Y Combinator and Paul Graham are bad for the world (Part 1) by Michael O. Church
Eric Nakagawa stashed this in startups
This is good.
Yes, this is well said:
Let’s be realistic about wealth. It’s usually attained slowly, not in some get-rich-quick gambit that has a better-than-even chance of costing you money and disrupting your career. The lesson of the 19th-century gold rushes, that much of the money was made by people selling tools and water, is well-understood. So why didn’t more of the prospectors go into the tool-selling business? Because that was the boring, slow way to get rich. Discovering a gold vein was the fast, flashy way that had more visceral appeal, although it was far more unlikely to work out.
Technology startups have, compared to other get-rich-quick schemes, far better odds of producing monstrous wealth for founders in a short amount of time. If you have the contacts necessary to become a VC-backed founder, then startup away. Graham takes it further and says “start or join a startup”. Employees of startups get a lot of their downsides, in terms of job insecurity and division-of-labor issues, but their payoffs are, almost always, mediocre. The people who get rich off the Googles are, in general, not the early entrants, but the people (early entrant or not) who manage to become executives in the middle phases. Of course, being an early entrant can sometimes give an inside track to an executive position as the company grows, but not as much of one as a decade in finance or management consulting, or an elite MBA. If you want to get rich in San Francisco and don’t have the contacts to become a founder, find a way to jump from one executive position to another in funded companies. You won’t get as rich as the founders who beat the odds and end up in the “three comma club”, but your chances of attaining reasonable wealth are better, as you’ll still get an order of magnitude or two more than the software engineers joining at the same time.
In other words, the get-rich possibility for non-founding employees is no different in the startup game than in the mainstream corporate one. If you climb the ladder and reach a highly-compensated executive position, you can get wealthy. Usually, it takes time and luck. At the end of the wringer, some people end up not making it, meaning that their time was wasted on a promise that was never delivered.
Wow, Michael O. Church holds no punches:
Where Graham gets dishonest is when he makes this promise:
Economically, you can think of a startup as a way to compress your whole working life into a few years.
Graham acknowledges that startups can fail, but he has argued in many of his essays that a startup’s failure won’t consume that much of one’s time anyway, so it shouldn’t be treated as a concern. In Paul Graham’s world, startups either fail quickly (and your investors will let you walk away and immediately start another one; in fact, they’ll fund you!) or they make you rich inside of 3-5 years. So, even though failure is the median outcome of a single startup, it shouldn’t take more than 10 years to get flamingly rich, right?
Let’s say that VC-backed startups have a 80 percent failure rate (this is about accurate) and in the other 20 percent, make the founders wealthy enough never to have to work again (false assumption). Let’s say that startups that fail do so within no more than 18 months (false assumption) and that founders are allowed to walk away (false assumption) and have someone else do the dismal shutdown work, and that investors will, rather than holding past failure against them, enthusiastically fund their next ventures (false assumption). Then startups might make sense as a career, because a person who spends 20 years in that game has well over a 90% chance of becoming independently wealthy. None of that, however is true.
Paul Graham doesn’t much like me. On Hacker News, others’ posts get deleted and accounts get banned for the crime of linking to my blog. Why? In 2013, Paul Graham started getting warnings from real venture capitalists (the people to whom Y Combinator must sell its companies) that they’d have trouble placing if something wasn’t done about certain “troublesome” posters on Hacker News. This blog post, in July 2012, my have led Graham to consider me one of the “troublesome” ones. Increasingly irritating adverse measures were taken against my account: slow performance of the site (“slowban”) and dishonest representation of a post’s popularity with other users (“rankban”). This culminated in my being banned from Hacker News last summer, Paul Buchheit talking shit about me on Quora, and (unless Quora is deliberately misdirecting blame toward YC) someone from Y Combinator calling Quora and demanding a ban on my account. Quora, which took YC investment in 2014 due to continuing difficulty with monetization, caved to this demand.
The offending blog post:
Yes, he's very thoughtful. It's clear that he's dangerous because he's unafraid to say things that go against conventional wisdom and challenge YC's power.
This part really stuck with me:
Y Combinator has created a “cool kids’ table” in Silicon Valley. While real venture capitalists don’t much care for Paul Graham himself (for reasons I won’t get into here, since I’d risk compromising sources) and his waves in the kiddie pool, many VCs will use his signal, simply because it’s expedient. There are firms now that won’t talk to a non-YC company. They’ve outsourced their talent vetting to a man who routinely makes foot-in-mouth statements about foreign accents or about those uncanny people with vaginas who, according to legend, make up half the species. This is unsurprising (VC groupthink is a notorious plague) but sad. Y Combinator now provides a service that is harmful to the world: it, increasingly, means that founders only get one chance. If YC judges you as employee-grade and passes, then the rest of Sand Hill Road will conclude the same.
Frankly, the best thing that the United States can do if it wishes to preserve private-sector innovation is to break up Sand Hill Road. I recognize that, formally speaking, it’s a collection of companies that are theoretically competitors, but their sharing of information means (even regardless of what YC does) that a founder gets only one real chance to make his case, because the VCs decide as a group who they like and who they don’t, like middle-school girls passing around “cutest guy” lists. The culture of note-sharing and co-funding isn’t new to finance; it’s a subcase of what would be called market manipulation (and highly illegal) if applied to publicly-traded stocks instead of unregulated private equity. The result of it is that the market no longer reflects aggregate preferences (however they may fluctuate) but the game-theoretic concerns of the most powerful players. This is bad for innovation and, while it’s good for the well-connected “serial entrepreneurs”, it’s bad for people who are trying to make the employee-to-founder leap.
As for YC, I’ve met about 30 YC founders in my life. I will admit that, a few of them, I ended up liking. They’re not all bad. Another 10 or so, I’m neutral on, or just don’t know much about them. And then, there are a substantial nunber who are dreadful. I don’t mean just that I dislike them; I mean that their personality and ethical flaws are so severe that I have no faith in a talent-scouting organization that would admit them.
I wouldn’t interview with, or work for, a YC-backed company today, and I can proudly say that I’ve never worked for a YC company, but I’ve interviewed with a few in the past. One time, I remember listening to a 25-year-old CEO gloating about firing people in their first 30 days because (you hear this justification a lot) “we’re a startup”. I heard another one, at one point, talk about how he’d be able to exploit his employees because, in his model, they’d so desperately want to be introduced to Y Combinator that they’d do anything, just on that promise, which he could rescind “for performance”. (I don’t know how his company turned out.) Obviously, I didn’t work for either of these companies.
It seems clear that YC people conceive of themselves as superior, founder-grade, relative to the employee-grade masses pounding on the doors of startups (not because startups are great, but because the mainstream corporate world is, due to technological unemployment, depopulating). That really irks me. Some organizations are founded for high-minded purposes but become exclusive and snooty. Such a criticism has been made about some of the most selective schools, for example. However, these institutions weren’t designed to be that way. Harvard doesn’t claim that it admits and gets every decent student, because it knows that it doesn’t have room for all of the “leader-grade” people who apply. The top universities are selective because they’re good universities, and because there are physical limitations regarding their ability to admit students. There’s good and bad to “the Ivy League”. These universities do a lot of good for people who attend them, and I don’t think that the snobbery actually hurts many people. (It makes some people massively insecure, which is part of why corporate executives in their 50s are often caught falsifying educational credentials, despite gaining no benefit, by that age, in doing so; but I don’t think that, in the U.S., there’s a serious job-market effect after age 27.) These universities make earnest efforts to have their positive effects on society outweigh the negatives. I cannot say the same of Y Combinator, which seems to be replicating the negative traits of such institutions, without any of the positive ones (such as noblesse oblige or a value on classical erudition and the preservation of culture). Y Combinator, unlike a university founded as a seminary in the 17th century, was actually created to be exclusive and snobbish, but its elitism is entirely about access to money.
It's telling that you can't share these thoughts openly.
He did share these thoughts openly. Which I guess is why he's banned on Hacker News.