The site was quiet for a long time and has very recently re-emerged to take on the tech industry - albeit from the perspective of the New York finance type.
A side note: If you claim that people are missing the point, then you need to state that point (and why). Otherwise you're just leaving those people confused and/or angry.
This was surprisingly entertaining. There's some truth to it, but it essentially misses three things:
1) The intangible benefits of being at a startup (as a founder or early employee) -- working on interesting problems, with smart people, in a well funded environment. You learn things, meet people, get to use amazing tools. (Startups definitely aren't the only way to do this -- academia or, for engineering, some parts of the military or government or big enterprises have some awesome toys, and some world-class experts, and interesting problems, too. But in Silicon Valley, the barrier to entry is really low, and the problems are generally the right size for individuals or small groups to solve (partially) and quickly.
2) The downside to failure is exceptionally low. It's all other people's money (at least in Silicon Valley); your real cost is opportunity, but generally the market values a failed startup founder or early employee at enough of a premium over a member of a later stage team that you can catch up quickly.
3) The EV of upside is both the odds of success (correctly identified as low) and the magnitude of that success. 1% odds in an even game suck; 1% odds where you're given your wager by someone else and you get to keep 50% of the upside and the upside is potentially 10000:1 is pretty awesome. Doubling down on success, moving away from failure, and you can do this 5-10 times pretty easily.
I think you're responding to just one part of the claim, namely that a person would be better off doing something else than a startup.
The more interesting point, I think, is not the entrepreneur side of the equation, but the YC side. The author claims that YC is exploiting entrepreneurs. This claim is more interesting (in the social-studies sense) as it seeks to uncover a particular kind of exploitation that's a feature of our current age. First, it's important to point out that this question is completely orthogonal to whether the allegedly exploited person is better off or not. A capitalist could start an iPhone factory on an island full of starving people and pay each a loaf of bread a day; while the people are certainly better off, they're still being exploited.
YC specifically is most certainly not exploiting anyone, as on average it gives companies much more value than it takes. But the question remains on whether the Silicon Valley ecosystem in general is exploitative, and I think the answer to that is yes, although this kind of exploitation is rather mild – I would call it "taking advantage" more than "exploiting". I think those taking advantage are not VCs, but large tech companies. Rather than paying regular salaries to large research departments, the SV ecosystem encourages a lottery-style payoff. Lots of people work trying to invent a novel product, or find an unexplored market niche, and instead of paying them all for their efforts, there's a large prize offered to those who succeed. I think that large tech companies are taking much more value out of this arrangement than they're putting in, so there's probably some exploitation there (in fact, any lottery-style economic construct, be it based on "merit" or sheer luck, suggests some sort of exploitation taking place).
I mean, your 2) point is critical: I am in Brazil, I am in a startup because I had no choice, and although I am getting paid with someone else money, if the startup crashes, I will go down with it, and go down I mean, get in worse situation than I already am... currently I am struggling to pay my rent and food, if my startup fails, I won't be able to pay rent and food, at all, considering my parents are having money issues too, this mean most likely I would experience real starvation, something that I am not much keen on experiencing.
...your real cost is opportunity, but generally the market values a failed startup founder or early employee at enough of a premium over a member of a later stage team that you can catch up quickly.
Hmm. Is "generally" right here? Are founders really getting hired at a enough of a premium to earn the ~$100-200k they lost over 1-2 years while failing?
the market values a failed startup founder or early employee at enough of a premium over a member of a later stage team that you can catch up quickly
This may be true for technical founders/employees[1]. I doubt it is the case for a non-technical founder who would otherwise work in the finance sector - which appears to be the case this story is about.
[1] I'm not convinced, but I'll concede it since there is another thread where that discussion is ongoing.
> The downside to failure is exceptionally low. It's all other people's money (at least in Silicon Valley)
i always feel disgusted by this sort of attitude. sure it mitigates risk, but as secular and reasoned as i like to think i am its just morally reprehensible as an attitude to take...
i treat other people's money with /more/ respect than my own. maybe thats just me being backwards.
always taken the attitude that if you need someone else's money to start then you aren't really ready to enter that business. maybe you should start a small business and build funds first... instead of taking a risk with other people's money when the sum total of your experience is approaching zero.
sure its their own fault for investing the money... but that doesn't make it easier for me to swallow.
i do not consider this irrationality to be a bad thing
There's an uncomfortable truth here. In the last 3 or 4 years, tech startups have started to become the fashionable choice for unthinking MBAs, taking the place of Investment Banking and Private Equity before it.
I was at a conference recently organised by University College, London (arguably the top science & engineering school in the UK). With no hint of irony, the organiser welcomed attendees - "we're all here because startups are the best way to get rich after college".
In the last week, I've been contacted by 3 separate people I knew from Law school asking me how they can get into startups.
As a YC founder I know exactly what I signed up for. YC is in the business of placing a series of low risk bets twice annually and then sorting through those bets looking for likely winners, doubling down and helping when possible
It doesn't matter though, they still lower my overall risk profile by being involved and (I believe) increase my odds of success. I believe it's a square deal.
I also believe that fundamentally if there's a time to aim high rather than minimizing downside risk in one's life, it's your 20s. Furthermore to a certain type of personality (mine) a secure life making a few hundred thousand dollars a year in an essentially mind-numbing profession that does little for humanity is unthinkably depressing.
It ain't for everyone, but I don't think it's fair to act as if it's some sort of sinister delusion projected by YC in order to benefit Paul Graham.
> secure life making a few hundred thousand dollars a year in an essentially mind-numbing profession that does little for humanity is unthinkably depressing.
You realize Wall Street bankers make a few million dollars a year doing mind-numbing work that does little for humanity, right?
Probably the biggest sign we're in a bubble[1] is that the Leveraged Sellout guy is back and has trained his focus on Silicon Valley.
1. Not saying we're actually in a bubble. Just pointing out that the last time he was around, he was poking fun at 22 year olds going into finance for absurdly high incomes.
My 2 cents: He is correct that YCombinator is running little risk doing what it does at this point. That seems pretty obvious now - though it was not when they started. Accelerators were a novelty back then, and YC could have fallen flat on its face.
YCombinator is a pretty low risk deal for entrepreneurs too, come to think of it. Perhaps the author misses this point. If your startup does fail and/or you get tired of the startup game, there's probably a large number of companies willing to take you on as an employee, given the skillset you likely had to get into YC.
Now there's some guy in every coffee shop claiming to have an accelerator without any idea how to succeed (specialize/differentiate). They're 95% wooly propositions with the occasional one that can sell nontrivial epsilon of value.
My favorite so far is this guy that hangs out at a cafe near Stanford that has alienated everyone in his potential "deal-flow" by anger outbursts on conference calls and generally acting like a dick.
This is faulty though, no? You're risking your best alternative to eating ramen over the course of those N years. That alternative is very, very high for anyone getting into YC at this point.
And when the check came, I passed it to Eric and watched his eyes widen at the total. The host came over, expecting his card. I could see Eric sweat. “Oh, this shouldn’t be a problem,” I assured him. I turned to the host: “You accept equity, right?” Her face contorted. I elbowed my cousin. “Eric – tell her about your startup.”
he's such a dick, I love it.
This is incredibly well-written. As someone who has a brother at Wharton and parents in the healthcare and legal fields I found myself smiling often. Was the iPad smashing too much though? Is that what rich people do?
If anyone is feeling bad for not necessarily knowing what to think about this piece, don't. I think it takes a while to realize this isn't a blog and the narrator isn't NECESSARILY the hero, but rather it's a story and there's a LOT to think about out of it.
My take is, of course, that the narrator is the villain, but that's just me.
I don't know to what extent this is a joke but I am not laughing. Yc is a school where they pay you, Paul Graham et al did not take over Airbnb or Dropbox... the people who founded those companies run them.
The idea that a life is worthless or wasted if you make less money is beyond flawed. It is the most american/capitalist/rewarding thing to make a go of building something of your own.
Being a wall street banker has virtually no social utility. Airbnb and Dropbox improve the collective productivity of society and make real markets in the case of Airbnb. If it takes hundreds of people and millions of dollars failing in an effort to make a few big winners so be it, and when Yc makes money in the process they deserve it. They are taking REAL risk, and it seems the people who emerge from their program are better for it even if their dreams don't all come true.
Finally, the girl next to him is an important part of this little story. Women love men who are passionate, who are alive and who take risks. If all of society fell apart I'd much rather be with a bunch of hackers than bankers, the hackers are creative, passionate, loving and ruthless when necessary. Women understand this and they they love it... because they know they are always safe with a man who can build something. They'd rather eat Mac & Cheese with a man who puts up a good fight before kneeling down THE MAN... or maybe never has to kneel at all.
I don't get it. What's the intended message for his younger brother?
That you should go into a steady, well-paying career because then you'll be able to impress women by picking up the tab at a fancy restaurant/bar? Or was it just poking fun at YC-as-a-cult?
I am still unsure whether the author was 1) seriously making some decent points about YC's model underneath a (self-aware and -effacing or just tone-deaf, I'm really not sure) veneer of old-school snobbery and greed, or 2) sarcastically making the opposite points by presenting the counterargument in such unappealing terms.
Either way, it left something of a bad taste in my mouth for both industries.
Well, if you're not setting out to read something clearly stupid into the author's intent, you might conclude that he's questioning whether equity in some early-stage startup is really worth anywhere near as much as what those who have/offer it talk like it's worth.
Entertaining to read all the comments on this thread. Great article and as a former investment banker, yes so true, really no difference from, what I observe for SV startup accelerators, and an investment banking approach of hiring the best. I guess the same could be said of other elite professions such as law etc. With respect to other derogatorary comments on this thread, about bankers and MBA's. I suspect most are written by people attempting to self justify there choice of startup vs a traditional careers. Good laugh re: the comments about the social utility of startups vs banks and how unproductive to society investment bankers are. But face it without these investment banking "parasites" who add no value to society, most startups who need to raise capital wouldn't exist. Anyway back to work on my bootstrapped startup!..
Great article and as a former investment banker so true. Good laugh reading the comments, I speculate mostly from insecure startup employees, executing their "post purchase rationalization" for taking the accelerator route.
The reality is that the accelerator model has more parallels to the investment banking model than many of the commenters are recognizing. Very entertaining to see some commenters trying as well to justify that startups have more benefit to society than bankers or MBAs, in fact hilarious as the reality is that without those "dumb" MBA investment bankers who can attract IPO money to feed the VC's to fund startups, many with questionable and untested business models, accelerators and most startups wouldn't exist.
Thanks for the entertainment, better not waste too much more time and get back to trying to bootstrap my startup.
I thoroughly enjoyed reading the article - yet I don't believe any of it. When you've got a wife, kids, mortgage, private school, etc, etc, etc, you've got to be a bit more risk averse. In this case, why not let the kid see what life is like when you're not a corporate drone?
Doing YC seems to me very similar to forming a band, writing a movie script, or attempting to become a successful actor, athlete, etc. If you go into the scenario expecting that failure is not an option, you will almost surely be disappointed. If you understand (really) that it is high risk/high reward, and the cost of failure can be as low as a teeny bit of your pride, it can be a great learning experience, providing you with a glimpse of a world outside the proverbial cubicle of a safe, predictable life.
YC didn't invent startups, and everyone should be able to do something they actually want to do all day at least once. And for their benefit it should be in their 20s.
[+] [-] etrain|12 years ago|reply
The site was quiet for a long time and has very recently re-emerged to take on the tech industry - albeit from the perspective of the New York finance type.
Outlandish and uncomfortably true.
[+] [-] argonaut|12 years ago|reply
[+] [-] ycmike|12 years ago|reply
[+] [-] rdl|12 years ago|reply
1) The intangible benefits of being at a startup (as a founder or early employee) -- working on interesting problems, with smart people, in a well funded environment. You learn things, meet people, get to use amazing tools. (Startups definitely aren't the only way to do this -- academia or, for engineering, some parts of the military or government or big enterprises have some awesome toys, and some world-class experts, and interesting problems, too. But in Silicon Valley, the barrier to entry is really low, and the problems are generally the right size for individuals or small groups to solve (partially) and quickly.
2) The downside to failure is exceptionally low. It's all other people's money (at least in Silicon Valley); your real cost is opportunity, but generally the market values a failed startup founder or early employee at enough of a premium over a member of a later stage team that you can catch up quickly.
3) The EV of upside is both the odds of success (correctly identified as low) and the magnitude of that success. 1% odds in an even game suck; 1% odds where you're given your wager by someone else and you get to keep 50% of the upside and the upside is potentially 10000:1 is pretty awesome. Doubling down on success, moving away from failure, and you can do this 5-10 times pretty easily.
[+] [-] pron|12 years ago|reply
The more interesting point, I think, is not the entrepreneur side of the equation, but the YC side. The author claims that YC is exploiting entrepreneurs. This claim is more interesting (in the social-studies sense) as it seeks to uncover a particular kind of exploitation that's a feature of our current age. First, it's important to point out that this question is completely orthogonal to whether the allegedly exploited person is better off or not. A capitalist could start an iPhone factory on an island full of starving people and pay each a loaf of bread a day; while the people are certainly better off, they're still being exploited.
YC specifically is most certainly not exploiting anyone, as on average it gives companies much more value than it takes. But the question remains on whether the Silicon Valley ecosystem in general is exploitative, and I think the answer to that is yes, although this kind of exploitation is rather mild – I would call it "taking advantage" more than "exploiting". I think those taking advantage are not VCs, but large tech companies. Rather than paying regular salaries to large research departments, the SV ecosystem encourages a lottery-style payoff. Lots of people work trying to invent a novel product, or find an unexplored market niche, and instead of paying them all for their efforts, there's a large prize offered to those who succeed. I think that large tech companies are taking much more value out of this arrangement than they're putting in, so there's probably some exploitation there (in fact, any lottery-style economic construct, be it based on "merit" or sheer luck, suggests some sort of exploitation taking place).
[+] [-] speeder|12 years ago|reply
I mean, your 2) point is critical: I am in Brazil, I am in a startup because I had no choice, and although I am getting paid with someone else money, if the startup crashes, I will go down with it, and go down I mean, get in worse situation than I already am... currently I am struggling to pay my rent and food, if my startup fails, I won't be able to pay rent and food, at all, considering my parents are having money issues too, this mean most likely I would experience real starvation, something that I am not much keen on experiencing.
[+] [-] achompas|12 years ago|reply
Hmm. Is "generally" right here? Are founders really getting hired at a enough of a premium to earn the ~$100-200k they lost over 1-2 years while failing?
[+] [-] kawera|12 years ago|reply
Oh my!
[+] [-] nl|12 years ago|reply
This may be true for technical founders/employees[1]. I doubt it is the case for a non-technical founder who would otherwise work in the finance sector - which appears to be the case this story is about.
[1] I'm not convinced, but I'll concede it since there is another thread where that discussion is ongoing.
[+] [-] jheriko|12 years ago|reply
i always feel disgusted by this sort of attitude. sure it mitigates risk, but as secular and reasoned as i like to think i am its just morally reprehensible as an attitude to take...
i treat other people's money with /more/ respect than my own. maybe thats just me being backwards.
always taken the attitude that if you need someone else's money to start then you aren't really ready to enter that business. maybe you should start a small business and build funds first... instead of taking a risk with other people's money when the sum total of your experience is approaching zero.
sure its their own fault for investing the money... but that doesn't make it easier for me to swallow.
i do not consider this irrationality to be a bad thing
[+] [-] ForHackernews|12 years ago|reply
Wall Street is all playing middleman with other peoples' money too.
[+] [-] tomblomfield|12 years ago|reply
I was at a conference recently organised by University College, London (arguably the top science & engineering school in the UK). With no hint of irony, the organiser welcomed attendees - "we're all here because startups are the best way to get rich after college".
In the last week, I've been contacted by 3 separate people I knew from Law school asking me how they can get into startups.
[+] [-] lostcolony|12 years ago|reply
[+] [-] aelaguiz|12 years ago|reply
It doesn't matter though, they still lower my overall risk profile by being involved and (I believe) increase my odds of success. I believe it's a square deal.
I also believe that fundamentally if there's a time to aim high rather than minimizing downside risk in one's life, it's your 20s. Furthermore to a certain type of personality (mine) a secure life making a few hundred thousand dollars a year in an essentially mind-numbing profession that does little for humanity is unthinkably depressing.
It ain't for everyone, but I don't think it's fair to act as if it's some sort of sinister delusion projected by YC in order to benefit Paul Graham.
[+] [-] akbar501|12 years ago|reply
Age is rarely a factor for those who are shooting for the moon, but it's a great excuse for those who don't.
[+] [-] ForHackernews|12 years ago|reply
You realize Wall Street bankers make a few million dollars a year doing mind-numbing work that does little for humanity, right?
[+] [-] kunle|12 years ago|reply
1. Not saying we're actually in a bubble. Just pointing out that the last time he was around, he was poking fun at 22 year olds going into finance for absurdly high incomes.
[+] [-] abvdasker|12 years ago|reply
[+] [-] arbuge|12 years ago|reply
YCombinator is a pretty low risk deal for entrepreneurs too, come to think of it. Perhaps the author misses this point. If your startup does fail and/or you get tired of the startup game, there's probably a large number of companies willing to take you on as an employee, given the skillset you likely had to get into YC.
[+] [-] ballard|12 years ago|reply
My favorite so far is this guy that hangs out at a cafe near Stanford that has alienated everyone in his potential "deal-flow" by anger outbursts on conference calls and generally acting like a dick.
[+] [-] achompas|12 years ago|reply
[+] [-] chrislloyd|12 years ago|reply
[+] [-] dethstar|12 years ago|reply
[+] [-] ycmike|12 years ago|reply
[+] [-] tomasien|12 years ago|reply
My take is, of course, that the narrator is the villain, but that's just me.
[+] [-] djyaz1200|12 years ago|reply
The idea that a life is worthless or wasted if you make less money is beyond flawed. It is the most american/capitalist/rewarding thing to make a go of building something of your own.
Being a wall street banker has virtually no social utility. Airbnb and Dropbox improve the collective productivity of society and make real markets in the case of Airbnb. If it takes hundreds of people and millions of dollars failing in an effort to make a few big winners so be it, and when Yc makes money in the process they deserve it. They are taking REAL risk, and it seems the people who emerge from their program are better for it even if their dreams don't all come true.
Finally, the girl next to him is an important part of this little story. Women love men who are passionate, who are alive and who take risks. If all of society fell apart I'd much rather be with a bunch of hackers than bankers, the hackers are creative, passionate, loving and ruthless when necessary. Women understand this and they they love it... because they know they are always safe with a man who can build something. They'd rather eat Mac & Cheese with a man who puts up a good fight before kneeling down THE MAN... or maybe never has to kneel at all.
https://www.youtube.com/watch?v=GuDRGuOVjvU
[+] [-] mkesper|12 years ago|reply
This article is satire...
[+] [-] 205guy|12 years ago|reply
[+] [-] spindritf|12 years ago|reply
That you should go into a steady, well-paying career because then you'll be able to impress women by picking up the tab at a fancy restaurant/bar? Or was it just poking fun at YC-as-a-cult?
[+] [-] sanderjd|12 years ago|reply
Either way, it left something of a bad taste in my mouth for both industries.
[+] [-] eru|12 years ago|reply
[+] [-] andreasvc|12 years ago|reply
[+] [-] kd0amg|12 years ago|reply
[+] [-] unknown|12 years ago|reply
[deleted]
[+] [-] Aqueous|12 years ago|reply
[+] [-] dbkbali|12 years ago|reply
[+] [-] dbkbali|12 years ago|reply
The reality is that the accelerator model has more parallels to the investment banking model than many of the commenters are recognizing. Very entertaining to see some commenters trying as well to justify that startups have more benefit to society than bankers or MBAs, in fact hilarious as the reality is that without those "dumb" MBA investment bankers who can attract IPO money to feed the VC's to fund startups, many with questionable and untested business models, accelerators and most startups wouldn't exist.
Thanks for the entertainment, better not waste too much more time and get back to trying to bootstrap my startup.
[+] [-] smoyer|12 years ago|reply
[+] [-] mikeknoop|12 years ago|reply
[+] [-] nvader|12 years ago|reply
[+] [-] whatgoodisaroad|12 years ago|reply
[+] [-] gatehouse|12 years ago|reply
[+] [-] gus_massa|12 years ago|reply
> To the uninitiated, this is a humour blog that was active until the debt crisis, focused on made up stories and rumors: http://www.leveragedsellout.com/2008/10/remember-the-titans/ .
[+] [-] danbmil99|12 years ago|reply
[+] [-] SworDsy|12 years ago|reply