Why There Aren't More Googles

Umair Haque wrote recently that the reason there aren't more Googles is that most startups get bought before they can change the world.
Google, despite serious interest from Microsoft and Yahoo—what must have seemed like lucrative interest at the time—didn't sell out. Google might simply have been nothing but Yahoo's or MSN's search box.

Why isn't it? Because Google had a deeply felt sense of purpose: a conviction to change the world for the better.
This has a nice sound to it, but it isn't true. Google's founders were willing to sell early on. They just wanted more than acquirers were willing to pay.

It was the same with Facebook. They would have sold, but Yahoo blew it by offering too little.

Tip for acquirers: when a startup turns you down, consider raising your offer, because there's a good chance the outrageous price they want will later seem a bargain. [1]

From the evidence I've seen so far, startups that turn down acquisition offers usually end up doing better. Not always, but usually there's a bigger offer coming, or perhaps even an IPO.

Of course, the reason startups do better when they turn down acquisition offers is not necessarily that all such offers undervalue startups. More likely the reason is that the kind of founders who have the balls to turn down a big offer also tend to be very successful. That spirit is exactly what you want in a startup.

While I'm sure Larry and Sergey do want to change the world, at least now, the reason Google survived to become a big, independent company is the same reason Facebook has so far remained independent: acquirers underestimated them.

Corporate M&A is a strange business in that respect. They consistently lose the best deals, because turning down reasonable offers is the most reliable test you could invent for whether a startup will make it big.


So what's the real reason there aren't more Googles? Curiously enough, it's the same reason Google and Facebook have remained independent: money guys undervalue the most innovative startups.

The reason there aren't more Googles is not that investors encourage innovative startups to sell out, but that they won't even fund them. I've learned a lot about VCs during the 3 years we've been doing Y Combinator, because we often have to work quite closely with them. The most surprising thing I've learned is how conservative they are. VC firms present an image of boldly encouraging innovation. Only a handful actually do, and even they are more conservative in reality than you'd guess from reading their sites.

I used to think of VCs as piratical: bold but unscrupulous. On closer acquaintance they turn out to be more like bureaucrats. They're more upstanding than I used to think (the good ones, at least), but less bold. Maybe the VC industry has changed. Maybe they used to be bolder. But I suspect it's the startup world that has changed, not them. The low cost of starting a startup means the average good bet is a riskier one, but most existing VC firms still operate as if they were investing in hardware startups in 1985.

Howard Aiken said "Don't worry about people stealing your ideas. If your ideas are any good, you'll have to ram them down people's throats." I have a similar feeling when I'm trying to convince VCs to invest in startups Y Combinator has funded. They're terrified of really novel ideas, unless the founders are good enough salesmen to compensate.

But it's the bold ideas that generate the biggest returns. Any really good new idea will seem bad to most people; otherwise someone would already be doing it. And yet most VCs are driven by consensus, not just within their firms, but within the VC community. The biggest factor determining how a VC will feel about your startup is how other VCs feel about it. I doubt they realize it, but this algorithm guarantees they'll miss all the very best ideas. The more people who have to like a new idea, the more outliers you lose.

Whoever the next Google is, they're probably being told right now by VCs to come back when they have more "traction."

Why are VCs so conservative? It's probably a combination of factors. The large size of their investments makes them conservative. Plus they're investing other people's money, which makes them worry they'll get in trouble if they do something risky and it fails. Plus most of them are money guys rather than technical guys, so they don't understand what the startups they're investing in do.

What's Next

The exciting thing about market economies is that stupidity equals opportunity. And so it is in this case. There is a huge, unexploited opportunity in startup investing. Y Combinator funds startups at the very beginning. VCs will fund them once they're already starting to succeed. But between the two there is a substantial gap.

There are companies that will give $20k to a startup that has nothing more than the founders, and there are companies that will give $2 million to a startup that's already taking off, but there aren't enough investors who will give $200k to a startup that seems very promising but still has some things to figure out. This territory is occupied mostly by individual angel investors—people like Andy Bechtolsheim, who gave Google $100k when they seemed promising but still had some things to figure out. I like angels, but there just aren't enough of them, and investing is for most of them a part time job.

And yet as it gets cheaper to start startups, this sparsely occupied territory is becoming more and more valuable. Nowadays a lot of startups don't want to raise multi-million dollar series A rounds. They don't need that much money, and they don't want the hassles that come with it. The median startup coming out of Y Combinator wants to raise $250-500k. When they go to VC firms they have to ask for more because they know VCs aren't interested in such small deals.

VCs are money managers. They're looking for ways to put large sums to work. But the startup world is evolving away from their current model.

Startups have gotten cheaper. That means they want less money, but also that there are more of them. So you can still get large returns on large amounts of money; you just have to spread it more broadly.

I've tried to explain this to VC firms. Instead of making one $2 million investment, make five $400k investments. Would that mean sitting on too many boards? Don't sit on their boards. Would that mean too much due diligence? Do less. If you're investing at a tenth the valuation, you only have to be a tenth as sure.

It seems obvious. But I've proposed to several VC firms that they set aside some money and designate one partner to make more, smaller bets, and they react as if I'd proposed the partners all get nose rings. It's remarkable how wedded they are to their standard m.o.

But there is a big opportunity here, and one way or the other it's going to get filled. Either VCs will evolve down into this gap or, more likely, new investors will appear to fill it. That will be a good thing when it happens, because these new investors will be compelled by the structure of the investments they make to be ten times bolder than present day VCs. And that will get us a lot more Googles. At least, as long as acquirers remain stupid.


[1] Another tip: If you want to get all that value, don't destroy the startup after you buy it. Give the founders enough autonomy that they can grow the acquisition into what it would have become.

Apple's Mistake

I don't think Apple realizes how badly the App Store approval process is broken. Or rather, I don't think they realize how much it matters that it's broken.

The way Apple runs the App Store has harmed their reputation with programmers more than anything else they've ever done. Their reputation with programmers used to be great. It used to be the most common complaint you heard about Apple was that their fans admired them too uncritically. The App Store has changed that. Now a lot of programmers have started to see Apple as evil.

How much of the goodwill Apple once had with programmers have they lost over the App Store? A third? Half? And that's just so far. The App Store is an ongoing karma leak.

* * *

How did Apple get into this mess? Their fundamental problem is that they don't understand software.

They treat iPhone apps the way they treat the music they sell through iTunes. Apple is the channel; they own the user; if you want to reach users, you do it on their terms. The record labels agreed, reluctantly. But this model doesn't work for software. It doesn't work for an intermediary to own the user. The software business learned that in the early 1980s, when companies like VisiCorp showed that although the words "software" and "publisher" fit together, the underlying concepts don't. Software isn't like music or books. It's too complicated for a third party to act as an intermediary between developer and user. And yet that's what Apple is trying to be with the App Store: a software publisher. And a particularly overreaching one at that, with fussy tastes and a rigidly enforced house style.

If software publishing didn't work in 1980, it works even less now that software development has evolved from a small number of big releases to a constant stream of small ones. But Apple doesn't understand that either. Their model of product development derives from hardware. They work on something till they think it's finished, then they release it. You have to do that with hardware, but because software is so easy to change, its design can benefit from evolution. The standard way to develop applications now is to launch fast and iterate. Which means it's a disaster to have long, random delays each time you release a new version.

Apparently Apple's attitude is that developers should be more careful when they submit a new version to the App Store. They would say that. But powerful as they are, they're not powerful enough to turn back the evolution of technology. Programmers don't use launch-fast-and-iterate out of laziness. They use it because it yields the best results. By obstructing that process, Apple is making them do bad work, and programmers hate that as much as Apple would.

How would Apple like it if when they discovered a serious bug in OS X, instead of releasing a software update immediately, they had to submit their code to an intermediary who sat on it for a month and then rejected it because it contained an icon they didn't like?

By breaking software development, Apple gets the opposite of what they intended: the version of an app currently available in the App Store tends to be an old and buggy one. One developer told me:
As a result of their process, the App Store is full of half-baked applications. I make a new version almost every day that I release to beta users. The version on the App Store feels old and crappy. I'm sure that a lot of developers feel this way: One emotion is "I'm not really proud about what's in the App Store", and it's combined with the emotion "Really, it's Apple's fault."
Another wrote:
I believe that they think their approval process helps users by ensuring quality. In reality, bugs like ours get through all the time and then it can take 4-8 weeks to get that bug fix approved, leaving users to think that iPhone apps sometimes just don't work. Worse for Apple, these apps work just fine on other platforms that have immediate approval processes.
Actually I suppose Apple has a third misconception: that all the complaints about App Store approvals are not a serious problem. They must hear developers complaining. But partners and suppliers are always complaining. It would be a bad sign if they weren't; it would mean you were being too easy on them. Meanwhile the iPhone is selling better than ever. So why do they need to fix anything?

They get away with maltreating developers, in the short term, because they make such great hardware. I just bought a new 27" iMac a couple days ago. It's fabulous. The screen's too shiny, and the disk is surprisingly loud, but it's so beautiful that you can't make yourself care.

So I bought it, but I bought it, for the first time, with misgivings. I felt the way I'd feel buying something made in a country with a bad human rights record. That was new. In the past when I bought things from Apple it was an unalloyed pleasure. Oh boy! They make such great stuff. This time it felt like a Faustian bargain. They make such great stuff, but they're such assholes. Do I really want to support this company?
* * *

Should Apple care what people like me think? What difference does it make if they alienate a small minority of their users?

There are a couple reasons they should care. One is that these users are the people they want as employees. If your company seems evil, the best programmers won't work for you. That hurt Microsoft a lot starting in the 90s. Programmers started to feel sheepish about working there. It seemed like selling out. When people from Microsoft were talking to other programmers and they mentioned where they worked, there were a lot of self-deprecating jokes about having gone over to the dark side. But the real problem for Microsoft wasn't the embarrassment of the people they hired. It was the people they never got. And you know who got them? Google and Apple. If Microsoft was the Empire, they were the Rebel Alliance. And it's largely because they got more of the best people that Google and Apple are doing so much better than Microsoft today.

Why are programmers so fussy about their employers' morals? Partly because they can afford to be. The best programmers can work wherever they want. They don't have to work for a company they have qualms about.

But the other reason programmers are fussy, I think, is that evil begets stupidity. An organization that wins by exercising power starts to lose the ability to win by doing better work. And it's not fun for a smart person to work in a place where the best ideas aren't the ones that win. I think the reason Google embraced "Don't be evil" so eagerly was not so much to impress the outside world as to inoculate themselves against arrogance. [1]

That has worked for Google so far. They've become more bureaucratic, but otherwise they seem to have held true to their original principles. With Apple that seems less the case. When you look at the famous 1984 ad now, it's easier to imagine Apple as the dictator on the screen than the woman with the hammer. [2] In fact, if you read the dictator's speech it sounds uncannily like a prophecy of the App Store.
We have triumphed over the unprincipled dissemination of facts.

We have created, for the first time in all history, a garden of pure ideology, where each worker may bloom secure from the pests of contradictory and confusing truths.
The other reason Apple should care what programmers think of them is that when you sell a platform, developers make or break you. If anyone should know this, Apple should. VisiCalc made the Apple II.

And programmers build applications for the platforms they use. Most applications—most startups, probably—grow out of personal projects. Apple itself did. Apple made microcomputers because that's what Steve Wozniak wanted for himself. He couldn't have afforded a minicomputer. [3] Microsoft likewise started out making interpreters for little microcomputers because Bill Gates and Paul Allen were interested in using them. It's a rare startup that doesn't build something the founders use.

The main reason there are so many iPhone apps is that so many programmers have iPhones. They may know, because they read it in an article, that Blackberry has such and such market share. But in practice it's as if RIM didn't exist. If they're going to build something, they want to be able to use it themselves, and that means building an iPhone app.

So programmers continue to develop iPhone apps, even though Apple continues to maltreat them. They're like someone stuck in an abusive relationship. They're so attracted to the iPhone that they can't leave. But they're looking for a way out. One wrote:
While I did enjoy developing for the iPhone, the control they place on the App Store does not give me the drive to develop applications as I would like. In fact I don't intend to make any more iPhone applications unless absolutely necessary. [4]
Can anything break this cycle? No device I've seen so far could. Palm and RIM haven't a hope. The only credible contender is Android. But Android is an orphan; Google doesn't really care about it, not the way Apple cares about the iPhone. Apple cares about the iPhone the way Google cares about search.
* * *

Is the future of handheld devices one locked down by Apple? It's a worrying prospect. It would be a bummer to have another grim monoculture like we had in the 1990s. In 1995, writing software for end users was effectively identical with writing Windows applications. Our horror at that prospect was the single biggest thing that drove us to start building web apps.

At least we know now what it would take to break Apple's lock. You'd have to get iPhones out of programmers' hands. If programmers used some other device for mobile web access, they'd start to develop apps for that instead.

How could you make a device programmers liked better than the iPhone? It's unlikely you could make something better designed. Apple leaves no room there. So this alternative device probably couldn't win on general appeal. It would have to win by virtue of some appeal it had to programmers specifically.

One way to appeal to programmers is with software. If you could think of an application programmers had to have, but that would be impossible in the circumscribed world of the iPhone, you could presumably get them to switch.

That would definitely happen if programmers started to use handhelds as development machines—if handhelds displaced laptops the way laptops displaced desktops. You need more control of a development machine than Apple will let you have over an iPhone.

Could anyone make a device that you'd carry around in your pocket like a phone, and yet would also work as a development machine? It's hard to imagine what it would look like. But I've learned never to say never about technology. A phone-sized device that would work as a development machine is no more miraculous by present standards than the iPhone itself would have seemed by the standards of 1995.

My current development machine is a MacBook Air, which I use with an external monitor and keyboard in my office, and by itself when traveling. If there was a version half the size I'd prefer it. That still wouldn't be small enough to carry around everywhere like a phone, but we're within a factor of 4 or so. Surely that gap is bridgeable. In fact, let's make it an RFS. Wanted: Woman with hammer.


[1] When Google adopted "Don't be evil," they were still so small that no one would have expected them to be, yet.

[2] The dictator in the 1984 ad isn't Microsoft, incidentally; it's IBM. IBM seemed a lot more frightening in those days, but they were friendlier to developers than Apple is now.

[3] He couldn't even afford a monitor. That's why the Apple I used a TV as a monitor.

[4] Several people I talked to mentioned how much they liked the iPhone SDK. The problem is not Apple's products but their policies. Fortunately policies are software; Apple can change them instantly if they want to. Handy that, isn't it?

Thanks to Sam Altman, Trevor Blackwell, Ross Boucher, James Bracy, Gabor Cselle, Patrick Collison, Jason Freedman, John Gruber, Joe Hewitt, Jessica Livingston, Robert Morris, Teng Siong Ong, Nikhil Pandit, Savraj Singh, and Jared Tame for reading drafts of this.

How to lose time and money

When we sold our startup in 1998 I suddenly got a lot of money. I now had to think about something I hadn't had to think about before: how not to lose it. I knew it was possible to go from rich to poor, just as it was possible to go from poor to rich. But while I'd spent a lot of the past several years studying the paths from poor to rich, I knew practically nothing about the paths from rich to poor. Now, in order to avoid them, I had to learn where they were.

So I started to pay attention to how fortunes are lost. If you'd asked me as a kid how rich people became poor, I'd have said by spending all their money. That's how it happens in books and movies, because that's the colorful way to do it. But in fact the way most fortunes are lost is not through excessive expenditure, but through bad investments.

It's hard to spend a fortune without noticing. Someone with ordinary tastes would find it hard to blow through more than a few tens of thousands of dollars without thinking "wow, I'm spending a lot of money." Whereas if you start trading derivatives, you can lose a million dollars (as much as you want, really) in the blink of an eye.

In most people's minds, spending money on luxuries sets off alarms that making investments doesn't. Luxuries seem self-indulgent. And unless you got the money by inheriting it or winning a lottery, you've already been thoroughly trained that self-indulgence leads to trouble. Investing bypasses those alarms. You're not spending the money; you're just moving it from one asset to another. Which is why people trying to sell you expensive things say "it's an investment."

The solution is to develop new alarms. This can be a tricky business, because while the alarms that prevent you from overspending are so basic that they may even be in our DNA, the ones that prevent you from making bad investments have to be learned, and are sometimes fairly counterintuitive.

A few days ago I realized something surprising: the situation with time is much the same as with money. The most dangerous way to lose time is not to spend it having fun, but to spend it doing fake work. When you spend time having fun, you know you're being self-indulgent. Alarms start to go off fairly quickly. If I woke up one morning and sat down on the sofa and watched TV all day, I'd feel like something was terribly wrong. Just thinking about it makes me wince. I'd start to feel uncomfortable after sitting on a sofa watching TV for 2 hours, let alone a whole day.

And yet I've definitely had days when I might as well have sat in front of a TV all day—days at the end of which, if I asked myself what I got done that day, the answer would have been: basically, nothing. I feel bad after these days too, but nothing like as bad as I'd feel if I spent the whole day on the sofa watching TV. If I spent a whole day watching TV I'd feel like I was descending into perdition. But the same alarms don't go off on the days when I get nothing done, because I'm doing stuff that seems, superficially, like real work. Dealing with email, for example. You do it sitting at a desk. It's not fun. So it must be work.

With time, as with money, avoiding pleasure is no longer enough to protect you. It probably was enough to protect hunter-gatherers, and perhaps all pre-industrial societies. So nature and nurture combine to make us avoid self-indulgence. But the world has gotten more complicated: the most dangerous traps now are new behaviors that bypass our alarms about self-indulgence by mimicking more virtuous types. And the worst thing is, they're not even fun.

What happened to Yahoo

When I went to work for Yahoo after they bought our startup in 1998, it felt like the center of the world. It was supposed to be the next big thing. It was supposed to be what Google turned out to be.

What went wrong? The problems that hosed Yahoo go back a long time, practically to the beginning of the company. They were already very visible when I got there in 1998. Yahoo had two problems Google didn't: easy money, and ambivalence about being a technology company.


The first time I met Jerry Yang, we thought we were meeting for different reasons. He thought we were meeting so he could check us out in person before buying us. I thought we were meeting so we could show him our new technology, Revenue Loop. It was a way of sorting shopping search results. Merchants bid a percentage of sales for traffic, but the results were sorted not by the bid but by the bid times the average amount a user would buy. It was like the algorithm Google uses now to sort ads, but this was in the spring of 1998, before Google was founded.

Revenue Loop was the optimal sort for shopping search, in the sense that it sorted in order of how much money Yahoo would make from each link. But it wasn't just optimal in that sense. Ranking search results by user behavior also makes search better. Users train the search: you can start out finding matches based on mere textual similarity, and as users buy more stuff the search results get better and better.

Jerry didn't seem to care. I was confused. I was showing him technology that extracted the maximum value from search traffic, and he didn't care? I couldn't tell whether I was explaining it badly, or he was just very poker faced.

I didn't realize the answer till later, after I went to work at Yahoo. It was neither of my guesses. The reason Yahoo didn't care about a technique that extracted the full value of traffic was that advertisers were already overpaying for it. If they merely extracted the actual value, they'd have made less.

Hard as it is to believe now, the big money then was in banner ads. Advertisers were willing to pay ridiculous amounts for banner ads. So Yahoo's sales force had evolved to exploit this source of revenue. Led by a large and terrifyingly formidable man called Anil Singh, Yahoo's sales guys would fly out to Procter & Gamble and come back with million dollar orders for banner ad impressions.

The prices seemed cheap compared to print, which was what advertisers, for lack of any other reference, compared them to. But they were expensive compared to what they were worth. So these big, dumb companies were a dangerous source of revenue to depend on. But there was another source even more dangerous: other Internet startups.

By 1998, Yahoo was the beneficiary of a de facto Ponzi scheme. Investors were excited about the Internet. One reason they were excited was Yahoo's revenue growth. So they invested in new Internet startups. The startups then used the money to buy ads on Yahoo to get traffic. Which caused yet more revenue growth for Yahoo, and further convinced investors the Internet was worth investing in. When I realized this one day, sitting in my cubicle, I jumped up like Archimedes in his bathtub, except instead of "Eureka!" I was shouting "Sell!"

Both the Internet startups and the Procter & Gambles were doing brand advertising. They didn't care about targeting. They just wanted lots of people to see their ads. So traffic became the thing to get at Yahoo. It didn't matter what type. [1]

It wasn't just Yahoo. All the search engines were doing it. This was why they were trying to get people to start calling them "portals" instead of "search engines." Despite the actual meaning of the word portal, what they meant by it was a site where users would find what they wanted on the site itself, instead of just passing through on their way to other destinations, as they did at a search engine.

I remember telling David Filo in late 1998 or early 1999 that Yahoo should buy Google, because I and most of the other programmers in the company were using it instead of Yahoo for search. He told me that it wasn't worth worrying about. Search was only 6% of our traffic, and we were growing at 10% a month. It wasn't worth doing better.

I didn't say "But search traffic is worth more than other traffic!" I said "Oh, ok." Because I didn't realize either how much search traffic was worth. I'm not sure even Larry and Sergey did then. If they had, Google presumably wouldn't have expended any effort on enterprise search.

If circumstances had been different, the people running Yahoo might have realized sooner how important search was. But they had the most opaque obstacle in the world between them and the truth: money. As long as customers were writing big checks for banner ads, it was hard to take search seriously. Google didn't have that to distract them.


But Yahoo also had another problem that made it hard to change directions. They'd been thrown off balance from the start by their ambivalence about being a technology company.

One of the weirdest things about Yahoo when I went to work there was the way they insisted on calling themselves a "media company." If you walked around their offices, it seemed like a software company. The cubicles were full of programmers writing code, product managers thinking about feature lists and ship dates, support people (yes, there were actually support people) telling users to restart their browsers, and so on, just like a software company. So why did they call themselves a media company?

One reason was the way they made money: by selling ads. In 1995 it was hard to imagine a technology company making money that way. Technology companies made money by selling their software to users. Media companies sold ads. So they must be a media company.

Another big factor was the fear of Microsoft. If anyone at Yahoo considered the idea that they should be a technology company, the next thought would have been that Microsoft would crush them.

It's hard for anyone much younger than me to understand the fear Microsoft still inspired in 1995. Imagine a company with several times the power Google has now, but way meaner. It was perfectly reasonable to be afraid of them. Yahoo watched them crush the first hot Internet company, Netscape. It was reasonable to worry that if they tried to be the next Netscape, they'd suffer the same fate. How were they to know that Netscape would turn out to be Microsoft's last victim?

It would have been a clever move to pretend to be a media company to throw Microsoft off their scent. But unfortunately Yahoo actually tried to be one, sort of. Project managers at Yahoo were called "producers," for example, and the different parts of the company were called "properties." But what Yahoo really needed to be was a technology company, and by trying to be something else, they ended up being something that was neither here nor there. That's why Yahoo as a company has never had a sharply defined identity.

The worst consequence of trying to be a media company was that they didn't take programming seriously enough. Microsoft (back in the day), Google, and Facebook have all had hacker-centric cultures. But Yahoo treated programming as a commodity. At Yahoo, user-facing software was controlled by product managers and designers. The job of programmers was just to take the work of the product managers and designers the final step, by translating it into code.

One obvious result of this practice was that when Yahoo built things, they often weren't very good. But that wasn't the worst problem. The worst problem was that they hired bad programmers.

Microsoft (back in the day), Google, and Facebook have all been obsessed with hiring the best programmers. Yahoo wasn't. They preferred good programmers to bad ones, but they didn't have the kind of single-minded, almost obnoxiously elitist focus on hiring the smartest people that the big winners have had. And when you consider how much competition there was for programmers when they were hiring, during the Bubble, it's not surprising that the quality of their programmers was uneven.

In technology, once you have bad programmers, you're doomed. I can't think of an instance where a company has sunk into technical mediocrity and recovered. Good programmers want to work with other good programmers. So once the quality of programmers at your company starts to drop, you enter a death spiral from which there is no recovery. [2]

At Yahoo this death spiral started early. If there was ever a time when Yahoo was a Google-style talent magnet, it was over by the time I got there in 1998.

The company felt prematurely old. Most technology companies eventually get taken over by suits and middle managers. At Yahoo it felt as if they'd deliberately accelerated this process. They didn't want to be a bunch of hackers. They wanted to be suits. A media company should be run by suits.

The first time I visited Google, they had about 500 people, the same number Yahoo had when I went to work there. But boy did things seem different. It was still very much a hacker-centric culture. I remember talking to some programmers in the cafeteria about the problem of gaming search results (now known as SEO), and they asked "what should we do?" Programmers at Yahoo wouldn't have asked that. Theirs was not to reason why; theirs was to build what product managers spec'd. I remember coming away from Google thinking "Wow, it's still a startup."

There's not much we can learn from Yahoo's first fatal flaw. It's probably too much to hope any company could avoid being damaged by depending on a bogus source of revenue. But startups can learn an important lesson from the second one. In the software business, you can't afford not to have a hacker-centric culture.

Probably the most impressive commitment I've heard to having a hacker-centric culture came from Mark Zuckerberg, when he spoke at Startup School in 2007. He said that in the early days Facebook made a point of hiring programmers even for jobs that would not ordinarily consist of programming, like HR and marketing.

So which companies need to have a hacker-centric culture? Which companies are "in the software business" in this respect? As Yahoo discovered, the area covered by this rule is bigger than most people realize. The answer is: any company that needs to have good software.

Why would great programmers want to work for a company that didn't have a hacker-centric culture, as long as there were others that did? I can imagine two reasons: if they were paid a huge amount, or if the domain was interesting and none of the companies in it were hacker-centric. Otherwise you can't attract good programmers to work in a suit-centric culture. And without good programmers you won't get good software, no matter how many people you put on a task, or how many procedures you establish to ensure "quality."

Hacker culture often seems kind of irresponsible. That's why people proposing to destroy it use phrases like "adult supervision." That was the phrase they used at Yahoo. But there are worse things than seeming irresponsible. Losing, for example.


[1] The closest we got to targeting when I was there was when we created pets.yahoo.com in order to provoke a bidding war between 3 pet supply startups for the spot as top sponsor.

[2] In theory you could beat the death spiral by buying good programmers instead of hiring them. You can get programmers who would never have come to you as employees by buying their startups. But so far the only companies smart enough to do this are companies smart enough not to need to.
Yet again England have scored a brilliant result in the World Cup (not). I wonder what causes world class players to suddenly lose all the excellence they have in their club games and turn them into a bunch of opportunity missing jessies!

It looked like the star play Rooney was home sick and missing his baby, and the rest of them clearly couldn't support the rest of the team. I may not be the expert, but if a formation aint working then the simple solution would be to change it wouldn't it?

Still onwards and upwards to the next game - England V Slovenia let it be 5 - 0 - I'd like to win one of my free bets on Opinion World!

The vuvuzela's are quiet

Oh deary me. South Africa's national pride Bafana Bafana got clobbered with a three-nil score last night by Uruguay. What a shame. South Africans are heart-broken. Many fans honestly believed that Bafana would do well in the World Cup matches, and even (dare one say it) have a chance to win the World Cup.


Bafana Bafana are, what, (Eighty-fourth? Eight-seventh?) on the world ranking list? And these people honestly think that they'll now become world champions? If South Africa hadn't been hosting the game, Bafana wouldn't even have qualified for playing at all. I mean, really, guys.

But at least the vuvuzela's are a lot quieter now...

To add insult to injury, a power cut following the disastrous match stranded some 2000 mourning fans who were on their way home. Having responded to the general call to use public transportas much as possible, fans were stranded in a crippled commuter train (without heating at several degrees below freezing) for two to three hours, with the last fans only arriving at 03:30. Train operator Metrorail finally had to resort to steam locomotives to get the fans to their stations.

I shit you not. Steam.
Soccer is not a game anymore - and it hasn't been for a very long time. Non-profit organization FIFA alone raked in 3.2 billion dollar during the Soccer Worldcup 2010 cycle (2007 - 2010) and has budgeted for an income of 3.8 billion dollar for the upcoming cycle. With that kind of money it is only a matter of time before criminals step in and try to take their share - which they have, in plenty.

For starters there is of course FIFA itself, with its doubtful methods of protecting its income. For example, sponsor Budweiser is the only beer allowed at soccer worldcup venues. So when a group of Dutch women tried to attend the games dressed in the orange mini skirts bearing the brand name of small Dutch brewer Bavaira, they were summarily arrested and jailed through a law that had been drawn up for the occasion in response to demands from FIFA. Seeing as about 30% of FIFA's income is derived from sponsorships, FIFA will stop at nothing in order to protect its sponsorship deals. Which is easy, because when politicans smell money and glory (both of which come with hosting a soccer world cup event) they are happy to bend over if that will help them to join the fun.

Another important player is the so-called "betting mafia" which has prompted FIFA to establish an early warning system that monitors around 400 major bookmakers world-wide for signs of match fixing. And then there are the small traders who try to sell merchandise that hasn't been bought from FIFA wholesalers at ridiculous prices, which FIFA also counts among the criminals.

But that is by no means the worst - at least not in terms of human suffering. Much more misery can be found in West Afrika, something that has increased during recent years thanks, in no small part thanks to the soccer world cup games being hosted in Africa. Countries like Nigeria, Ivory Coast and Ghana, to name a few, appear to offer an excellent soccer climate: they have provided the world with numerous brilliant (and promising) players. African soccer prodigies are a popular import product with European clubs. Soccer players are merchandise - merchandise with considerable value. For the merchandise this trade doesn't always end well. But even more serious is that in West Africa, where there is trade, crime is never far away.

In the slums of West Africa you will find no jobs, no food, and no plumbing. What you will find is thousands of young men who, for lack of a better occupation, spend their days practicing with a football, and drreaming of being discovered by one of the prestigious Europan clubs. Deep down inside they know that it takes more than some agility and ball handling skills to become a big soccer star, but in the face of the misery that is their daily lives they are more than happy to ignore that reality. As if to to attend that shortcoming, there are countless "soccer academies" around who promise to train up these aspiring young football talents into full-fledged players. At a price, of course... but often families are willing to give up everything, spend whatever savings they may have and sell what little they own, in order to give one of their children a chance for fame and glory, a decent future, and an income that would feed them all and then some. But the sad reality is that the "football academy" always turns out to be a miserable slum that the aspiring hopeful young soccer talents will never leave. Technically one may not call it slavery as such, since the victims are not property in a formal sense, but de facto it is, and at the very least this is to be classified as human trafficking, - although "inhuman" would be a better term. Criminal fraudsters usually pretend to be talent scouts representing the best European football clubs (especially British clubs seem to be popular) and promist a golden future in European soccer - as long as the "expenses" get paid up front. But instead of a golden future the victims end up in apalling conditions where most of them are stuck for life.

An interesting documentary on the subject is "Soccer's lost boys" (of which, unfortunately, I can only find a trailer on the 'web (suggestions, anyone?) and Aljazeera is currently running an episode of their series "People and power" on it, which can be viewed online (at least at this time of writing) and which I heartily recommend.

Update: A full version of "Soccer's lost boys" can be seen here.

The downside of the Soccer World Cup games

Currently nothing happens on this planet - except for the Soccer World Cup games in South Africa. At least, if we are to believe the South African press. So it's time for another Soccer World Cup update! The party is in full swing, vuvuzela's won't be banned and everyone is happy. Right?


The first cracks are beginning to appear in South Africa's official image of soccer success. Security staff in at least four stadiums are  on strike and demand higher wages. In accordance with tradition in South Africa, such a strike comes with considerable mayhem; blocking roads and emptying rubbish bins into the streets is part of the fun. In Durban a few platoons of riot police joined in, with tear gas and rubber bullets, which contributed to the festivities no end. Security in the stadiums has now hastily been taken over by the local constabulary. Security staff has been sent home, but on their way there they found the time to pause and set fire to their employers' offices.. Today more protests followed as 3000 people marched in Durban to protest the Soccer World Cup spending, and its negative impact on their livelihoods. One protester has been killed.

National electricity supplier Eskom is gearing up for a strike as well. Trade unions believe that this is a good time to demand an 18% wage increase and if they don't see money soon the lights in South Africa may very well go off. And heaters, too, while this winter in South Africa is unusually chilly.

The bus strike has been resolved, but not before whole bus loads of soccer fans on their way to a match were dumped by the side of the road rather than delivered at the stadiums. Transport is a problem anyway. Although FIFA has released huge quantities of "category 4" tickets (at prices starting at R20, which is about 2 Euro's) in order to fill up the stadiums at any cost, there are still huge empty spaces during many matches. FiFA blames distribution problems and wholesalers who have made off with large numbers of (unsold) tickets, which in part is true, but everyone knows that large numbers of fans were not delivered to the stadiums until well after the matches.

South Africa is also waking up to the fact that the Soccer World Cup won't net South Africa one cent. The heaps of gold that wre promised turn out not to exist (now there's a shocker!) and most of the revenues are going straight to FIFA in any case. Of ourse FIFA (a non-profit organisation) did demand free hotels, hospital reservations and a tax exemption. Meanwhile accounting company  Grant Thornton has calculated, on the back of a napkin, what we all have known for a long time: of the $5.5 billion that were spent on new stadiums, we won't see more then about $1.7 billion returned. Meanwhile nobody has any idea what these expensive stadiums will be used for after the games are over, and the Institute for Security Studies points out that even the money spent on the Cape Town stadium alone could have housed about a quarter million people who currently live in corrugated iron shacks. Incidentally, the Cape Town stadium was built when FIFA decided that a renovation of the existing stadium was not good enough.

Meanwhile 36 Dutch fans have been arrested and detained for wearing dresses sporting the Bavaria beer logo, and told that they faced a possible 6 months imprisonment. Today two more arrests were made in Roodepoort. "These women, who have been part of a larger group, are suspected to be involved in organised acts to conduct unlawful commercial activities," police spokesman Col. Vishnu Naidoo said in a statement. The two women have been released for now, but (as is usually the case with serious criminals like these) they had to pay R10,000 bail each, and surrender their passports. They may not leave South Africa until their case is brought to court.

Now the scary part is that any transgression of FIFA marketing rules has been made into a criminal offence in response to FIFA's demand that the South African government do so. Yes, Sepp Blatter rules the nation - in a very literal sense.

What VCs look for in founders

1. Determination

This has turned out to be the most important quality in startup founders. We thought when we started Y Combinator that the most important quality would be intelligence. That's the myth in the Valley. And certainly you don't want founders to be stupid. But as long as you're over a certain threshold of intelligence, what matters most is determination. You're going to hit a lot of obstacles. You can't be the sort of person who gets demoralized easily.

Bill Clerico and Rich Aberman of WePay are a good example. They're doing a finance startup, which means endless negotiations with big, bureaucratic companies. When you're starting a startup that depends on deals with big companies to exist, it often feels like they're trying to ignore you out of existence. But when Bill Clerico starts calling you, you may as well do what he asks, because he is not going away.

2. Flexibility

You do not however want the sort of determination implied by phrases like "don't give up on your dreams." The world of startups is so unpredictable that you need to be able to modify your dreams on the fly. The best metaphor I've found for the combination of determination and flexibility you need is a running back. He's determined to get downfield, but at any given moment he may need to go sideways or even backwards to get there.

The current record holder for flexibility may be Daniel Gross of Greplin. He applied to YC with some bad ecommerce idea. We told him we'd fund him if he did something else. He thought for a second, and said ok. He then went through two more ideas before settling on Greplin. He'd only been working on it for a couple days when he presented to investors at Demo Day, but he got a lot of interest. He always seems to land on his feet.

3. Imagination

Intelligence does matter a lot of course. It seems like the type that matters most is imagination. It's not so important to be able to solve predefined problems quickly as to be able to come up with surprising new ideas. In the startup world, most good ideas seem bad initially. If they were obviously good, someone would already be doing them. So you need the kind of intelligence that produces ideas with just the right level of craziness.

Airbnb is that kind of idea. In fact, when we funded Airbnb, we thought it was too crazy. We couldn't believe large numbers of people would want to stay in other people's places. We funded them because we liked the founders so much. As soon as we heard they'd been supporting themselves by selling Obama and McCain branded breakfast cereal, they were in. And it turned out the idea was on the right side of crazy after all.

4. Naughtiness

Though the most successful founders are usually good people, they tend to have a piratical gleam in their eye. They're not Goody Two-Shoes type good. Morally, they care about getting the big questions right, but not about observing proprieties. That's why I'd use the word naughty rather than evil. They delight in breaking rules, but not rules that matter. This quality may be redundant though; it may be implied by imagination.

Sam Altman of Loopt is one of the most successful alumni, so we asked him what question we could put on the Y Combinator application that would help us discover more people like him. He said to ask about a time when they'd hacked something to their advantage—hacked in the sense of beating the system, not breaking into computers. It has become one of the questions we pay most attention to when judging applications.

5. Friendship

Empirically it seems to be hard to start a startup with just one founder. Most of the big successes have two or three. And the relationship between the founders has to be strong. They must genuinely like one another, and work well together. Startups do to the relationship between the founders what a dog does to a sock: if it can be pulled apart, it will be.

Emmett Shear and Justin Kan of Justin.tv are a good example of close friends who work well together. They've known each other since second grade. They can practically read one another's minds. I'm sure they argue, like all founders, but I have never once sensed any unresolved tension between them.


I have a feeling that I'm stuck in a forever depressed state. You know, that feeling of being left behind? It is stronger than ever now. Every damn body I know is busy with college. I feel angry when I hear them complaining. I really do. Just fucking exchange the places and see! The pressure is sucking the life out of me.

I need something so strong and powerful that would occupy my mind and I won't have time to even think. June, July, August, September. Four down, seven more. WTF? So much time! :'(

Where to see Silicon Valley

Silicon Valley proper is mostly suburban sprawl. At first glance it doesn't seem there's anything to see. It's not the sort of place that has conspicuous monuments. But if you look, there are subtle signs you're in a place that's different from other places.

1. Stanford University

Stanford is a strange place. Structurally it is to an ordinary university what suburbia is to a city. It's enormously spread out, and feels surprisingly empty much of the time. But notice the weather. It's probably perfect. And notice the beautiful mountains to the west. And though you can't see it, cosmopolitan San Francisco is 40 minutes to the north. That combination is much of the reason Silicon Valley grew up around this university and not some other one.

2. University Ave

A surprising amount of the work of the Valley is done in the cafes on or just off University Ave in Palo Alto. If you visit on a weekday between 10 and 5, you'll often see founders pitching investors. In case you can't tell, the founders are the ones leaning forward eagerly, and the investors are the ones sitting back with slightly pained expressions.

3. The Lucky Office

The office at 165 University Ave was Google's first. Then it was Paypal's. (Now it's Wepay's.) The interesting thing about it is the location. It's a smart move to put a startup in a place with restaurants and people walking around instead of in an office park, because then the people who work there want to stay there, instead of fleeing as soon as conventional working hours end. They go out for dinner together, talk about ideas, and then come back and implement them.

It's important to realize that Google's current location in an office park is not where they started; it's just where they were forced to move when they needed more space. Facebook was till recently across the street, till they too had to move because they needed more space.

4. Old Palo Alto

Palo Alto was not originally a suburb. For the first 100 years or so of its existence, it was a college town out in the countryside. Then in the mid 1950s it was engulfed in a wave of suburbia that raced down the peninsula. But Palo Alto north of Oregon expressway still feels noticeably different from the area around it. It's one of the nicest places in the Valley. The buildings are old (though increasingly they are being torn down and replaced with generic McMansions) and the trees are tall. But houses are very expensive—around $1000 per square foot. This is post-exit Silicon Valley.

5. Sand Hill Road

It's interesting to see the VCs' offices on the north side of Sand Hill Road precisely because they're so boringly uniform. The buildings are all more or less the same, their exteriors express very little, and they are arranged in a confusing maze. (I've been visiting them for years and I still occasionally get lost.) It's not a coincidence. These buildings are a pretty accurate reflection of the VC business.

If you go on a weekday you may see groups of founders there to meet VCs. But mostly you won't see anyone; bustling is the last word you'd use to describe the atmos. Visiting Sand Hill Road reminds you that the opposite of "down and dirty" would be "up and clean."

6. Castro Street

It's a tossup whether Castro Street or University Ave should be considered the heart of the Valley now. University Ave would have been 10 years ago. But Palo Alto is getting expensive. Increasingly startups are located in Mountain View, and Palo Alto is a place they come to meet investors. Palo Alto has a lot of different cafes, but there is one that clearly dominates in Mountain View: Red Rock.

7. Google

Google spread out from its first building in Mountain View to a lot of the surrounding ones. But because the buildings were built at different times by different people, the place doesn't have the sterile, walled-off feel that a typical large company's headquarters have. It definitely has a flavor of its own though. You sense there is something afoot. The general atmos is vaguely utopian; there are lots of Priuses, and people who look like they drive them.

You can't get into Google unless you know someone there. It's very much worth seeing inside if you can, though. Ditto for Facebook, at the end of California Ave in Palo Alto, though there is nothing to see outside.

8. Skyline Drive

Skyline Drive runs along the crest of the Santa Cruz mountains. On one side is the Valley, and on the other is the sea—which because it's cold and foggy and has few harbors, plays surprisingly little role in the lives of people in the Valley, considering how close it is. Along some parts of Skyline the dominant trees are huge redwoods, and in others they're live oaks. Redwoods mean those are the parts where the fog off the coast comes in at night; redwoods condense rain out of fog. The MROSD manages a collection of great walking trails off Skyline.

9. 280

Silicon Valley has two highways running the length of it: 101, which is pretty ugly, and 280, which is one of the more beautiful highways in the world. I always take 280 when I have a choice. Notice the long narrow lake to the west? That's the San Andreas Fault. It runs along the base of the hills, then heads uphill through Portola Valley. One of the MROSD trails runs right along the fault. A string of rich neighborhoods runs along the foothills to the west of 280: Woodside, Portola Valley, Los Altos Hills, Saratoga, Los Gatos.

SLAC goes right under 280 a little bit south of Sand Hill Road. And a couple miles south of that is the Valley's equivalent of the "Welcome to Las Vegas" sign: The Dish.


I skipped the Computer History Museum because this is a list of where to see the Valley itself, not where to see artifacts from it. I also skipped San Jose. San Jose calls itself the capital of Silicon Valley, but when people in the Valley use the phrase "the city," they mean San Francisco. San Jose is a dotted line on a map.

Thanks to Sam Altman, Paul Buchheit, Patrick Collison, and Jessica Livingston for reading drafts of this.

Internet woes

I have been without a working Internet feed since late Friday afternoon, and I will most likely be without it until sometime next Thursday. (I'm posting this via carrier pigeon.)
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