
The Book of Graham - allworknoplay
http://www.leveragedsellout.com/2014/02/the-book-of-graham/
======
etrain
It seems that a lot of people are missing the point. Leveraged Sellout was
famously satirical of the financial markets in the heady pre-crisis days of
'06-'08\. Even published a book: [http://www.amazon.com/Damn-Feels-Good-Be-
Banker/dp/B0023RSZK...](http://www.amazon.com/Damn-Feels-Good-Be-
Banker/dp/B0023RSZKU)

The site was quiet for a long time and has very recently re-emerged to take on
the tech industry - albeit from the perspective of the New York finance type.

Outlandish and uncomfortably true.

~~~
argonaut
A side note: If you claim that people are missing the point, then you need to
state that point (and why). Otherwise you're just leaving those people
confused and/or angry.

~~~
PakG1
I thought the point was made clear that it's a satirical website?

~~~
argonaut
And what is the point that the satire makes? Just saying that something is
"satire" or "sarcasm" is a total cop-out.

~~~
norswap
Satire makes people laugh at the absurdity of things, by means of exageration.

The point of satire is not always to "make a point". I don't think it is in
this case anyway. But if you really want to see something you could see a
criticism of the startup ecosystem that "puts bright people to work by making
them shuffle bits of questionable value".

~~~
PakG1
Actually, usually there is a point to satire, the vibe of which is caught in
your first sentence.

[http://en.wikipedia.org/wiki/Satire](http://en.wikipedia.org/wiki/Satire)

 _Satire is a genre of literature, and sometimes graphic and performing arts,
in which vices, follies, abuses, and shortcomings are held up to ridicule,
ideally with the intent of shaming individuals, corporations, government or
society itself, into improvement.[1] Although satire is usually meant to be
humorous, its greater purpose is often constructive social criticism, using
wit as a weapon and as a tool to draw attention to both particular and wider
issues in society._

------
rdl
This was surprisingly entertaining. There's some truth to it, but it
essentially misses three things:

1) The intangible benefits of being at a startup (as a founder or early
employee) -- working on interesting problems, with smart people, in a well
funded environment. You learn things, meet people, get to use amazing tools.
(Startups definitely aren't the only way to do this -- academia or, for
engineering, some parts of the military or government or big enterprises have
some awesome toys, and some world-class experts, and interesting problems,
too. But in Silicon Valley, the barrier to entry is really low, and the
problems are generally the right size for individuals or small groups to solve
(partially) and quickly.

2) The downside to failure is exceptionally low. It's all other people's money
(at least in Silicon Valley); your real cost is opportunity, but generally the
market values a failed startup founder or early employee at enough of a
premium over a member of a later stage team that you can catch up quickly.

3) The EV of upside is both the odds of success (correctly identified as low)
and the magnitude of that success. 1% odds in an even game suck; 1% odds where
you're given your wager by someone else and you get to keep 50% of the upside
and the upside is potentially 10000:1 is pretty awesome. Doubling down on
success, moving away from failure, and you can do this 5-10 times pretty
easily.

~~~
kawera
_The downside to failure is exceptionally low. It 's all other people's
money..._

Oh my!

~~~
nl
It's easy to pull a quote like that and make it sound like a moral failing. If
you read the comment it's quite smart observation:

 _1% odds in an even game suck; 1% odds where you 're given your wager by
someone else and you get to keep 50% of the upside and the upside is
potentially 10000:1 is pretty awesome._

The fact is is someone else's money _directly_ modifies the costs to you, and
therefore changes the risk/reward calculation. There is no implication that
you wouldn't work as hard simply because it isn't your money.

~~~
crntaylor
You might not work any less hard, but you'll certainly take more risks if you
don't experience the downside.

Answer quickly - how much of your net worth would you risk on a bet with 1%
chance of a 1000X payout? Now how much would you risk if you can hand off 90%
of any loss you take to someone else?

The difference is what we call moral hazard:
[http://en.wikipedia.org/wiki/Moral_hazard](http://en.wikipedia.org/wiki/Moral_hazard)

~~~
CapitalistCartr
Taking a crazy risk is what the VC is paying you to do. If it didn't take a
crazy idea to make it big, everyone would see it, and many would be doing it.
From the point of view of the VC: how much of your net worth would you bet on
a 1% chance of a 10K payout, if you cold make dozens of such bets?

------
tomblomfield
There's an uncomfortable truth here. In the last 3 or 4 years, tech startups
have started to become the fashionable choice for unthinking MBAs, taking the
place of Investment Banking and Private Equity before it.

I was at a conference recently organised by University College, London
(arguably the top science & engineering school in the UK). With no hint of
irony, the organiser welcomed attendees - "we're all here because startups are
the best way to get rich after college".

In the last week, I've been contacted by 3 separate people I knew from Law
school asking me how they can get into startups.

~~~
lostcolony
Good. Keep the unthinking MBAs out of sectors where they can do real damage.

------
aelaguiz
As a YC founder I know exactly what I signed up for. YC is in the business of
placing a series of low risk bets twice annually and then sorting through
those bets looking for likely winners, doubling down and helping when possible

It doesn't matter though, they still lower my overall risk profile by being
involved and (I believe) increase my odds of success. I believe it's a square
deal.

I also believe that fundamentally if there's a time to aim high rather than
minimizing downside risk in one's life, it's your 20s. Furthermore to a
certain type of personality (mine) a secure life making a few hundred thousand
dollars a year in an essentially mind-numbing profession that does little for
humanity is unthinkably depressing.

It ain't for everyone, but I don't think it's fair to act as if it's some sort
of sinister delusion projected by YC in order to benefit Paul Graham.

~~~
akbar501
There are people who aim high whether they are in the 20's, 30's, 40's ... and
then there are those who aim low.

Age is rarely a factor for those who are shooting for the moon, but it's a
great excuse for those who don't.

~~~
aelaguiz
Yeah I didn't say people past their 20s don't aim high. I said your 20s is a
great time to aim high.

~~~
illumen
Spend your youth however you want to, but there's no refunds.

~~~
argonaut
And your point is...?

~~~
mattwad
You can "aim high" working long days in your 20s, 30s, or 40s. But in your 20s
maybe there's other stuff you want to do, like chasing college tail, or not
having kids.

------
kunle
Probably the biggest sign we're in a bubble[1] is that the Leveraged Sellout
guy is back and has trained his focus on Silicon Valley.

1\. Not saying we're actually in a bubble. Just pointing out that the last
time he was around, he was poking fun at 22 year olds going into finance for
absurdly high incomes.

~~~
abvdasker
22 year-olds still go into finance for absurdly high incomes.

------
arbuge
My 2 cents: He is correct that YCombinator is running little risk doing what
it does at this point. That seems pretty obvious now - though it was not when
they started. Accelerators were a novelty back then, and YC could have fallen
flat on its face.

YCombinator is a pretty low risk deal for entrepreneurs too, come to think of
it. Perhaps the author misses this point. If your startup does fail and/or you
get tired of the startup game, there's probably a large number of companies
willing to take you on as an employee, given the skillset you likely had to
get into YC.

~~~
ballard
Now there's some guy in every coffee shop claiming to have an accelerator
without any idea how to succeed (specialize/differentiate). They're 95% wooly
propositions with the occasional one that can sell nontrivial epsilon of
value.

My favorite so far is this guy that hangs out at a cafe near Stanford that has
alienated everyone in his potential "deal-flow" by anger outbursts on
conference calls and generally acting like a dick.

~~~
arbuge
Speaking of bad accelerators:
[http://www.davidgcohen.com/2013/08/29/a-shocking-
accelerator...](http://www.davidgcohen.com/2013/08/29/a-shocking-accelerator-
story-that-youll-need-to-read-twice/)

------
chrislloyd
Google cache:
[http://webcache.googleusercontent.com/search?q=cache%3Ahttp%...](http://webcache.googleusercontent.com/search?q=cache%3Ahttp%3A%2F%2Fwww.leveragedsellout.com%2F2014%2F02%2Fthe-
book-of-
graham%2F&oq=cache%3Ahttp%3A%2F%2Fwww.leveragedsellout.com%2F2014%2F02%2Fthe-
book-of-
graham%2F&aqs=chrome..69i57j69i58.1178j0j7&sourceid=chrome&espv=210&es_sm=119&ie=UTF-8)

------
dethstar
_And when the check came, I passed it to Eric and watched his eyes widen at
the total. The host came over, expecting his card. I could see Eric sweat.
“Oh, this shouldn’t be a problem,” I assured him. I turned to the host: “You
accept equity, right?” Her face contorted. I elbowed my cousin. “Eric – tell
her about your startup.”_ he's such a dick, I love it.

------
ycmike
This is incredibly well-written. As someone who has a brother at Wharton and
parents in the healthcare and legal fields I found myself smiling often. Was
the iPad smashing too much though? Is that what rich people do?

------
tomasien
If anyone is feeling bad for not necessarily knowing what to think about this
piece, don't. I think it takes a while to realize this isn't a blog and the
narrator isn't NECESSARILY the hero, but rather it's a story and there's a LOT
to think about out of it.

My take is, of course, that the narrator is the villain, but that's just me.

------
djyaz1200
I don't know to what extent this is a joke but I am not laughing. Yc is a
school where they pay you, Paul Graham et al did not take over Airbnb or
Dropbox... the people who founded those companies run them.

The idea that a life is worthless or wasted if you make less money is beyond
flawed. It is the most american/capitalist/rewarding thing to make a go of
building something of your own.

Being a wall street banker has virtually no social utility. Airbnb and Dropbox
improve the collective productivity of society and make real markets in the
case of Airbnb. If it takes hundreds of people and millions of dollars failing
in an effort to make a few big winners so be it, and when Yc makes money in
the process they deserve it. They are taking REAL risk, and it seems the
people who emerge from their program are better for it even if their dreams
don't all come true.

Finally, the girl next to him is an important part of this little story. Women
love men who are passionate, who are alive and who take risks. If all of
society fell apart I'd much rather be with a bunch of hackers than bankers,
the hackers are creative, passionate, loving and ruthless when necessary.
Women understand this and they they love it... because they know they are
always safe with a man who can build something. They'd rather eat Mac & Cheese
with a man who puts up a good fight before kneeling down THE MAN... or maybe
never has to kneel at all.

[https://www.youtube.com/watch?v=GuDRGuOVjvU](https://www.youtube.com/watch?v=GuDRGuOVjvU)

~~~
205guy
On the subject of women who love passionate startup founders, did you see his
previous vignette?

    
    
      http://www.leveragedsellout.com/2014/01/the-founder-hounder/
    

/ducks

~~~
djyaz1200
Hilarious!

------
spindritf
I don't get it. What's the intended message for his younger brother?

That you should go into a steady, well-paying career because then you'll be
able to impress women by picking up the tab at a fancy restaurant/bar? Or was
it just poking fun at YC-as-a-cult?

~~~
sanderjd
I am still unsure whether the author was 1) seriously making some decent
points about YC's model underneath a (self-aware and -effacing or just tone-
deaf, I'm really not sure) veneer of old-school snobbery and greed, or 2)
sarcastically making the opposite points by presenting the counterargument in
such unappealing terms.

Either way, it left something of a bad taste in my mouth for _both_
industries.

~~~
speeder
Actually, you are one of the few people that got the article 100%

That IS the intention of the author (make you feel a bad taste for BOTH
industries)

------
Aqueous
He's 22 and a Harvard grad. If you believe this is a mistake, let him fail. He
will recover.

------
dbkbali
Entertaining to read all the comments on this thread. Great article and as a
former investment banker, yes so true, really no difference from, what I
observe for SV startup accelerators, and an investment banking approach of
hiring the best. I guess the same could be said of other elite professions
such as law etc. With respect to other derogatorary comments on this thread,
about bankers and MBA's. I suspect most are written by people attempting to
self justify there choice of startup vs a traditional careers. Good laugh re:
the comments about the social utility of startups vs banks and how
unproductive to society investment bankers are. But face it without these
investment banking "parasites" who add no value to society, most startups who
need to raise capital wouldn't exist. Anyway back to work on my bootstrapped
startup!..

------
dbkbali
Great article and as a former investment banker so true. Good laugh reading
the comments, I speculate mostly from insecure startup employees, executing
their "post purchase rationalization" for taking the accelerator route.

The reality is that the accelerator model has more parallels to the investment
banking model than many of the commenters are recognizing. Very entertaining
to see some commenters trying as well to justify that startups have more
benefit to society than bankers or MBAs, in fact hilarious as the reality is
that without those "dumb" MBA investment bankers who can attract IPO money to
feed the VC's to fund startups, many with questionable and untested business
models, accelerators and most startups wouldn't exist.

Thanks for the entertainment, better not waste too much more time and get back
to trying to bootstrap my startup.

------
smoyer
I thoroughly enjoyed reading the article - yet I don't believe any of it. When
you've got a wife, kids, mortgage, private school, etc, etc, etc, you've got
to be a bit more risk averse. In this case, why not let the kid see what life
is like when you're not a corporate drone?

------
mikeknoop
This read as sarcasm to me. Isn't there a name for not being able to
distinguish parody and sarcasm?

~~~
nvader
[http://en.wikipedia.org/wiki/Poe's_law](http://en.wikipedia.org/wiki/Poe's_law)
is the inability to distinguish between parody of, and sincerity in,
extremism.

------
gatehouse
Dup:
[https://news.ycombinator.com/item?id=7220385](https://news.ycombinator.com/item?id=7220385)

~~~
gus_massa
I think that the fist comment in the other thread is interesting. (I just
notice that it was wroten by you.)

> _To the uninitiated, this is a humour blog that was active until the debt
> crisis, focused on made up stories and
> rumors:[http://www.leveragedsellout.com/2008/10/remember-the-
> titans/](http://www.leveragedsellout.com/2008/10/remember-the-titans/) ._

------
danbmil99
Doing YC seems to me very similar to forming a band, writing a movie script,
or attempting to become a successful actor, athlete, etc. If you go into the
scenario expecting that failure is not an option, you will almost surely be
disappointed. If you understand (really) that it is high risk/high reward, and
the cost of failure can be as low as a teeny bit of your pride, it can be a
great learning experience, providing you with a glimpse of a world outside the
proverbial cubicle of a safe, predictable life.

------
SworDsy
YC didn't invent startups, and everyone should be able to do something they
actually want to do all day at least once. And for their benefit it should be
in their 20s.

------
sytelus
This article just doesn't sound right. YC has much higher success than most
VCs. But even if you weren't doing your startup at YC, I still feel it's far
better thing than having a corporate tech job (let alone pseudo-tech job in
finance). The thing is that, you choose what you want to do. Even if you
choose selling newspaper, its better than a random "manager" with half the
competency telling you to fix a random bug in some product you didn't even
cared before. You setup your own culture. If you don't like meetings, you
don't do it. If you like blasting music and have grill in your office, go
ahead.

Above all, startups in SV is something that doesn't have downside to people
coming out of college. Even with miserable failures, you would be most likely
get aqui-hired with 3-5X better pay package than someone who had worked for a
decade in that same company.

However I totally discourage people _dropping out_ of school to do startup. I
get truly disgusted when people suggest that option. As Guy Kawasaki used to
say, stay in school as _long_ as you possibly can. Rest of your life is very
likely going to be in one job or another unless you hit a lottery.

------
brudgers
I can't say I am entirely unsympathetic to the criticisms.

But to be plausible the author had to reinforce the investment banking
alternative with a close personal connection between good cousin Eric and
someone already established in the industry. It's not that YC's model is
perfect, but at least it is nakedly tuned toward making money for YC rather
than providing good jobs for one's buddies.

------
d0m
I hoped to see PG' comment.

------
thatthatis
Remember that in all brilliant satire there are elements of both truth and
absurdity circling around a key absurd truth. I think that key truth is: YC is
a value investor by any reasonable definition of the term. That's not in any
way to say they're not a symbiotic value investor.

~~~
eru
They are both a value and a growth investor.

------
tipsy
It's interesting how one can take any phenomena and demonize the actors
playing in it.

The author focuses on the tangible benefits of working at a startup vs.
working in finance (e.g. corporate card, company car, free food), but leaves
out the journey which drive so many entrepreneurs to continue to do what they
do and what ultimately makes many of them come alive.

It's a stark contrast to finance where many engage in soul-crushing work and
anxiously await their bonuses, so they can find a more fulfilling job.

Entertaining read.

------
admnor
Don't work with PG, he's evil!

Come and work on Wall Street and be evil yourself.

~~~
gagaga
I interpreted this piece of satire attacking both industries. I don't think
the author's intention is to state the Wall Street is better.

------
jheriko
i enjoyed this - maybe a bit extreme, but since his family is involved it
makes good sense.

a lot of what he says is common sense and knowledge though. something lacking
massively in this community it would seem...

------
thesz
The question is: can I have that interesting presentation too?

------
pgl
This is returning a 404 now. Does anyone have a mirror?

------
hughes
We killed it. Anyone got a paste of the text?

~~~
nicklovescode
[http://pastebin.com/h5Q5RNz2](http://pastebin.com/h5Q5RNz2)

~~~
peterwwillis
You can use pastebin to save on the wall of text.

~~~
nicklovescode
Good suggestion. Updated.

------
spajus
There is way too few upvotes on this.

------
ajju
This is satire guys. Hopefully it's intentional satire, and not an
unintentional self-parody of how wall street guys think.

------
avodonosov
funny reading :)

------
jjoe
Great! Let's see what we have here. Random guy from Greed Street is giving
_sound_ advice on what's good for his cousin's soul and something about hope?

Oh, it's a sarcastic piece. Phew! Wait a minute...

I'm so glad I seized the opportunity to leave Wall Street.

------
dschiptsov
Brainwashing youths to this or that habit of thinking and then to use them for
a great good is an idea as old as humanity. All sorts of religious sects,
political fractions even hobbyists are doing this.

What is going on around YC is absolutely nothing special from a psychological
point of view. "If you want loyal workers pay them less, so they would escape
from the pain of cognitive dissonance by leveraging the big idea" a textbook
says, and goes on about in-groups dynamics and notion of us versus them.

What is interesting is that all this was not created and orchestrated by the
evil mind of Paul Graham, and it is not even a sect with him as a great guru.
The whole thing was bootstrapped applying that very same bottom-up process he
advocated in his technical books about Lisp.

Another part why the whole thing works, which was not mentioned in the
pamphlet, is analogy to insider trading. PG has reputation and connections so
he could sell teams and/or technologies to "friends".

So, YC is rather remarkable example that good ideas work, while banal
practices of housing young naive fools are exactly the same in investment
banking or politics or whatever. And it is not risk offloading, it is mere
business among connected guys in a valley.

One more subtle difference. Contrary to investment products, which is a
cheating by definition, teams and technologies YC selects and sells are "fair"
and we could see and use them in our everyday life. We also could see CDS and
HFT and mortgage and stock market scams all over the place. This is the
difference between finance and tech - it is much more difficult to cheat, and
hence succeeded in tech.

YC is the same kind of success based on proper ideas as viaweb was at its
time, you like it or not. The analogy with banking is selling piles of java
crap to ignorant fools.

~~~
sjg007
Huh?

------
lmg643
Considering this guy is running a finance/consulting parody website, I have to
assume there's a measure of jealousy and regret that the website he is running
does not have attractive enough characteristics to be let into Y Combinator,
although he must swim in some of the same circles as these startups.

The main question I take away from reading this is how the average payout to a
young college grad compares on wall street, to the elite VC/startup track,
taking away the unquantifiable benefits and focusing on average hard dollars
earned.

Of course - that's probably not the comparison to make. Most of PG's stuff was
written for technical folks considering entry level technical jobs. I would
guess that even considering survivorship bias, the average outcome for elite
startup tracks versus entry level tech track is extremely good, considering
the jobs it can lead to (would love to hear if otherwise).

It's a little harder to compare for the theoretical econ major from harvard
contemplating a wall street track. wall street is not a normal business
environment - oligopolistic, heavy regulatory protections - much more like
joining a club earning economic rents off capital flows than a group doing
much to change the world.

IMHO the main reason people work 100 hour weeks in finance is to prove they
are willing to give up everything in their life to make it to the next rung -
not because they are doing anything particularly noteworthy or unusual that
demands intensive focus. from first hand experience, I've noted most M&A
customers have sophisticated in house teams that can run the numbers plenty
well on their own, which does raise the question what the six banks typically
advising them are doing.

All I can say is - for the average econ major contemplating the future on wall
street - it will be really interesting when Amazon (and/or others) decide to
take on financial services. regulations can hold them off for a while, but as
they eat the rest of the world, it's inevitable hungry eyes will aggressively
turn to where the money is (literally) - only a matter of time I'm sure.

Plan accordingly, I say.

~~~
allworknoplay
To be clear (from the guy who submitted this), leveraged sellout was an
incredibly popular blog that covered wall street from a junior insider's
perspective for years. It was generally ironic, but as a friend of mine once
asserted, irony is kind of like absolute value -- the more ironic you are
about something the more seriously you take it, and it becomes difficult to
distinguish the intensity of your irony from real belief at some point. A
_lot_ of people (like myself) are still subscribed to this blog, and a lot of
people (unlike myself) are still subscribed to an unironic version of its
world view.

~~~
lmg643
i used to read the site. he was an outsider observing finance (the roomate of
a bunch of bankers) who launched a popular website instead of following "the
path". high point was the book, which came out in 2008 - worst possible timing
- and did not sell. bad luck. the same site in 2012 would have been funded for
millions ... get some guest authors ... maybe sell to gawker media / huff post
/ etc ... no book required.

with regards to the content - if you take away the "irony" as cover for a
legitimate argument, it's still an interesting question to contemplate. for
the average econ major (but not CS major), with no edge in technology,
compared to the safe average payouts available on wall street, it is probably
a bad decision to pursue a tech startup ... which is what makes the parody
work.

