
Startup Stagnation - jonemo
http://www.getfinch.com/2012/08/startup-stagnation/
======
moocow01
One thing Ive realized after working in software for a while is that software
itself has very little ability to be applied in a way that is directly
transformative to the human condition. By and large software is a tool to
carry out an existing process or idea in a more efficient way, and in this
regard it is a job-destroyer ready to eat the work of anyone who performs non-
creative or intellectual tasks. This is what software does and the reason it
can be so profitable - you can effectively capture the cost savings of
automating very large processes. In fact the majority of startups when you
strip them of their branding and buzzwords are just this ... they provide
increased efficiency around an existing process whether it be social or
business or otherwise. There is nothing inherently wrong with this in that it
is the business of software. Additionally it also absolutely does not mean
that these companies do not matter or are inconsequential but if you are
looking for the true way software is transformational to the human condition,
I think many are looking through the wrong lense completely...

The way software is truly transformational to the human condition is by
freeing more and more of us from doing mindless tasks that only feel good to
some due the distortions our current educational system and perverted social
incentives. We should be celebrating the destruction of automatable jobs so
more of us can be free to live better in whatever way that may mean. This
doesn't happen in reality because our current system gives little to no
rewards for doing other things like living, experiencing, helping, or learning
- what actually happens to those people is that they go without another job
and flounder. There are very few ladders to guide anyone displaced and thats a
shame because their energy could be used in an endless number of ways for
society.

~~~
apsurd
The phrase is "by and large"

<http://www.merriam-webster.com/dictionary/by%20and%20large>

~~~
moocow01
Thanks - changed

------
ChuckMcM
_"If you enjoy thoughtful and smart writing, and being a part of a meaningful
conversation ..."_

Then don't read this guy apparently. A page of snarky comments? When YC
invests in a promising team that has yet to have an idea that is "investing in
nothing", but a MacArthur Genius Grant is "investing in the future" ?

I understand that to a lot of people outside of the startup eco-system or
outside of technology in general don't "get" what it is we do, they also don't
"get" how Google makes billions shoving just the right advertisement in front
of them at just the right time, and they don't "get" that they haven't looked
in a paper copy of the Yellow Pages in years or cracked open any of the 27
volumes of the World Book Encyclopedia on their shelf that they got for their
kids 10 years ago. But to spend time and energy hating on something you don't
understand, well that isn't really a meaningful use of your time is it? And
telling someone who is having a great time doing something they love that it
isn't "meaningful" is also just mean.

~~~
thaumaturgy
I think that's unnecessarily dismissive.

The article, and your response, are just examples of two opposite sides of the
same old argument: how do you measure value? Should value be measured in how
much money is made, or should it be estimated in more subjective terms of
human impact?

We need occasional articles like this. It's healthy to re-evaluate what's
being done once in a while. Dismissing people advocating for the human impact
measure of value as not "getting" Google or the startup industry leaves
yourself vulnerable to not "getting" what they're talking about, either.

Here's a softball example. Pinterest, or Doctors Without Borders: which one is
more likely to be having a real, positive impact on the lives of people around
the world? In terms of money and exposure, Pinterest is more valuable than
Doctors Without Borders. Is that the right conclusion that we should be
drawing then, that Pinterest is worth more to the future of humanity than an
organization dedicated to sending medical talent into parts of the world where
it's otherwise unavailable?

I think the article was reasonable. I don't see anything in the article that
suggests that the _entire_ industry is without merit; just that, there is a
trend right now in the industry as a whole which we might want to think about
a little. (Its author might be suffering from being a bit too immersed in only
one aspect of business, perhaps.)

So why does that always make everyone so defensive? Why shouldn't we question
whether or not money is the best measure of success, or progress?

~~~
ChuckMcM
You make my point for me.

"Here's a softball example. Pinterest, or Doctors Without Borders: which one
is more likely to be having a real, positive impact on the lives of people
around the world? In terms of money and exposure, Pinterest is more valuable
than Doctors Without Borders. Is that the right conclusion that we should be
drawing then, that Pinterest is worth more to the future of humanity than an
organization dedicated to sending medical talent into parts of the world where
it's otherwise unavailable?"

If the author could put together such an argument it would be 'smart and
thoughtful' writing, but they don't and it wasn't. I am all in favor of taking
a hard look at what we're doing with our time and money, and economics is
simply a way of allocating resources.

There was a very approachable, if somewhat flawed, documentary called "A World
Without US" (no not Weisman's book, but Ferguson's documentary [1]) which
talked about political ramifications of the US Foreign Policy interventions.
The interesting take away here was first, the US becomes the world's largest
political entity, then two what do they do about it. And the documentary
basically goes on to say "some good stuff which other people don't
appreciate."

And the strange connection that made for me was from a Jon Stewart Daily Show
routine about Apple knocking down the door of the Gizmodo writer who leaked
the iPhone prototype and pointing out that Bill Gates is ridding the world of
mosquitoes and Steve Jobs is out breaking down peoples doors.

So bringing it back to Doctors without Borders and their funding. They _exist_
today in part because some of those crazy money grubbing web sites give them
money [2], Google over $500K, Expedia $200K, Microsoft, and a number of trusts
which were created by people who got 'rich' doing startups. And when Pinterest
has a huge exit and the founders go out and start building clean water wells
in Africa (like a couple of Googlers I met did) how does that change the
evaluation?

So this is where it comes together, you can't tell someone who is working to
build value for their employees and their community 'meaningless pursuit of
profits' and you certainly can't imply that the people who can turn a photo
sharing site into a billion dollar acquisition could have created a billion
dollars of humanitarian aide if they had only been focused on that problem
instead of pictures.

It would be smart and thoughtful if you looked at the economic forces that are
allowing people to build a financially secure base _from which they make great
contributions to humanity._ You want to compare the amount of good done in the
world by a dozen tech entrepreneurs that first made it 'big' and then turned
that into a force for good? You can compare that to the resources people
working for NGOs have created (not just steered) for those activities.

I get irritated when I read people dismiss the efforts of smart people to turn
their ideas and smarts to large chunks of cash as being vain, shallow, and
selfish, when I have seen so many of those very same people turn around once
they don't have to worry about money any more and devote their efforts to
doing great things. Sorry, but its a sore point with me.

[1]
[http://www.theworldwithoutus.com/theworldwithoutus_tvstation...](http://www.theworldwithoutus.com/theworldwithoutus_tvstations.htm)

[2]
[https://www.doctorswithoutborders.org/publications/ar/MSF%20...](https://www.doctorswithoutborders.org/publications/ar/MSF%202010%20Annual%20Report.Final.pdf)

~~~
milfot
I always find it a little staggering when people start tracing back profits or
motivations to prove a point, but stop as soon as their point is made. If you
want to employ a systems thinking view of the world to make a point, you need
to chase the rabbit all the way down the hole.

Google didn't create all that wealth. They took a large part of that wealth
from other advertising companies - primarily newspapers. And that money came
from companies which in turn came from consumers. A good part of the wealth of
companies is from arbitrage, monetising previously non-tradable items and
digging stuff up - you know, externalities. A good portion from consumers is
intergenerational. Very little actually comes from wealth creation.

Wealth is for all practical purposes, finite. This does not mean it is fixed.
As a previous commenter pointed out, global economic growth is increasing at
3-4%.. at least some small portion of this is due to wealth creation rather
than the monetisation thing. Understand also that monetisation usually
transfers wealth rather than creates it, but sometimes can actually reduce
wealth overall (take say, tobacco companies as a non-controversial example.. a
controversial, though equally true, example might be BP or Shell).

Then you start asking yourself, if wealth is largely finite.. and some
companies are making money hand over fist, then surely someone must be losing
out? Why exactly do you think there are people living around the world who
cannot afford good healthcare or clean water? You think they are just lazy?
You actually believe all that BS in the doco you watched?

It also amazes me when people point out how generous US companies and people
are in philanthropy - generally 1-2% of profit - while completely turning a
blind eye to the very low levels of tax they pay. The democratic-capitalist-
welfare state has a bigger positive impact worldwide to population health than
all the charities put together, and it can be cheaper to run.

And another thing, you think google giving the doctors 500k is actually
significant? In addition to the $400m / 80% figures already pointed out, think
about the individual contributions - peoples life work. Also from wikipedia,
in 07 there were 26,000 professionals who helped MSF. I don't know if you are
aware, but people who work for charities don't get paid as much.. and that is
if they are not just volunteering their time. Say 26,000 x 10% pay cut x ave
wage (in aus dollars with aus wages this would be about $130m, you can adjust
elsewhere if you like).

130 million a year in wealth donations from ordinary people.

I am all for wealth creation, which I think was the crux of the OP - if you
are not contributing value to people's lives, you are not creating wealth,
just taking it from someone else. And I don't discount the efforts of the
people you mention. I think companies like google have helped in other ways
with more impact than just their cash. Just want you to see these efforts in
context, and maybe think a bit deeper. Because it is a very long rabbit hole.

And because it irritates me.

~~~
ChuckMcM
<http://paulgraham.com/wealth.html>

"A surprising number of people retain from childhood the idea that there is a
fixed amount of wealth in the world. There is, in any normal family, a fixed
amount of money at any moment. But that's not the same thing."

That is a great essay, I've read it several times. I particularly appreciated
the how he points out what money is and what it isn't. I bought this course on
Economics
[http://www.thegreatcourses.com/tgc/courses/course_detail.asp...](http://www.thegreatcourses.com/tgc/courses/course_detail.aspx?cid=550)
(sometimes you can check it out from the library) and listened to it in my car
over the course of a couple of months. Dr Taylor has a very easy to listen to
delivery for a lecturer. And it really helped illustrate how the economy both
works and how it can be reasoned about effectively.

I can't fly around Africa in a bush plane and give out medical advice, I can
build a successful business here and then fund a doctor who volunteers to do
that. If I'm smart and thoughtful I would look at how much solid humanitarian
work is funded by folks in the US, and I would note that there is more funding
going into humanitarian aid from the US than any other country in the world
[1], and while it did take a hit during the Great Recession it is recovering.
And if I was smart and thoughtful I would know that like the aphorism "a
rising tide lifts all boats" that anything that generates economic growth in
the US results in more humanitarian aid for the world. And then I would note
all those awesome tech companies in the top 500 list that are driving creating
the GDP which is coming out of the #1 source of humanitarian funding in the
world and I would say "Go tech! Go tech!"

[1] [http://www.globalhumanitarianassistance.org/wp-
content/uploa...](http://www.globalhumanitarianassistance.org/wp-
content/uploads/2010/07/GHA_Report8.pdf)

------
c0da
“Some of the most successful technology companies haven’t done much for job
growth: “Take the ubiquitous iPod. It’s created less than 14,000 jobs in the
U.S., Internet giant Google, 20,000 employees, Twitter, a mere 300””

It's absolutely absurd to imply that the extent of Google's effect on our
economy is a sum of their employees. That quote completely mis-understands how
markets work.

Google provides services that have completely revolutionized how people find
information and build buisnesses. Of course that has impacted job growth.

~~~
fusiongyro
I don't disagree, but it's worth noting that if a business comes along and
creates 20,000 jobs by putting (say) 100,000 people out of work, that's going
to have a negative effect on the economy. Many of those newly unemployed
people are going to be using your service to find out how to get their
unemployment check.

That said, government protection of buggy whip makers doesn't work. Look at
the ridiculous legally mandated benefits for railroad engineers.

I think there's reason to be concerned about how non-information folks are
going to be making money in the next fifty years. After all, how much of the
economy can be producing hamburgers, entertainment and technology?

~~~
ChuckMcM
As someone who runs a search engine (Blekko.com) I can tell you that Google
and their AdSense program has created way more than 100,000 jobs. I see their
web sites all the time, a small bit of cruft or copied content and eleventy-
billion ads.

That is a way of saying what economists have said for years, which is that
advancements and disruptions create a net pool of more opportunities rather
than reduce the total. The proof of that is that the number of jobs that are
available in the country continues to rise even as its population goes up.

 _"I think there's reason to be concerned about how non-information folks are
going to be making money in the next fifty years. After all, how much of the
economy can be producing hamburgers, entertainment and technology?"_

They will become literate, or become supported by someone who is. One of the
interesting things you notice reading about the transition to the
'manufacturing age' between the 19th and 20th century was that working people
who were thrown out of work by technology their kids had grown up with, and
their kids began supporting them with their employable skills. Its worthwhile
to look at how the world reacted to those, just as sweeping in their own way,
changes.

Elsewhere on HN this week the quote "Humans are a bottomless pit of wants" was
shared, that is so true. As long as people want something, there will be a job
which involves getting that for them.

~~~
ippisl
First, at the start of the industrial revolution, people who had to leave
their home in the country and come to the city to look for work, had to work
very long hours for subsistence pay.

This has only changed with the rise of the labor movement, and a general shift
in democratic societies towards a welfare state.

So for a huge positive technological revolution, societal change is needed.

In fact, i think that today we have the right technologies to solve many of
the world's problems, just the wrong politics and societal order(globally).
Just look at education,healthcare,global hunger, the subprime crisis. The
biggest barriers there are political, legal and societal.

And yes, "Humans are a bottomless pit of wants". But that didn't helped the
loyal employee - the horse. After the industrial revolution they were left
unemployed and sadly went to the glue factory.

------
kerryiob
I think the points made are good.

Modern efficiencies have eliminated a lot of jobs. Fact. No point in arguing
about whether it's good or bad. It just is. So don't waste time trying to
defend Apple or Google. They are just successful in their time. Good for them.

Consider though, that many of us who are fortunate enough to be working in the
information tech / startup area, are focusing most of our efforts of creating
products consumers don't even know they want or need yet, but we hope they
find super cool. Hopefully the product gives us enough users to figure out how
to make money off ads or something. Cool, fine.

I have to agree that it's a shame that there isn't more momentum behind
figuring out how to solve problems that people already have. Figuring out
problems that would benefit the vast majority of people who don't work in
information technology, who just so happen to be finding it harder to find
good jobs because of information technology.

~~~
pron
I don't think you must necessarily "solve problems that people already have",
nor that startups don't do that. I think the article is just a call for
startup founders and investors to _think_ first about how meaningful their
product is.

But it's not that they don't do that already. Many know damn well that their
product, though very cool, has little "true" significance, and they do it
anyways. Why? Some of the reasons are mentioned in the article. The startup
economy pushes founders towards products that could reap quick exits, so many
startups just try to solve smaller and smaller problems. It's not that they're
not real – they're just very small. Also, in most cases, these are the only
problems a small company has the resources to tackle. This economy, in turn,
makes it socially acceptable, and even respectable, to address all of those
minor, "meaningless", issues.

There's no one to blame – it's just the market (said with some irony). If we
must blame someone, though, I think it's the big companies. Instead of putting
a lot of money into research (and only they have the resources to solve the
big problems), they prefer – because it's much cheaper – to wait for a startup
to successfully solve a minor problem, and then acquire it. Those acquisitions
make the prospects of founding a startup to solves a minor pain-point less
risky, and so more people do it.

------
kylebrown
> _The truth is, we may well be in the largest slowdown of technological
> growth in human history. Economist Tyler Cowen calls this the “great
> stagnation.”_

relevant relink: Peter Thiel and George Gilder debate the prospects for
technology and economic growth[1]. The basis of Thiel's argument comes down to
the price of energy. He's bearish. He notes that Warren Buffet's biggest bet,
which is on trains that transport 40% by volume coal, is a bet that clean,
cheap energy tech will fail.

[1] <http://www.youtube.com/watch?v=XRrLyckg8Nc>

------
theoj
>> The 19th-century kitchen was built around a live fireplace, but then we
rapidly benefited from electricity, water, and gas stoves. Then the past fifty
years brought no major technological changes.

Ever heard of microwave ovens? Automatic dishwashers? Pretty significant
kitchen innovations in the last 50 years.

~~~
ChuckMcM
I remember sitting down on a plane once and striking up a conversation with
the passenger next to me. They were visiting their grand parent and thought it
was amazing that their grand parent had been alive both when people thought it
was impossible to fly (1900) and when we had a plane that could fly into space
(the Space Shuttle). They said this wistfully like they would never see that
kind of change in their life.

I asked them about their laptop. It was a Sony Vaio, they were going to watch
a movie later on it. I pointed out that when they were born the thought of an
individual owning a computer all to themselves was absurd, that their laptop
had more compute power and storage than all the computers at NASA had when
they sent a man to the Moon, and that their computer would do more
calculations in the two hours of showing a movie than were done during the
Manhattan project to design the A-bomb.

The difference was that you only see the change in the rear view mirror and
even then only if you know what you are looking for. Sailors think they are
holding a straight course but when you look back at the wake you see if its
really straight or not.

The article's cites Tyler Cowen who suffers from this same blind spot. There
are literally thousands of things that have changed in a kitchen, from
Microwaves to the Silicone cooking mats which keep your cookies from sticking
to the layered composites that do heat spreading on ceramic cook tops. But you
don't "see" those as a casual user (and I'm guessing Tyler only casually uses
his kitchen) just like my seat mate as a casual user of their laptop didn't
"see" the change it represented. There must be a name for that.

~~~
theoj
Good points on the blind spot.

I wanted to add the range hood as well, but it turns out that was in the last
60 years. <http://en.wikipedia.org/wiki/Range_hood>

------
AtTheLast
"In short, if software is truly eating the world, then it needs to be more
meaningful." I think we are slowly getting there. But, areas such as politics,
education and medicine are really behind the curve. I've noticed a lot more
start ups focused on the well being of humanity and our personal lives. Sites
like nextdoor.com and myenergy.com come to mind.

------
nickdpi
Worth noting that this is an excerpt of a (much) longer essay in Distance:
<http://distance.cc>

Some of the critiques here are totally fair, but folks should read the whole
thing before forming a final opinion.

------
AndrewKemendo
If the goal is to give everyone a job, we are definitely on the wrong track.

We should strive for the world where you don't actually need a job, then all
this jobs "gained/lost" talk would be moot. I know I'm not the only one who
has read Player Piano.

------
jayunit
Reminds me of <http://www.foundersfund.com/the-future>

~~~
zio99
Exactly! This article just belittles the work of startups and is demeaning to
all the work that founders are putting in. Groupon didn’t think that selling
2-for-1 pizza coupons were beneath them - that’s how they started out. And
that’s how a lot of companies got to where they are now - through a series of
incremental and attainable steps, often riddled with failures and in
industries they are no longer in now. But each lesson helps them gain traction
and find product/market fit along the way. It's not that 140 characters is of
less value than a spaceship. The important thing is to start, not lose hope,
and keep on trucking. Or we wouldn't have any of the conglomerates we have
today.

~~~
jfb
OK, this is tangential to your post and the OP but … using Groupon as an
example of anything other than shell games and Ponzi schemes strikes me as
more than a little bit naïve.

~~~
zio99
I think you may have misunderstood. I wasn't agreeing with the OP. And I
wouldn't be naïve to recognize that Groupon is in the business of selling.
There are a lot of skeletons in the closet for MySpace as well (their cursor
icons that you downloaded in the 90s would be labelled as spyware today since
they snooped on users and sold the information). I am not discounting that,
but if the OP is to say that our solution to our stagnation is to simply "make
software more meaningful" and has an Amy Hoy quote to back up his claim, then
I would have to respectfully disagree with some examples below:

From YC's recent batch, sure, we've got Makr.io and ReelSurfer that would be
classified as "startup porn" by the OP, but you cannot discount Double,
Dreamforge, Coco Controller are in the business of selling, addressing
customer's pain points and actually being meaningful to its users. Customers
are not naïve. His gross oversimplication of the startup industry by quoting
Pinterest as dumbification of society is what bothers me.

~~~
jfb
OK, thanks for the clarification. On my bad days, I crabbily agree with the
OP's general contention that the software startup industry is cramped and
largely idea-poor. Most of the time, though, yeah. It's a pants argument.

------
chime
I think there is an underlying assumption when VCs "invest in nothing" - the
founder knows how to make a startup succeed, the actual product
notwithstanding. The biggest risk in startups today is not the product, but
the founders ability to succeed. The idea doesn't matter, the execution
doesn't matter, the connections don't matter, even the near-term profits don't
matter. What matters is if you can get a million people to use the product
regularly. Risk(Founders who have done that once and have no product now) <
Risk(First-time founders with a product).

This brings me to the biggest problem with startups that nobody seems to
address and in fact, every successful/smart/talented/skilled person
contributes towards it - every single startup is reinventing the wheel and
that is inefficient. Step back and think about any given startup. They have to
do all of the following: Setup accounting/legal/corporation, manage
employees/payroll/benefits, perform data analysis/SEO/marketing, excel at
PR/word-of-mouth, engage with users, encourage developers, design their brand,
manage infrastructure (even AWS/Heroku accounts need pampering), source
funding, present at tradeshows/industry-conferences, and tons of other boring
things that you will see mentioned in expensive 20 page e-books and "X things
you should do" lists. The worst part is that they have to this on top of
making their product work in every environment: multiple browsers, mobile
devices, app stores, online/offline modes, hi-res/lo-res graphics, hi/lo
bandwidth, multiple languages/regions, and do all of that 24/7.

Why isn't all of the repeatable stuff outsourced in bulk, while still enabling
the founders to develop the product and own equity? If you work for Google,
you don't have to worry about any of this and just hack away on your code and
let someone else market it and manage payroll. But you're trading away your
high-equity/high-risk for a fixed salary/bonus. Why isn't there a median
between coding at Google with no equity/risk and do-everything in your
startup? Being an early hire at a startup doesn't cut it because it's high-
risk/low-equity. Imagine if you could join YC and all you have to worry about
is making a good product and someone else manages everything, while you still
get to collect X% of your product sales. And if you feel YC isn't doing a good
enough job, you can easily switch to XYZ and after a brief catch-up, they can
take over everything. Certainly this happens already during acquisitions or
switching vendors.

Why can't there be a one-stop-shop-startup-vendor who handles everything about
running a startup? And why can't there be more of them so they can all compete
for the best founders/products? I know I've simplified a lot of complex issues
here but I think big ideas start with solving difficult problems. And running
a startup isn't easy. Running 800 is near impossible. But it could happen.

Off-topic but related: I kept trying to clean my LCD thinking there were small
spots on it. Turns out it is the site's background.

~~~
AndrewKemendo
I was at a startup event just yesterday and talked to an aspiring VC about a
plan he had to build an incubator of sorts for people to bring ideas to and he
and his team would build the team, marketing, production, sales etc... around
it and the "founder" would ostensibly run the company and direct the
enterprise. So the "founder" only had to bring the idea - and the rest would
be done. At the back end, the VC would get their share as all do and the
company and founder would be on their way.

I have mixed feelings about this approach. On the one hand I think it would be
very valuable to have a place where people with legitimately good solid ideas,
but no experience could go and have them turn into something real. On the
other hand ideas are dime a dozen and really mean nothing without execution -
and it's in getting to execution that the product is actually worth anything.
Learning all of that "stuff" is the core of what being an entrepreneur is
about. Short circuiting that is a recipe for disaster in the long term where
you have tons of one hit wonders - that barely get out of beta, or V1 and
don't know how to use what they have built to build other things.

I think there is value in re-inventing the wheel in most cases because you'll
notice, when you have to do that, it's the real smart folks who recognize how
the wheel is broken along the way and seek to improve that while developing
their original product. That's where the gold is.

~~~
jyu
This approach fails when hard obstacles start presenting themselves. The
founder is not bought into the idea so much that he/she cares to see it
through. The VC sees it as 1 of a large portfolio of ideas. And if you look
through the history of startup ideas, (as you've said) the execution helps
bring the team unique insights to help with pivots.

I've seen this type of thing work inside companies though, where people work
in an incubator like YC, except there are shared resources and the incubator
is an umbrella company.

