Essays on Technology and Culture

Thinking Outside the Startup

Back in 2005, Paul Graham of YCombinator wrote “Why Smart People Have Dumb Ideas” in the midst of approving applicants for the first YCombinator class. Nearly a decade later, his thoughts are even more relevant. Graham bemoans applicants with startup ideas that just seem “cool,” but aren’t anything that will get customers—business ideas that don’t solve problems.

Reading the Wall Street Journal for a week should give anyone ideas for two or three new startups. The articles are full of descriptions of problems that need to be solved. But most of the applicants don’t seem to have looked far for ideas.

Lack of imagination is a problem in every space. But, I don’t want to turn out another angry screed against seemingly frivolous startups that exist just to get bought out. Paul’s essay gave me something else to think about: whether we should focus so much energy into the startup model to solve real problems in the first place—especially technology startups.

Despite what some like to think, not every problem has a technological solution, at least no exclusively technological. Consider the scope at which many startups and solo entrepreneurs work. A smartphone app can tell you how much CO2 you put out on your drive to work. It won’t get high-speed commuter rail in walking distance of home. Changing the transportation infrastructure of the country into something environmentally friendly takes cooperation and sacrifice. It takes government, not just private enterprise. It’s part of why Elon Musk’s Hyperloop might never get off the ground. [1]

Such thinking is anathema to Silicon Valley ideals of individualism, where “sharing” is something you do as a side hustle on Lyft or AirBNB. Compare building out high-speed rail with Google’s self-driving car. The Google Car is the Silicon Valley ideal: individual and asocial. It makes a great demo, but it’s far from a solution to real transporation and environmental issues. Cars For Trees, the carpooling app by Leo Grand, the homeless coder, has the potential to change behavior, but it’s a hack over existing infrastructure, not a change.

The startup model fails at solving problems on a large scope for one reason: money. From the moment a startup gets its first round of seed funding, the pressure is on for it to grow, and either start profiting, or get the attention of a larger company for an acquisition. Only then does the VC get a return on their investment. To go back to Paul Graham:

Most of the groups applying have not stopped to ask: of all the things we could do, is this the one with the best chance of making money?

Paul’s job, the job of any Venture Capitalist, is to make money. It’s why the VC’s investors chose to invest with them: the promise of a lucrative return. By any measure, Paul is doing his job when selecting companies on the basis of if they’ll succeed and profit. The problem is that not every problem can be solved in a way that turns a profit. And, when the race is on to make more money (or a higher valuation) faster and faster, any endeavor that requires a large investment in time before a return can be realized is just isn’t going to cut it. When the California Public Employees’ Retirement Board wants to know they’ll get back so much percent on their fund inside of six years, anything that takes five-plus years to realize is in trouble. This is why biotechnology firms got hurt so bad during the financial crisis, and they still haven’t recovered.

It would be great to see other models explored for solving problems that don’t just focus on what consumers will buy, and what will turn an investment. It’s interesting that growth in non-profits has outpaced growth of for-profit businesses in the US, but you don’t hear much about that. Many of these new non-profits are probably working similarly to startups: focusing on a small niche and working to solve a small problem before expanding—if they expand at all. It also could be advocacy groups, SuperPACs, launching to promote political causes.

What if the serial entrepreneurs who made it big decided to start a non-profit that focused on improving public education, and fund it with their own money instead of putting it into another college drop-out’s idea for a service that could be acquired by Facebook in two years? What if they took their money and used it to lobby for progressive policies in Congress like net neutrality and breaking up the cable monopolies? These aren’t even new models. Imagine what the sort of minds who create groundbreaking new consumer tech could do if they were free from the requirement to make money: just to improve people’s lives with the wildest ideas they can come up with.

It’s high-minded idealism, but there’s so much money being created and recirculated back into the system of startups, acquisitions, and acqui-hires. I don’t see why a civically minded, successful tech entrepreneur couldn’t just say “to hell with it” and fund some blue-sky project for the good of even a community, not just a wallet. Dale Carnegie built libraries. The best we’ve gotten is Mark Zuckerberg throwing $120 million at San Francisco schools. It’s a drop in the bucket of his $28 billion net worth, and hopefully it’ll work better than the $100 million he gave to Newark, New Jersey. The rhetoric of Silicon Valley is all about thinking bigger. Let’s see them put their money where their mouths are—without worrying about making it back.