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Black Swan Farming

paulgraham.com

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Re: Black Swan Farming

#31

Post by gabrielbutu »

Thiel had a nice way of approaching this question in his CS183 class. In assessing a venture's probability of success, think in terms of calculus -- and not statistically. Since many of these founders are charting new territory, the standard deviation in this sample size of 1 will be infinite. Statistical analysis can't happen.

So instead you treat it as a calculus problem. The metaphor Thiel used was that of space travel and the Apollo missions. You assume you know exactly what's going to happen and behave as such. In a nutshell, "no-one would want to ride in a statistically, probabilistically-informed spaceship."

It's a hard task spotting black swan founders (so instead you just leave yourself as open as possible to them). But the conviction of calculus (in them and in you) is almost certainly a necessary ingredient.

You could stretch a Wilde one-liner around this: "We are all in the gutter, but some of us are looking at the stars."

Re: Black Swan Farming

#32

Post by karpathy »

Great post. I hope that by "idea", what is really meant is a more general notion of "some kind of weighted average of the idea, the context, the team dynamics, and an estimate of how capable they could be in the execution".

Re: Black Swan Farming

#33

Post by autophil »

seiji wrote: post #17
autophil wrote: post #6

I still shake my head with AirBnB, a total ripoff of couch surfing. For it to be comparable in any way, shape or form to the innovative and beautifully executed Dropbox boggles the mind.

I used to think airbnb was a direct for-profit, money grubbing ripoff of the pure-of-heart couchsurfing. Then I tried to use couchsurfing this year. Their website is virtually unusable. It looks like it hasn't been updated since 1995. They have a horrific profile system and verification process. They have one 500,000th of the audience they could have. If you stagnate, you will be eaten. Just keep swimming.

Nicely said. I'll have to give you that. I used couch surfing a few years ago and distinctly remember thinking I should redo the site for them. I may have even written it on my profile.

Re: Black Swan Farming

#34

Post by [deleted] »

paul wrote: post #23
mikeleeorg wrote: post #9

Earlier quoted context omitted.

If I had the time, I would do a bunch of research into trying to determine what made Dropbox, Facebook, AirBnB, et al, succeed in their markets. I assume the answer involves the founding teams, but what traits did these founders have that others did not? I don't have the time though, so if any bloggers/journalists are reading, this could be an interesting article, or even book, if you get enough info. Whether or not…

As best I can tell, success = luck * skill. The big successes that I've seen all have exceptional founders, but that's clearly not enough. Timing is a huge component as well. Often a good idea will fail simply because the market or technology isn't ready. My own experience with Gmail reflects some of that. When we decided to write the whole frontend in JS, everyone said that it was a bad idea doomed to failure. It ha…

[deleted]

Re: Black Swan Farming

#36

Post by pg »

waterlesscloud wrote: post #22

So is there value in increasing the class size every time around? If there's only one winner in a class, at best, does it matter if the class is 10 or 50? 50 isn't going to give 5 winners, is it? Is the idea that 50 gives a 5 times higher chance of finding the 1? Is that really true, though? Would focusing on a smaller number of potentials actually be better for finding the 1? Thinking through the scenarios more thor…

There should be value in increasing the class size if (a) the number of applicants increases and (b) the average quality of the top applicants remains at least constant.

During YC's history so far, we know (a) is true and (b) seems anecdotally to be true.

Re: Black Swan Farming

#37

Post by markerdmann »

Did Dropbox appear to be a bad idea at the time? I seem to recall that the market was pretty crowded when Dropbox launched, and that everyone was expecting Google to announce a "GDrive".

Or does PG mean that the idea can seem bad because the market is already very crowded? I remember talking to William Morgan about the early days of GitHub. He knew the founders from Powerset, and he told me that at the time he thought to himself, "Really? Another hosted version control startup? That seems like a bad idea."

Re: Black Swan Farming

#38

Post by 00000000swan »

Can you afford to fund 100% bad ideas?

Assume you could separate the funding vehicle from the YC reputation, having it as a separate unassociated entity.

That is, assume the "reputational" cost could be managed. And no one would accuse you of being "insane".

I liked this essay. I think it's sufficiently honest.

Re: Black Swan Farming

#39

Post by pg »

markerdmann wrote: post #37

Did Dropbox appear to be a bad idea at the time? I seem to recall that the market was pretty crowded when Dropbox launched, and that everyone was expecting Google to announce a "GDrive". Or does PG mean that the idea can seem bad because the market is already very crowded? I remember talking to William Morgan about the early days of GitHub. He knew the founders from Powerset, and he told me that at the time he though…

Yes, Dropbox was in the Google category of bad ideas: there were already lots of similar things. Success turned out to depend on execution. Dropbox was the first application of its type that worked sufficiently well. But that sort of thing is hard to predict.

Re: Black Swan Farming

#40

Post by jmtame »

I'm curious if this would affect how you give advice to founders. For example, let's say a team is working on an idea that isn't working out. If you had two ideas or recommendations in your head, one that seems intuitively good and one intuitively bad, would you ignore the intuitively good idea in favor of the intuitively bad idea because it seems that the best ideas start out as bad ones?
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