There is some really good advice here. Honestly, I think this might be one of the most important takeaways you can have as a startup founder/CEO in general:
> It's exciting when you notice users "misusing" your product to do something you hadn't intended. This means there's something they want so desperately that they'll not only use any solution you offer, but even use things that aren't meant to be solutions. When you see something like that, don't be annoyed that your users are using your product wrong; listen for the message they're sending, because it could be valuable.
A lot of very specialist businesses seem to fail this test, and lose out on the potential for a huge market because of it. Like it sounds ridiculous as hell, but I remember when GoAnimate had a huge audience among kids and teens looking to make silly videos for sites like YouTube. I also remember the company feeling uncomfortable that they were getting known for that online, and trying to refocus their product/service towards business users instead.
Maybe they should have not done that, and realised that the periphery demographic was a potential customerbase that could have used a slightly different, perhaps more focused product with features relevant to their usecases.
Similarly, I remember an example of a business creating software meant for designing signs for road and metro systems being surprised that toy train and simulation game enthusiasts were using the software for other uses. Again, feels like they should have treated this as a business opportunity, not a cause for confusion or concern.
> Squeezing every last penny out of customers is a distraction. It gets you 2x returns at most. Whereas discovering some new thing you could make for them could easily get you 10x or 100x returns. They're two different ways of looking at the world, and the O'Reilly way makes more, for those who can do it. [5]
This feels like a perfect condemnation of how a lot of private equity firms manage businesses. These sorts of tactics make them money sure, but a lot of the businesses they buy up would probably do better if they held off on the whole 'squeeze resources to breaking point' philosophy in favour of a much more customer focused one.
>A lot of very specialist businesses seem to fail this test, and lose out on the potential for a huge market because of it. Like it sounds ridiculous as hell, but I remember when GoAnimate had a huge audience among kids and teens looking to make silly videos for sites like YouTube. I also remember the company feeling uncomfortable that they were getting known for that online, and trying to refocus their product/service towards business users instead.
I was testing ISP billing software a decade ago, and there was a product we had already committed to buy and it was 99% feature complete, there was just 1 little thing it wouldnt do. And they refused to implement it. Not only that but they told us "Actually we have been acquired and we aren't allowed to implement any new features anyway."
Anyway we went with our second choice, who are now very famous in the space, but at the time were still getting a foothold. And they were only 75% feature complete. But they brought themselves up to 100% over 3 sprints. Other than them using an old version of a single package, they never gave us any grief. They know that their customer needs are what they build software for.
> Being generous makes you more powerful. As Tim O'Reilly said, you should create more value than you capture. Many hard-headed business types would write this off as idealistic hippy stuff, but in fact this is the route to becoming really rich.
> Hired CEOS take the power of the companies they run for granted, whereas founders remember the days when the company was so weak that it had to delight users to survive.
I've always instinctively followed the generosity path, and have experienced that when customers are delighted and that when frictions are removed (or not added in the first place), good things will follow.
However, I have not always been able to convince others to trust in and follow this path. Can anyone offer any advice or experiences on talking people out of trying to prematurely squeeze out every last penny?
My sense is that it's context dependent. If you've got VC backing (or could soon) and are making deals in SF, the generosity path makes a lot of sense. Limited downside, infinite upside. You can afford generosity.
If you're starting with $2000 and bootstrapping a textiles business out of Kolkata, it's a terrible idea, you're likely going to immediately get burned and never recover.
(take with a grain of salt as I have no experience, just stating my observations)
Generosity is not "giving stuff away for free when it hurts you badly to do so." Neither the giver nor the receiver are comfortable when generosity hurts the giver, and the dignity of both may be compromised as well. Generosity that is disrespectful of comfort and dignity is worth very little.
A company with $2000 in its first few days need not give away $1000 to act generously.
> Can anyone offer any advice or experiences on talking people out of trying to prematurely squeeze out every last penny?
Yes. Lend them many more pennies, removing the necessity for short-term profit taking and allowing them to run at a loss until they decimate the competition, capture the market and then start raising prices to the point that they are more profitable than had they taken the short-sighted approach.
before the pandemic hit and most of the world was quarantined, we decided to give loom away to students and teachers for free and made the service 50% off indefinitely. this was generous but also strategic. we made the simple deduction that, should people be locked inside, they would naturally see their sons/daughters using loom as students. or their spouse or roommates as teacher/staff.
This depends on what you are building and what your goals are. What pg is referring to is how to build transformative companies, unicorns if you will.
There's plenty of businesses where you are simply optimizing a funnel, and driving more revenue at all costs is fully aligned with the goals of the company
I'm nearly always building early stage companies, where even the dev and operational overhead of charging for some added extra is not guaranteed to be paid for by the money collected.
As a startup with deep pockets, you think you can afford to be generous, without realising it is made possible due to borrowed time and money. When the bills come due, generosity ends and enshittification onsets.
People are more sympathetic to pg retaining a sense of purpose (than Terry Tao) because they rightfully imagine that's it's easy to obtain the virtues that he has (the generosity, the optimism, the agency,the lack of worry, the curiosity, the faith in all sorts of humanity)
> always instinctively followed the generosity path
> experienced that when customers are delighted and that when frictions are removed
Charlie Munger:
When other companies find ways to save money, they turn it into profit. [Costco] passes it on to customers. It’s almost a religious duty. [They] sacrifice short-term profits for long-term success”.
> talking people out of trying to prematurely squeeze out every last penny?
I'd say this is a wrong framing. It isn't the people; it is the systems & environs they are in, the incentives they operate under.
Economists have a term they call "willingness-to-pay", using which some business might optimize for "consumer surplus" (low price), some for "producer surplus" (high margin).
Exactly what I came to say. This 100% is hippy dippy head in the clouds stuff. Sure if your product is 100% digital you can "be generous" in so far as it costs you nothing. Real products, real services. Hell no. You will get robbed blind if you give people too much slack or come off as willing to easily pay out.
I learned this the hard way early on doing contract work. Multimillionaires would actively try to take advantages of my naivety and inexperience to coerce free work out of me. Also I highly suspect many of them get a sick sense of pleasure out of it. Good luck being "generous" to those types.
Take a look at those donate for pain videos on tiktok if you don't believe there is significant population of sadists out there.
Never be generous with the product itself. In consulting, the product is your time - you can't give that away. In textiles the product is the physical textiles - you can't give that away. In tech start-ups the product is a growing userbase - you can't give that away.
> There's a variant of going full stack where you eat your way gradually through the customer by doing all their hardest work for them.
One of my clients provisions front office applications for banks and the conversation has come up more than once regarding the client evolving into a bank themselves and building up operations around the capabilities of the product stack.
One good multi-regional partner and it could be a radically different animal. Providing software to one very big customer tends to be a lot simpler than providing it to 20+ smaller customers.
In my experience it depends on the nature of that client. A drawback to having a dominant client is that they have a lot more leverage in roadmap, prioritisation, and product fit. That can seriously impact the internal coherence and maintainability of the product. Too many bits of business logic lodges in weird places because the client didn't want to write custom behaviours, and no time to tidy it up because they're always demanding their next wishlist feature to be deployed yesterday.
You should read the essay. It is mostly about pivoting towards an outsized outcomes for founders & leveraging various avenues available to their advantage.
Because when investors allocate resources based on the ability of those resources to generate a profitable return you end up with an increasing volume of resources being used in the service of fulfilling the needs of a decreasing number of people.
We really need a change in mindset around what success means. Concentration of power, concentration of resources, concentration of market share are some measures of success. Out competing your rivals until you grind them into dust is some measure of success. This is the Peter Thiel and Bezos and to a large extent the ycombinator and PG philosophy of success. It's dressed up as "just innovation bro" whereas the truth is, innovation in a rapidly increasing technological society is certainly both broadly useful to everyone, but also, left unchecked, just a tool to be successful in ways that are, sometimes extremely, detrimental to society as a whole. "Disruption and Innovation" could go well past the lines that AirBnb and Uber crossed and achieve a lot more success.
Just on PG as a persona, I was never a fan or non fan I've barely read his blogposts and only know of him incidentally from knowing this forum, but on the general area of "thought leaders" and the increasingly asymmetry one-to-many relationships we have been getting used to for decades I came across this very interesting and well put together video here: https://www.youtube.com/watch?v=Dqh17U3tymU , give it 15 minutes if you do decide to watch it its a bit of a slow burn.
I realize posting youtube videos that appear to be about 'creator beefs' at first glance may be considered low brow content for all the Jane Street or Palantir aspiring employees around here but such is life, you can lead a horse and all that. The world is made up of a bigger bubble than you are in but its still just a larger bubble with a lot of symmetries
> We really need a change in mindset around what success means.
How?
Wealth and power is all that society obsesses about and there's an endless list of suckers for people that appear to be wealthy or powerful. Hell, even this board is filled with rat races spamming how to climb the pyramid in companies I vomit just thinking about "oh, this is how I got promoted to L17 from L16" or bs like that.
Nobody's getting interviewed and hailed for saving the most lives in an Indian hospital or risking its life reporting in Gaza under constant Israeli bombs and shooting.
But sure there's endless content of how this or that startupper created yet another unicorn with some pointless B2B saas.
People want to hear and reflect and empathize with winners who have all, not with the "real" heroes impacting the world positively through sacrifice and pain.
It doesn't need need to be tied to some mystical god, "music is my religion" is a phrase that has been used and is understood easily, and you can replace music with many other nouns, games, science, family, dog grooming, whatever.
You can kind of see this in the rise of weird internet cults around celebrities and obviously many IRL cults over the years, and I don't know if the frequency of weird cults has increased in the last 3 decades but I would take wild guess and say it has.
"Make religions cool again" is a bit of a hard sell considering worldwide events but unless we can come up with a better word for a shared value system where people sacrifice things they can gain, for the good of the group, I don't think there is a stronger word.
The comments here are taking a very uncharitable definition of “power”. If I take that definition I can see how people are being so negative. But just a slightly more positive definition and this all seems like reasonable dialogue to have with an early stage startup.
I wonder what the tipping point was where the general attitude towards PG and his essays changed. It's tempting to say AI, but I feel it was more like AirBnB era? When people saw how one of YC's golden goose affected the local communities, the rosy color on our glasses inevitably faded.
I think people have now become extremely wary of VC, startup and Silicon Valley because at some point there was a boiling frog shift from helping people and enabling new things to viciously eating anyone not participating.
Are you sure the attitude changed generally or did it change more specifically here on Hacker News? Perhaps the kinds of people who use Hacker News changed.
Go to the 2:00 mark of this interview. Sam Altman says “Paul Graham is the most important force in startups of the past few decades” and the whole auditorium starts cheering. So Paul Graham is akin to a god in some places.
I would hazard a guess that the people attending a YC event (!) to watch Sam Altman (!) talk with Garry Tan (!) would regard Paul Graham well irrespective of how the rest of the world sees him.
In this tweet he appears to support the racist POS who "outed" Jason Arday:
> "How should universities respond to the Arday scandal? Should they crack down on plagiarism and academic fraud? Ghent University's response, apparently, will be to fire the person who reported it."
This is an incredibly shitty thing to say. Nathan Cofnas is a proponent of "scientific racism" who thinks human races 1/ exist and 2/ have very different intellectual capabilities. (Unsurprisingly, his own "race" is at the top of this hierarchy.) He was fired from Ghent not because of the "Arday scandal", but because of his theories. This was the second time he was fired from a university. (He had previously been fired from Cambridge.)
People rushing to his defense can only do so for one of two reasons: they have a knee-jerk feeling that he's right and his victim is wrong, and are too lazy to research the facts, or they truly agree with his ideas on a fundamental level.
According the the University it was for "Ghent University is shocked by the death of Professor Arday....recent public statements made by a postdoctoral researcher at Ghent University regarding this matter"[1] and as discussed on that page he was not fired (yet?) but was "imposed a disciplinary measure on a member of its research staff for a period of three months. A preliminary inquiry is also under way to determine if further disciplinary action is warranted."
So perhaps you appear to the one "too lazy to research the facts"?
If I remember correctly, Paul talked a lot about things that are ‘unsayable’ but his support for those going further than he was prepared to suggested at the things that he would to be able to say without losing status or power
No, they are not in trouble yet. I'm not saying SaaS is dead. The article, to me, reads as, if you are in SaaS, you better be looking at ways to build power above and beyond a simple service, be it a network moat, corporate compliance, competing with the vertical....
Is open source still viable these days for a business model that relies on a single large customer and anyone else that also happens to need that solution?
I am not surprised that Silicon Valley researchers say they cannot solve the alignment problem... Here the leading voice in the region publishes an article about how to be more powerful without any other mention of alignment but "users".
For example, I am sure facebook users (the ones buying ads) are super happy, but is the company aligned?
How do we prove alignment? Often times, large regulatory bodies. Who supports that? Does the regulatory body actually have enough power to enforce those standards? (Hint: look at modern America). That's an example of power questions sneaking in even when you didn't want to.
Even "mere Darwinism" is less extreme because it pretends like there is some objective criterion called natural selection that will filter out bad candidates, when it's often the case that the bad candidates are the ones that weren't proactive to define the selection process themselves. Sitting back and optimizing for an externally imposed standard is worse than being able to impose said standard yourself.
(If this point was complicated - my point is that yes, Darwinism makes sense, but when applying it, you can get a mis-skewed definition of what "natural selection" really entails. I am calling out that caveat).
Of course, my hope is that that isn't the end all, be all solution. Philosophy doesn't end with Nietzche, hopefully. But the world does sure looks bleak right now...
Playing for the long game is good. But that sentence is too lossy to decipher the meaning unless you know what it means.
Instead of making the company more powerful, I would recommend making the company more aligned with truth and the real world which has a nice side effect of being resilient.
Add to that, preparing for scale.
We have dedicated an entire year for nothing but architecture, correctness, distributedness and scaling.
The economic perspective of the same would be reducing the cost of software development (not in the LLM massive code generation way but the opposite with architecture).
Its been 5 years since we have been building Slyp and SlypBusiness along with the plethora of technologies around it.
I don't know whether we are powerful as per the author's definition but we are damn resilient.
Given the impact some YC startups are having on society at large I think a better question than "How" is "Why". Do we really want Flock to become even more powerful?
Even in the cases where the answer is "yes"; I believe that working backwards from the why could provide a more elegant path to accomplishing said goal.
> But all these strategies for making startups more powerful have one thing in common — or more precisely, have to obey one constraint. They all have to make things better for the customer.
Good thing we have venture capital to alleviate that constraint by enabling selling a dollar for 50 cents.
PG hasn't been in the bay for a long time so he doesn't understand what the ecosystem is like anymore.
For example "startups make the best stuff" is just wrong these days. I almost always assume the startup's product today is going to screw you or is hacky, because they prove over and over again they cut corners for growth. Very few startups still take the mentality PG has in his era and now ship half broken hacked stuff.
I do think that the startup pendulum swung too far in the direction of shipping as fast as possible. The cliche advice for years was that if your first shipping MVP wasn’t embarrassing in some way, you probably weren’t shipping fast enough.
That led to a long period where startups were shipping things that barely worked and would fall apart if you deviated from the happy path at all.
Companies and consumers alike got tired of paying to be alpha testers and do market research for startups. It was really bad when you’d start using a startup product, spend a lot of time working with them to identify bugs, and then they would pivot to some other idea they had.
> I do think that the startup pendulum swung too far in the direction of shipping as fast as possible.
Nope. They did, but that's not the problem.
The problem is that VCs moved way too much in the direction of "take over the world or go home" and don't allow companies that take investment to be just successful anymore.
I think this is a very classic "waterfall" world view.
In many cases, the problem can only be understood through many failed solution attempts. It could be because the actual problem is novel. It could be because there is a different way of thinking about the problem that is not apparent studying only what a customer does today with the limitations of the software that they have right now.
The point of "move fast, break things" is to address this fallacy that anyone can fully understand a problem before attempting the solution; it is often the case that in attempting a solution, one comes to understand the actual, valuable problem.
Waterfall means designing and building everything before rolling it out to users. Researching a problem before you start tackling it is just general good advice. You can be more effective while moving fast and breaking things while still taking some time to know where to move and what is ok vs not ok to break.
Prioritizing something other than 7% week over week growth. This doesn't appeal as much to venture capitalists so we may have to try it with some bootstrapped products first.
The only ones I've seen are AI grifters (not even useful AI) and Polymarket/Kalshi, which makes me cynical; although I've seen some decent startups that are small (i.e. non-powerful) but nonetheless profitable.
Isn't Anthropic and OpenAI still startups? Even though they have big revenue, their business model isn't proved yet and there is a big chance they gonna fail and so most of the AI startups.
I read the article and kept wondering what the author is trying to convey. It reads like a checklist compiled into an essay with no wisdom nor rationale baked into it. mostly vague and generic -- like a human transform applied to an llm output.
For example, if you opt in, we'll tell you how you're doing compared to other users. The obvious AI variant is to let your users opt in to training your model on their interactions with it. Many will resist that, but if some don't, the model they get to use will outperform the vanilla one used by the others.
The vanilla one? Is this the pg Malcolm Gladwell arc, where he's retelling some real concept but warped by misunderstanding to the point of incoherence? Who's getting hobbled running on "vanilla models", do we have examples?
> Being generous makes you more powerful. As Tim O'Reilly said, you should create more value than you capture. Many hard-headed business types would write this off as idealistic hippy stuff, but in fact this is the route to becoming really rich. Squeezing every last penny out of customers is a distraction.
I sure did appreciate the generosity of paying $1,500/night for a villa where I had to pay a $250 cleaning fee and was then told to take out the trash, sweep the floors and put the bedsheets in the laundry room.
The only time I ever used AirBnB the host cancelled on me 2 days before my trip while I was scrambling to find a replacement. Absolutely awful user experience that truly offers nothing to people in their moments of extreme need.
I’m glad there’s a lot of people commenting negatively below to PGs modus operandi (rationalizing maximum greed in seemingly thoughtful measured essays that make him seem like a kindly philosopher instead or digital robber barron)
Like Ayn Rand, and PT Barnum before them VCs and Tech Bros will be looked at with great hostility in next years as having destroyed society with their brand of hyper-capitalism all in the name of “disruption”
Suggesting every dark pattern for startups and then using record labels as the boogeyman like it's 2000 again is ... odd.
Why don't you let artists decide if they want record labels? They were far better off with EMI and Columbia records than with Spotify.
It is better to give $500,000 of $1,000,000 to a record label than $3 of $10 to Spotify. And record labels were pretty damn good at selecting artists, even in pop music. Does Paul Graham think music got any better after 2010?.
Here is an article on this topic, which comes to a mixed conclusion.
"The article suggests that more musicians rather than fewer might now be able to earn money from recorded music than in preceding recorded-music systems. But it also proposes that the current system retains the striking inequalities and generally poor working conditions that characterised its predecessors, and that better debate requires greater transparency about usage and payment on the part of streaming services and music businesses."
Here's an article about Germany, which claims streaming is not worse
"However, the current streaming-dominated music market does not fundamentally perform worse compared to the former CD market: in 2023, more than twice as many music creators earned revenues above the basic tax-free allowance compared to 2002."
I'm shocked to read that Paul Graham is only 61. His writings lately sound more like late 70s in terms of age and worldview.
References to record labels? How much do record labels have to do with people discovering and catching on to music artists in 2026? What does a multi-billion-dollar 17 year old tech conglomerate like Stripe have to do with startups at this point?
I maintain that one of the hardest things for people to really internalize is when the group that they are in goes from being an insurgent to being the establishment. I can think of very few examples of people successfully adapting their worldview to that fundamental change in their identity.
The next class of YC founders is no less a product of the financial/tech ruling elite than the next batch of Goldman Sachs summer interns.
IIRC the record labels made a deal with Spotify to own a percentage of the company in exchange for a lower royalty rate. This is a mathematically diabolical way to shut artists out of profits. Sure, the record label also takes a lower percent of the pie, but they also own part of Spotify's pie.
In the context of the post-AI economic environment where we are casually talking about our TVs wiretapping our homes even when they don't have Internet access, the whole article reads so gross. How to make your startups more powerful:
1. Get your customers signed up and locked in ASAP
2. Make your product its own little feudal kingdom with walls, moats, and gates
3. Maximize the amount you slurp up customer data in disgusting ways your customers can't even comprehend
Steve Jobs was no saint but compare how he talked about products to how Paul G is talking about them, it's not even the same basic concept of business. For the former, it was about increasing profits by building the best product experience possible. People will spend more on a Mac or an iPod because it's better than the competition. Yes, there were plenty of forms of ecosystem and lock-in, but the way you locked customers in was by providing the best experience.
In the case of the latter, it's all about flexing your leverage and holding power over your customers. You don't even hold basic respect your customers in the system that Paul and the rest of Silicon Valley champions these days.
There is some really good advice here. Honestly, I think this might be one of the most important takeaways you can have as a startup founder/CEO in general:
> It's exciting when you notice users "misusing" your product to do something you hadn't intended. This means there's something they want so desperately that they'll not only use any solution you offer, but even use things that aren't meant to be solutions. When you see something like that, don't be annoyed that your users are using your product wrong; listen for the message they're sending, because it could be valuable.
A lot of very specialist businesses seem to fail this test, and lose out on the potential for a huge market because of it. Like it sounds ridiculous as hell, but I remember when GoAnimate had a huge audience among kids and teens looking to make silly videos for sites like YouTube. I also remember the company feeling uncomfortable that they were getting known for that online, and trying to refocus their product/service towards business users instead.
Maybe they should have not done that, and realised that the periphery demographic was a potential customerbase that could have used a slightly different, perhaps more focused product with features relevant to their usecases.
Similarly, I remember an example of a business creating software meant for designing signs for road and metro systems being surprised that toy train and simulation game enthusiasts were using the software for other uses. Again, feels like they should have treated this as a business opportunity, not a cause for confusion or concern.
> Squeezing every last penny out of customers is a distraction. It gets you 2x returns at most. Whereas discovering some new thing you could make for them could easily get you 10x or 100x returns. They're two different ways of looking at the world, and the O'Reilly way makes more, for those who can do it. [5]
This feels like a perfect condemnation of how a lot of private equity firms manage businesses. These sorts of tactics make them money sure, but a lot of the businesses they buy up would probably do better if they held off on the whole 'squeeze resources to breaking point' philosophy in favour of a much more customer focused one.
I miss the pre-https-by-default days where I could see what search terms people used to land on my blog. Gave excellent topic ideas for unmet needs.
I miss the pre-https-by-default days where I could see what search terms people used to land on my blog. Have excellent topic ideas for unmet needs.
>A lot of very specialist businesses seem to fail this test, and lose out on the potential for a huge market because of it. Like it sounds ridiculous as hell, but I remember when GoAnimate had a huge audience among kids and teens looking to make silly videos for sites like YouTube. I also remember the company feeling uncomfortable that they were getting known for that online, and trying to refocus their product/service towards business users instead.
I was testing ISP billing software a decade ago, and there was a product we had already committed to buy and it was 99% feature complete, there was just 1 little thing it wouldnt do. And they refused to implement it. Not only that but they told us "Actually we have been acquired and we aren't allowed to implement any new features anyway."
Anyway we went with our second choice, who are now very famous in the space, but at the time were still getting a foothold. And they were only 75% feature complete. But they brought themselves up to 100% over 3 sprints. Other than them using an old version of a single package, they never gave us any grief. They know that their customer needs are what they build software for.
> Being generous makes you more powerful. As Tim O'Reilly said, you should create more value than you capture. Many hard-headed business types would write this off as idealistic hippy stuff, but in fact this is the route to becoming really rich.
> Hired CEOS take the power of the companies they run for granted, whereas founders remember the days when the company was so weak that it had to delight users to survive.
I've always instinctively followed the generosity path, and have experienced that when customers are delighted and that when frictions are removed (or not added in the first place), good things will follow.
However, I have not always been able to convince others to trust in and follow this path. Can anyone offer any advice or experiences on talking people out of trying to prematurely squeeze out every last penny?
My sense is that it's context dependent. If you've got VC backing (or could soon) and are making deals in SF, the generosity path makes a lot of sense. Limited downside, infinite upside. You can afford generosity.
If you're starting with $2000 and bootstrapping a textiles business out of Kolkata, it's a terrible idea, you're likely going to immediately get burned and never recover.
(take with a grain of salt as I have no experience, just stating my observations)
Generosity is not "giving stuff away for free when it hurts you badly to do so." Neither the giver nor the receiver are comfortable when generosity hurts the giver, and the dignity of both may be compromised as well. Generosity that is disrespectful of comfort and dignity is worth very little.
A company with $2000 in its first few days need not give away $1000 to act generously.
So the generosity rule is more like "if you have lots of money you can make lots of money"
Agreed. They can probably afford to invest time into delighting those early customers i.e. doing things that don’t scale.
> Can anyone offer any advice or experiences on talking people out of trying to prematurely squeeze out every last penny?
Yes. Lend them many more pennies, removing the necessity for short-term profit taking and allowing them to run at a loss until they decimate the competition, capture the market and then start raising prices to the point that they are more profitable than had they taken the short-sighted approach.
my advice? be the boss.
before the pandemic hit and most of the world was quarantined, we decided to give loom away to students and teachers for free and made the service 50% off indefinitely. this was generous but also strategic. we made the simple deduction that, should people be locked inside, they would naturally see their sons/daughters using loom as students. or their spouse or roommates as teacher/staff.
This depends on what you are building and what your goals are. What pg is referring to is how to build transformative companies, unicorns if you will.
There's plenty of businesses where you are simply optimizing a funnel, and driving more revenue at all costs is fully aligned with the goals of the company
I'm nearly always building early stage companies, where even the dev and operational overhead of charging for some added extra is not guaranteed to be paid for by the money collected.
As a startup with deep pockets, you think you can afford to be generous, without realising it is made possible due to borrowed time and money. When the bills come due, generosity ends and enshittification onsets.
People are more sympathetic to pg retaining a sense of purpose (than Terry Tao) because they rightfully imagine that's it's easy to obtain the virtues that he has (the generosity, the optimism, the agency,the lack of worry, the curiosity, the faith in all sorts of humanity)
> always instinctively followed the generosity path
> experienced that when customers are delighted and that when frictions are removed
Charlie Munger:
> not always been able to convince othersMany different ways to conduct business. "Lean Enterprise" might be in line with your thinking: https://en.wikipedia.org/wiki/Lean_enterprise
> talking people out of trying to prematurely squeeze out every last penny?
I'd say this is a wrong framing. It isn't the people; it is the systems & environs they are in, the incentives they operate under.
Economists have a term they call "willingness-to-pay", using which some business might optimize for "consumer surplus" (low price), some for "producer surplus" (high margin).
See also, The Economics of Customer Businesses, Michael Mauboussin et al, https://www.eatonvance.com/insights/consilient-observer/the-... (2021).
Or Bezos' "Create more than you consume": https://www.aboutamazon.com/news/company-news/2020-letter-to...
Warren's response:
https://youtu.be/Z1sTs8wkAbw
Thank you for these references, I really appreciate it.
>bootstrapping a textiles business
Exactly what I came to say. This 100% is hippy dippy head in the clouds stuff. Sure if your product is 100% digital you can "be generous" in so far as it costs you nothing. Real products, real services. Hell no. You will get robbed blind if you give people too much slack or come off as willing to easily pay out.
I learned this the hard way early on doing contract work. Multimillionaires would actively try to take advantages of my naivety and inexperience to coerce free work out of me. Also I highly suspect many of them get a sick sense of pleasure out of it. Good luck being "generous" to those types.
Take a look at those donate for pain videos on tiktok if you don't believe there is significant population of sadists out there.
Never be generous with the product itself. In consulting, the product is your time - you can't give that away. In textiles the product is the physical textiles - you can't give that away. In tech start-ups the product is a growing userbase - you can't give that away.
> There's a variant of going full stack where you eat your way gradually through the customer by doing all their hardest work for them.
One of my clients provisions front office applications for banks and the conversation has come up more than once regarding the client evolving into a bank themselves and building up operations around the capabilities of the product stack.
One good multi-regional partner and it could be a radically different animal. Providing software to one very big customer tends to be a lot simpler than providing it to 20+ smaller customers.
In my experience it depends on the nature of that client. A drawback to having a dominant client is that they have a lot more leverage in roadmap, prioritisation, and product fit. That can seriously impact the internal coherence and maintainability of the product. Too many bits of business logic lodges in weird places because the client didn't want to write custom behaviours, and no time to tidy it up because they're always demanding their next wishlist feature to be deployed yesterday.
How about "making investors less powerful"?
You should read the essay. It is mostly about pivoting towards an outsized outcomes for founders & leveraging various avenues available to their advantage.
I don't mean less powerful relative to startup founders, I mean less powerful in terms of how we allocate resources in the economy.
Why would that be a good idea?
Greed has been clearly very efficient at allocating resources and money is the first resource of any business endeavour.
Politics and courts should frames and boundaries around that greed's reach, otherwise just let it alone.
Because when investors allocate resources based on the ability of those resources to generate a profitable return you end up with an increasing volume of resources being used in the service of fulfilling the needs of a decreasing number of people.
Greed has also been very inefficient at holding companies accountable in regards to external costs.
We really need a change in mindset around what success means. Concentration of power, concentration of resources, concentration of market share are some measures of success. Out competing your rivals until you grind them into dust is some measure of success. This is the Peter Thiel and Bezos and to a large extent the ycombinator and PG philosophy of success. It's dressed up as "just innovation bro" whereas the truth is, innovation in a rapidly increasing technological society is certainly both broadly useful to everyone, but also, left unchecked, just a tool to be successful in ways that are, sometimes extremely, detrimental to society as a whole. "Disruption and Innovation" could go well past the lines that AirBnb and Uber crossed and achieve a lot more success.
Just on PG as a persona, I was never a fan or non fan I've barely read his blogposts and only know of him incidentally from knowing this forum, but on the general area of "thought leaders" and the increasingly asymmetry one-to-many relationships we have been getting used to for decades I came across this very interesting and well put together video here: https://www.youtube.com/watch?v=Dqh17U3tymU , give it 15 minutes if you do decide to watch it its a bit of a slow burn.
I realize posting youtube videos that appear to be about 'creator beefs' at first glance may be considered low brow content for all the Jane Street or Palantir aspiring employees around here but such is life, you can lead a horse and all that. The world is made up of a bigger bubble than you are in but its still just a larger bubble with a lot of symmetries
> We really need a change in mindset around what success means.
How?
Wealth and power is all that society obsesses about and there's an endless list of suckers for people that appear to be wealthy or powerful. Hell, even this board is filled with rat races spamming how to climb the pyramid in companies I vomit just thinking about "oh, this is how I got promoted to L17 from L16" or bs like that.
Nobody's getting interviewed and hailed for saving the most lives in an Indian hospital or risking its life reporting in Gaza under constant Israeli bombs and shooting.
But sure there's endless content of how this or that startupper created yet another unicorn with some pointless B2B saas.
People want to hear and reflect and empathize with winners who have all, not with the "real" heroes impacting the world positively through sacrifice and pain.
Religion
It doesn't need need to be tied to some mystical god, "music is my religion" is a phrase that has been used and is understood easily, and you can replace music with many other nouns, games, science, family, dog grooming, whatever.
You can kind of see this in the rise of weird internet cults around celebrities and obviously many IRL cults over the years, and I don't know if the frequency of weird cults has increased in the last 3 decades but I would take wild guess and say it has.
"Make religions cool again" is a bit of a hard sell considering worldwide events but unless we can come up with a better word for a shared value system where people sacrifice things they can gain, for the good of the group, I don't think there is a stronger word.
The comments here are taking a very uncharitable definition of “power”. If I take that definition I can see how people are being so negative. But just a slightly more positive definition and this all seems like reasonable dialogue to have with an early stage startup.
I wonder what the tipping point was where the general attitude towards PG and his essays changed. It's tempting to say AI, but I feel it was more like AirBnB era? When people saw how one of YC's golden goose affected the local communities, the rosy color on our glasses inevitably faded.
Once YC companies started having a negative impact on people and communities. Airbnb and gig worker stuff seems to be the start of it.
His reaction to the 2011 Dropbox password incident was an early concern, IIRC.
Very much so in my recollection
OpenAI Airbnb Stripe Coinbase DoorDash Scale AI Dropbox Reddit Instacart GitLab Kalshi Replit Twitch
These are the companies advertised on ycombinator.com. The only one I like is GitLab which I'm neutral about. All other are companies I dislike.
I think people have now become extremely wary of VC, startup and Silicon Valley because at some point there was a boiling frog shift from helping people and enabling new things to viciously eating anyone not participating.
Are you sure the attitude changed generally or did it change more specifically here on Hacker News? Perhaps the kinds of people who use Hacker News changed.
https://youtu.be/ZIaOBAjvc38
Go to the 2:00 mark of this interview. Sam Altman says “Paul Graham is the most important force in startups of the past few decades” and the whole auditorium starts cheering. So Paul Graham is akin to a god in some places.
I would hazard a guess that the people attending a YC event (!) to watch Sam Altman (!) talk with Garry Tan (!) would regard Paul Graham well irrespective of how the rest of the world sees him.
In this tweet he appears to support the racist POS who "outed" Jason Arday:
> "How should universities respond to the Arday scandal? Should they crack down on plagiarism and academic fraud? Ghent University's response, apparently, will be to fire the person who reported it."
https://x.com/paulg/status/2090439693334937963
This is an incredibly shitty thing to say. Nathan Cofnas is a proponent of "scientific racism" who thinks human races 1/ exist and 2/ have very different intellectual capabilities. (Unsurprisingly, his own "race" is at the top of this hierarchy.) He was fired from Ghent not because of the "Arday scandal", but because of his theories. This was the second time he was fired from a university. (He had previously been fired from Cambridge.)
People rushing to his defense can only do so for one of two reasons: they have a knee-jerk feeling that he's right and his victim is wrong, and are too lazy to research the facts, or they truly agree with his ideas on a fundamental level.
Both options are very, very bad.
According the the University it was for "Ghent University is shocked by the death of Professor Arday....recent public statements made by a postdoctoral researcher at Ghent University regarding this matter"[1] and as discussed on that page he was not fired (yet?) but was "imposed a disciplinary measure on a member of its research staff for a period of three months. A preliminary inquiry is also under way to determine if further disciplinary action is warranted."
So perhaps you appear to the one "too lazy to research the facts"?
[1]https://www.ugent.be/en/news-events/updates-case-postdoctora...
If I remember correctly, Paul talked a lot about things that are ‘unsayable’ but his support for those going further than he was prepared to suggested at the things that he would to be able to say without losing status or power
I feel like the basis of this post is that in the current state of software development, SaaS alone holds very limited power.
if so, are Salesforce and Oracle in trouble yet?
No, they are not in trouble yet. I'm not saying SaaS is dead. The article, to me, reads as, if you are in SaaS, you better be looking at ways to build power above and beyond a simple service, be it a network moat, corporate compliance, competing with the vertical....
Oracle has a BBB- credit rating (one step above junk bonds), so maybe yeah.
Sometimes communication from “powerful” people are often signals to others who are, or aspire to be, “powerful”.
When you are signalling to the latter, you need to be cruder with your approach or the signal may be lost. There needs not be any wisdom in it.
Agree with what you're saying, but what are you ultimately driving at?
Is open source still viable these days for a business model that relies on a single large customer and anyone else that also happens to need that solution?
I am not surprised that Silicon Valley researchers say they cannot solve the alignment problem... Here the leading voice in the region publishes an article about how to be more powerful without any other mention of alignment but "users".
For example, I am sure facebook users (the ones buying ads) are super happy, but is the company aligned?
To a first approximation, everything is power.
How do we prove alignment? Often times, large regulatory bodies. Who supports that? Does the regulatory body actually have enough power to enforce those standards? (Hint: look at modern America). That's an example of power questions sneaking in even when you didn't want to.
Even "mere Darwinism" is less extreme because it pretends like there is some objective criterion called natural selection that will filter out bad candidates, when it's often the case that the bad candidates are the ones that weren't proactive to define the selection process themselves. Sitting back and optimizing for an externally imposed standard is worse than being able to impose said standard yourself.
(If this point was complicated - my point is that yes, Darwinism makes sense, but when applying it, you can get a mis-skewed definition of what "natural selection" really entails. I am calling out that caveat).
Of course, my hope is that that isn't the end all, be all solution. Philosophy doesn't end with Nietzche, hopefully. But the world does sure looks bleak right now...
Counterpoint: Love is not power.
"Where love rules, there is no will to power, and where power predominates, there love is lacking. The one is the shadow of the other." -Jung
I would say, the author does have a point.
Playing for the long game is good. But that sentence is too lossy to decipher the meaning unless you know what it means.
Instead of making the company more powerful, I would recommend making the company more aligned with truth and the real world which has a nice side effect of being resilient.
Add to that, preparing for scale.
We have dedicated an entire year for nothing but architecture, correctness, distributedness and scaling.
The economic perspective of the same would be reducing the cost of software development (not in the LLM massive code generation way but the opposite with architecture).
Its been 5 years since we have been building Slyp and SlypBusiness along with the plethora of technologies around it.
I don't know whether we are powerful as per the author's definition but we are damn resilient.
Given the impact some YC startups are having on society at large I think a better question than "How" is "Why". Do we really want Flock to become even more powerful?
Even in the cases where the answer is "yes"; I believe that working backwards from the why could provide a more elegant path to accomplishing said goal.
> But all these strategies for making startups more powerful have one thing in common — or more precisely, have to obey one constraint. They all have to make things better for the customer.
Good thing we have venture capital to alleviate that constraint by enabling selling a dollar for 50 cents.
PG hasn't been in the bay for a long time so he doesn't understand what the ecosystem is like anymore.
For example "startups make the best stuff" is just wrong these days. I almost always assume the startup's product today is going to screw you or is hacky, because they prove over and over again they cut corners for growth. Very few startups still take the mentality PG has in his era and now ship half broken hacked stuff.
I do think that the startup pendulum swung too far in the direction of shipping as fast as possible. The cliche advice for years was that if your first shipping MVP wasn’t embarrassing in some way, you probably weren’t shipping fast enough.
That led to a long period where startups were shipping things that barely worked and would fall apart if you deviated from the happy path at all.
Companies and consumers alike got tired of paying to be alpha testers and do market research for startups. It was really bad when you’d start using a startup product, spend a lot of time working with them to identify bugs, and then they would pivot to some other idea they had.
> I do think that the startup pendulum swung too far in the direction of shipping as fast as possible.
Nope. They did, but that's not the problem.
The problem is that VCs moved way too much in the direction of "take over the world or go home" and don't allow companies that take investment to be just successful anymore.
What’s the solution
Understanding the problem before attempting the solution is always a good idea.
I think this is a very classic "waterfall" world view.
In many cases, the problem can only be understood through many failed solution attempts. It could be because the actual problem is novel. It could be because there is a different way of thinking about the problem that is not apparent studying only what a customer does today with the limitations of the software that they have right now.
The point of "move fast, break things" is to address this fallacy that anyone can fully understand a problem before attempting the solution; it is often the case that in attempting a solution, one comes to understand the actual, valuable problem.
Waterfall means designing and building everything before rolling it out to users. Researching a problem before you start tackling it is just general good advice. You can be more effective while moving fast and breaking things while still taking some time to know where to move and what is ok vs not ok to break.
Prioritizing something other than 7% week over week growth. This doesn't appeal as much to venture capitalists so we may have to try it with some bootstrapped products first.
You can't say it here
What are some recent powerful startups?
The only ones I've seen are AI grifters (not even useful AI) and Polymarket/Kalshi, which makes me cynical; although I've seen some decent startups that are small (i.e. non-powerful) but nonetheless profitable.
Isn't Anthropic and OpenAI still startups? Even though they have big revenue, their business model isn't proved yet and there is a big chance they gonna fail and so most of the AI startups.
I read the article and kept wondering what the author is trying to convey. It reads like a checklist compiled into an essay with no wisdom nor rationale baked into it. mostly vague and generic -- like a human transform applied to an llm output.
"Vapid" is the best description of the slop that comes out of paul graham's website.
For example, if you opt in, we'll tell you how you're doing compared to other users. The obvious AI variant is to let your users opt in to training your model on their interactions with it. Many will resist that, but if some don't, the model they get to use will outperform the vanilla one used by the others.
The vanilla one? Is this the pg Malcolm Gladwell arc, where he's retelling some real concept but warped by misunderstanding to the point of incoherence? Who's getting hobbled running on "vanilla models", do we have examples?
> Being generous makes you more powerful. As Tim O'Reilly said, you should create more value than you capture. Many hard-headed business types would write this off as idealistic hippy stuff, but in fact this is the route to becoming really rich. Squeezing every last penny out of customers is a distraction.
I sure did appreciate the generosity of paying $1,500/night for a villa where I had to pay a $250 cleaning fee and was then told to take out the trash, sweep the floors and put the bedsheets in the laundry room.
Yeah, Airbnb has been awful since 2022. Hotels always cheaper, easier, and better.
Airbnb is so much more versatile I almost always start there when traveling. (And then move to booking.com.)
A house for 6 people. A guaranteed view. A real kitchen. A remote location. Etc.
Airbnb is insanely expensive and I have to do everything myself.
The only reason to choose it is because it has some great venue that Booking is missing, but it's very rare.
The only time I ever used AirBnB the host cancelled on me 2 days before my trip while I was scrambling to find a replacement. Absolutely awful user experience that truly offers nothing to people in their moments of extreme need.
My mere fear of this happening keeps me away from the platform
I’m glad there’s a lot of people commenting negatively below to PGs modus operandi (rationalizing maximum greed in seemingly thoughtful measured essays that make him seem like a kindly philosopher instead or digital robber barron)
Like Ayn Rand, and PT Barnum before them VCs and Tech Bros will be looked at with great hostility in next years as having destroyed society with their brand of hyper-capitalism all in the name of “disruption”
Suggesting every dark pattern for startups and then using record labels as the boogeyman like it's 2000 again is ... odd.
Why don't you let artists decide if they want record labels? They were far better off with EMI and Columbia records than with Spotify.
It is better to give $500,000 of $1,000,000 to a record label than $3 of $10 to Spotify. And record labels were pretty damn good at selecting artists, even in pop music. Does Paul Graham think music got any better after 2010?.
Here is an article on this topic, which comes to a mixed conclusion.
"The article suggests that more musicians rather than fewer might now be able to earn money from recorded music than in preceding recorded-music systems. But it also proposes that the current system retains the striking inequalities and generally poor working conditions that characterised its predecessors, and that better debate requires greater transparency about usage and payment on the part of streaming services and music businesses."
https://journals.sagepub.com/doi/10.1177/1461444820953541
Here's an article about Germany, which claims streaming is not worse
"However, the current streaming-dominated music market does not fundamentally perform worse compared to the former CD market: in 2023, more than twice as many music creators earned revenues above the basic tax-free allowance compared to 2002."
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5474735
I'm shocked to read that Paul Graham is only 61. His writings lately sound more like late 70s in terms of age and worldview.
References to record labels? How much do record labels have to do with people discovering and catching on to music artists in 2026? What does a multi-billion-dollar 17 year old tech conglomerate like Stripe have to do with startups at this point?
I maintain that one of the hardest things for people to really internalize is when the group that they are in goes from being an insurgent to being the establishment. I can think of very few examples of people successfully adapting their worldview to that fundamental change in their identity.
The next class of YC founders is no less a product of the financial/tech ruling elite than the next batch of Goldman Sachs summer interns.
IIRC the record labels made a deal with Spotify to own a percentage of the company in exchange for a lower royalty rate. This is a mathematically diabolical way to shut artists out of profits. Sure, the record label also takes a lower percent of the pie, but they also own part of Spotify's pie.
In the context of the post-AI economic environment where we are casually talking about our TVs wiretapping our homes even when they don't have Internet access, the whole article reads so gross. How to make your startups more powerful:
1. Get your customers signed up and locked in ASAP
2. Make your product its own little feudal kingdom with walls, moats, and gates
3. Maximize the amount you slurp up customer data in disgusting ways your customers can't even comprehend
Steve Jobs was no saint but compare how he talked about products to how Paul G is talking about them, it's not even the same basic concept of business. For the former, it was about increasing profits by building the best product experience possible. People will spend more on a Mac or an iPod because it's better than the competition. Yes, there were plenty of forms of ecosystem and lock-in, but the way you locked customers in was by providing the best experience.
In the case of the latter, it's all about flexing your leverage and holding power over your customers. You don't even hold basic respect your customers in the system that Paul and the rest of Silicon Valley champions these days.
Capitalism is being replaced by Leveragism: https://www.youtube.com/watch?v=4FZy1lBNykA
Clerky is super useful for startups