… old people must really be stupid and lazy. http://www.paulgraham.com/sfp.html is a report on what happens when you give seed capital to 18-21-year-olds so that they can start little tech companies. My personal theory is that most supranormal profits are the result of people who understand one class of customer better than anyone else. College-aged kids generally haven’t spent enough time with customers to know anything at all. They might have a lot of energy, skill, and dedication, but have not seen customers first-hand. The programmers who built SAP, for example, spent years at IBM doing consulting work. After having seen 10+ companies’ problems and built 10+ similar solutions they decided to go off on their own, rewrite it all, package it up, and sell it.
Graham has introduced some bias into the experiment by hand-picking companies to fund. The teams that he funded were the ones who came to him with the ideas that he liked best. On the other hand, if these guys are succeeding as well as he suggests it must mean that the competition is very weak. Who are the competitors? Older programmers working in bureaucracies at larger companies, which have strong brands and near-infinite capital. So basically what Graham is proving is that these folks are incredibly unproductive and their aggregate work product is almost worthless.
Paul’s experiment may have involved young people, but I don’t think it necessarily says anything about older people per se, as it says something about mindset.
For most people, they believe they should go to school to get a good job and work at it the rest of their pre-retirement life. There’s not necessarily anything wrong with that, but, as Paul is proving (and has proved through his own life), there’s another way — go to school (as much as you need to) and invent some product or service that you personally, or you with a small number of others, can actually produce and offer to real, paying users.
If all goes optimally, you will be able to sell the entire company to another larger company, and retire when you’re, say, 26 instead of 62.
Older people can do this too, if they will change their mindset (which can be very hard to do!). Of course, they have some other inhibitors, like a family to support and house payments to make, but it is still doable.
I am one of those geeks in that situation. I am pretty much ready to start my own shop, except that while I have plenty of geek talent to tap into, I don’t know anyone I can trust with my marketing and sales. And no, I am not going to start a company only to get stuck with the damn marketing, sales and paper pushing.
Philip says:
Who are the competitors? Older programmers working in bureaucracies at larger companies, which have strong brands and near-infinite capital. So basically what Graham is proving is that these folks are incredibly unproductive and their aggregate work product is almost worthless.
You’re only looking at part of the picture. Why are any of these start-ups worth so much to an investor? They’re only worth significant money if they can be turned into a product/service that can bring in revenue and profit and build a brand over the long term (*if* the investors are doing their job well). Those long term businesses need people to sustain, fix, and extend the product, and these are the people you call unproductive and whose work output you deem worthless. The thing is without these so-called unproductive people, the start-up could not bring in the huge sums.
You even made this point clear as day in your own comment. You claimed these companies have “strong brands and near-infinite capital”. Where do you think the brands and capital came from and what do you think sustains them?
During the insanity of the dot com boom, a bunch of start-ups had plans that took them to the IPO and no further. there was no vision of how this is turned into a long-term source of revenue, profit, and brand. Investors who bought the hype and couldn’t analyze their way out of a wet paper bag paid huge sums.
And where are these start-ups now? How did the investors do in the long term?
For the record, it was 18-28 year olds, not 18-21. The average age was 23. So they weren’t really young (I’m 22, so, what do I know?) just younger than most startup founders.
What Graham has shown most convincingly is that it’s possible to found a startup with far fewer resources than is generally believed.$10,000, three months, and a couple nerdy friends that don’t know anything about business is apparently all it takes.
Proved? What exactly has Paul Graham proved? That young people can write software? Hell yeah! I was writing software when I was 14. SO WHAT?
You can claim your experiments are a success when these software ideas can be turned into product and REAL MONEY. Until that time you haven’t proved a thing. Reddit and Kiko are not real companies folks!
You can’t tell whether a startup was a “real company” till it gets acquired (since 98% of the time that is success for a startup). Reddit and Kiko are 4 1/2 months old and both are already on acquirers’ radar screens. One has already turned down an offer. That’s about as real as you get at 4 1/2 months.
Large coporations often have perverse accounting structures which favor acquisitions over developing things in house, even when such a decision does not really maximize shareholder value (though they do maximize the value of executive compensation packages). Productivity doesn’t really have much to do with it.
Something else that some big companies have to deal with is matters of specific funding.
True, a startup needs funding too (lest its founders perish due to lack of eating), but in some big companies a software development team may have funding to work on X but not on Y, even if Y is a really good idea and something that should be done. No funding, and you can’t do Y during work hours. You can do it in your free time, most likely, but you might rather be starting a startup in your free time.
Hmmm, 40ish dotcom billionaire backs 20ish CS grads in a low-cost startup. Not sure what makes that original or innovative. The ars Digita prize was more innovative. All this 45 year old programmer can say to the people at reddit.com is Bring it On