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Comment by dagw | Hacker News Reader

American startup culture is so weird

On the one hand, sure. On the other hand this relentless focus on "hyper-scale" or bust is what has pushed the US startup scene to where it is and probably why it is so far ahead of the rest of the world.

If you told most European startup founders that in 5 years you'll have plateaued at 15-20 employees, a steady income flow, and you'll be paying yourself $200-250k a year, they'd think of that has a big success. In the US they may very well think of that as failure, especially if they are VC funded. I remember hearing a SV VC straight up say that if you consider selling your company for $50 million a win, the you don't have the right mindset and he doesn't want to do business with you.

If you never take big swings and big risks and are happy with small wins and stable growth you'll never win the big prize. And while this might be healthier for you as an individual, it's bad for the Economy.

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Worth pointing out that something being bad for the economy, from this perspective, isn’t necessarily the same as being bad for the population. Median incomes are stagnant and quality of life is declining in the US. In part, I’d argue this is because hyper scaling and overoptimising are squeezing the humanity out of most economic life, and most people are not benefitting from these trends.

There are exception: we need big companies to make GPUs, probably. But it’s not clear to me that this logic applies universally. Some inefficiency is probably going to be good for public wellbeing.

> we need big companies to make GPUs, probably.

we definitely don't need trillion dollar companies selling ads.

But we do want them considering our hesitation at paying for things without ads, especially when a free gmail, google maps, google drive, etc is available.

A lot of those ads support startups and small businesses.

>Median incomes are stagnant and quality of life is declining in the US

You think it's better in Europe? Here in germany everything is going downhill fast

> Median incomes are stagnant

But they're not? Adjusted for inflation, median US household income is 18% higher than fifteen years ago and 32% higher than it was thirty years ago: https://fred.stlouisfed.org/series/MEHOINUSA672N

You could say it was stagnant from 1999 to 2015, though.

Inflation from 15 years ago to now is 33%[0]. Inflation from 30 years to now is 107%[0]. So yeah, median incomes are dropping.

[0]: According to this calculator - https://www.usinflationcalculator.com/

You're adjusting for inflation twice. The numbers I gave in my comment, and in the chart I linked, are after inflation adjustment.

Here's the equivalent chart without inflation adjustment, which gives the (incorrect) impression of sharply rising incomes: https://fred.stlouisfed.org/series/MEHOINUSA646N

You're right, and that's 100% on me for not clicking your link.

What about wages compared to house prices?

Some things in the "basket of goods" we use to compute inflation have gone up more than others, and housing is definitely one of them.

You can compute exactly how much by dividing https://fred.stlouisfed.org/series/MEHOINUSA646N by https://fred.stlouisfed.org/series/MSPUS Here's a sheet where I've done this: https://docs.google.com/spreadsheets/d/14NVqsKXnswG27TiwENpi...

But note that some of the change here is people building and buying larger houses as we get richer, which inflation calculations account for and this division does not.

Average rent per square foot since 2014 has increased by 42% [1]. By your unadjusted income chart, incomes have only increased by 33% in that time. In my case, existing just to the left of the income median, that's meant going from comfortably affording a 2br apartment and weekly dinner out, to barely squeaking by in a small 1br. Add in a $600 car payment (which I have managed to avoid), and it's not possible to live reasonably.

[1] https://ipropertymanagement.com/research/average-rent-by-yea...

For many people housing isn't part of a basket, it is the basket.

If food prices go up, it hurts psychologically but it's not the end of the world. I can buy cheaper food, I can buy less food, I can eat out less. Most people in the developed world are very far from food price-induced famine. I can buy a year's worth of sustenance for a thousand dollars, it might not be healthy but I'm not going to die.

Housing is qualitatively different. Many renters are only a few steps away from homelessness, and more people rent nowadays because they cannot afford to buy. It's hard to adjust for increases in housing costs by buying cheaper housing, your housing is linked to your income.

I complain about but don't ever worry about food prices, yet the roof over my head is a real cause for concern.

For my parents' generation it was the opposite, being overweight was more uncommon, housing was dirt cheap, people worried about getting enough calories rather than too many. Indexing wages to inflation is an anachronism that we have taken into this new world.

> It's hard to adjust for increases in housing costs by buying cheaper housing

I think this is mostly not true? You can adjust for housing becoming more expensive by changing your consumption patterns, just as you describe with food. It's still rough, but unless your family is living in single room in a shared unit (or, if you're single, sharing a room) there are choices between "consume housing at your current level" and "be homeless".

The CPI-U table has housing as 37% of the overall basket: https://www.bls.gov/news.release/cpi.t01.htm What do you think it should be?

However, because big-ticket items we all buy (housing, healthcare) and items many of us buy (education, childcare) have increased much more rapidly than inflation, the overall impact has been a deterioration of financial stability for many Americans.

If we’re comparing ourselves to Europe we are certainly not worse off (or anyhow the portion of the population that is worse off is not evaluating whether they should work at FAANG or a startup). Any serious discussion has to start from acknowledging that we are richer.

> If you never take big swings and big risks and are happy with small wins and stable growth you'll never win the big prize. And while this might be healthier for you as an individual, it's bad for the Economy.

Correction: it's not bad for the economy, it's bad for the investors (the only people who matter in the whole world).

I'm sure a tremendous amount of actual value in the economy has been destroyed by VCs demanding a binary result of either total failure or exponential growth.

I've learned to mentally replace "the economy" with "rich people's yacht money" whenever I read it in an online article. Make that substitution in this article, and it makes a lot more sense.

> If you never take big swings and big risks and are happy with small wins and stable growth you'll never win the big prize.

You don't win the big price either by taking the big swings. I mean, some people do, but they are so few that they can be considered a rounding error.

Maybe the economy wins when one-in-a-million business unicorn appears, but I don't make any of my other life choices by considering the global economy either, so why would consider it here?

> On the one hand, sure. On the other hand this relentless focus on "hyper-scale" or bust is what has pushed the US startup scene to where it is and probably why it is so far ahead of the rest of the world.

I don't agree. I think this is specious reasoning fueled by a mix of cargo cult mentality and survivorship bias. Just because a hand full of startups made it all the way through to a unicorn status, and some where bought out for undisclosed reasons,that means nothing on whether an idea is or can be hiper-scalable. To make matters worse, this reeks of short-term mentality that serves no purpose whatsoever other than find yet another angle to put together a kind of pump and dump scam.

I don't think any of this is the case, and you haven't really said why. Focusing on winning big is absolutely not survivorship bias. Everyone in the 100m is aiming to be the fastest human on earth, but only one will win. That's not survivorship bias. Throwing fallacy names as insults is still just insults.

The 100m is not a sustainable model for a nation or world's economy. Everyone needs to eat, not just the single individual who runs fastest.

That doesn't seem in any way relevant to the point about survivorship bias. Nor to the US, whose system has if anything produced far too much food for its citizens.

> That doesn't seem in any way relevant to the point about survivorship bias.

To me, it seems exactly like the point of view that someone who wins the 100m would have.

> Nor to the US, whose system has if anything produced far too much food for its citizens.

Where people still starve, where people are still homeless, where people still live in poverty. What's your point here?

> To me, it seems exactly like the point of view that someone who wins the 100m would have.

That's just your own assumption. Who cares what any of us imagines anyone else thinks? It's not really relevant.

> Who cares what any of us imagines anyone else thinks?

Since you're responding and we're having a conversation about each other's opinions, I'd say it actually is relevant.

I'm not imagining what you think; I'm just responding to what you write.

Value creation isn't a zero sum game. Increased productivity benefits everyone. Whether it hyperscales or not, genuinely profitable businesses add value to the economy. This in turn creates more opportunities for everyone willing to participate.

"Value creation" is not the same as the monopolistic paradigm of a winner-take-all 100m race. Hyperscaling is a system where potentially profitable businesses are destroyed because they weren't profitable ENOUGH for some singular VC investor class.

I agree with you that profitable businesses add value to everyone's lives, but there's a maximalist limit to the relationship where they start extracting value and opportunity overall.

Similarly, almost all of the track and field athletes always cross the finish line, regardless of placement. If your business is genuinely profitable, you should do the same. You don't have to be gold medalist if it means compromising your vision or values. If you object to the whims of investors, it may be better to focus on things you can build without their assistance. It isn't as glamorous and it may not make you a billionaire, but it does hone your ability.

Frankly, not all of the VC sphere is focused on value creation. Much of it seems focused on buzzwords and vaporware. Success in the VC world might mean keeping the hype and promises of hyperscale performance rolling long enough to successfully dump on retail. Sure, VCs and founders profit, but is it genuine value creation?

It is a symptom of an overly financialized economy. We should distinguish these cynical scenarios from genuinely profitable value creation.

> It is a symptom of an overly financialized economy. We should distinguish these cynical scenarios from genuinely profitable value creation.

1000% agree, thanks for the thoughtful reply

> Value creation isn't a zero sum game. Increased productivity benefits everyone. Whether it hyperscales or not, genuinely profitable businesses add value to the economy. This in turn creates more opportunities for everyone willing to participate.

Your comment contradicts the "hyperscale or bust" mentality. Hyperscale is not a necessary condition to be competitive. You can put out a better product/service even before economies of scale are reachable. In the meantime, this hyperscale nonsense is nothing more than cargo cult mentality where the need for a sustainable business model is replaced with hand-waving and mindlessly repeating "hyperscale" as a mantra, which has been the death of countless startups.

> Everyone in the 100m is aiming to be the fastest human on earth, but only one will win.

This is a mental model of how things actually work that is fundamentally wrong and out of touch with reality. In any free market economy you have multiple competing businesses operating in the same market. The world is not a 100m race. Second place can still turn an fantastic profit and make everyone rich.

> If you never take big swings and big risks and are happy with small wins and stable growth you'll never win the big prize.

If you do, you still won't win the big prize. The people who do win the big prize are so few, even in the US, that it's an almost certainty you won't do it. Perhaps you're right that there must be thousands of losers for even a single winner to come up, but that seems so inefficient I doubt that's really true.

I’m not going to look for stats but as someone who’s been in the startup scene for a long time, it’s true and the stats are probably even worse than that. It’s totally inefficient for the entrepreneur but very efficient for the VC. One of my other observations is that the ones who do make it often come from families that have already made it and are able to leverage those connections and experiences.

This has not been my experience at all. I moved to the bay area in 2012 and 5 people I met living there have built unicorns/have net worth now around > $1BN. None of them leveraged family connections. this might be true in Europe but the best folks figure out how to move to america.

You know 5 unicorn founders? That seems pretty crazy given there's been how many in total since 2012, like around 60 from what I can find online?

Wikipedia says 1219 unicorns as of August 2023, with 702 of them being from the US.

I would argue it is less healthy for the economy. Large companies are very good at extracting value, not necessarily producing it.

Did you use an iPhone to type this?

Everything apart from the look of the iPhone is value created by publicly funded organisations, with the exception of the transistor which was developed by at&t. And at&t were effectively a government sponsored monopoly at the time. So apple extracted value, I would argue.

Publically funded means "paid for out of taxes skimmed off value created by private citizens and private corporations". The value was extracted from people by taxes. It was reused into something useful for people by Apple.

Wild.

I can't think of any companies that were more product-focused than Steve Jobs' Apple. They created so much value across so many industries. They created so many transformational products.

Their machines in the 1980s revolutionized personal computing (eg they brought GUIs and the mouse to the world). The iPod let us carry thousands of songs, audiobooks, or podcasts in our pocket. iTunes changed the music industry, giving us an easy way to get the music we wanted without piracy. The iPhone put the Internet in every pocket. Honorable tangential mention: Pixar transformed kids movies and dethroned Disney.

Apple made a ton of money making products that were delightful to use that users happily pay a massive premium for. They made things that were so much more than the sum of their parts.

> Large companies are very good at extracting value, not necessarily producing it

Citation seriously needed. There is no argument here, merely a demonstrably false statement. A large company is literally the only kind of entity that is capable of creating entire categories of value which make up a huge percentage of the global economy. Furthermore, a lot of what many, many small businesses are doing, especially very profitable ones, is directly enabled by and entirely dependent on the existence of large businesses.

> I would argue it is less healthy for the economy. Large companies are very good at extracting value, not necessarily producing it.

I agree, but from a different point of view. Companies put out products and services aligned with their strategies. In large companies, you build up strategies that spread across multiple domains. This means that product managers need to enforce constraints that will go well beyond the concerns of the use base of their specific product. That is a net loss for the customer as the product/service they once loved is now a way to force-feed them things they do not want or care about.

There's an optimum point. Too small is bad[1], too big is bad (too big to fail, regulatory capture, and sales driving out product[2]).

[1] https://asteriskmag.com/issues/07/want-growth-kill-small-bus...

[2] Steve Jobs quote: "It turns out the same thing can happen in technology companies that get monopolies, like IBM or Xerox. If you were a product person at IBM or Xerox, so you make a better copier or computer. So what? When you have monopoly market share, the company's not any more successful.

So the people that can make the company more successful are sales and marketing people, and they end up running the companies. And the product people get driven out of the decision making forums, and the companies forget what it means to make great products. [...]"

Unless large companies can intercept cash before it's paid to you and take some of it, they are only getting value from providing value.

I am sure you yourself can think of some specific examples, where companies earn money without providing value.

Or are you suggesting, that every single cent that every single company earns, comes from something that actually provides value to someone (excluding shareholders)?

I'm not saying every cent; who knows? But companies can't take your money on pain of throwing you in jail. They're not tax systems. They get money when people buy their stuff, and, pretty much universally, people buy stuff they think is worth the price.

> a SV VC straight up say that if you consider selling your company for $50 million a win, the you don't have the right mindset

This makes sense from a VC perspective, but not from a founder perspective (for most).

> it's bad for the Economy

Economy != VCs' pockets

Yes, but SV VC are not known for being wise people you look to for life advice. It's a bit like asking for forest safety advice from drunk hunters.

Were "the Economy" comprised broadly of 15-20 employee companies with a few £million turnover each per year, I think that could be good for it...

> In the US they may very well think of that as failure, especially if they are VC funded

Man, if anything, this is the part that’s weird.

There’s this very weird undercurrent of keeping track of who is “winning” in the US.

Is it not possible that someone who shepherds a hypergrowth startup to IPO, is just as of much a winner as the bootstrapped founder who has a profitable, sustainable business with a handful of employees?

I get it - everyone wants to win. But in hyper focusing on winning, you may lose sight of the fact that there’s lots of ways to win.

The last part of this comment is the last part of Jerry Maguire, because I think Jerry’s mentor Dicky Fox has the right idea about this:

”Hey, I don't have all the answers. In life, to be honest, I failed as much as I have succeeded. But I love my wife. I love my life. And I wish you my kind of success.”

People chasing such carrots on sticks are not healthy, happy nor balanced individuals. Every single one of them has something fundamentally broken deep inside, unquenchable thirst to over-compensate for that itch, which can manifest ie as greed.

In most cases in fact its just broken childhood mostly via broken father figure, source of eternal income for most psychologists since those issues are not actually fully fixable, at best they can be tamed a bit and folks brought into acceptance. Add some lower intensity mental issues and voila.

Of course neither money nor power work for such issue, but if one surrounds themselves with enough people repeating such mantras, it may eventually feel like they are right. At least for some time.

Nothing for regular folks here, unless one specifically says and feels that pursuit of happiness is not really on their agenda.

Also, would be nice if somebody compared mental issues drug consumptions US vs Europe say split by jobs. I literally know 0 people, peers, IT colleagues nor friends who take anything on mental health, we are just bunch of relatively happy balanced folks here who are not in frequent dread over some bigger protracted health issue that can wipe one out, don't have to worry about saving up a million or two for out kids universities, have enough time to relax on vacations, fully paid sick days etc. Once one is not desperately poor, this is how proper quality of life looks like, not some numbers on accounts.

I think you have a kernel of insight in this take, but I have to be frank: I really don’t think you frame this or phrase it in a very kind or generous way.

I say this as someone who has personally experienced the kind of struggles you talk about in such unflattering terms. (I lost my dad to heart failure at age 7, and have struggled with major depression for most of my adult life.)

Swinging big or not, the odds of (by definition of startup) "failure" are high. Therefore, you might as well swing big. A swing small experiment that doesn't connect is still a "failure".

Put another way, there is an endless supply of noise (read: competition for attention). If you're not swinging big enough to cut through that clutter odds are good you're just adding to the clutter. That's going to be an endless struggle.

Less risk is actually more risk.

“Less risk is actually more risk.” - Maybe the title of Nassim Talebs next book?

This is the problem with VC culture: it's not funding good, sustainable ideas, it's basically betting.

If you can see the future you can become the best VC ever. If you can't, you're no better than VCs.

This is what’s wrong with this country. We are run by a ruling class that only sees a profit. Screw sustainability, I (“SV VC”) just want 100X off my $1M initial investment, bro. Either hYpErScAlE or fuck off.

Taking VC money is a poison pill.

Sometimes the priority appears to be hitting all of the latest buzzwords. Customers and long term revenue may not be as important as dumping on retail with an IPO or tokens. The promise of "hyperscale" performance becomes more valuable than tangibles. Which is the same as saying, demonstrating tangible performance is undesirable, if it detracts from the narrative of "hyperscale".

What big prize? Having way more money than I know what to do with? I genuinely don't get what the reward even means to me as a human here

The person who you should expect (or look for) to buy your startup for $50M will reasonably expect to meet someone else in the future who will then buy the "startup" (probably at that time an established company) for $100M or maybe $200M - otherwise why would he want to buy your startup? People rarely buy startups just to extend their collection of statups ... If you build a staryup with the mindset of selling it to someone bigger - you will never grow to be the next BIG among the Big Guys. And if you are not looking to be one of the Big Guys (which implies you do not plan to sell your startup) - you can live happily on the plateau with 20 employees and a satisfying income.

> I remember hearing a SV VC straight up say that if you consider selling your company for $50 million a win, the you don't have the right mindset and he doesn't want to do business with you.

Is there someone out there focused on selling ten $50m companies at the same rate that this guy is focused on being part of, I assume one $.5bn company?

I'm actually 'stuck' in this situation right now. Make about 350-400k/year with no prospect to clear (much) more or exit. I mean, why should I exit ? To risk doing something else and 0.1% chance of making millions, or go along this way a few more years while building my investment portfolio.

Well to be honest, you could be earning that much money somewhere else with a lot less stress and insecurity.

Doesn't this thinking also lead to the eventual enshittification of their product? Hyperscalar growth will eventually stop. At that point to justify your valuation you need to start screwing over customers

It also means that, as a customer, you are utterly fucked because almost everyone you want to do business with or buy things from could potentially disappear in a few years because bootstrapping isn't exciting enough for the VC fucks. "Enshittification" runs rampant because literally EVERYONE is swinging for the fences, even when they shouldnt be.

> And while this might be healthier for you as an individual, it's bad for the Economy.

... an while it's bad for the economy, it may be good for the country. Notice how Europe doesn't have regular school shootings, rampant crime or 100k people a year killing themselves with Fentanyl. It may have something to do with culture that prioritizes other things besides the economy.

how is that bad for the economy?

was it? Or the inability of other countries to block US startups (because the US government will never let them) makes it impossible for local startups to compete leading to monopolies? If every country went US way of blocking TikTok, the hyper-scale growth would cease to exist fast.

Your statement seems to assume that non-US startups are intrinsically worse than US ones. Why is that?

Money from customers of all non-US countries is the biggest reason. Where US tech companies can't grow, local alternatives grow to the same level (China, Russia).

Why should the presence of US tech companies mean local tech companies can't compete? What's special about US companies?

> Why should the presence of US tech companies mean local tech companies can't compete?

That's not the right question. The correct question is:

Why DOES the presence of US tech companies mean local tech companies can't compete?

And that's the beginning of the discussion. If there is no money to be made, no market will be developed. Block US companies and in a few years you have a booming ecosystem.

Can you answer why US companies are so good at providing value that customers choose them? Obviously things can survive if there's no competition, but why is that better for the consumer?

> Can you answer why US companies are so good at providing value that customers choose them?

Some greasy words. Using VC money to offer subsidized services while capturing the market and killing competition has no relation with being "so good" at providing value, much the opposite.

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