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Comment by dqh | Hacker News Reader

> Being generous makes you more powerful. As Tim O'Reilly said, you should create more value than you capture. Many hard-headed business types would write this off as idealistic hippy stuff, but in fact this is the route to becoming really rich.

> Hired CEOS take the power of the companies they run for granted, whereas founders remember the days when the company was so weak that it had to delight users to survive.

I've always instinctively followed the generosity path, and have experienced that when customers are delighted and that when frictions are removed (or not added in the first place), good things will follow.

However, I have not always been able to convince others to trust in and follow this path. Can anyone offer any advice or experiences on talking people out of trying to prematurely squeeze out every last penny?

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My sense is that it's context dependent. If you've got VC backing (or could soon) and are making deals in SF, the generosity path makes a lot of sense. Limited downside, infinite upside. You can afford generosity.

If you're starting with $2000 and bootstrapping a textiles business out of Kolkata, it's a terrible idea, you're likely going to immediately get burned and never recover.

(take with a grain of salt as I have no experience, just stating my observations)

Generosity is not "giving stuff away for free when it hurts you badly to do so." Neither the giver nor the receiver are comfortable when generosity hurts the giver, and the dignity of both may be compromised as well. Generosity that is disrespectful of comfort and dignity is worth very little.

A company with $2000 in its first few days need not give away $1000 to act generously.

Agreed. They can probably afford to invest time into delighting those early customers i.e. doing things that don’t scale.

So the generosity rule is more like "if you have lots of money you can make lots of money"

The VC backed model in a nutshell.

> always instinctively followed the generosity path

> experienced that when customers are delighted and that when frictions are removed

Charlie Munger:

  When other companies find ways to save money, they turn it into profit. [Costco] passes it on to customers. It’s almost a religious duty. [They] sacrifice short-term profits for long-term success”.

> not always been able to convince others

Many different ways to conduct business. "Lean Enterprise" might be in line with your thinking: https://en.wikipedia.org/wiki/Lean_enterprise

> talking people out of trying to prematurely squeeze out every last penny?

I'd say this is a wrong framing. It isn't the people; it is the systems & environs they are in, the incentives they operate under.

Economists have a term they call "willingness-to-pay", using which some business might optimize for "consumer surplus" (low price), some for "producer surplus" (high margin).

See also, The Economics of Customer Businesses, Michael Mauboussin et al, https://www.eatonvance.com/insights/consilient-observer/the-... (2021).

Or Bezos' "Create more than you consume": https://www.aboutamazon.com/news/company-news/2020-letter-to...

Thank you for these references, I really appreciate it.

Warren's response:

https://youtu.be/Z1sTs8wkAbw

my advice? be the boss.

before the pandemic hit and most of the world was quarantined, we decided to give loom away to students and teachers for free and made the service 50% off indefinitely. this was generous but also strategic. we made the simple deduction that, should people be locked inside, they would naturally see their sons/daughters using loom as students. or their spouse or roommates as teacher/staff.

> Can anyone offer any advice or experiences on talking people out of trying to prematurely squeeze out every last penny?

Yes. Lend them many more pennies, removing the necessity for short-term profit taking and allowing them to run at a loss until they decimate the competition, capture the market and then start raising prices to the point that they are more profitable than had they taken the short-sighted approach.

This depends on what you are building and what your goals are. What pg is referring to is how to build transformative companies, unicorns if you will.

There's plenty of businesses where you are simply optimizing a funnel, and driving more revenue at all costs is fully aligned with the goals of the company

I'm nearly always building early stage companies, where even the dev and operational overhead of charging for some added extra is not guaranteed to be paid for by the money collected.

As a startup with deep pockets, you think you can afford to be generous, without realising it is made possible due to borrowed time and money. When the bills come due, generosity ends and enshittification onsets.

People are more sympathetic to pg retaining a sense of purpose (than Terry Tao) because they rightfully imagine that's it's easy to obtain the virtues that he has (the generosity, the optimism, the agency,the lack of worry, the curiosity, the faith in all sorts of humanity)

>bootstrapping a textiles business

Exactly what I came to say. This 100% is hippy dippy head in the clouds stuff. Sure if your product is 100% digital you can "be generous" in so far as it costs you nothing. Real products, real services. Hell no. You will get robbed blind if you give people too much slack or come off as willing to easily pay out.

I learned this the hard way early on doing contract work. Multimillionaires would actively try to take advantages of my naivety and inexperience to coerce free work out of me. Also I highly suspect many of them get a sick sense of pleasure out of it. Good luck being "generous" to those types.

Take a look at those donate for pain videos on tiktok if you don't believe there is significant population of sadists out there.

Never be generous with the product itself. In consulting, the product is your time - you can't give that away. In textiles the product is the physical textiles - you can't give that away. In tech start-ups the product is a growing userbase - you can't give that away.

Crazy how cavalier people talk about the user being the product these days. Who's the customer?

Who ever wants to manipulate the user using their PII and associated metadata - Retail, Marketers, Political and Security Apparatus... the world is your dystopian oyster in that regard.

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