Ryan Petersen (Flexport); the best Generalist talent is in tech startups...

Dominic Cummings has a great substack, which I highly recommend. 

I just read his recent post 

Dan Wang & Ryan Petersen on China, governance, technology, infrastructure, supply chains, ROE 

which led me to the podcast interview below with Ryan Peterson, CEO and Founder of Flexport. It's one of the best startup founder interviews I've heard in a long time.

 

See also this YC blogpost about the interview.

Is there any doubt that the best "generalist" talent among people aged 20-35 is in tech startups? Petersen understands more about the world (or, at least, how to get stuff done in the world) than any typical business school or social science prof, or any typical big company exec or government official.

Dan Wang of Gavekal is a great China tech and economics analyst -- well calibrated, in my opinion.

... China has strong entrepreneurs as well as a strong state, and these two sometimes reinforce each other. An interesting fact I noticed recently is that the party secretary of Zhejiang province, one of the country’s most important, used to be a director of China’s manned space program. A skim through the Wikipedia pages of provincial party secretaries would reveal a diverse range of technocratic experiences. 

An important factor in China’s reform program includes not only a willingness to reshape the strategic landscape—like promoting manufacturing over the internet—but also a discernment of which foreign trends to resist. These include excessive globalization and financialization. Beijing diagnosed the problems with financialization earlier than the US, where the problem is now endemic. The leadership is targeting a high level of manufacturing output, rejecting the notion of comparative advantage. That static model constructed by economists with the aim of seducing undergrads has leaked out of the lecture hall and morphed into a political justification for only watching as American communities of engineering practice dissolved. And Beijing today looks prescient for having kept out the US social media companies that continuously infuriate their home government. ...

Only a retard (autistic economist) can overlook the pitfalls of blind acceptance of Comparative Advantage (Ricardo, etc.): "Gee, those guys are great at making hypersonic missiles and targeting radar. We'll let them do it and just buy the stuff from them. Everybody wins!" See Charlie Munger, Ricardo and finance.

The next Silicon Valley? ...

A Silicon Valley entrepreneur and angel investor (originally from Germany) on the Beijing startup ecosystem. See also Canyons of Zhongguancun.

recode: ... Beijing will be the only true competitor to Silicon Valley in the next 10 years.

Beijing is not just a nice startup playground which might become truly interesting in a few years. This is the big leagues now. Startups can achieve massive scale quickly, because the domestic market is 1.3 billion people, which is four times the U.S. or European population.

An increasing share of these 1.3 billion people is actually targetable. In the U.S., 190 million people carry a smartphone; in China, it is more than 530 million today, and it will be 700 million or more in three years.

But a large market alone does not mean that a place will become a startup hub. It is the combination of market size and the extreme consumer-adoption speed of new services, combined with the entrepreneurial spirit and hunger for scale of Chinese entrepreneurs.

Beijing is the main hub where it happens. Here, entrepreneurs, engineering talent from the two top Chinese universities — Tsinghua and Peking — and VC money come together. Seeing the scale, speed, aspirations, money supply and talent here, I walked away thinking this will be the only true competitor to Silicon Valley in the next 10 years.

... Big startups are built in three to five years versus five to eight in the U.S. Accordingly, entrepreneurs who try to jump on the bandwagon of a successful idea scramble to outcompete each other as fast as they can.

Work-life balance is nonexistent in Chinese startups.

Meetings are anytime — really. My meeting in Beijing with Hugo Barra, who runs all international expansion for Xiaomi — the cool smartphone maker and highest-valued startup in China, at around $45 billion or so — was scheduled for 11 pm, but got delayed because of other meetings, so it started at midnight. (Hugo had a flight to catch at 6:30 am after that.)

In China, there is a company work culture at startups that's called 9/9/6. It means that regular work hours for most employees are from 9 am to 9 pm, six days a week. If you thought Silicon Valley has intense work hours, think again.

For founders and top executives, it's often 9/11/6.5. That's probably not very efficient and useful (who's good as a leader when they're always tired and don't know their kids?) but totally common.

Teams get locked up in hotels for weeks before a product launch, where they only work, sleep and work out, to drive 100 percent focus without distractions and make the launch date. And while I don't think long hours are any measure of productivity, I was amazed by the enormous hunger and drive. ...

No Exit

The gritty life of a startup founder in 2014 Silicon Valley.

WIRED: ... you’re getting a lot of people starting companies who shouldn’t be starting companies. Another investor I talked to called this “buying a cheap call option on a guy who doesn’t know that’s what you’re doing”—on a guy, that is, who thinks you’re investing in his success, not betting on the high-risk, high-yield chances of it. You know the odds on any given company’s success are long, but that’s why you make a lot of bets. In the first dotcom boom, the risk was largely carried by the investors, but now the risk has been returned to the youth.

Without mentioning the name of the company, I told him about Boomtrain, about what the past few weeks and months had been like for them. About how quickly they’d aged, how much weight they’d lost, the Airbnb-ing, the heavy mask of confidence, the number of mornings they’d woken up at 5 am grinding their teeth. Martino was sympathetic but unmoved. He didn’t expect them to make it. “They ran an experiment. None of their lives have been ruined.” He knew they’d get good jobs, even if it meant the life of a project manager at Yahoo. “And none of their investors’ lives have been ruined either. When they close up shop, their investors will say, ‘That’s one more off the books. I don’t need to help them anymore. I get my time back.’”

Martino watched the game for a minute, then turned back to me and held my gaze. He could tell I’d come to like and admire and root for the Boomtrain guys. I could understand the risk they thought they were taking. I was glad it looked like they’d finally found the momentum they so badly needed. “Let me tell you what the worst thing would be. The worst thing is that these guys get their funding tomorrow and are stuck doing this for another year. So far, they only lost one.” ...

All the while, Martino’s ultimate warning—that they might someday regret actually getting the money they wanted—would still hang over these two young men, inherent to a system designed to turn strivers into subcontractors. Instead of what you want to build—the consumer-facing, world-remaking thing—almost invariably you are pushed to build a small piece of technology that somebody with a lot of money wants built cheaply. As the engineer and writer Alex Payne put it, these startups represent “the field offices of a large distributed workforce assembled by venture capitalists and their associate institutions,” doing low-overhead, low-risk R&D for five corporate giants. In such a system, the real disillusionment isn’t the discovery that you’re unlikely to become a billionaire; it’s the realization that your feeling of autonomy is a fantasy, and that the vast majority of you have been set up to fail by design.

WhatsApp?

A detailed inside look at the founders and early days of the startup. The team is only 50 people. Over half of the $19 billion from Facebook will go to the two founders (both Yahoo! alums), and I'd guess at least a billion or two will be split by the rest of the team. The rest will go to investors: Sequoia + angels.

Forbes: ... The two sat at Acton’s kitchen table and started sending messages to each other on WhatsApp, already with the famous double check mark that showed another phone had received a message. Acton realized he was looking at a potentially richer SMS experience – and more effective than the so-called MMS messages for sending photos and other media that often didn’t work. “You had the whole open-ended bounty of the Internet to work with,” he says.

He and Koum worked out of the Red Rock Cafe, a watering hole for startup founders on the corner of California and Bryant in Mountain View; the entire second floor is still full of people with laptops perched on wobbly tables, silently writing code. The two were often up there, Acton scribbling notes and Koum typing. In October Acton got five ex-Yahoo friends to invest $250,000 in seed funding, and as a result was granted cofounder status and a stake. He officially joined on Nov. 1. (The two founders still have a combined stake in excess of 60% — a large number for a tech startup — and Koum is thought to have the larger share because he implemented the original idea nine months before Acton came on board. Early employees are said to have comparatively large equity shares of close to 1%. Koum won’t comment on the matter.)

The pair were getting flooded with emails from iPhone users, excited by the prospect of international free texting and desperate to “WhatsApp” their friends on Nokias and BlackBerries. With Android just a blip on the radar, Koum hired an old friend who lived in LA, Chris Peiffer to make the BlackBerry version of WhatsApp. “I was skeptical,” Peiffer remembers. “People have SMS, right?” Koum explained that people’s texts were actually metered in different countries. “It stinks,” he told him. “It’s a dead technology like a fax machine left over from the seventies, sitting there as a cash cow for carriers.” Peiffer looked at the eye-popping user growth and joined.

Through their Yahoo network they found a startup subleasing some cubicles on a converted warehouse on Evelyn Ave. The whole other half of the building was occupied by Evernote, who would eventually kick them out to take up the whole building. They wore blankets for warmth and worked off cheap Ikea tables. Even then there was no WhatsApp sign for the office. “Their directions were ‘Find the Evernote building. Go round the back. Find an unmarked door. Knock,’” says Michael Donohue, one of WhatsApp’s first BlackBerry engineers recalling his first interview. ...

Global innovation and entrepreneurship

Photos from the World Summit on Innovation and Entrepreneurship, held at the Museum of the Moving Image, NYC.

It seems that every region in the world is trying to replicate the Silicon Valley model. There were delegations at this event from the EU, Norway, Jordan, Egypt, Japan, you name it. Lots of interesting NYC startups represented.

The NSA will note that I do a lot of blogging while traveling -- in particular while waiting for a flight  8^/

Hacker hostels

When I started my first company we rented a huge house in N. Berkeley (which we called the Geek House, or Geek Haus) and furnished it in one shot (beds, desks, tables, lamps, dressers) with a mega trip to Ikea. The coders lived in the house, generally one or two to a room, and the downstairs had a server room and rows of workstations. The whole thing was wired with ethernet (pre-Wifi!) and the garage was filled with computers. We even had mats in the back to practice BJJ and a pullup bar (I tied another Berkeley physics PhD named Aram in the pullup contest with 18). What else could anyone ask for? When we closed a bigger VC round we got some real office space in Emeryville next to the Siebel building.

I actually never lived in the Geek House. My girlfriend and I rented a 3500 square foot house in the Piedmont hills from a Berkeley chemistry professor who was on sabbatical. From the decks and patio you could see SF, the Bay Bridge and the Golden Gate Bridge. If you ever get a chance to live in the Berkeley hills don't turn it down :-)

NYTimes: This is not some kind of dorm, but a “hacker hostel.” It’s one of several in the Bay Area that offer short- or long-term stays for aspiring tech entrepreneurs on the bottom rung of the Silicon Valley ladder, those who haven’t yet achieved Facebook-level riches. These establishments put a twist on the long tradition of communal housing for tech types by turning it into a commercial enterprise. 

The San Francisco hostel is part of a minichain of three bunk-bed-stuffed residences under the same management, all places where young programmers, designers and scientists can work, eat and sleep. 

These are not so different from crowded apartments that cater to immigrants. But many tenants are here not so much for the cheap rent — $40 a night — as for the camaraderie and idea-swapping. And potential tenants are screened to make sure they will contribute to the mix. Justin Carden, a 29-year-old software engineer who is staying in another hostel, in Menlo Park, while working on a biotech start-up, talks about the place as if it were Stanford. 

“The intellectual stimulation you get from being here is unparalleled,” Mr. Carden said. “If you’re wanting to do something to change the world and make it a fundamentally better place, you need to be around the right people.”

Notice how idealistic Mr. Carden is. His goal is to change the world by creating something great -- not to earn a seven-figure bonus by ripping the face off a muppet (client)  ;-)

Compare to Foo Camp.

University of Edinburgh: Introduction to Technology Startups

The afternoon of June 20 we have a break from ICQG 2012 (International Conference on Quantitative Genetics). I'll be giving a talk at the University of Edinburgh, in case anyone is interested. Both Charles Darwin and James Clerk Maxwell started their higher education at Edinburgh. It's quite an honor to give a lecture in the James Clerk Maxwell Building! :-)

Mmmm... doughnuts!

 

Roberts Funded Lecture

Introduction to technology startups

Steve Hsu

Professor of Theoretical Physics & Director, Institute for Theoretical Science

University of Oregon

Wednesday 20 June 2012 from 1600

All welcome!

In the past, applied research and development was concentrated at corporate labs like Bell, IBM, Xerox PARC, etc. Today, innovation is more likely to be found at small venture capital backed companies founded by creative risk takers. The odds have never been greater that you, a scientist or engineer, might someday work at (or found!) a startup company. The talk is an introduction to this important and dynamic part of our economy, from the perspective of a physics professor and serial entrepreneur.

Lecture Theatre C, School of Physics & Astronomy, James Clerk Maxwell Building, Kings Buildings

Doughnuts and coffee at 1600

Talk 1630-1730

The Instagram story

I was shocked at the $1B Instagram acquisition, but then again I'm not exactly up to speed on the latest in iPhone apps or social networking. This Times article gives some background. Although the article stresses founder Kevin Systrom's Stanford connections, it seems like the go to guy was really a Caltecher ;-)

NYTimes: Past midnight, in a dimly lighted warehouse jutting into the San Francisco Bay, Kevin Systrom and Mike Krieger introduced something they had been working on for weeks: a photo-sharing iPhone application called Instagram. What happened next was crazier than they could have imagined.

In a matter of hours, thousands downloaded it. The computer systems handling the photos kept crashing. Neither of them knew what to do.

“Who’s, like, the smartest person I know who I can call up?” Mr. Systrom remembered thinking. He scrolled through his phone and found his man: Adam D’Angelo, a former chief technology officer at Facebook. They had met at a party seven years earlier, over beers in red plastic cups, at the Sigma Nu fraternity at Stanford University. That night in October 2010, Mr. D’Angelo became Instagram’s lifeline.

... For Mr. Systrom, the connections forged at Stanford were crucial.

Mr. D’Angelo, a 2006 graduate of the California Institute of Technology, helped him find engineers, set up databases and flesh out features. Soon after Instagram came out of the box, he put his money into it.

Foo: exuberant geeks

Making the future.



CTOs and CEOs and Founders and Inventors and Creators.



Never before have the economic and creative prospects been so good for a young person with quantitative or technical abilities. In my generation we had fewer options: defense, academia or big stodgy corporations. Today you can code or analyze data or build mathematical models for a hedge fund, a bank, a social networking startup, a web publisher, an e-commerce site, a video game company, Google, etc., etc. If you can manage a team and communicate your vision to investors and partners, all the better. The sky is the limit.




"The Times gets a billion impressions a day. How do they optimize their ad revenue? To get real-time or nearly real-time analysis of, say, how many people in Wisconsin who were on Zappos within the last hour also viewed a Style section article, we need a big hadoop deployment and in-memory database that let's the user slice through a 100 dimensional parameter space. It's business intelligence on a supercomputer. Remnant ad space is auctioned on AdSense to competing bots, with the whole thing -- cookie analysis, automated bidding, ad fetching and placement -- taking place over 500 milliseconds."

"We're empowering people in rural India by giving them access to piece-rate work over the internet."

"90% of mechanical turk work is web spam." :-)

"They tried to buy us with shares priced on a secondary market, but I wouldn't trade my execution risk against that valuation risk."

"Yes, it's a flashlight but it's LED with a lithium ion battery. 3000 lumens shined into a burglar's eyes will blind them for 20 minutes. Those fins are for heat dissipation; the tip reaches 180 degrees."

"Computer vision is next. Much easier than NLP, but it'll be hacks strung together like everything else."


A few more Foo Camp 2011 photos here. Scott Berkun shares his insights here.

Foo 2011 photos

Opening dinner.




The scheduling scrum.



Werewolf?



Make zone.





A schedule board.



Face board.



A session on Bitcoin. There seems to have been a bit of a crash today -- the dollar exchange rate went down to $8 from $28. Was there more rhetoric from Senator Schumer?



Outside camping.



Inside camping.



Geeks and booze.



Favorite quote of the day: "Startup CEOs are warm sociopaths."

Foo Camp 2011

I'm off today to Sebastapol, CA for another Foo Camp :-)



Here is what I wrote about it last year.

What it takes to be a startup founder

This is an interview with Paul Graham of Y Combinator by Charlie Rose. Founders need to be smart, determined and willing to break the rules -- slightly devious :-)

Perhaps Paul should have mentioned The Will to Power.


Video streaming by Ustream

techcrunch: ... Graham says that when people come to him and say they’ve got a great idea, his first response is, “Tell me about your cofounders”. In general the idea is less important, though he says that if it’s a really terrible idea that might reflect poorly on the founders, and a really great idea might lift them up.

“There are some people who just get what they want in the world. If you want to start a startup you have to be one of those people. You can’t be passive and wishy-washy,” Graham says.

Rose followed up with a key question: how can you tell which people have that kind of determination in ten minutes (which is how long YC interviews are)?

Graham says that it’s hard to tell. “We can be fooled about determination — you can usually tell how smart people are in ten minutes. But people can put on an act for determination for ten minutes.” The YC partners also look for mental flexibility — they’ll ask a company to rotate their idea 90 degrees to see how they respond. “Some people will say yeah, that would work. Others will say, ‘Oh no, actually we wanted to do the other thing.’”

Another key factor: Naughtiness. “Startups often have to do slightly devious things,” Graham says. “You can tell if people have a gleam in their eye. You don’t want people who would be obedient employees… we’re not looking for people who did what they were told in life.”

Graham recounted his initial interactions with Loopt founder Sam Altman, who he first spoke to when he was only 19. (“19 going on 40″, Rose added). Altman was actually initially rejected, but he “pushed back like a 40-year old” and told Graham that he would be joining the program.

Asked about the recurring arguments that we’re in a bubble, Graham said, “I worry prices are high, but I’m reluctant to use the word bubble. Things are not crazy. I warn people that prices are high and that they should raise money now, because things could change tomorrow.”

Overall, Graham says that YC partners are “looking for people like us”, explaining that many VCs are MBAs, whereas YC partners are mostly entrepreneurs. This, Rose later added, appears to be the lowest common denominator uniting the people that YC invests in.

... Asked to list ten of YC’s best successes, Graham listed off: Dropbox, Airbnb, Loopt, Heroku, Scribd, Grepplin, Xobni, Justin.tv (it sounded like he could keep going)

Y Combinator keeps track of the successful companies that they initially rejected. One anecdote: Graham says that MIT Professor and YC Partner Robert Morris is a notoriously low grader for the applications. He had given one app a ‘C’, which sunk it in the ratings, and it went on to be successful. Now YC double-checks every app Morris gives a low grade to.

The total value of YC companies is now around $3 billion — YC has invested a total of around $5 million. !!

Startups, back in the day

I did this interview on entrepreneurship a while ago, and just noticed they now have a transcript up. I'm describing events between 2000-2003, when I was CEO of a startup called SafeWeb.

Me: ... It was the usual lose-a-dollar-on-every-transaction-but-make-it-up-in-volume kind of thing that a lot of people experienced this back in the day. So we succeeded wildly in terms of getting users and…but that was just eating up our cash reserves in terms of the bandwidth costs and stuff like that. ... it was apparent to us we couldn’t continue this way; we weren’t going to become profitable on the consumer side. And there were some efforts at that time to see if there was interest in say Yahoo or by Yahoo or other portals to acquire us so that they could have a kind of Yahoo branded privacy experience for their users. Stuff like that. We had some pretty high level meetings. I shook Jerry Yang’s hand and had a meeting with him at Yahoo and we thought, ‘Oh, hey there’s a chance we’re going to get acquired here.’ But those things didn’t play out and so we had to make a very tough decision just to drop that business and head in the enterprise direction. And that was a very tough decision and we had to cut our team quite a bit after that decision. I’ll never forget …

Me: ... Emeryville’s where Pixar is and a bunch of biotech companies just south of Berkeley; it’s right near the Bay Bridge. And it’s a beautiful little place and we were right on the water, we had a beautiful office and one day I had to … well, how do you fire people? You don’t want to fire people in the middle of a work day with other people around so you know, you kind of wait till the end of the day. This is all, if you look up in management books, there’s a whole algorithm for how you fire people. But one of the problems we had was we had to fire a lot of people, we had to do it all at once and there wasn’t space in the office. So what we did, because we didn’t want to call people in sequentially, so we basically ... just told ... guys to meet us outside. The group that we were going to let go and we had a conversation out there. And I’ll never forget ... it was a beautiful, sunny, idyllic day. We were standing next to the Bay but I was firing five or ten guys. And some of these guys were people I had known for years ... one of the guys actually started crying. And it just… I tell you, every time you hire somebody you should picture that you might have to fire them. That forces you to be careful in the hiring because the most painful thing for me at least, as a CEO, that I ever had to do was fire somebody. And you can’t … you’re not a man if you delegate that. You hired him, you brought him in, you've got to face him and tell him what’s going on. And it’s the toughest thing, I think, for me. Anyway, so anybody who’s ever done it knows what I’m talking about.

...

Me: OK, so, at this point, we were competing well in the SSL VPN space [enterprise security]. We have the potential of closing a pretty big round … like 5, 10 million dollar round, with one of the big Sand Hill shops. And at this time, I’m still the CEO. But what’s happening now is my Department Chair is telling me I have to come back. You’ve been out a year and a half, and you’re going to have to resign or come back. And that’s a typical story, actually. Universities are pretty rigid about this stuff. My wife is also a professor at the same university. So unless she wanted to give up her career, too, I had to go back to the university. I couldn’t stay down in the Valley anymore... very tough decision ... at one point, the senior partner, the managing partner of this fund that wanted to put the money in, we had had a very nice dinner in, you know, one of these. Can’t remember the name of the restaurant. It’s one of the standard restaurants where you eat with VC’s down there. [Laughs] Anyway, so he calls me on the phone ... for some reason I think I’m back in Eugene. He calls me. I’m in my office. I’m actually sitting right where I’m sitting right now. And he says, “Hey, we really like you. We love the company. We think it’s a great opportunity. We want to put the money in. But we’re not putting it in unless you’re CEO. And we don’t like the guy that you have slotted in to take your place.” That was a very tough decision. The future of the company basically bifurcated on that point. So had we taken the money, we would have muscled up. And we probably would not have gone for an acquisition until much later. And it would have been like a 100 million, 200 million dollar acquisition. Instead, because we didn’t get that money, we had to look more immediately for an acquisition. And it turned out to be a smaller acquisition. So my whole life, basically, in that other parallel universe, I would be very different, living in a very different life right now.

Interviewer: And so why did you make that decision? Here you’ve got someone who’s offering you money, who thinks so highly of you as an entrepreneur, that he won’t have anybody else in your place. You still have the possibility for incredible riches. Why give that up?

Me: Well, you know, part of it is, it’s a life choice. And I’m still, to this day, I’m still a professor. So, I’m obviously intellectually interested in the kind of work that I do as a theoretical physicist. And I ultimately chose that, and the family situation, over staying in the company. And, I mean, I became Chairman of the Board of Directors, but I wasn’t the CEO anymore. So, it was a tough decision. I second guess it. I mean maybe I should have stayed, you know.

Bill Gross (Idealab) at Caltech

Went to a talk by Bill Gross (of Idealab, not Pimco) at the Caltech entrepreneur's club. Gross graduated in 1981 and is one of the most creative entrepreneurs in the world. Here's a great interview with him.

How to Get a Real Education

Scott Adams, creator of Dilbert, writes in the Wall St. Journal.

WSJ: I understand why the top students in America study physics, chemistry, calculus and classic literature. The kids in this brainy group are the future professors, scientists, thinkers and engineers who will propel civilization forward. But why do we make B students sit through these same classes? That's like trying to train your cat to do your taxes—a waste of time and money. Wouldn't it make more sense to teach B students something useful, like entrepreneurship? ...

Conquer Fear. ... Then I took the Dale Carnegie course. It was life-changing. The Dale Carnegie method ignores speaking technique entirely and trains you instead to enjoy the experience of speaking to a crowd. Once you become relaxed in front of people, technique comes automatically. Over the years, I've given speeches to hundreds of audiences and enjoyed every minute on stage. But this isn't a plug for Dale Carnegie. The point is that people can be trained to replace fear and shyness with enthusiasm. Every entrepreneur can use that skill. [ See this post from 2004 for a summary of How to Win Friends and Influence People -- a timeless classic! ] ...

Write Simply. I took a two-day class in business writing that taught me how to write direct sentences and to avoid extra words. Simplicity makes ideas powerful. Want examples? Read anything by Steve Jobs or Warren Buffett.

Learn Persuasion. Students of entrepreneurship should learn the art of persuasion in all its forms, including psychology, sales, marketing, negotiating, statistics and even design. Usually those skills are sprinkled across several disciplines. For entrepreneurs, it makes sense to teach them as a package.

That's my starter list for the sort of classes that would serve B students well. The list is not meant to be complete. Obviously an entrepreneur would benefit from classes in finance, management and more.

Remember, children are our future, and the majority of them are B students. If that doesn't scare you, it probably should.

Mixergy interview

I did this interview with Andrew Warner, an entrepreneur whose web site mixergy.com aims to help other business innovators. Andrew and I both ran tech startups "back in the day" and got to experience the Internet Bubble first hand :-)

The Scientific Life: entrepreneurs

From The Scientific Life, by Harvard historian of science Steven Shapin. This book is full of realistic descriptions of the "late modern" scientific enterprise, and how it came to be. (Publisher synopsis, interview, talk.)

Many scientific entrepreneurs reject any notion that the transformation of knowledge into material products or marketable services is any less intellectually demanding, or that it requires any lesser degree of intelligence, than so called pure science. ... The problems may be diffusely framed -- how to raise finance, recruit and motivate people, organize the corporate environment, locate markets and identify competitors -- but, because of that, they can plausibly be seen as more intellectually demanding than the well-framed problems of academic science. Entrepreneurs may see themselves as having a broad vision of the world, contrasted to the narrowness and inwardness of their purely academic colleagues. They know how to do things about which their colleagues are clueless. It's a matter of experience, of course, but it may also be seen as a form of constitutional intelligence.

While I can't help but like this paragraph, I do think we should distinguish between intellectual ability and other sorts of abilities. Scientists who start and run companies may have a broader set of skills (leadership, negotiation, risk taking, communication, psychological insight, etc.) than the typical academic, but I wouldn't describe running a startup as more intellectually demanding than pure scientific research (at least not theoretical physics!).

Me and Twitter

No, I'm not on Twitter. I don't need to be immersed in distracting stimulus -- the web is bad enough. My thoughts are already shallow; don't force my brain to swim in even shallower water :-)

I met Twitter founder Evan Williams a few years ago, before Twitter was anywhere near a big thing. He told me about Blogger, which he sold to Google, and then the inevitable "So what are you working on now?" question came up.

He described Twitter to me, and two thoughts entered my mind. The first shows I am old, or out of touch, or have no feel for Web 2.0 consumer startups: "Who would use that?" I said to myself.

The second thought, which I actually verbalized, turns out to be a good question (still unanswered) and shows I may have VC potential: "How are you going to monetize that?" :-)

Here is a great talk by Williams about his podcasting startup Odeo, which somehow spun out Twitter. Note it's from 2005, but his insights on entrepreneurship are great; he's a low-key midwestern guy like me (from Nebraska).


Nevertheless, this Twitter feed cracked me up today:
http://twitter.com/shitmydadsays

"You need to flush the toilet more than once...No, YOU, YOU specifically need to. You know what, use a different toilet. This is my toilet."
1:07 PM Aug 23rd from web

"Don't touch the bacon, it's not done yet. You let me handle the bacon, and i'll let you handle..what ever it is you do. I guess nothing."
11:15 AM Aug 22nd from web

"Your mother made a batch of meatballs last night. Some are for you, some are for me, but more are for me. Remember that. More. Me."
8:57 AM Aug 21st from web

"Your brother brought his baby over this morning. He told me it could stand. It couldn't stand for shit. Just sat there. Big let down."
9:35 AM Aug 20th from web

"Love this Mrs. Dash. The bitch can make spices... Jesus, Joni (my mom) it's a joke. I was making a joke! Mrs. Dash isn't even real dammit!"
9:28 AM Aug 19th from web

"The dog is not bored, it's a fucking dog. It's not like he's waiting for me to give him a fucking rubix cube. He's a god damned dog."
10:43 AM Aug 18th from web

"I didn't live to be 73 years old so I could eat kale. Don't fix me your breakfast and pretend you're fixing mine."
11:24 AM Aug 3rd from web

Bhide, innovation and basic research

I highly recommend this podcast interview with Amar Bhide at Columbia Business School. Bhide studies entrepreneurship and has a very good understanding of how business innovation actually works. (This is quite rare for an academic -- even those in economics departments or business schools.)

The whole podcast is worthwhile, but particularly the last 25 minutes (starting at about minute 40), in which Bhide discusses Schumpeterian vs Hayekian models of innovation, Knightian uncertainty, securitization and the financial crisis.

I would fault Bhide in one area: the catchy point of his recent book is that high level scientific breakthroughs (e.g., Archimedes' Principle of buoyancy) rapidly become public goods, whereas the nitty gritty skills and know-how necessary to create a useful product (e.g., shipbuilding) are more readily localized and the real source of competitive advantage. He focuses on small optimizations of existing technology to solve everyday problems; it's true that this is the more common type of innovation. But he neglects how whole new industries are sometimes created by real technological breakthroughs.

To take a particular example, look at the Fairchild Semiconductor guys. They weren't just average engineers -- they were trained in advanced labs and hired by the guy who actually invented the transistor (Shockley). It's no coincidence that the country that paid for the basic R&D went on to invent and capture the semiconductor industry. Of course, it was also necessary to have venture capital (actually, they sort of invented it), big capital markets and proximity to customers. But Bhide sounds like he wants to leave out the R&D aspect -- that can be done anywhere, he says. Yes, it can be done anywhere, but the commercialization is more likely to happen nearby, as long as the other necessary factors are also available. I could tell a similar story about biotech or internet companies in the bay area.

Basic research tends to be underfunded primarily because the inventor seldom captures the lion's share of future returns. This makes it less appealing to private investors compared to small optimizations (applications of existing technology) which lead more directly to products and profits. Therefore, funding for basic research must come from the public sector. Societies typically spend too little rather than too much, as future returns are diffuse and have no singular advocate.

Founders' stories

If you want to know what it's like to found a technology startup, read Founders at Work: Stories of Startups' Early Days by Jessica Livingston (Web page, Google books, Amazon). She interviews 32 founders of companies such as Apple (Steve Wozniak), Hotmail (Sabeer Bhatia), RIM (Mike Lazaridis) and ViaWeb (Paul Graham). I haven't finished it yet, but so far the stories ring very true.

One complaint I might have is that all these startups succeeded. It would be good to hear from a few founders who crashed and burned! You do get a bit of exposure to failure in this collection, because in almost every story there are close brushes with defeat -- founders running out of cash, having to radically change business models, lay off employees, etc. -- but ultimately there's a happy ending.

I guess I'm an old Silicon Valley hand, because I knew the broad outlines of the stories of almost all the companies in the book, but each interview so far has revealed fascinating details I'd never heard before.

Another nitpick about the interviews, which I think kind of reveals that the author Livingston is not herself an entrepreneur, is that they don't go into very much detail about the financials of the company -- the real nitty gritty of valuations, equity stakes, acquisition prices, how key negotiations (like exits) went. I guarantee you that almost any startup guy (emphasis, perhaps, on "guy"), when hearing the story of another startup, is doing a running calculation in his head of the founders' equity stake and how much they ended up making. It may sound crass but it's absolutely true and I've experienced it many times in conversations ("Hmm, what was the price? What was his stake?").

The best in-depth account of a startup I've read is High Stakes, No Prisoners by Charles Ferguson, who doesn't leave out any of the key details. I read it before I started my first company, and I'm very glad I did. Ferguson is a very interesting character (Times profile); I can't wait to see his new movie on Iraq.

A note to scientists, academics and economists: even if you have no plans to ever start your own company, I recommend this book for the insight it gives into the workings of technological innovation -- Schumpeter's all important process of creative destruction, as wrought by individual entrepreneurs.

Econlib.org on Schumpeter:

Capitalism, Socialism, and Democracy was much more than a prognosis of capitalism's future. It was also a sparkling defense of capitalism on the grounds that capitalism sparked entrepreneurship. Indeed, Schumpeter was among the first to lay out a clear concept of entrepreneurship. He distinguished inventions from the entrepreneur's innovations. Schumpeter pointed out that entrepreneurs innovate, not just by figuring out how to use inventions, but also by introducing new means of production, new products, and new forms of organization. These innovations, he argued, take just as much skill and daring as does the process of invention.

Innovation by the entrepreneur, argued Schumpeter, led to gales of "creative destruction" as innovations caused old inventories, ideas, technologies, skills, and equipment to become obsolete. The question, as Schumpeter saw it, was not "how capitalism administers existing structures,... [but] how it creates and destroys them." This creative destruction, he believed, caused continuous progress and improved standards of living for everyone.