with investors, an excommunicated investor could be excluded without damaging the fund-raising company at all.

In other words, yes, YC was engaging in what the US Government would call "secondary sanctions": actions taken to cut the sanctioned individual or group off from support.

This and the other things you mentioned have both happened and not happened in various instances of cancellation. I think you might have some motivated reasoning going on here. It sounds like you are trying to make a distinction between sanctions imposed by people you agree with and people you don't. This is a distinction without a difference. Secondary sanctions are the most effective form of sanctions[0]. Everyone imposes secondary sanctions if they feel they can get away with it, because sanctions without secondary sanctions have no teeth.

[0] Why? Simple: they force everyone in the room to not only make a choice between the intolerant and the sanctioned, but if they choose the intolerant, to also enforce that same decision upon others. In other words, they're "GPL viral".

I specifically chose the phrase "anyone who says a word in defense of the person who is being sanctioned" for a reason. My key point is not about secondary sanctions in general. It's about freedom of speech, and our ability as a society to grapple with moral questions.

Suppose, hypothetically, that any lawyer who's found guilty of "defending a criminal" receives the same sentence as that criminal. So if you're a public defender, and you defend someone accused of murder, and that person is found guilty and serves a life sentence -- then you yourself are also required to serve a life sentence.

In this hypothetical, the justice system breaks down very rapidly. No one wants to defend the accused anymore -- even if you're fairly sure they're innocent. The risk of being forced to serve the same sentence is just way too high. This has second-order effects. Accusations are now much more likely to be successful, since the accused lack representation. If you're having a beef with someone, you'll want to be sure to accuse them before they accuse you. Etc. Society collapses into chaos.

This isn't just a hypothetical, note. A dean at Harvard was dismissed for representing Harvey Weinstein. Even the ACLU can explain why that was wrong: https://www.aclu.org/news/free-speech/harvard-was-wrong-dism...

Reputational punishments are serious punishments. There's an urban legend that public speaking is a more common fear than death. Obviously, public shaming is even scarier than public speaking -- public shaming is basically the worst-case scenario for public speaking.

If I choose to defend someone whose reputation is under attack, and my reputation gets attacked in response, that's isomorphic to the situation where a public defender gets sentenced for defending a criminal. This helps explain the chaotic, dysfunctional nature of modern cancel culture.

>you are trying to make a distinction between sanctions imposed by people you agree with and people you don't. This is a distinction without a difference.

Consider: "You are trying to make a distinction between punishment administered by the state, and punishment administered by private individuals." There's a huge difference between a judge sentencing a prisoner to 10 lashes with a whip, and a private individual randomly lashing another private individual because they're having a bad day.

There's nothing inconsistent about me trusting PG as an authority in enforcing SV good behavior norms, and me not trusting random vigilantes on social media to correctly diagnose racism/sexism/etc.

If you want to argue that I shouldn't trust PG, the best way to do that would be to mention an example of miscarriage of justice that he's responsible for. If your complaint is just: "but he's acting as an authority!" -- well, it would appear that he's doing a good job, since the Valley seems to be thriving.

> "I'm going to influence others not to work with you because of X"

What X is, is material though. So as much as we want to be able to simplify and not get lost in the weeds of interpersonal drama, we can't just say any behavior in that vague direction is toxic. If X is "he is a bad person and is going to make false claims and lie and cheat and steal from you, has repeatedly done this, and there is legally admissible evidence of this", that's a totally different thing from X is "he looked at me funny and, I dunno, I just feel a bad energy coming from him" amplified by the social media megaphone.

> I always find it interesting

That's not interesting. That's not understanding capitalism. It's all about Incentives.

The idea that business leaders can be ever considered genuine political or cultural voice or actor is the problem. Silicon Valley and hacker culture has created an atmosphere of business politicians and for some reason hackers take them seriously and don't laugh at their faces.

The talk is just empty PR. Somehow smart people working for OpenAI, Google, keep eating it.

Traditionally business people don't get into discussions of culture or politics directly. They might work in the background, but never directly. There is a good reason for that.

If I have the choice of people from my industry or people not from my industry why would I ever choose the latter?

Because you know the people from your industry well enough to hate their guts? :)

It doesn't matter who I like. I am not in any type of personal relationship with these people, so it makes no sense to "like" or "hate" them anyway. It matters whose incentives are aligned with mine. It's also not smart to assume you would like someone else better just because you don't know them.

People can easily disagree even when their incentives align. Hopefully we aren’t beings who have to blindly submit to whatever incentives are out there, or assume the same of other people.

You can choose people AND understand that they care only about money and not take their political talk seriously.

> Traditionally business people don't get into discussions of culture or politics directly.

Traditionally business people have always done that:

https://en.wikipedia.org/wiki/House_of_Medici

I did not speak against using money to get political power and benefit oneself.

This was about propaganda of painting it as being somehow pro-social and criticism of those who believe it.

> The idea that business leaders can be ever considered genuine political or cultural voice or actor is the problem. Silicon Valley and hacker culture has created an atmosphere of business politicians and for some reason hackers take them seriously and don't laugh at their faces.

> Traditionally business people don't get into discussions of culture or politics directly. They might work in the background, but never directly. There is a good reason for that.

What is "traditional" for you? East India Company and the VOC (Dutch East Indies Company) conquering lands and colonising people, and directing foreign and military policy for centuries traditional enough?

Stabdard Oil's Rockefeller influenced politics aplently. William Randolph Hearst was the son of a Senator, businessman, newspaper publisher and politician who was among the main causes for a war for colonies. The Dole Company, United Fruit company, Standard Fruit company literally toppled governments and operated death squads, and often had enough influence to get the US marines involved ("War is a Racket" by a Marine general who took part in the banana wars describes this nicely). JFK's father was a businessman who got into politics for his and his family's interests.

In Russia, oligarchs are the ruling class and are politics, and have been for the past 30 years. In the US, you have multiple businesspeople and very rich people in the upcomming cabinet.

South Korea is sometimes jokingly referred to as the Republic of Samsung due to the outsized influence Samsung have on their GDP (22%), with ramifications such as their high level execs getting pardoned of crimes such as bribery of public officials due to the impact it would have on the company and country.

Business has always tried to influence politics in its favour, which often escalated into branching put into politics, often directly.

I did not speak against using money to get political power. Your examples honest power plays. Using raw power to benefit themself.

This was about propaganda and criticism of those who believe it.

The examples were not honest at the time. They only seem so to you through the lens of history. You think the banana companies plainly said "we want to change the government, kill any opposition if necessary, just to make more money"? That's just our view now. Because there's nothing more to be gained from clouding the issue. They made the money, time has passed, there's no way to reach back and change anything. At the time, they pretended they had other reasons, to get support from people who didn't understand the situation. Just like it happens now.

How was deposing Hawaii's kingdom to be able to exploit the land for pineapples an "honest power play"?

> "War is a Racket" by a Marine general who took part in the banana wars describes this nicely

Smedley D. Butler, who a year prior was paid off by J. P. Morgan to coup the US government and immediately went to Congress to blow the lid on the plot.

The Wikipedia article lists a lot of people who think the plot was more of a joke than a reality, but I suspect had it been kept secret it would have eventually been executed.

The veil will come off now with the second Trump administration. Everyone knows what's coming, and CEOs already changed tone.

There is also this thing that is very specific to Silicon Valley parties, you may have some dirt on some VC partners or the other way around.

This also affects the dynamics of the regular business, it's not right, nor fair, and outright disgusting, though sadly happening.

Will the administration go to the point that they will investigate such ? I doubt it, it's too risky for the economy.

People with something valuable to trade don't have dirt aired in public -- they just barter changing their behavior on certain matters into everything being kept quiet.

Consequently, if anyone does have skeletons in their closet, they'll just suddenly decide to do things more favorable to those who could have power over them.

Disagree. Social ideals are fundamentally part of business for the majority of human existence. As someone else mentioned, the east india company most definitely had social goals baked into it.

Socially agnostic ideals for firms is relatively recent, and entirely good for business. Perhaps from the “greed is good” days of laissez faire policy.

The limits of those policies were found and society has learned a new tool to make its desires known - by being vocal customers.

"Cancel culture" is one of those buzzwords that can take on whatever meaning it needs to in a given situation.

> If by [noun], you mean [negative descriptors of noun], then of course [statement of lack of support/belief]. If, however, by [noun], you mean [positive descriptors of noun], then [statement of support/belief].

The only consistency you'll find in business and politics is self-interest - perceived or real.

I think that's a bit of an oversimplification. A lot of people are well meaning.

Very few extend this to their own livelihood or survival. It's easy to do when you're not playing with your own resources, or they're just crumbs.

It's hard to disentangle motivations as treating people well is also usually good business too but in my experience a lot of people are motivated by doing good as well as making an income. If you look at the history of YC, Paul and Jessica started it primarily to help out the young would be founders without much expectation of making money. And in the story here it seems his main motivation was to stop the founders being screwed over rather than to enrich himself.

The attitude that all business / political people are no good can be counterproductive as it can lead to not differentiating between the helpful and iffy ones.

Hagiographies should be viewed with suspicion, particularity those that make claims about people's motivation (which is notoriously difficult to pin down/prove)

Only insofar as having a positive opinion is material. The chances on HN are drastically higher than elsewhere on the Internet, but most here will never have the chance to interact with pg, so having a positive or negative view of his motivations is immaterial. Most opinions are immaterial. Unless we're on a ship in the ocean, and we're using the stars for navigation, and you're the navigator, whether or not you believe the Earth is flat, what you believe doesn't affect me. So then it really comes down to world view - are you an optimists or a pessimist? Is that neat little story about pg a carefully coldly calculated PR piece, or just a neat little story that has no effect on anything other than some people feeling good, like chicken soup for the entrepreneureal spirit. Why not both!

It's a matter of proportionality in power and influence. E.g: Yes, most football fans are likely well meaning folks, but the World Cup is still ending up in absolute monarchies with all excuses under the sun suddenly appearing to defend it, not rarely from the same influential people that would scoff at the idea a short while earlier.

Those are the useful idiots, the chess pieces on the board to work with.

A cartel protecting its interests is not cancel culture.

Its okay to threaten that someone will never work in the valley again if they don’t accede to their demands.

Wouldn't surprise me in the slightest, but care to cite some examples of them literally doing that?

> Wouldn't surprise me in the slightest, but care to cite some examples of them literally doing that?

That would probably result in *never working in the valley again...*, so I wouldn't be surprised if GP would skip citing.

How long until we find out the people doing the threatening and the ones offering 'protection' dine together and have a mutually beneficial relationship?

This kind of extra-judicial tampering cuts short the process, which exists for a reason. There are two sides to every story--I have every reason to expect there was a valid reason for a lawsuit here. Such mafia-like behavior is unsettling.

An ex employer suing employees who left to found a startup and you actually think it's a legit suit? I have every reason to expect it's nothing but bullying / a tactic to scare other employees who have the same idea. I see no evidence that it was legit.

A stunningly powerful lesson that one never really win a lawsuit. The best you can do is survive.

It funny because both companies went to shit and the whole thing was mostly a pissing contest

I particularly love the following quotes from "Chaos Monkeys." This is "The Social Network" level of commentary:

The harsh reality is this: to have influence in the world, you need to be willing and able to reward your friends and punish your enemies.

But in the passive-aggressive popularity contest that is Silicon Valley, someone actually going to bat for you—really going to bat, like telling important people to go fuck themselves—that’s rarer and more short-lived than a snowflake in a bonfire.

Y'all YCs live in a bubble, on multiple levels, and it's funny to watch the temperature go up.

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