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Black Swan Farming

paulgraham.com

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Re: Black Swan Farming

#281

Post by pg »

brlewis wrote: post #259
pg wrote: post #59

Earlier quoted context omitted.

It's pretty grim. I think that's one of the reasons I write fewer essays now. After I wrote this one, I had to go back and armor it by pre-empting anything I could imagine anyone willfully misunderstanding to use as a weapon in comment threads. The whole of footnote 1 is such armor for example. I essentially anticipated all the "No, what I said was" type comments I'd have had to make on HN and just included them in t…

When I saw this comment (before reading the essay) I was ready to decry this armoring. But now, having read the essay, I think it's a good thing. This essay flows nicely and is clear. Footnote 1 is a good clarification, especially if someone hadn't read your other essays. I think at least half of the misunderstandings that arise in HN comment threads are honest misunderstandings.

That seems a reasonable estimate, but it means up to half are dishonest misunderstandings, which is quite a lot if you think about it.

Re: Black Swan Farming

#283

Post by jonny_eh »

gadders wrote: post #255
majormajor wrote: post #109

Earlier quoted context omitted.

You mentioning rock stars make me wonder if being a scout for a record label is similar. A band that's going to define a new genre or movement will sound nothing like anything currently popular, so it seems you have to identify the things that sound nothing like what's popular but that sound like what will be popular. The returns aren't as dominated by just a few big successes, though. Although I suppose one-hit wond…

Back in the deep, dark days of the internet, when Napster was new, I believe this was one of the arguments that Def Leppard used against file-sharing. Namely, that record companies are like VC funds, and the massive cash they make from Def Leppard (or Lady Gaga or whoever) pays for the 1000's of other acts that they fund and then fail.

But with self-publishing mechanisms we no longer need the record labels to risk all that money to produce bands that will likely fail. Now people can just put stuff on youtube, most will fail, but some like Justin Bieber, and Skrillex will get noticed.

Re: Black Swan Farming

#284

Post by [deleted] »

yen223 wrote: post #253
its_so_on wrote: post #252

I wrote the following email to PG some time ago, which I hope have helped inform the present essay. ---------------------------------------------------- 1. You know, I came across: " I think they're not so much dense as bitter. There's a subset of HN readers who regard startups as a whole as a sort of con game, and are angry that the participants get so much attention. There may not be that many of them, but their an…

Wait I don't understand, are we assuming that the lottery ticket has a 100% chance of being worth $20 billion? Are we ignoring the fact that there's a sizeable chance that it is worth $0?

[deleted]

Re: Black Swan Farming

#285

Post by Jun8 »

patio11 wrote: post #122

This is a very interesting essay, if for no other reason that when smart people observe that other smart people have mental blocks against believing the truth of measurable features of material reality, that suggests a market inefficiency. Persistent market inefficiencies should always ping your radar a little bit, because exploiting them makes you rich.

"Persistent market inefficiencies should always ping your radar a little bit, because exploiting them makes you rich."

If I had to teach middle and high-school kids just one thing about entrepreneurship, this would be it!

Re: Black Swan Farming

#286

Post by RickHull »

cperciva wrote: post #247
thaumaturgy wrote: post #226

Earlier quoted context omitted.

For you it is, for others it is not. You would be disappointed, others would be contented. (I'm not picking on you btw, I have a tremendous amount of respect for you. But I don't think your desire for debate on what you write is suitable justification for other people putting up with the same, especially when it's discouraging them from writing.)

I claim no privileged position for my preferences. I was just stating what they were. :-)

You should have preempted this thread with more armor.

Re: Black Swan Farming

#287

Post by derefr »

ryanbrunner wrote: post #248
bambax wrote: post #243

Earlier quoted context omitted.

We obviously agree on everything... except the "Dropbox promise". I don't think Dropbox had any competitor when it was founded and I'm not sure it has any now. Dropbox is not another file sharing software; the application form to YC doesn't even mention file sharing: http://dl.dropbox.com/u/27532820/app.html Dropbox isn't even about cloud storage. Dropbox synchronizes your files between your different computers -- si…

I'm sure there were companies that were doing the same thing as Dropbox at the time that Dropbox was released. To name one example - Microsoft's SkyDrive (apparently called Windows Live Folders at the time), released either around the same time or prior to DropBox, depending on your definition. It's been a while since I've used it, but I remember the functionality being roughly equivalent between the two products (in…

> but certainly not iCloud or any other "solution" that is restricted to one OS or company,

This part is important. The Microsoft service only synced to your other Microsoft things. iCloud only syncs to your Apple things. Dropbox syncs everywhere.

Re: Black Swan Farming

#288

Post by danenania »

jnw2 wrote: post #156
neilk wrote: post #80

Just curious, YC people - let's say that an eccentric billionaire asked you to "invest" in things that would have the greatest impact on the world, even if they weren't profit-generating enterprises. Would you have invested in Wikipedia? Tim Berners-Lee's WorldWideWeb project? WikiLeaks? Linux? I guess I'm interested because it's not clear to me that any of the founders of these things radiate "winner" in the same wa…

Improving medical technology with a goal of curing currently-uncurable diseases, making health care cheap enough to make Medicare sustainable (perhaps specifically by looking for ways to eliminate 90% of the costs associated with the half dozen or so families of diseases that Medicare finds most expensive), and improve quality of life with better treatments. Better transportation infrastructure, especially high speed…

What we need to stop doing is strictly equating profit with money. A venture can be extremely profitable without making a dime if it improves people's lives in a significant way. Money is only a tool to accomplish this, and monetary profits are only loosely correlated to true profits, the kind that add value to the world by making a it a healthier, happier place.

Re: Black Swan Farming

#289

Post by lutorm »

nostrademons wrote: post #157
onwardly wrote: post #140

Earlier quoted context omitted.

One inefficiency could be related to this point Paul makes: We can afford to take at least 10x as much risk as Demo Day investors. And since risk is usually proportionate to reward, if you can afford to take more risk you should. What would it mean to take 10x more risk than Demo Day investors? We'd have to be willing to fund 10x more startups than they would. Which means that even if we're generous to ourselves and…

That quote was the sketchiest part of the article for me, because the same math was used to justify the subprime mortgage bubble. The implicit assumption is that the population of startups is uniform across both the set that YC funds and the set that YC does not fund, such that startups in the latter group have the same chance of being a big hit (modulo YC's mentoring, which is accounted for with the "triple a startu…

That quote was the sketchiest part of the article for me, because the same math was used to justify the subprime mortgage bubble.

Though PG didn't mention it, from the title it's clear he's alluding to Taleb, who would decidedly not justify the mortgage bubble. The idea is not simply to expose yourself to risk but to make sure you are exposed to large positive outliers while making sure you are not exposed to the negative ones.

As resbear said, when you leverage yourself you are increasing your exposure to both positive and negative fluctuations. The long-term success of such a scheme relies on a) accurately estimating the probability of positive vs negative, and b) being able to take the negative ones without blowing up. Neither of those conditions were fulfilled.

Re: Black Swan Farming

#290

Post by committed_lp »

Reading this, I wonder if pg & co. have done an experiment where they do two sets of interviews for applicants: One to assess anything at all about their business, and another which is more or less a normal technical (or marketing) interview _without informing the interviewer about the applicant's potential business idea_.

This would basically be a test of the notion that "ideas don't matter", and it would allow you to correlate how even knowing a founder's idea might bias you towards believing they might succeed.

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