Paul Graham Essays Rss





July 2007

I have too much stuff. Most people in America do. In fact, the poorer people are, the more stuff they seem to have. Hardly anyone is so poor that they can't afford a front yard full of old cars.

It wasn't always this way. Stuff used to be rare and valuable. You can still see evidence of that if you look for it. For example, in my house in Cambridge, which was built in 1876, the bedrooms don't have closets. In those days people's stuff fit in a chest of drawers. Even as recently as a few decades ago there was a lot less stuff. When I look back at photos from the 1970s, I'm surprised how empty houses look. As a kid I had what I thought was a huge fleet of toy cars, but they'd be dwarfed by the number of toys my nephews have. All together my Matchboxes and Corgis took up about a third of the surface of my bed. In my nephews' rooms the bed is the only clear space.

Stuff has gotten a lot cheaper, but our attitudes toward it haven't changed correspondingly. We overvalue stuff.

That was a big problem for me when I had no money. I felt poor, and stuff seemed valuable, so almost instinctively I accumulated it. Friends would leave something behind when they moved, or I'd see something as I was walking down the street on trash night (beware of anything you find yourself describing as "perfectly good"), or I'd find something in almost new condition for a tenth its retail price at a garage sale. And pow, more stuff.

In fact these free or nearly free things weren't bargains, because they were worth even less than they cost. Most of the stuff I accumulated was worthless, because I didn't need it.

What I didn't understand was that the value of some new acquisition wasn't the difference between its retail price and what I paid for it. It was the value I derived from it. Stuff is an extremely illiquid asset. Unless you have some plan for selling that valuable thing you got so cheaply, what difference does it make what it's "worth?" The only way you're ever going to extract any value from it is to use it. And if you don't have any immediate use for it, you probably never will.

Companies that sell stuff have spent huge sums training us to think stuff is still valuable. But it would be closer to the truth to treat stuff as worthless.

In fact, worse than worthless, because once you've accumulated a certain amount of stuff, it starts to own you rather than the other way around. I know of one couple who couldn't retire to the town they preferred because they couldn't afford a place there big enough for all their stuff. Their house isn't theirs; it's their stuff's.

And unless you're extremely organized, a house full of stuff can be very depressing. A cluttered room saps one's spirits. One reason, obviously, is that there's less room for people in a room full of stuff. But there's more going on than that. I think humans constantly scan their environment to build a mental model of what's around them. And the harder a scene is to parse, the less energy you have left for conscious thoughts. A cluttered room is literally exhausting.

(This could explain why clutter doesn't seem to bother kids as much as adults. Kids are less perceptive. They build a coarser model of their surroundings, and this consumes less energy.)

I first realized the worthlessness of stuff when I lived in Italy for a year. All I took with me was one large backpack of stuff. The rest of my stuff I left in my landlady's attic back in the US. And you know what? All I missed were some of the books. By the end of the year I couldn't even remember what else I had stored in that attic.

And yet when I got back I didn't discard so much as a box of it. Throw away a perfectly good rotary telephone? I might need that one day.

The really painful thing to recall is not just that I accumulated all this useless stuff, but that I often spent money I desperately needed on stuff that I didn't.

Why would I do that? Because the people whose job is to sell you stuff are really, really good at it. The average 25 year old is no match for companies that have spent years figuring out how to get you to spend money on stuff. They make the experience of buying stuff so pleasant that "shopping" becomes a leisure activity.

How do you protect yourself from these people? It can't be easy. I'm a fairly skeptical person, and their tricks worked on me well into my thirties. But one thing that might work is to ask yourself, before buying something, "is this going to make my life noticeably better?"

A friend of mine cured herself of a clothes buying habit by asking herself before she bought anything "Am I going to wear this all the time?" If she couldn't convince herself that something she was thinking of buying would become one of those few things she wore all the time, she wouldn't buy it. I think that would work for any kind of purchase. Before you buy anything, ask yourself: will this be something I use constantly? Or is it just something nice? Or worse still, a mere bargain?

The worst stuff in this respect may be stuff you don't use much because it's too good. Nothing owns you like fragile stuff. For example, the "good china" so many households have, and whose defining quality is not so much that it's fun to use, but that one must be especially careful not to break it.

Another way to resist acquiring stuff is to think of the overall cost of owning it. The purchase price is just the beginning. You're going to have to think about that thing for years—perhaps for the rest of your life. Every thing you own takes energy away from you. Some give more than they take. Those are the only things worth having.

I've now stopped accumulating stuff. Except books—but books are different. Books are more like a fluid than individual objects. It's not especially inconvenient to own several thousand books, whereas if you owned several thousand random possessions you'd be a local celebrity. But except for books, I now actively avoid stuff. If I want to spend money on some kind of treat, I'll take


Paul Graham, essayist, programmer and partner in the y-combinator talks with EconTalk host Russ Roberts about start-ups, innovation, and creativity. Graham draws on his experience as entrepreneur and investor to discuss the current state of the start-up world and how that world has changed due to improved technology that makes it easier to start a software company. Graham talks about his unusual venture firm, the y-combinator, and how he and his partners work with start-ups to get them ready for more advanced funding. Along the way, Graham discusses why hackers are like painters and how to survive high school.

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0:36Intro. [Recording date: July 17, 2009.] What is the Y Combinator? A venture capital (VC) firm, but how did you get involved in it? Wouldn't use the term venture capital firm, which means you've raised money from university endowments, venture partners on boards. Do seed funding, no name for it yet. To copy us they have to mention us. What does it do? Trying to use the name incubator, but that already meant something different. A venture capital fund makes a small number of large bets; invest one or two million at a time, one or two deals per partner per year. Y Combinator invests twenty thousand in fifty or sixty ideas; four partners. Likely success rate--don't know yet. Will not be as high as a good VC fund--ought to be a lot of failures or being too careful. Don't know success rate yet, but happy if it's a third; means most will fail. How are they screened? Patterns, but not in ideas. Batch mode. Applying mass production techniques to venture funding. Didn't set out to do this. Usually one thing made with a lot of time; someone comes along and rationalizes it, making it possible to produce a lot. Usually with a lot of technology. Fund a whole bunch of startups at once, bring all to Mountain View; they all start up at once--literally. Like a boot camp. Horse race. Graduate program. Teach things: common materials, mass production part. Software used internally: get many hundreds of applications; two batches a year, might get a thousand for next batch. Can't look at printed forms or Power Point presentation. Application form; software reads through the applications. Those who do best are invited to meet in person in November. Talk to them for ten minutes each. Do not like or have time to be pitched. Ask questions, like court martial, four interviewers. How long? Started summer of 2005. First batch did anomalously well; included Loopt, application that shows you where your friends are on your cell phone, used by high school students. Like having an ant farm. Reddit; Justin.tv, more viewers than hulu.com. Justin.tv was doing a different startup that failed. TextPayMe got bought instantly.
9:19What happens afterwards? Tell everybody yes or no; tell them to show up in January or June. Thought of doing a reality show? Would affect measuring what happened. Don't know if Y Combinator will work; not making lots of money yet; don't want to mess with something that might keep it from not working. Accept 25-30; they come from all over the world. Last winter batch, 7 out of 16 start-ups were from overseas. Not regional; can't start the Y Combinator of St. Louis; competing for same pool of applicants. Founders at this stage are completely mobile, two guys with laptops eating pizzas. If a city was a little better than others for startups, would vacuum them up. Easier to start a startup now--it's cheaper. Four reasons. One is hardware. Moore's law has made computer hardware effectively free. Internet has made promotion free: used to have to buy advertising or PR firm; now word can spread more quickly. Programming languages have gotten more advanced, more abstract; don't have to do as much work to get a given program done. Used to be that to build a startup you had to have a team of developers, five or six people writing C++; doesn't work to have that many partners, so had to hire them. Now, you can do it with just the founders, if 2-3 or them are programmers. Don't need to raise money to hire people. That's the reason there are so many more startups, and the reason they are more mobile. Anyone can do it. Don't have to raise money to build a factory; don't have to be plausible, old, well-dressed to raise money. Doesn't cost any more than hanging out. Larger pool of people and more variation. More risky ideas. Always going to lose the bottom people anyway, so larger pool is a good thing. See it already: Facebook and Google. Both too risky when they first started up. VCs and angels: VCs invest larger amounts of other people's money; angels invest smaller amounts of their own money. Ron Conway, famous angel; invested in both Google and Facebook.
17:03Common guess: when you are investing other people's money you can be riskier. Other way around. VCs have to worry. If they invest in a startup that looks plausible but tanks, they can point to how plausible it looks; if they invest in a 19-year-old whose idea tanks, the investors will not be convinced. An angel can go with his gut. Often angels founded startups themselves. VCs rarely were startup founders; most are money managers. Google and Facebook were both angel investments; and ideas seemed wacko. Social networking didn't exist. Just like fantasy as a genre didn't exist before Tolkien's Lord of the Rings. Social networking has taken over thousands of people's lives but didn't exist three years ago. Tempting to say there won't be anything like that again; but three years from now, who knows? Probably being built now. Asked earlier if any patterns in ideas. Line in TV show, "The Saint"; Roger Moore, not just the bad Bond: "I'm never disappointed by anything." Never surprised by anything any more. Now funded 144 startups; seen so much stuff happen; surprised in both directions. Sit back and watch things happen. By definition, can't predict the next big thing. Cool about capitalism. French and German governments cooperating, spending billions to make their own Google. Google was a good idea in 1997. What it was, was a stupid idea proposed by outsiders. What are the odds that a government is going to end up working on a stupid idea proposed by outsiders? Worse than average. Hayekian idea of trial and error; progress is not centrally planned; many fail, market weeds them out. Standard procedure with web apps: Release something as soon as you possibly can, because the point of releasing is to start learning from your users. Then you watch what people do with it. Amar Bhide podcast. Nothing better than to have sophisticated users; dangerous to build a product for giant corporations. Want to build a product for clever, impoverished outsiders, who are leaders, harbingers, willing to switch, not driven by inertia.
23:52Bring folks in, work intensively for three months. Several gears. This is the incubatorish phase. Word used to mean that all the startups work on your premises, makes the startups feel like employees. Don't provide space. Successful startups all tell stories about working out of the garage, turn on washing machine when cold. Space is not the hard part. But they do have to be nearby. They come for dinner weekly, give talks about how things really work; off the record, founder-to-founder. Can't publish them; speakers would clam up. After 10 weeks, demo day--actually two days. Invite all the investors from Silicon Valley and the country; speakers present for five minutes each. That's the conversation that starts the next round of money. After three months, the dinners stop, but nothing else. Office hours, meetings still with startups from two or three years ago. Counseling and mentoring. Help with deal-making. What they're building and talking to investors. Hard part is to get an investor to want to even listen. Get equity in exchange, from 2-10%, average 6-7%. Reputation good; when people are applying can tell them to just pick any of their startups and ask.
29:21The times we live in. What is the impact of the macroeconomic recession; and California in particular, which has had problems? California's fiscal troubles have not had an effect so far. Taxes already hideously high; could have some effects. Economy at large: worried that investors would slap wallets shut; but people kept investing. For startups, the bad days are over, unless a second wave of disaster. When it was bad, valuations were lower, half what they would have been. If people invest a million dollars at a pre-money-valuation of two million, what that means is the post-money-valuation is two million plus the million they put in, so they own a third of the company. Investors were asking for more of the company. Scared? Just sensed that everyone was more desperate; supply and demand; fewer people investing, pushing things on their terms. Not everybody ran out of money. Some VC funds were structurally messed up, their limited partners (LPs) couldn't come up with funds; but there were firms, big angels, that kept investing. You'd think some people out of work who would turn to a startup; haven't seen a lot of that. What age? 25-26, a couple of years out of college.
33:05How cities might be able to capture startup market: urban economic development in the 1990s went through a bizarre phase where cities wanted to be more like Seattle. Good thing, but you can't get there from here. St. Louis thought it was a lot like Seattle: world class universities; Boeing vs. McDonald-Douglas; Microsoft vs. Monsanto. But more people want to live in Seattle than St. Louis, which is geographically flat and visually boring. As a place for 22 year-olds it's not as attractive. City funded a lot of incubators--public/private partnerships. Politicians like this kind of thing: T1 lines, labs. Bio-tech completely different world. Commercializing research; lead guy, patents, less risk, more money. You know who to back: can narrow it down to 20 people. Interesting geographical role that regions play in innovation. Now, a handful of places: money; people like them who they can hire; the weather is nice; fun to be around; often because of a university, which gets them there in the first place. Stanford for Google founders. It is possible to create a magnet but hard to do. Cities that try to do it are not critical about their own plans: revitalize the downtown, never stop and ask themselves if it's going to work; result of some political compromise; or send delegation to Seattle and try to imitate it, like the Google of France. Can't see Mount Ranier from St. Louis even on a very clear day.
39:21Essay: "Hackers and Painters." Similarities: studying programming in college, idea was that it was supposed to be like math. But the interesting parts, you can't make scientific, let alone mathematical. Cornell has department of poultry science, more science than computer science. What makes someone good at programming is not what makes a scientist good at science. More like what makes a painter or architect good. Taste, aesthetics, a certain knack. Had studied painting; a lot in common with hacking. You make stuff. People who make stuff have more in common with one another regardless of what vertical silo they're in. Horizontal brotherhood of people who make stuff. Programmers and painters next door neighbors. Did studying painting and painting itself make you a better hacker? Can look at a hex color and know what it's going to look like: html red, green, blue hex code for colors. Web startups succeed in part because of good design. Hacker model for cheapness is the artist's model for cheapness; artists live cheaply in a way that is not squalid. Poor but uneducated tend to live a caricature of rich people's live, plastic tawdry versions of the same material things. Artist won't try to live like that; live in industrial space, rent a loft, paint everything white, put cool bright-colored things on the wall. Don't try to do a tawdry, cheap imitation of Microsoft. La Boheme: tuberculosis at end. Society richer today. Baseline high now, many more opportunities to live super cheaply and yet still nice. Left-brain, right-brain podcasts. People think of hackers as left-brained and painters as right-brained; but obviously there is a right-brained, visionary--aha!--aspect of hacking. Creativity. In the world of painting, there are some people who are fabulously talented at drawing; at age 15 they can draw. Use this skill to produce anything, though, then they lose. Similar distinction in programming. Some people, you give them a spec to write a program and they will just produce it, no matter how hard, as long as you tell them precisely what to do. But they can't make up a product that someone would want. This is a mistake companies make. Programmers translate their ideas into code; no loop-back. Best programmers combine in one head both the ability to translate ideas into code and having the ideas. Cezanne could not draw, makes same drawing mistakes that everyone makes in introductory drawing classes. But what he was good at was deciding what to produce. Frustrated. In a room of paintings, it looks like there is a spotlight shining on his and the others have been coated with a light coating of mud.
48:23Related stereotype: technical people like bells and whistles, and so create products that are cool or fun but are not what the user wants. Hackers like gadgets; it's a tendency you have to fight. Hack: gratuitously cool by nature. Not too much of a problem with the startups because they have very little time. In an essay, wrote "Facebook killed TV." Literally meant that's what people are doing instead of watching TV. Not literally true, but as true as you can get in three words. People like to talk to one another. TV, like the Brady Bunch, a fake family; might have preferred to be talking to group of friends, but no mechanism. Telephone was one-on-one till parents got mad. Now you can talk to your friends all the time. Also something about gadgetry: TV versus computer, cell phone versus camera. What got people to use computers even though they are hard to use. Even 14-year-old girls; that's how they exchange pictures of their friends. People over the age of 50 don't get this at all--the Facebook and Twitter phenomena. Why do I care that you are feeding your dog right now? Maybe when you are 18, your life is minutiae. Teenagers waste their time hanging out with their friends. Used to be on cars. Tweeting, great distraction. Time sink. Feature, not a bug, for a certain demographic. Used to be TV; now snuck back in to my computer. Many people over 70 don't have a cell phone, many don't use email. But even many over 50 don't do Facebook or Twitter. Will there be 70-year-old Facebook users? Most people like to waste their time, rich and poor. The reason 70-year-olds don't do it is their peers don't do it. For today's kids, there will be a new thing they haven't grown up with. People will be younger and younger when they are left behind.
55:47Why does the United States have such a vibrant startup culture; and how does immigration affect the startup market? Both the same question. Immigrants start startups, disproportionately so. More than half started by immigrants. Single biggest problem that kills startups is visa problems--people who get kicked out of the country because of political problems back home. Commencement address--just a talk--written for a high school; but no permission granted to student-inviter. Surviving high school. Should treat high school as a day job. Functionally high school was a holding pen. Welcome to the real world: you have to spend a lot of time doing what you don't want to do. Best to use that time effectively. Compared to being a waiter, high school is a pretty good gig; sweet deal. Lots of free time. As long as you are in prison, you might as well learn to be a good chess player. High schools with good reputations academically and for football. Remembering little from high school. Remember college more; still unremembered stuff. Possibly nature of the brain, learning other things that were important. The Scarlet Letter in English class--such a boring book. Deep insights into the challenge of that experience.

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