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Black Swan Farming

paulgraham.com

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Re: Black Swan Farming

#201

Post by ten_fingers »

salemh wrote: post #186
ten_fingers wrote: post #165

Earlier quoted context omitted.

You talked yourself into nonsense. On waste in DoD, sure, but not the parts I was talking about. Some of the big waste was, say, getting AC working in Iraq and now getting Diesel fuel and jet fuel to Akrapistan. And the cost of the black oil to send a destroyer across the Pacific would really set one back. > Also you appear not to have any idea how much waste exists in Pentagon contracting. Nonsense. All my early car…

But there are also some ways to make money, and I gave some rock solid ideas for how, based on research. There has been nothing concrete out of your posts in improving evaluation of ideas / founders / research.

"Nothing concrete"? SURE there is. Just read what I wrote.

I said to pick an important, unsolved problem and then to do some research to find a powerful solution.

For what is 'research', get a Ph.D. from a good research university. For how to do research that yields a solution powerful for an important problem, get a job in a lab, e.g., a DoD lab, that does such work. For how to take a powerful solution to an important problem and make money with it, be an entrepreneur -- that is, write some corresponding software and start a business.

If you will lower your ego and read, you might learn something, e.g., a solution to what PG, VCs, SV, and LPs are struggling with, i.e., how to get "big wins" and how to know early on that a project has high promise of a big win.

A war story: The SSBNs were well on the way to sea, and the question of navigation was noticed. An SSBN didn't want to have to surface for navigation. So, there was inertial navigation, but something more accurate was desired. So some physics guys worked out navigation satellites. Their derivations and proposal were short. The Navy evaluated their proposal, approved it, and the project was 100% wildly successful. The lab where the work was done navigated its position to within 1 foot. The GPS system was later, by the Air Force, and better, but the original Navy system was quite good. At one point, the Navy system, to have a better means of measuring the gravitational field of the earth, wanted a satellite with no drag. Some research found one. I will leave for you just how to do that!

Re: Black Swan Farming

#202

Post by adrianhoward »

bambax wrote: post #195
paul wrote: post #12

The counter-intuitive nature of startup investing is a big part of what makes it so interesting to me. In most aspects of life, we are trained to avoid risk and only pursue "good ideas" (e.g. try to be a lawyer, not a rock star). With startups, I get to focus on things that are probably bad ideas, but possibly great ideas. It's not for everyone, but for those of us who love chasing dreams, it can be a great adventure…

Is it really that counter-intuitive, though? A sample of two "rock stars" doesn't seem to be enough to draw conclusions from it. For instance, whereas Airbnb can admittedly be seen as a questionable idea (but not outright bad), Dropbox (the idea, before implementation) sounds like a very good idea. Maybe not a $7b idea, but still very good. Of course, among the YC funded startups, there may be a lot of ideas that sou…

Dropbox (the idea, before implementation) sounds like a very good idea. Maybe not a $7b idea, but still very good

I don't think so. My first encounter with DropBox was very similar to my first encounter with Google... but it was "Oh look - another way to share files" rather than "Oh look - another search engine".

Or indeed many, many people's reaction to the release of the first iPod ("Oh look - another mp3 player").

Predicting their current level of success from the point of initial investment - pretty close to impossible without the benefit of 20/20 hindsight. Their success depending so much on how well they executed and the smart changes of direction that those companies made along the way.

(with, maybe, the exception of the iPod which was a bit more obvious for those that paid attention to iTunes)

E.g. Would DropBox be anywhere close to their current position if they hadn't figured out their freemium / recommendation based model for customer acquisition?

Re: Black Swan Farming

#203

Post by lsc »

patio11 wrote: post #149
lsc wrote: post #147

Earlier quoted context omitted.

hm. do you know where I can read more about them? or is this stuff you know personally? They did seem to grow... very quickly. My impression was that they grew much faster than linode or I. Of course, I have no numbers to back that up either way.

It's public knowledge which I picked up in being an early customer and fan of the company. I think much of the story is summarized here: http://37signals.com/founderstories/slicehost

man, 0-20,000 users in less than 3 years? damn. I've been at it for what, seven now? eight? and I've achieved 1/10th that. Even if we only count from the time when I kinda figured out the hardware end of things, 2007 or so, that's still five years.

Re: Black Swan Farming

#204

Post by ten_fingers »

YuriNiyazov wrote: post #200
ten_fingers wrote: post #190

Earlier quoted context omitted.

You responded to my post about the law of large numbers and utility functions? That is actually a good and appropriate observation. Of course, some mods came along and down voted it. I doubt that they understand either the law of large number or utility functions. Of course, the law of large numbers is a crown jewel of 20th century probability theory, and utility functions are one of the better contributions of von N…

I responded to your post about large numbers and utility functions only because it was your most recent one. I would've sent you a private message had the site supported PM functionality or if you had some e-mail address in your profile. The point that I am making is about your general behavior in this thread. You have broken multiple guidelines: 'Be civil. Don't say things you wouldn't say in a face to face conversa…

I was attacked strongly for no good reason. Basically this UID was ruined because I am now an enemy of the HN mods. In the future, they wouldn't let me comment in positive terms about apple pie.

The main reason for the attack was clear: I was commenting on how venture capital could do better, and that is a sensitive subject on HN. Further, the VC community is wildly arrogant and just insists on pretending to be the smartest guys in the room. So, no way do they want public comments on their work, comments that presume to tell them better ways to do their work. And, since the venture partners are rarely significantly technical, they are insecure and defensive about their qualifications and, thus, especially fear and resent a technical Ph.D. commenting on their work. Especially the VCs don't want comments that go around them to their LPs, who now are unhappy with VC returns. So, in the end the issue is VC and HN ego.

The HN mods are hot on slapping down any commenter who fails to bow deeply enough before the VCs. So, they slapped me down. In the end, that is the shame of HN and its mods and a display of their absurd ego. I did nothing wrong but defend myself.

The world is what it is. It's too bad that HN is run by some nasty people. But, so be it. Users can read this thread and draw their own conclusions, at least while my posts are still available and not yet 'hell banned'.

I've got nothing to lose here. But HN and PG have lost, and by attacking me for no good reason they deserve to lose.

Re: Black Swan Farming

#205

Post by rmc »

dirtyaura wrote: post #177
patio11 wrote: post #112

Earlier quoted context omitted.

it's really rare to find a lifestyle technology business. The traditional challenge you'd level here is "Name three" (37signals, Fog Creek, Balsamiq) but, due to the type of people I hang out with, I could get to fifty before having to slow down and start checking my Gmail. A friend of mine who is in the selling shovels business estimated that there are 30,000 firms selling SaaS. (That number struck me as crazy until…

Are those fifty making 1 million dollars a year (per founder) from products? I mean it's obvious that you can make a good living in tech by consulting, but I'm curious how many "lifestyle" product companies are out there that make profit in millions.

I don't think profit per year per founder is a good definition of "lifestyle business", a better definition would be "can you make money while you're sleeping/on holiday?". If you're a consultant, then you don't make money while on holiday. I don't even think you need €1,000,000 per annum to count as success, I'd set the bar at €100,000. I'd be quite happy to make that amount per year in my sleep.

Re: Black Swan Farming

#206

Post by Andrex »

lsc wrote: post #142

The thing of it is that a bubble is not the right time to start a lifestyle/sustainable business. During a bubble there is all sorts of investor money floating around driving up prices on things you might want to buy as a sustainable company, and as a sustainable company, you can't compete with investor money for inputs. So yeah; right now? PG is absolutely doing the right thing. But if I'm right, after the crash? as…

If you are trying to start a traditional sustainable company, in many ways, it's easier to do during a downturn.

This was basically the message of PG's recent leaked "bad times" email:

"The startups that really get hosed are going to be the ones that have easy money built into the structure of their company: the ones that raise a lot on easy terms, and are then led thereby to spend a lot, and to pay little attention to profitability. That kind of startup gets destroyed when markets tighten up. So don't be that startup." [1]

What I take away from all this is: have a revenue model built into your startup from the start. Use it. Generate profits of some kind. Not only will this help when you need investors (since they like businesses that can stand alone), but it will help you even more if they don't come.

[1] http://www.businessinsider.com/facebook-fallout-y-combinator...

Re: Black Swan Farming

#207

Post by Estragon »

bambax wrote: post #195
paul wrote: post #12

The counter-intuitive nature of startup investing is a big part of what makes it so interesting to me. In most aspects of life, we are trained to avoid risk and only pursue "good ideas" (e.g. try to be a lawyer, not a rock star). With startups, I get to focus on things that are probably bad ideas, but possibly great ideas. It's not for everyone, but for those of us who love chasing dreams, it can be a great adventure…

Is it really that counter-intuitive, though? A sample of two "rock stars" doesn't seem to be enough to draw conclusions from it. For instance, whereas Airbnb can admittedly be seen as a questionable idea (but not outright bad), Dropbox (the idea, before implementation) sounds like a very good idea. Maybe not a $7b idea, but still very good. Of course, among the YC funded startups, there may be a lot of ideas that sou…

Frankly, I still don't understand why everyone's so excited about dropbox.

Re: Black Swan Farming

#208

Post by pitchups »

Great insights and lots of lessons for both investors and entrepreneurs. Especially the one about the best ideas looking like bad ideas initially. This should give pause to all aspiring entrepreneurs, and keep them moving towards their vision if they are convinced, even if everyone else thinks their idea will never work. In fact one could almost say that it is a necessary but not a sufficient condition for an idea to be the next big thing is for it to be considered bad or crazy initially by most people. Reminds me of Neils Bohr famous quote (paraprhasing) : "Yes your theory is crazy, but is it crazy enough to be correct!" It also reminds one of how some of our most successful books in publishing history have been rejected dozens of times by publishers - Harry Potter by JK Rowling, Carrie by Stephen King, Dr. Seuss' books, plus many others.

Re: Black Swan Farming

#209

Post by YuriNiyazov »

ten_fingers wrote: post #204
YuriNiyazov wrote: post #200

Earlier quoted context omitted.

I responded to your post about large numbers and utility functions only because it was your most recent one. I would've sent you a private message had the site supported PM functionality or if you had some e-mail address in your profile. The point that I am making is about your general behavior in this thread. You have broken multiple guidelines: 'Be civil. Don't say things you wouldn't say in a face to face conversa…

I was attacked strongly for no good reason. Basically this UID was ruined because I am now an enemy of the HN mods. In the future, they wouldn't let me comment in positive terms about apple pie. The main reason for the attack was clear: I was commenting on how venture capital could do better, and that is a sensitive subject on HN. Further, the VC community is wildly arrogant and just insists on pretending to be the s…

0) It's very nice to see you change your position. First, "you did nothing wrong". Then, after I pointed out that you did, indeed, do something wrong, turns out you did it because "you were attacked strongly". This is a common behavior in elementary school, and not an acceptable mode of conduct in adult age, especially from a technical Ph.D.

1) There are plenty of people on HN who don't bow down before VCs. See patio11, mechanical_fish, tptacek etc. They are not voted down into oblivion, so it is likely that the reason why you are being downvoted has nothing to do with your particular opinion of VCs.

2) I looked through your comment history on the site. You tend to write long, rambling, stream-of-consciousness walls of text - this is true not just of this thread, but of many others over the last two months. Different commenters have pointed out that they do not enjoy reading your posts precisely because of that reason. Frankly, I don't either. So, I'm pretty sure that's why you were, as you say, "strongly attacked". It is perfectly acceptable to downvote comments for presentation rather than substance, and that happens on HN quite often. If you think that the substance of your comments is so important that presentation doesn't matter, you and HN are both better off if you leave.

Re: Black Swan Farming

#210

Post by lsc »

Andrex wrote: post #206
lsc wrote: post #142

The thing of it is that a bubble is not the right time to start a lifestyle/sustainable business. During a bubble there is all sorts of investor money floating around driving up prices on things you might want to buy as a sustainable company, and as a sustainable company, you can't compete with investor money for inputs. So yeah; right now? PG is absolutely doing the right thing. But if I'm right, after the crash? as…

If you are trying to start a traditional sustainable company, in many ways, it's easier to do during a downturn. This was basically the message of PG's recent leaked "bad times" email: "The startups that really get hosed are going to be the ones that have easy money built into the structure of their company: the ones that raise a lot on easy terms, and are then led thereby to spend a lot, and to pay little attention…

Interesting. That's completely the opposite of what I was taking away from PG's essay; My takeaway from the essay was that investors want you to swing for the fences; in my mind, that means not worrying about profitability early on.

I mean, twitter didn't introduce advertising at all until they were absolutely huge. I had the impression that facebook was similar (though I could be off; I'm not a regular user of facebook) - I mean, in a very real sense, it's easier to grow if you don't monetize (assuming you can still keep the lights on.)

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