Startup Stagnation
getfinch.com
getfinch.com
The way software is truly transformational to the human condition is by freeing more and more of us from doing mindless tasks that only feel good to some due the distortions our current educational system and perverted social incentives. We should be celebrating the destruction of automatable jobs so more of us can be free to live better in whatever way that may mean. This doesn't happen in reality because our current system gives little to no rewards for doing other things like living, experiencing, helping, or learning - what actually happens to those people is that they go without another job and flounder. There are very few ladders to guide anyone displaced and thats a shame because their energy could be used in an endless number of ways for society.
I have to disagree on at least the area of communications. I travel all the time and if I'd have been doing this in the 90s I'd either have a hefty phone bill or I'd not be able to keep in touch with my family. More than likely, I'd not keep in touch with my friends and keep my friends, and know my place in this world through my friends. I agree, a lot of software is just convenience, such as better flight search that replaced my travel agent, or the ability to pay my bills online so when I get do home the power is still on.
>The way software is truly transformational to the human condition is by freeing more and more of us from doing mindless tasks
I also celebrate the destruction of the mindless job. I can't remember where I read this yesterday, but someone mentioned imagine you are having a conversation with yourself from 100 years ago: the amount of free time we have because of automation is astounding and I can only hope it gets better. I like to be creative on my free time, but the paradox is that I need a lot of free time to be creative. I find myself spending time on programming or thinking about the automating of tasks instead of just doing them once a week. I hope to find a balance over time and I do jump on anything that can save me from mundane activities.
The problem is that 90 percent of software is just bad. Really bad. Unusable code, horrific UIs, bad decisions that have calcified and cannot be reversed. So bad that much of our industry's total person-power is devoted to maintaining legacy messes and deciphering shitty code.
Multiplier-dom (for lack of a better word) used to be for managers and executives only (although at least a third to one-half are dividers in most companies). Executives and capitalism could claim that they were the real producers and movers of progress and that the workers, "mere" adders. were hangers-on (Randism) but that's no longer the case. Now software engineers can be multipliers without access to capital or bureaucratic installation into a managerial role.
Global economic growth is currently about 4% per year. That's the highest it's ever been, but there's no reason it can't be much higher-- possibly 20 or 30 percent per year. That seems radical, but in 1798 (Malthus) economic growth under 1%, and that (sub-1% global economic growth) had been the norm for eternity. Malthus was wrong mathematically in his assumption that economic growth was linear (even in pre-industrial times, the curve was exponential-- just a very slow exponential curve) but he was right about population increases outpacing economic growth and leading to disaster or war. That happened constantly in pre-industrial societies. It stopped happening in the developed world around 1850. Some time in the next two hundred years we'll probably see post-scarcity.
I, for one, would love to see a post-scarcity world. I don't care if I live to be 1000 years old, in the sense that if we don't eradicate scarcity I don't want to live past my natural ~75-100 (even for the rich, the with-scarcity existence is too crappy to justify more than a century in such a world in one incarnation) but a post-scarcity would be worth seeing. Technology is a chance to contribute, in some small way, to the overarching effort to see that through.
Then don't read this guy apparently. A page of snarky comments? When YC invests in a promising team that has yet to have an idea that is "investing in nothing", but a MacArthur Genius Grant is "investing in the future" ?
I understand that to a lot of people outside of the startup eco-system or outside of technology in general don't "get" what it is we do, they also don't "get" how Google makes billions shoving just the right advertisement in front of them at just the right time, and they don't "get" that they haven't looked in a paper copy of the Yellow Pages in years or cracked open any of the 27 volumes of the World Book Encyclopedia on their shelf that they got for their kids 10 years ago. But to spend time and energy hating on something you don't understand, well that isn't really a meaningful use of your time is it? And telling someone who is having a great time doing something they love that it isn't "meaningful" is also just mean.
Thanks for the feedback.
And I don't think they don't "get" it. They get it alright, and still think there's something a little wrong with it. It's just a different perspective, and quite a valid one. (Though I wouldn't call investing in people, "investing in nothing". The MacArthur Genius Grant is a nice comparison.)
The article, and your response, are just examples of two opposite sides of the same old argument: how do you measure value? Should value be measured in how much money is made, or should it be estimated in more subjective terms of human impact?
We need occasional articles like this. It's healthy to re-evaluate what's being done once in a while. Dismissing people advocating for the human impact measure of value as not "getting" Google or the startup industry leaves yourself vulnerable to not "getting" what they're talking about, either.
Here's a softball example. Pinterest, or Doctors Without Borders: which one is more likely to be having a real, positive impact on the lives of people around the world? In terms of money and exposure, Pinterest is more valuable than Doctors Without Borders. Is that the right conclusion that we should be drawing then, that Pinterest is worth more to the future of humanity than an organization dedicated to sending medical talent into parts of the world where it's otherwise unavailable?
I think the article was reasonable. I don't see anything in the article that suggests that the entire industry is without merit; just that, there is a trend right now in the industry as a whole which we might want to think about a little. (Its author might be suffering from being a bit too immersed in only one aspect of business, perhaps.)
So why does that always make everyone so defensive? Why shouldn't we question whether or not money is the best measure of success, or progress?
"Here's a softball example. Pinterest, or Doctors Without Borders: which one is more likely to be having a real, positive impact on the lives of people around the world? In terms of money and exposure, Pinterest is more valuable than Doctors Without Borders. Is that the right conclusion that we should be drawing then, that Pinterest is worth more to the future of humanity than an organization dedicated to sending medical talent into parts of the world where it's otherwise unavailable?"
If the author could put together such an argument it would be 'smart and thoughtful' writing, but they don't and it wasn't. I am all in favor of taking a hard look at what we're doing with our time and money, and economics is simply a way of allocating resources.
There was a very approachable, if somewhat flawed, documentary called "A World Without US" (no not Weisman's book, but Ferguson's documentary [1]) which talked about political ramifications of the US Foreign Policy interventions. The interesting take away here was first, the US becomes the world's largest political entity, then two what do they do about it. And the documentary basically goes on to say "some good stuff which other people don't appreciate."
And the strange connection that made for me was from a Jon Stewart Daily Show routine about Apple knocking down the door of the Gizmodo writer who leaked the iPhone prototype and pointing out that Bill Gates is ridding the world of mosquitoes and Steve Jobs is out breaking down peoples doors.
So bringing it back to Doctors without Borders and their funding. They exist today in part because some of those crazy money grubbing web sites give them money [2], Google over $500K, Expedia $200K, Microsoft, and a number of trusts which were created by people who got 'rich' doing startups. And when Pinterest has a huge exit and the founders go out and start building clean water wells in Africa (like a couple of Googlers I met did) how does that change the evaluation?
So this is where it comes together, you can't tell someone who is working to build value for their employees and their community 'meaningless pursuit of profits' and you certainly can't imply that the people who can turn a photo sharing site into a billion dollar acquisition could have created a billion dollars of humanitarian aide if they had only been focused on that problem instead of pictures.
It would be smart and thoughtful if you looked at the economic forces that are allowing people to build a financially secure base from which they make great contributions to humanity. You want to compare the amount of good done in the world by a dozen tech entrepreneurs that first made it 'big' and then turned that into a force for good? You can compare that to the resources people working for NGOs have created (not just steered) for those activities.
I get irritated when I read people dismiss the efforts of smart people to turn their ideas and smarts to large chunks of cash as being vain, shallow, and selfish, when I have seen so many of those very same people turn around once they don't have to worry about money any more and devote their efforts to doing great things. Sorry, but its a sore point with me.
[1] http://www.theworldwithoutus.com/theworldwithoutus_tvstation...
[2] https://www.doctorswithoutborders.org/publications/ar/MSF%20...
Google , which is relatively generous, gave 2.1% of it's profits in 2010 to charities, which is $180 million.
So i wouldn't say google or larry page "devote" their life to doing good.
And i wouldn't say that there's a trend of ex entrepreneurs trying to help others. maybe donating here and there.
Henry Ford made a fortune by delivering automobiles to Americans -- especially those that could not have afforded them otherwise -- and in the process, he forever transformed American culture and landscape (whether for better or worse is perhaps another debate).
Elon Musk made a fortune by transforming payments online, and in the process, helped to create a new global marketplace. Paypal may not be my favorite company anymore, but I wouldn't argue that they haven't made a huge positive difference in the way that people buy things from each-other around the world.
And now he's making another fortune by advancing space technology, with no lesser vision than opening up an entirely new frontier in his lifetime.
So I think there's room for an argument that it would be nice to have more of that, and I usually find myself nodding my head in agreement every time it comes up. For example, I'd point out that investors are often quoted as "looking for the next Facebook"; shouldn't we also be "looking for the next SpaceX"?
And yet, I don't think I've ever read that.
But maybe I just hang out in the wrong places.
Google didn't create all that wealth. They took a large part of that wealth from other advertising companies - primarily newspapers. And that money came from companies which in turn came from consumers. A good part of the wealth of companies is from arbitrage, monetising previously non-tradable items and digging stuff up - you know, externalities. A good portion from consumers is intergenerational. Very little actually comes from wealth creation.
Wealth is for all practical purposes, finite. This does not mean it is fixed. As a previous commenter pointed out, global economic growth is increasing at 3-4%.. at least some small portion of this is due to wealth creation rather than the monetisation thing. Understand also that monetisation usually transfers wealth rather than creates it, but sometimes can actually reduce wealth overall (take say, tobacco companies as a non-controversial example.. a controversial, though equally true, example might be BP or Shell).
Then you start asking yourself, if wealth is largely finite.. and some companies are making money hand over fist, then surely someone must be losing out? Why exactly do you think there are people living around the world who cannot afford good healthcare or clean water? You think they are just lazy? You actually believe all that BS in the doco you watched?
It also amazes me when people point out how generous US companies and people are in philanthropy - generally 1-2% of profit - while completely turning a blind eye to the very low levels of tax they pay. The democratic-capitalist-welfare state has a bigger positive impact worldwide to population health than all the charities put together, and it can be cheaper to run.
And another thing, you think google giving the doctors 500k is actually significant? In addition to the $400m / 80% figures already pointed out, think about the individual contributions - peoples life work. Also from wikipedia, in 07 there were 26,000 professionals who helped MSF. I don't know if you are aware, but people who work for charities don't get paid as much.. and that is if they are not just volunteering their time. Say 26,000 x 10% pay cut x ave wage (in aus dollars with aus wages this would be about $130m, you can adjust elsewhere if you like).
130 million a year in wealth donations from ordinary people.
I am all for wealth creation, which I think was the crux of the OP - if you are not contributing value to people's lives, you are not creating wealth, just taking it from someone else. And I don't discount the efforts of the people you mention. I think companies like google have helped in other ways with more impact than just their cash. Just want you to see these efforts in context, and maybe think a bit deeper. Because it is a very long rabbit hole.
And because it irritates me.
"A surprising number of people retain from childhood the idea that there is a fixed amount of wealth in the world. There is, in any normal family, a fixed amount of money at any moment. But that's not the same thing."
That is a great essay, I've read it several times. I particularly appreciated the how he points out what money is and what it isn't. I bought this course on Economics http://www.thegreatcourses.com/tgc/courses/course_detail.asp... (sometimes you can check it out from the library) and listened to it in my car over the course of a couple of months. Dr Taylor has a very easy to listen to delivery for a lecturer. And it really helped illustrate how the economy both works and how it can be reasoned about effectively.
I can't fly around Africa in a bush plane and give out medical advice, I can build a successful business here and then fund a doctor who volunteers to do that. If I'm smart and thoughtful I would look at how much solid humanitarian work is funded by folks in the US, and I would note that there is more funding going into humanitarian aid from the US than any other country in the world [1], and while it did take a hit during the Great Recession it is recovering. And if I was smart and thoughtful I would know that like the aphorism "a rising tide lifts all boats" that anything that generates economic growth in the US results in more humanitarian aid for the world. And then I would note all those awesome tech companies in the top 500 list that are driving creating the GDP which is coming out of the #1 source of humanitarian funding in the world and I would say "Go tech! Go tech!"
[1] http://www.globalhumanitarianassistance.org/wp-content/uploa...
It's absolutely absurd to imply that the extent of Google's effect on our economy is a sum of their employees. That quote completely mis-understands how markets work.
Google provides services that have completely revolutionized how people find information and build buisnesses. Of course that has impacted job growth.
That said, government protection of buggy whip makers doesn't work. Look at the ridiculous legally mandated benefits for railroad engineers.
I think there's reason to be concerned about how non-information folks are going to be making money in the next fifty years. After all, how much of the economy can be producing hamburgers, entertainment and technology?
You no longer have 100,000 people digging and refilling proverbial holes, so they're now free to contribute in other ways.
Of course that's going to cause some short term friction, but a refusal to see past that friction would still have >90% of us working a family farm for a living.
It may be due to education or just human nature, but most are unwilling or unable to adapt and learn.
If we are not careful we will end up with a techno-illiterate underclass that are unable to find any work due to not having skills beyond what was required in the jobs that are now replaced by automation.
That is a way of saying what economists have said for years, which is that advancements and disruptions create a net pool of more opportunities rather than reduce the total. The proof of that is that the number of jobs that are available in the country continues to rise even as its population goes up.
"I think there's reason to be concerned about how non-information folks are going to be making money in the next fifty years. After all, how much of the economy can be producing hamburgers, entertainment and technology?"
They will become literate, or become supported by someone who is. One of the interesting things you notice reading about the transition to the 'manufacturing age' between the 19th and 20th century was that working people who were thrown out of work by technology their kids had grown up with, and their kids began supporting them with their employable skills. Its worthwhile to look at how the world reacted to those, just as sweeping in their own way, changes.
Elsewhere on HN this week the quote "Humans are a bottomless pit of wants" was shared, that is so true. As long as people want something, there will be a job which involves getting that for them.
This has only changed with the rise of the labor movement, and a general shift in democratic societies towards a welfare state.
So for a huge positive technological revolution, societal change is needed.
In fact, i think that today we have the right technologies to solve many of the world's problems, just the wrong politics and societal order(globally). Just look at education,healthcare,global hunger, the subprime crisis. The biggest barriers there are political, legal and societal.
And yes, "Humans are a bottomless pit of wants". But that didn't helped the loyal employee - the horse. After the industrial revolution they were left unemployed and sadly went to the glue factory.
Modern efficiencies have eliminated a lot of jobs. Fact. No point in arguing about whether it's good or bad. It just is. So don't waste time trying to defend Apple or Google. They are just successful in their time. Good for them.
Consider though, that many of us who are fortunate enough to be working in the information tech / startup area, are focusing most of our efforts of creating products consumers don't even know they want or need yet, but we hope they find super cool. Hopefully the product gives us enough users to figure out how to make money off ads or something. Cool, fine.
I have to agree that it's a shame that there isn't more momentum behind figuring out how to solve problems that people already have. Figuring out problems that would benefit the vast majority of people who don't work in information technology, who just so happen to be finding it harder to find good jobs because of information technology.
But it's not that they don't do that already. Many know damn well that their product, though very cool, has little "true" significance, and they do it anyways. Why? Some of the reasons are mentioned in the article. The startup economy pushes founders towards products that could reap quick exits, so many startups just try to solve smaller and smaller problems. It's not that they're not real – they're just very small. Also, in most cases, these are the only problems a small company has the resources to tackle. This economy, in turn, makes it socially acceptable, and even respectable, to address all of those minor, "meaningless", issues.
There's no one to blame – it's just the market (said with some irony). If we must blame someone, though, I think it's the big companies. Instead of putting a lot of money into research (and only they have the resources to solve the big problems), they prefer – because it's much cheaper – to wait for a startup to successfully solve a minor problem, and then acquire it. Those acquisitions make the prospects of founding a startup to solves a minor pain-point less risky, and so more people do it.
relevant relink: Peter Thiel and George Gilder debate the prospects for technology and economic growth[1]. The basis of Thiel's argument comes down to the price of energy. He's bearish. He notes that Warren Buffet's biggest bet, which is on trains that transport 40% by volume coal, is a bet that clean, cheap energy tech will fail.
Ever heard of microwave ovens? Automatic dishwashers? Pretty significant kitchen innovations in the last 50 years.
I would argue that the microwave oven is a significant innovation because it's not based on burning fuel -- wood or gas -- as was done in previous stoves.
I asked them about their laptop. It was a Sony Vaio, they were going to watch a movie later on it. I pointed out that when they were born the thought of an individual owning a computer all to themselves was absurd, that their laptop had more compute power and storage than all the computers at NASA had when they sent a man to the Moon, and that their computer would do more calculations in the two hours of showing a movie than were done during the Manhattan project to design the A-bomb.
The difference was that you only see the change in the rear view mirror and even then only if you know what you are looking for. Sailors think they are holding a straight course but when you look back at the wake you see if its really straight or not.
The article's cites Tyler Cowen who suffers from this same blind spot. There are literally thousands of things that have changed in a kitchen, from Microwaves to the Silicone cooking mats which keep your cookies from sticking to the layered composites that do heat spreading on ceramic cook tops. But you don't "see" those as a casual user (and I'm guessing Tyler only casually uses his kitchen) just like my seat mate as a casual user of their laptop didn't "see" the change it represented. There must be a name for that.
I wanted to add the range hood as well, but it turns out that was in the last 60 years. http://en.wikipedia.org/wiki/Range_hood
And you'd be wrong :)
Some of the critiques here are totally fair, but folks should read the whole thing before forming a final opinion.
We should strive for the world where you don't actually need a job, then all this jobs "gained/lost" talk would be moot. I know I'm not the only one who has read Player Piano.
From YC's recent batch, sure, we've got Makr.io and ReelSurfer that would be classified as "startup porn" by the OP, but you cannot discount Double, Dreamforge, Coco Controller are in the business of selling, addressing customer's pain points and actually being meaningful to its users. Customers are not naïve. His gross oversimplication of the startup industry by quoting Pinterest as dumbification of society is what bothers me.
This brings me to the biggest problem with startups that nobody seems to address and in fact, every successful/smart/talented/skilled person contributes towards it - every single startup is reinventing the wheel and that is inefficient. Step back and think about any given startup. They have to do all of the following: Setup accounting/legal/corporation, manage employees/payroll/benefits, perform data analysis/SEO/marketing, excel at PR/word-of-mouth, engage with users, encourage developers, design their brand, manage infrastructure (even AWS/Heroku accounts need pampering), source funding, present at tradeshows/industry-conferences, and tons of other boring things that you will see mentioned in expensive 20 page e-books and "X things you should do" lists. The worst part is that they have to this on top of making their product work in every environment: multiple browsers, mobile devices, app stores, online/offline modes, hi-res/lo-res graphics, hi/lo bandwidth, multiple languages/regions, and do all of that 24/7.
Why isn't all of the repeatable stuff outsourced in bulk, while still enabling the founders to develop the product and own equity? If you work for Google, you don't have to worry about any of this and just hack away on your code and let someone else market it and manage payroll. But you're trading away your high-equity/high-risk for a fixed salary/bonus. Why isn't there a median between coding at Google with no equity/risk and do-everything in your startup? Being an early hire at a startup doesn't cut it because it's high-risk/low-equity. Imagine if you could join YC and all you have to worry about is making a good product and someone else manages everything, while you still get to collect X% of your product sales. And if you feel YC isn't doing a good enough job, you can easily switch to XYZ and after a brief catch-up, they can take over everything. Certainly this happens already during acquisitions or switching vendors.
Why can't there be a one-stop-shop-startup-vendor who handles everything about running a startup? And why can't there be more of them so they can all compete for the best founders/products? I know I've simplified a lot of complex issues here but I think big ideas start with solving difficult problems. And running a startup isn't easy. Running 800 is near impossible. But it could happen.
Off-topic but related: I kept trying to clean my LCD thinking there were small spots on it. Turns out it is the site's background.
Because then it would be painfully clear how little value the products bring.
Startup entrepreneurs are not compensated because of technical genius, they're compensated because they accomplished the very difficult task of combining some domain expertise (often software engineering in Silicon Valley style startups) with business acumen, including executing all the boring stuff you outlined (and executing often can mean just coordinating vendor services).
Typical startups contract out most of the stuff you mentioned. Which amounts to the same thing, although it's not as efficient as having a trusted competent department in-house.
Essentially incubators and VC's are a way to lower the risk for startups. You trade equity in return for capital/guidance/connections/and a better chance of a soft-landing if you fail.
I don't know if watching idiots have enormous success should be taken as encouraging (if they can do it, so can I) or discouraging (in the what-the-shitz-is-going-on sense) but, whatever man. I've definitely seen some fucked-out morons get funding, and not a small number.
The best way to demonstrate that talent is to start your own company and make it wildly successful. Until then, the risk of investing in you will be greater than the risk of investing in someone else who has done that, regardless of your respective talent levels.
I've worked for people whose biggest talent was convincing other people they're talented. It sucks, but take that as a lesson in what talents you might be lacking rather than dismissing potential investors as "idiots."
It's depressing to watch people like that get funding. I have no faith that any of these king-makers really have much sense. No idea if I could do their jobs better, because it may be that sizing people up is just an unsolvable problem that we've tricked ourselves into believing we can hack (i.e. fooled by randomness) but I know I wouldn't be worse.
Usually the services were priced on a per-seat basis for something like $1-2k per month. It made sense for very small companies that had raised a few million, but once you hit 10-20 employees the math didn't work as well and so you had to either pay through the nose or scramble to find in-house replacements (not to mention office space). And if you were bootstrapped it was hard to justify the cost.
I have mixed feelings about this approach. On the one hand I think it would be very valuable to have a place where people with legitimately good solid ideas, but no experience could go and have them turn into something real. On the other hand ideas are dime a dozen and really mean nothing without execution - and it's in getting to execution that the product is actually worth anything. Learning all of that "stuff" is the core of what being an entrepreneur is about. Short circuiting that is a recipe for disaster in the long term where you have tons of one hit wonders - that barely get out of beta, or V1 and don't know how to use what they have built to build other things.
I think there is value in re-inventing the wheel in most cases because you'll notice, when you have to do that, it's the real smart folks who recognize how the wheel is broken along the way and seek to improve that while developing their original product. That's where the gold is.
I've seen this type of thing work inside companies though, where people work in an incubator like YC, except there are shared resources and the incubator is an umbrella company.