Memorable quotes
To paraphrase the very quotable Silicon Valley venture capitalist Marc Andreessen, in the future there will be two types of jobs: people who tell computers what to do, and people who are told by computers what to do.
Don’t believe me? Think your idea is worth something? Go and try to sell it, and see what sort of price you’ll get for it. Ideas without implementation, or without an exceptional team to implement them, are like assholes and opinions: everyone’s got one.
When confronted with any startup idea, ask yourself one simple question: How many miracles have to happen for this to succeed? If the answer is zero, you’re not looking at a startup, you’re just dealing with a regular business like a laundry or a trucking business. All you need is capital and minimal execution, and assuming a two-way market, you’ll make some profit. To be a startup, miracles need to happen. But a precise number of miracles.
Whenever membership in some exclusive club is up for grabs, I viciously fight to win it, even if only to reject membership when offered. After all, echoing the eminent philosopher G. Marx: How good can a club be if it’s willing to have lowly me as a member?
The classic sign of a shitty startup idea is that it requires at least two (or more!) miracles to succeed. This was what was wrong with ours. We had a Bible’s worth of miracles to perform: Small-business owners had to use us for all their marketing. We had to solve the scanning-a-bar-code-with-a-phone problem.* We had to generate a comprehensive retail product database, with relevant metadata like prices, reviews, and model numbers. We had to programmatically generate ad campaigns based on that product database. We had to design the world’s best small-biz marketing and campaign management workflow, one that allowed even unsavvy marketers to be successful. That was five miracles, just for starters.
One of Mark Twain’s more uplifting quotes maintains that small people always belittle your ambitions, while the great make you feel that you too can be great. Murthy was most assuredly a small man.
Investors are people with more money than time. Employees are people with more time than money. Entrepreneurs are simply the seductive go-betweens. Startups are business experiments performed with other people’s money. Marketing is like sex: only losers pay for it.
Company culture is what goes without saying. There are no real rules, only laws. Success forgives all sins. People who leak to you, leak about you. Meritocracy is the propaganda we use to bless the charade. Greed and vanity are the twin engines of bourgeois society. Most managers are incompetent and maintain their jobs via inertia and politics. Lawsuits are merely expensive feints in a well-scripted conflict narrative between corporate entities. Capitalism is an amoral farce in which every player—investor, employee, entrepreneur, consumer—is complicit.
What are the costliest Google keywords among relatively high-volume keywords? The ranking changes, but the top ten is always composed of some combination of “insurance,” “loans,” “mortgage,” “classes,” “credit,” “lawyer,” and so on. These are Google’s moneymakers, which pay for the Android phones, the Chrome browser, the self-driving cars, the flying Wi-Fi balloons, and whatever weird, geeky, philanthropic shit the company is up to recently.
You go to war with the army you have. They’re not the army you might want or wish to have at a later time.
The most important decision in a startup, as in life, is picking a partner. It will determine everything that comes after. With the right team, no man or organization can stand against you, and you will ultimately triumph. With the wrong team, you’ll produce internal problems even faster than the external world can, and your inevitable death will effectively be a suicide.
Learn from our missteps, gentle reader! Here’s how it needs to be: either you’ve achieved a certain Vulcan-quality mind-meld with your founders, your brains welded together in the crucible of some formative life experience like the military or hard-won work experience, or there’s one guy running the show (with at least 51 percent of the equity). End of story.
More symbolically, technology entrepreneurs are society’s chaos monkeys, pulling the plug on everything from taxi medallions (Uber) to traditional hotels (Airbnb) to dating (Tinder). One industry after another is simply knocked out via venture-backed entrepreneurial daring and hastily shipped software. Silicon Valley is the zoo where the chaos monkeys are kept, and their numbers only grow in time. With the explosion of venture capital, there is no shortage of bananas to feed them. The question for society is whether it can survive these entrepreneurial chaos monkeys intact, and at what human cost.
More symbolically, technology entrepreneurs are society’s chaos monkeys, pulling the plug on everything from taxi medallions (Uber) to traditional hotels (Airbnb) to dating (Tinder). One industry after another is simply knocked out via venture-backed entrepreneurial daring and hastily shipped software. Silicon Valley is the zoo where the chaos monkeys are kept, and their numbers only grow in time. With the explosion of venture capital, there is no shortage of bananas to feed them. The question for society is whether it can survive these entrepreneurial chaos monkeys intact, and at what human cost.
In order to understand both the function and the name of the chaos monkey, imagine the following: a chimpanzee rampaging through a data center, one of the air-conditioned warehouses of blinking machines that power everything from Google to Facebook. He yanks cables here,
The only thing you got in this world is what you can sell. —Arthur Miller, Death of a Salesman
The lifelong Machiavelli fan in me remembered that memorable line from The Prince: war is never avoided; it’s only postponed to someone’s advantage. I had thought it would be postponed to our advantage, but we’d clearly miscalculated Murthy’s vindictiveness.
As Sun Tzu informs us, no matter how cowardly by nature, anyone fights to the death when his back is against the wall. A wise combatant always allows his opponent a way out, something Murthy in his maniacal pursuit of us hadn’t provided
You may think yourself a puny midget among giants when you stride out into a marketplace, and suddenly confront such a giant via litigation or direct competition. But the reality is that larger companies often have much more to fear from you than you from them.
By halving our effective valuation, we would raise enough to at least pay ourselves and keep the machine going. We’d sell way more of the company in a seed round (about 22 percent) than was typical, and this would raise eyebrows when it came time to raise a series A. Investors don’t like it when a prior round of investors has bought a huge part of the company. It means that either they have to take down less of the company in their round, or the founders have to give up a lot of their share to top up the new investors, and hence lessen their incentive to do well. Also, investors like to feel you’re their bitch or their boy when they wire you a bunch of money, and some other pack of moneymen also having you by the short hairs mutes that sense of ownership.
Like many hardcore engineers, the man was incapable of lying and/or reading a social situation.
Google and a passel of Silicon Valley acquisitions made very rich men of many Valley players. In the self-perpetuating genius of the Valley, that wealth wanted to create more tech wealth, creating an almost embarrassing glut of early-stage angel-investor money. Not only did many of these startup pickers invest their own money, they raised small funds in the $20 million to $40 million range to scale their stakes in budding companies. Angels who used to write $20,000 checks on a deal could now easily write one for $200,000 or more (e.g., our boy Sacca). In tandem, the popularity of accelerators like Y Combinator, plus a general acceptance of entrepreneurship as a career, meant lots of very skilled engineers and product people were skipping the corporate trajectory and building exciting products. The emergence of turnkey, on-demand computation like Amazon Web Services, plus off-the-shelf Web-development frameworks like Ruby on Rails, meant that new ideas were easier than ever to test. Many entrepreneurs chose to build shovels rather than dig for gold, creating more complex software building blocks to underpin the innovation, such as back-end services like Parse, accelerating the startup explosion in an almost exponential way.
First, the ability to monomaniacally and obsessively focus on one thing and one thing only, at the expense of everything else in life. I lived, breathed, and shat AdGrok. Thanks to focusing on AdGrok, I watched my daughter grow up through the frame of a Skype window while I was in AdGrok’s Mountain View shit hole. Second, the ability to take and endure endless amounts of shit. I was raised under the sadistic care of a sister ten years my senior who delighted in unleashing endless taunts and abuses. My father was a domineering man, in every way.
If we see a smiling entrepreneur like Drew Houston of Dropbox on the cover of Fortune, then we assume (A) he deserves to be there due to merit, and (B) he got there through a series of rational acts, one triumph following another in a causal chain. However, such fairy tales reveal themselves to be the fantasies they are following a launch. You’ve spent months and gambled your career on a product, and then after a bit of excitement, you realize what a misshapen and misbegotten piece of shit it really is. This is the crisis that kills 90 percent or more of startups that manage to survive the initial plagues of founder disagreements, failure to ship code, and failure to raise money. This nearly uncrossable chasm is behind all those “What happened?” posts on TechCrunch or other tech rags that crop up when some seemingly unstoppable startup suddenly announces it is ceasing operations and giving back what’s left of the investors’ money. Its founders and management could not negotiate the trough of despair, and like some lost British adventurer trying to cross a forbidding desert, the company basically gave up and died.
The trendy answer is that you need to find what’s called “product-market fit,” which is a fancy way of saying that you need to build a thing people are willing to pay for. It turns out that’s pretty hard, because you don’t know what people will pay for until you ask them to, and if what you’re building is truly novel, there’s no history for you to go on. Fortunately, the iteration cycle in a software business is fast (we don’t need to retool milling machines here), and from some approximately correct starting point we can converge on a final product, almost like successive guesses at the solution to an equation. The quicker we iterate, the more steps we can take in the direction of this mythical point of perfect fit. Each such step costs money in wages, server costs, and lost time.
If, however, we get close enough to that perfect product-market fit, in which users pay more money for the product than it costs to operate (and than it cost to acquire those users to begin with), we’ve escaped the financial free fall.
As true now as in Machiavelli’s time, men are judged by the company they keep.
Where do they hang out? Cheap tastes or expensive? Do they have that “lean and hungry look” of Cassius in Julius Caesar, and eat at dingy taquerias, or perhaps live off cheap staples like ramen or food substitutes? Those are the truly dangerous ones, the ones who live like organized crime trigger men, guerrilla fighters, or sailors at sea—eating shitty food and living in cheap, dumpy crash pads—and who couldn’t give a damn about quality of life. Those are the people to fear, because they don’t need anything an antagonist can deprive them of. Or do they have a score of check-ins at Benu, Saison, and Quince? If they’re not financially independent, then they are harmless tools; they’ll do anything to keep the parade of fungi terrine monkfish and tangerine-peel abalone coming.
The ones who could pass for a homeless person, though, those are the startup kamikazes who will give everything for the entrepreneurial cause, and are stopped only by death or jail.
Here’s another lesson for the aspiring startupista: don’t skimp on lawyers. An error at the hour of signing a big contract, or negotiating an acquisition, could easily cost you millions, or be the deciding factor between summers in Ibiza with your model girlfriend or taking a consolation-prize job as product manager at Oracle instead (look, you get pretax commuter cost benefits there!).
If a local app like Uber makes it big, taxi drivers in Paris and Mexico City will be rioting and sending bricks through cars’ windshields. If Uber wins, Madrid taxi drivers’ wives will be weeping and wondering what’s for dinner. This was the major-league, serious shit, take-no-prisoners championship of tech entrepreneurship, and if you were going to play, you’d better show up ready to bite the ass off of a bear.
Consider for a moment what fertile fields of globe-spanning technology these human shit-strewn streets were: Twitter provides a broadcast platform for political disaffection and political extremism, and heads of states worldwide are unseated in scandals, and governments violently overthrown in the Middle East, destabilizing an entire region.
VCs (or so-called angels like Sacca) raise a fund, out of which they’ll provision some number of investments. Barring doubling down on the same company, which they might do if the fund still has money when a company raises again, those investments are effectively “fire and forget.” The fund’s total profit will be calculated from whatever those initial bets return. Unlike, say, a hedge fund portfolio manager, who rolls the winnings from one good bet into the next, compounding a series of returns into something truly huge, VCs do not take liquidity from one company’s exit and pour it into yet another’s.* This, at heart, is why the go-big-or-go-home strategy makes the Silicon Valley world turn, and why entrepreneurs push themselves to be either the next Airbnb, or nothing. The entrepreneur who bucks this and creates a long-term business of recurring revenue but relatively slow growth is dismissed as running a mere “lifestyle business,” which is a dirty word among VCs.
Little did I know that in the real world of deals, what’s very euphemistically called the “consideration” given to investors can vary widely per the whims and machinations of the founders and the acquiring company. How it works is this: The acquiring company doesn’t care less how money is divided between investors and employees. As we’ve reviewed, what they care about is price per high-value person (that is, engineers and product managers). If that works out, and the form of payment is whatever admixture of cash versus equity they prefer (or are willing to put up with), the deal looks fine to them. Every acquiring company will have such a target price per person in mind when you seriously discuss a deal. Your job as deal negotiator is to get as close to that as humanly possible.
The corporate-development teams of large companies, insofar as their small-company deals are concerned, are really glorified HR recruiters with fatter checkbooks. That’s another little detail the self-glorifying founders of acquired companies often fail to mention.
The human need for immortality projects—those ends that dole out meaning and purpose beyond ourselves—hasn’t changed since the pyramids. The only difference now is the nature of the putative Holy Land, and the means for achieving it
Facebook is full of true believers who really, really, really are not doing it for the money, and really, really will not stop until every man, woman, and child on earth is staring into a blue-framed window with a Facebook logo. Which, if you think about it, is much scarier than simple greed. The greedy man can always be bought at some price or another, and his behavior is predictable. But the true zealot? He can’t be had at any price, and there’s no telling what his mad visions will have him and his followers do. That’s what we’re talking about with Mark Elliot Zuckerberg and the company he created.
But the beat to which the Valley really marches, the actual workaday cadence of technological progress, is that line product manager in a conference room or an engineering bullpen alongside a team, like the first lieutenant leading a platoon in every great war film ever made, figuring out what to build, how to build it, and how to sell it once built. Thousands of such teams dot Silicon Valley, and it’s how the work of technology development really gets done.
But then, that would be doing the bourgeois family thing full-on, with combined finances, expectations of pricey schools, mortgages, the entire needy contraption of settled-down life. To me, only the man who needed nothing was truly free. Until I was financially independent (e.g., fuck-you money), or the captain of a profitable enterprise, I was merely a slave whose bondage was worth one or another price, locked in as much by diapers and tuition costs as by a vesting schedule.
…my Facebook colleagues in the over-thirty cohort were in that dependent boat. Facebook said jump and they could only ask “How high?” And jump they did, reciting whatever corporate script and leaping through whatever hoops their paymaster required, down to the logo-ed onesie they’d slap on their newborns, photos posted on Facebook to the online applause of their equally enslaved colleagues.
However, having grown to adulthood under a tyrannical father I loathed, and whose oppressive presence I never stopped dreaming of escaping, I found the thought of submitting to yet another master repugnant. Not to mention never wanting to relive any sort of family situation, as either child or parent, ever again, for the same reasons of personal history. I couldn’t do it, no matter the paternal draw of vulnerable newborn.
Perhaps just once, marvel at your Facebook experience, at its almost total lack of pornography, spam, hate speech, and general human detritus, and consider what spectacular systems and expertise must exist for a few hundred people to safeguard the online experience of 1.5 billion users, fully a fifth of humanity, on a continual, 24/7 basis.
Why do Facebook and Twitter acquire piddly little companies like AdGrok, FriendFeed, and Aardvark? We’ve already discussed how corporate mergers and acquisitions are basically recruitment via other means in the Valley’s overheated market for technical talent. But there is another motivation: by hybridizing their corporate DNA with the pluck and daring of the startup entrepreneur, they revitalize their internal cultures and add traits not typically found among their recruitment fodder (i.e., smart but obedient engineering grads).
Almost invariably (and there are exceptions) the startup product disappears into the maw of the acquiring company, and is never seen again. But those founders and early employees, skilled at creating something out of nothing when armed with very little, bring their technical flair and product chutzpah to a lumbering organization that is already forgetting its pioneering roots.
Everyone treated me like some champion on a victory lap. But inside, I felt like the survivor of a shipwreck: cold, wet, hands shaking, and a Red Cross blanket thrown over my shoulders, wondering just what the fuck had happened. How I’d gotten from the wild, untethered AdGrok shipwreck in the making to the corporate Elysium of free burgers and mission statements was an ontological puzzle. But the first rule of startups is also true of any fast-paced, competitive workplace like Facebook: act like you belong there, even if you don’t.
As for the actual ability to opt out under capitalism: look at Seattle or SF real estate prices, and the cost of a decent US education, and consider whether Amazon or Facebook employees could really opt out of their treadmill.
The reality is that capitalism, communism, and every other sweeping ideology feed off the same human drives—the founder’s or revolutionary’s narcissistic will to power, and the mass man’s desire to be part of something bigger than himself—even if with very different outcomes. National Socialism, Technofuturism, Bolshevism, the Islamic State, Pan-Arabism, la Commune, Jonestown, the Crusades, la mission civilisatrice, the white man’s burden, evangelical Christianity, Manifest Destiny, Spanish Falangism, the Church of Latter-day Saints, the Cuban Revolution—the villain with a thousand faces, yoking together the monomaniac’s twitchy urge and the follower’s hunger for a role in some captivating story.
In communism people made lines for bread, while in capitalism they make lines for iPhones.
And so the protocol is to not talk about it at all publicly. People of course did discuss it among themselves. Among what were surely many such groups, there was one called NR250, which was more or less a collaborative how-to on being affluent. The title came from “New Rich,” and the 250 from its originally involving the first 250 or so employees, or so the story goes (and at this point it’s more than just early Facebookers). Yes, they were literally nouveaux riches in all senses of the term, and from all reports (more than one member has dished to me) they acted like it. How to buy land under an LLC to hide the fact you’re amassing a compound, the best resort on Maui, how to book or lease private jets, the best high-end credit cards to use, and so forth. But not a word of it while on campus.
As in companies, so in nations: the national conversation also ignored the socioeconomic rift, almost geologic in size, between how the affluent and the just-making-it lived. Facebook was merely the United States in microcosm.
A sharp contrast developed between Googlers working side by side. While one was looking at local movie times on his monitor, the other was booking a flight to Belize for the weekend. How was the conversation Monday morning going to sound now?
A man with a conviction is a hard man to change. Tell him you disagree and he turns away. Show him facts or figures and he questions your sources. Appeal to logic and he fails to see your point.
This study would lay the groundwork for Festinger’s theory of “cognitive dissonance”: the mental stress people suffer when presented with realities contrary to their deeply held beliefs. The key takeaway is that humans naturally avoid this discomfort, skirting situations that aggravate it, or ignoring data that make their mental contradiction more apparent. Note: The purpose of the following exposition is not a neener-neener troll of Facebook, reveling in an embarrassing fiasco for the sadistic glee of it. It’s a case study in how even very smart companies can go temporarily mad and believe in fairies or flying saucers, under the twin pressures of market expectation and blinkered arrogance. Every large company has languished in the delirious trance of some product folly, waking with an urgent start only when reality finally catches up with delusion.
There are only two inflection points in personal wealth, two points where your life really changes. One is the aforementioned fuck-you money, the other is the even loftier fuck-the-world money. Real transformation happens at the first real rung on the wealth ladder. Fuck-you money is like reaching the break-even point in the startup of you, and it means you are no longer beholden to outside forces. Imagine that inflection point for a moment.
Here is your lesson from the Facebook IPO: whenever you see the headline “Stock X Pops on First Day of Trading and Declared a Success,” instead think “Founders and employees just got completely screwed, and the bankers and their wealthy clients made fortunes.” Because that’s what happened, and didn’t happen, in the case of Facebook.
For someone who had spotted the resemblance between Goldman Sachs and Facebook within an hour of meeting the latter, I had forgotten my lessons learned at the former. When it came to monetization, Facebook had no interest in real innovation. It liked its faxes. Like any large company, Facebook would always aim to create monopoly pricing power and maintain information asymmetry, rather than drive true innovation. If Facebook played with the outside world, it always played with loaded dice.
FBX was the Flash Boys of media, trading quanta of human attention at the speed of light. Every time you load a new page in Facebook, not to mention most of the Internet, optical signals crisscross the globe to hundreds of waiting machines, all announcing, like some phalanx of royal trumpeters, your impending arrival.
But would Goldman cede its information asymmetry in the form of the trading flows that it, and only it, saw? Would it cede the ability to more or less arbitrarily set prices for credit risk, alongside a tightly knit network of brokers, effectively manipulating the market to its own benefit, rather than offering an open one?
If you’re cleverer than most middle managers (e.g., Gokul), you’ll work at building your personal brand in a way that both augments your prestige and reflects well on the organization, all in a studiously self-effacing way that allays any concerns around thinking yourself a “star.” Failing that, the logo on your business card is your strongest asset, and you need to bank as much on that as you can, right up to the moment you trade it for another (hopefully better) one.
For every beautiful woman, there’s a man tired of screwing her. —Latin American proverb
The two apps—one for hipsterish, color-filtered photo sharing, the other for mundane texting in price-sensitive markets where SMS was expensive—were the sort of altogether new market directions that big companies tended to miss. WhatsApp and Instagram sold out, but the day will arrive when the leader of a globe-spanning app, the new paradigm in how Homo sapiens sapiens communicates via electrons and radio waves, proves as obdurate and proud as Zuckerberg himself. Then Facebook won’t be able to buy its way out of trouble, and it will have to build its way out instead, a far riskier proposition.
To quote Theodor Herzl, “If you will it, it is no dream; and if you do not will it, a dream it will remain.” Willing dreams into existence was what being an entrepreneur and a product manager was about; for once, finally, they’d be my dreams, rather than purely corporate or mercenary ones.
The lowest level, despite often being the face of Facebook to the world and bedecking themselves with fancy titles like “head of Facebook EMEA,” had no real impact on what product got built, and were there mostly for show.
The way to think about startup employment is this: you’re earning the right, via your labor and time, to invest in the company, at the stock price of the last fund-raising round, just as the company’s initial venture capitalists did. That’s the real compensation you’re earning, and many a former employee agonizes over the decision of whether to plunk down the pile of money or not. If you wouldn’t invest in a company from the get-go, you’re a fool to work for it, as the cash compensation in a startup is typically woefully below market. * The name Y Combinator comes from a type of function in the wonky world of formal mathematical logic.
The “pre-money valuation,” or “pre,” is the stated value of a company before the investors’ money is added to the company’s balance sheet. “Post” is that same value after you’ve cashed their check(s). For example, raising $1 million on $10 million pre means you’ve got an $11 million ($1M + $10M) post-valuation.