Deprogramming corporatism

There’s a culture to big corporations that is unnatural and detrimental to founders who have spent too much time in them. Some experienced founders have a really hard time coping with starting a new company, and are very frustrated and surprised when things don’t work even when they're working really hard at it. And even when founders overcome that, often they’ll try to grow the team by hiring experienced directors and managers from corporations that are well known and successful. Many of them fail pretty quickly, and it’s always a surprise to everyone, especially the experienced hire. 

These are well-known startup tropes for a reason. There are specific aspects to that culture that cause problems. If you know what they are, then you can at least recognize it and try to counter them.

Doing things without results

People become corporate do-nothings because it’s easy to become disconnected from the act of creating when you’re at a big company. Even at the best big companies, employees can just do things that look like work that aren’t, and you wouldn’t be able to tell. Getting customers is easier (sometimes trivial) with a large installed base, sales force, or huge brand name. There are large protected revenue streams that cover up failure on the quarterly financials. 

Founders from corporate backgrounds aren't stupid. They're just used to doing things and having something happen— they have the wind at their backs at a big company, and there are a lots of things that you can do at a big co that would never work on your own. It's bewildering to work really freaking hard at something and have no results at all come back. But it happens all the time. 

There’s no air cover for startups. You don’t have backup troops. It’s just you versus the world. So naturally, if your product or service sucks, then you die. You can’t just look like you’re doing stuff. You actually have to make it, and almost totally on your own. 

Cover your ass culture

If doing things that aren’t effective don’t get you fired, then what does? Usually making mistakes that make your boss look bad. Big organizations are just groups of people, and people sure like to talk shit. The one thing you can’t do is look like a bozo. It’s fine to work really hard to no effect (hey, you worked hard!), but if you become a social liability, you’re donezo.

What’s worse than just covering your ass is actually taking credit for what other people do. This seems correlated with people who climb high in organizations. Obviously this works poorly in a small startup environment because there’s nowhere to hide. Someone's got to do the work.

In some sense this dynamic is unavoidable, since we are all social animals after all. Startups can sometimes develop a cover-your-ass culture too, but that’s the job of the founders and CEO to keep people focused on things that actually matter. It helps that startups are just smaller, so this toxic effect of group dynamic is blunted. 

Buzzword thinking and trend-following

How do you avoid looking like a bozo? Well, for one thing, if everyone in the world out there is saying it, then nobody can fault you for it. So getting the right corporate whitepapers, or latching yourself to the right buzzword du-jour (e.g. big data, Internet of Things, NoSQL, etc.) is necessary to blend into the pack. Oh, that big data initiative failed? Everyone else was doing it, so our ass is covered and we won’t get fired. 

Founders get this confused all the time and then wonder why they fail. We said all the right secret words! Why am I failing? It was never about those words to begin with.

Startups can’t survive blindly following buzzwords or whatever trend is hot because you actually have to know what’s coming in the future and be right. That’s all there is. If you chose the wrong market, or you’re wrong about what people want, then you’re toast. I’m not saying all things with buzzword labels will fail. I’m saying that startups for big data, for instance, actually have to make life better for specific customers such that people are willing to pay for it. It has to make sense. It’s not enough to be attached to that name. 

This was a tough lesson for me to learn personally. At 23, I turned down the shot to be first engineer at Palantir (now rumored to be worth $20 billion!) even though Peter Thiel personally took me out to dinner to recruit me. I thought the buzzwords were signal, and absolutely zero of the mainstream press or tech blogs were abuzz about the latest hot government enterprise software startup in 2004. It turns out you have to work on things that a) you know are right, and b) most people don’t know yet. This is why Peter likes to ask: What super valuable company is nobody building yet?


Experienced founders who have grown up in these environments are not doomed to failure. Quite the contrary, those who succeed have avoided, overcome, or escaped the problems described above. 

The recurring theme seems to be simply results. We spend a lot of time trying to get founders to focus on action and results — build product, talk to customers, that’s it. Think in terms of concrete numbers, whether it is user growth, savings to customer, or revenue. There are lots of places in the world where you can survive without results of your own, but startups are not one of them. 

Just as corporate culture is a culture that is learned, not innate— founder culture is learned as well. I think one of the reason why YC works for founders is that it takes a village. It takes a bunch of people who all believe a thing, and practice it daily. It takes fundamentally changing your surroundings and the people you’re around. It takes avoiding the coworking space [0], and working harder than you ever have in your own space. 

This is also a big reason why they say YC is a concentrated form of Silicon Valley. For decades, Silicon Valley has been the place where people can escape their corporate cultures and create something new. Now you can do it with a lot more like-minded people by your side. 


Share buybacks: Big cos say "We don't know what to do with the cash anyway!" and why it's good for startups.

Stock buybacks are the biggest force influencing equities since 2009 — over $2 trillion have been done.

Some are probably good, but many aren't. In 2011, Warren Buffet wrote about how you can tell: (via Seeking Alpha blogger Chuck Carnevale)

Charlie and I favor repurchases when two conditions are met: first, a company has ample funds to take care of the operational and liquidity needs of its business; second, its stock is selling at a material discount to the company's intrinsic business value, conservatively calculated.

Clearly a lot of buybacks fail the 2nd criteria — but there are so many boards and management teams that are compensated by EPS that the share buybacks keep happening even when the price is not a discount. A natural result when incentive structures meet personal self-interest. One blogger points out, it's actually a form of managers looting their companies. 
By using large stock buybacks to manage the short-term objectives that trigger higher compensation for themselves. By using those stock buybacks to manipulate the share price, which allows them to use inside information to time their own stock sales. By using buybacks to funnel most of the company’s profits back to shareholders (including themselves).  They use the stock market to loot their companies.
It's a claim echoed by the Atlantic in February of this year in an article called "Stock Buybacks Are Killing the American Economy." Rather than new jobs, new factories, new products, it's straight back into the financial system.

Since the companies themselves have no specific better ideas about how to use the capital to grow in real terms (e.g. real new products that drive real new revenue) all their professional managers can do is buy shares back regardless of price. In this world, buybacks are directly related to Thiel's ideas around indeterminate optimism of the markets, where companies are encouraged to be as profitable as possible.

Who cares if you're buying back at a ridiculous price? We don't know what to do with the cash anyway. 

This is interesting because a traditional criticism of whether we're in a bubble is whether P/E ratios are high or low. The E part is Earnings Per Share, and so if managers manipulate the denominator for both P/E and EPS, they can make it seem like things are fine (and get their quarterly bonus to boot!) when functionally there's little happening. 

On the bright side, the lack of innovation in traditional incumbent businesses means that startups have a chance in more arenas than ever. If big companies have management that won't take the risk of failure, and aren't hiring teams to attack new markets, then it's wide open for new players to get capital, hire people, and make these things happen. 

If buybacks are killing the economy, then startups will save it. Pretty sweet if you ask me. 

Chart via Factset
More reading here: ValueWalk 

Defending A16z: Noam Scheiber mistakes a VC portfolio for his 401K

Labor and workforce reporter for the NY Times Noam Scheiber takes on Andreessen Horowitz in this recent piece:

Rather than profiting like Mr. Ovitz and his fellow agents, the venture capitalists may be more like the Hollywood studios — chronically overpaying for projects whose costs they can rarely recoup. Mr. Andreessen and his partners have invested so much in so many start-ups that it would take a remarkable string of successes to make the approach pay off. For all their skill — the firm bought into the likes of Airbnb, Instagram and Pinterest relatively early — their track record suggests it’s unlikely. Already, they’ve suffered a few impressive flameouts, including Fab, on which they are likely to lose tens of millions of dollars.

Even when they pick well, they often bid so much for stars that the return is relatively modest. It’s easier to triple or quadruple your money when you’ve invested $10 million in a $100 million company than when you’ve invested nearly $100 million in a $1 billion company, as they did with the daily deal site Zulily. There are only so many companies that are acquired for billions of dollars or reach that kind of price through an initial public offering. Fewer retain such valuations — Zulily’s stock price has fallen sharply since last year.

Noam doesn't make a data-based argument. He uses an anecdote. Because data would ruin a really good story in this case. He compares Silicon Valley juggernaut Andreessen Horowitz to the excesses of Hollywood and CAA.

There's a big difference here. Let's take Avatar, for instance. It's a film that was made in 2009 for $237 million. It grossed over $2.7 billion worldwide — a roughly 11X return on capital. That's the highest grossing film ever made, and a good proxy for how profitable Hollywood can be at best. 

Let's take another example from Silicon Valley— Facebook. Peter Thiel invested $500,000 in the fledgling company in its first seed round in 2006, and from public records held 22.4 million shares of the stock at IPO. Those shares, if he hadn't sold them, would be worth $1.9B today (at about $74 per share). That's a 3,800X return on capital. 1 

Multi-billion dollar companies happen when non-obvious ideas and huge market needs meet perfect execution. We've seen it before our eyes — Uber, Airbnb, Dropbox, Stripe, Instacart — and when you have the potential for 100X to 4000X returns, it's not about avoiding loss or minimizing downside. A proper venture portfolio is not like your 401K. The only way startup investors truly lose is if they miss the Uber. 

And that, in a nutshell, is why using anecdotes (e.g. Zulily in Sheiber's piece above) as evidence against Andreessen Horowitz makes no sense at all. An individual investment may fail but it's just one in a portfolio. The returns that are possible in early stage technology investing far outweigh anything Hollywood has ever seen or ever will see. Software is eating the world, and the numbers bear it out. 

1 David Hammer suggested a better comparison would be Accel, their Series A partner. Their 10% stake at IPO is now worth $14.8B, so their $12M investment yielded roughly 1100X return.

How does a startup out-recruit Google? Palantir cofounder Stephen Cohen explains.

In a conversation at Stanford with Peter Thiel and Max Levchin, my friend Stephen Cohen (cofounder of Palantir Technologies) says:

We tend to massively underestimate the compounding returns of intelligence. As humans, we need to solve big problems. If you graduate Stanford at 22 and Google recruits you, you’ll work a 9-to-5. It’s probably more like an 11-to-3 in terms of hard work. They’ll pay well. It’s relaxing. But what they are actually doing is paying you to accept a much lower intellectual growth rate. When you recognize that intelligence is compounding, the cost of that missing long-term compounding is enormous. They’re not giving you the best opportunity of your life. Then a scary thing can happen: You might realize one day that you’ve lost your competitive edge. You won’t be the best anymore. You won’t be able to fall in love with new stuff. Things are cushy where you are. You get complacent and stall. So, run your prospective engineering hires through that narrative. Then show them the alternative: working at your startup.

My friend and fellow Y Combinator partner Aaron Iba gives incredible lectures when we visit top CS schools on behalf of YC. He says the sense you get from college recruiters is that you get to write new code. Most great hackers love to do this. But that's not what you get from a software engineering position at the tech giants. You get to maintain old code. The job should really be called software technician. 

So that's why starting a startup or working at a startup is so much more rewarding. You get to keep your edge. 

Travel planning software: The most common bad startup idea

At CMU yesterday, I heard a story about how Yahoo Trip Planner has pretty much zero adoption. It has never taken off, though it remains online even today. Yahoo keeps it around because it's fantastic for recruiting. People love to work on this idea! Yahoo recruiters lure talented engineers, designers and PMs to work on this project, then gradually shift them off to real value-creating projects once they're hired. 

Travel planning software (the kind that you would use with friends and family to plan vacations) is one of the most common ideas pitched. It has been attempted, and attempted, and attempted again. 

It doesn't surprise me that people go after this, though. The idea actually points in the right direction: founders pursuing this idea are looking to solve problems or pain points in their life. Brilliant. And practically everyone has the problem of not spending enough quality time with friends and family. Travel is the best and most meaningful way to do that. Surely this is something that solves a big problem that everyone wants. 

Yet so far, this particular idea doesn't lead to massive success and incredible amounts of value creation. My best guess is that a truly great consumer service needs to be something that is can be used every day. My friend Suhail Doshi, CEO of Mixpanel (he'd know a thing or two about analytics), recently told me that 20% daily retention is probably the baseline at which a service has legs. 

This points to the deeper problem that underlies every product or service: obscurity. I only have a finite number of slots in my brain. If I don't remember it, I won't use it. And I only remember things that I use often. Just like I order Coca Cola whenever I get a cheeseburger... the consumer web/mobile services I use need to be things I use all the time.  

Which leads us back to trip planning. How often do people really plan trips? For the typical working adult, probably once or twice a year if you're lucky. In fact, Americans are notorious for shirking vacation, clocking the lowest rates of vacation on the planet. Twice a year just doesn't cut it.

I used to think nobody needs this. That's probably not true. Lots of people want this. They just won't ever be able to remember it. 

Steve Jobs and Farhad Manjoo are wrong: Dropbox can do what Apple, Microsoft and Google can never do.

Farhad Manjoo writes in Pando Daily about how Dropbox is just a feature. Unfortunately the examples he talks about seem to support the exact opposite.

Someday, someone will figure out how to make this sort of thing work well, but I suspect it will most likely be one of the companies that makes a major operating system: Either Apple, Microsoft, or Google. Each of these firms has a file-storage and/or syncing solution that it’s pushing, and I expect that those efforts—iCloud, Skydrive, Google’s Chrome syncing and perhaps the mythical Gdrive—will gradually incorporate more and more of the features I’m looking for.

This assertion is about as wrong as could be. Earlier in the piece Farhad talks about how things just plain worked as Dropbox synced things from his Windows desktop to his Macbook Air. What are the odds of Apple getting their sync client right for PC's? Just about zero, considering what they've done in the past with MobileMe sync.

Same goes for Microsoft writing sync software for the Apple platform. Arguably Google is in the best shape to provide a seamless multiplatform experience... well, except for iOS! The odds of a viable multi-platform option emerging from one of these big three seem slim to me.

The truth is none of these behemoths will execute perfectly on this scenario in the way Dropbox (with no ulterior platform motive) can.

Dropbox is probably working to build many of these features as well. But as third-party app, it’s just not in a very good technical position to do so. In order to sync programs and window states, Dropbox would need access to some of the deeper parts of my various gadgets’ OSes. This is easy for some operating systems and impossible with others—including iOS and probably Amazon’s Kindle Fire. Apple could easily build a way to sync the current browser tabs between my Mac and my iPhone, so that I can switch from reading Pando on my couch to reading it on the train. Dropbox will need to go through incredible hacks to achieve the same functionality, and it probably won’t manage to do so even then.

Sadly Farhad is just wrong on this too. Getting native bare-metal access is easy to get on every platform that matters except iOS. On iOS, Dropbox *already* has a huge lead on all of the other file syncing platforms by virtue of wide support by the developer community. Apple will undoubtedly get some share of iOS developer love, but it is yet to be seen whether Apple will actually unseat Dropbox.

Truthfully, it is foolish to count large platform players out. But my money is on Dropbox. Until Apple wins every last device over (not even a goal of theirs), Microsoft steals the show for mobile and regains share on desktop (highly unlikely), or Google wrests mobile supremacy from the hands of iOS (not going to happen) -- the ongoing platform cold war will assure it's Dropbox that's going to be how we keep our data.

Why the new task UI in Taskrabbit has great behavioral design

Taskrabbit is a cool service that helps people list local tasks that they'd like to hire people to do. It's also a great example of behavioral design-- helping users not just complete the task but want to do it as well. 

Here's the new task UI:

1) Great copy is great communication

Copy is UI, UI is copy. The only way you can explain what's happening on the screen is by the text and elements on the screen. They work together. You must explain what's going on, and what's next. Yes, you know what's happening, but you're the creator of the UI. Users have no such context.

Remember that as a designer, you must design with intention in mind, but evaluate what you create with beginner's eyes. Often in YC office hours, PG will point out glaring holes in people's designs -- but it is because he has honed this skill of viewing a web page with the eyes of a novice, even if you've been talking about the idea with him for hours.

Clear your mind, read what you've got, and if it doesn't make sense, then explain. Rinse, repeat.

2) Great use of contrast to determine what's important and what's more information 

You'll notice the darkest pieces of information (highest contrast) are the headers for the specific inputs. "Title of your Task" for instance. It's big, it's dark, and it commands the most initial attention. This establishes a visual hierarchy. All things below that title pertain to that particular input. There's proper padding between inputs so that the grouping is further reinforced. 

Some products mistake extreme brevity for being simple. Wrong. You should strive to have enough text to properly guide the user to their task. A long block of text that is undifferentiated won't be read, of course -- so your main tool here is to make the important stuff bolder, larger, and command more attention. Then write additional text in a smaller, lower contrast font.

If they care, they'll read it. If they don't, they won't. And that's just OK. The important part is that people complete the task. 

3) Show a lot of examples

It's the worst when UI doesn't show an example at all. It's the rudest experience. Imagine a brusque waiter, or a bank clerk who can't be bothered to help you with what you're trying to do. That's what you're doing when you don't show more examples. 

Yes, that even means helping people with writing titles.Notice how Taskrabbit drops a greyed-out tip right there in the textbox.

DO THIS. There's nothing that will orient a user more as to what they should put than text right there inside the textbox they're about to fill out. Don't forget to clear it when the textbox gets focus, though.

4) Progressive Disclosure

See those little links at the bottom? They're optional. And they don't take more space than they need. If someone wants it, they'll click. If someone doesn't want it, they won't. 

This is virtually your only tool to create things that are both powerful and simple. Use it everywhere and you too will be both easy to use and powerful. 


Remember, UI is a conversation that you have with your users, hundreds if not thousands of times a day. But if you can make that conversation go well... it'll be a few million times a day soon enough. 

Again, props to Sarah Harrison, @sourjayne, Taskrabbit Director of UX. I am impressed. Two thumbs up, way up.

Like this article? PS, you can follow me on twitter here.

Is an MBA a Plus or a Minus in the Startup World? Both, but @guykawasaki is more right.

Vivek Wadwha, writing for TechCrunch, rebuts Guy's assertion that engineering degrees are most important.

Engineering degrees can be very technical and can actually narrow one’s horizons. To innovate, you need to understand customers and markets. To build a successful product—one that actually sells and makes an impact, you need to understand distribution and finance. So even in the lower echelons of technology, a broader educational background is a plus.

The truth is, the fastest path between two points is a straight line. When I go to college campuses to try to pass along stuff I wished I knew back in college, the #1 thing was that I wish I spent more time *creating* and less time *analyzing* startups and markets.

I do meet engineers who probably should get an MBA. They need to round themselves out, think more about users and markets and distribution. Get out of the lab or cubicle. These are the minority.

I meet far more people with a will and a dream, but no engineering/design capability to create it. This is why Guy is right when he says an engineering background is far more essential.

Kawasaki explained that his issue with MBAs is that they are “taught that the hard part is the analysis and coming up with the insightful solution”. In other words: implementation is easy and analysis is hard. “But this is the opposite of what happens in startups. Implementation is everything in a startup.”

Indeed, ideas are merely multipliers on execution. Everyone has ideas. We can all imagine a world where ____ is made better. But to make that dream a reality, ah, that is the rub. And that is why Guy is right.

Square (squareup?) is super badass.

Looks like Square went public today. Hot. Its a device and service that lets you take payments from any credit card anywhere via iPhone.

Rumor has it that the device (that hooks into the iPhone audio jack) should be super cheap too.

I think they have the potential to totally change personal payments. Isn't this what PayPal was supposed to be originally?

FINALLY someone will solve that dreaded "How do we split the bill?" issue. I can't wait to get one.

How Wage Slaves vs. Entrepreneurs look at money

Really amazing analysis of business, interpersonal communications, and life coming out of

In particular, this latest piece on capital is brilliance.

My conception of money completely changed in the years and months leading up to work Posterous. The bargain when working as an employee is completely different. Its very easy to spend money like water when times are good and you've got a steady, reliable, and more than adequate. Its a renewable resource that in the moment seems to be infinite.

But if you want to make it on your own, you can't look at each dollar as something to be spent on your own happiness. That latte won't really make you happy. The only thing that may really make you happy is to be able to reinvest the money into yourself. It is, as Venkatesh points out above, building material for your dreams.