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Why Silicon Valley Works (samaltman.com)
294 points by philip1209 on Nov 3, 2014 | hide | past | favorite | 236 comments

The premise here is that Silicon Valley "works". What do you mean by "works"?

If you mean creating artificial wealth for a small group of already-rich folk, yes, it works. If you mean transforming one of the most naturally advantaged landscapes on earth into a traffic-choked sea of concrete where people do little more than work at creating new ways to buy and sell stuff, yes, it works. If you mean polluting what was once the most democratic communications vehicle available with social drivel and advertising, it works.

If you mean creating innovations that truly improve humanity, the Valley extremely inefficient. If you mean demonstrating that humans don't need a pleasant natural environment to survive, the Valley is on the right track.

The one thing the Valley works very well at is self-congratulation, especially among the wealthy.

>The one thing the Valley works very well at is self-congratulation, especially among the wealthy.

Yup, this is why everything that comes out of the Y Combinator's mouth should be inherently suspect: they have an incentive in romanticizing Silicon Valley because they profit off of your drinking the kool-aid.

>truly improve humanity, the Valley extremely inefficient

I think Intel, Google and Facebook have improved humanity though your tastes may vary and I enjoy Apple's shiny stuff. Those have a market cap of $1.4 tr and it's hard to think of anywhere else with similar output. Maybe like democracy it's the worse possible system apart from all the other ones?

Two of those, Google and Facebook, have made it their core business to prime humanity for a lifetime of exploitation of their privacy in exchange for so relatively very little. How the f is that "improving humanity"?

My life is quite a bit better because of both Google and Facebook, and I would say a significant portion of the amount of time I spend online touches one of those two entities. I really don't care that much about the privacy compromises for the level I use either.

My experience is at least somewhat similar for at least a half billion to billion other people, so I'd say their impact on humanity is "pretty large".

Oh come on.

It's not like we wouldn't have basically the same world without Google, Facebook, or virtually any other SV company.

People are just so full of themselves here.

market cap != quality of life.

The Valley works well at convincing people that fake money is equal to the quality of real life. Market caps have nothing to do with happiness, health, and interpersonal relationships.

Market caps aren't fake money, a significant (majority?) portion is actually real money that has been exchanged in their name. It represents wealth.

My experience with family life is that happiness, health, and interpersonal relationships are generally much harder to sustain without some wealth. Not impossible, but harder.

Could not have said it better myself. I know because I tried.

This was one of the best posts on this topic that I've ever seen.

Have an Indignation. You earned it. https://www.youtube.com/watch?v=EtCiP8B2xpc#t=7s

And keep the faith. Technology is important and what we value and can do will outlive the Silly Cons of the Valley.

Two sentences early on are problematic:

"One of the biggest misconceptions about us is that you need to have pre-existing connections to get value from the network. Remarkably, you don’t. "

If Sam had said "you need them in Silicon Valley much less than anywhere else" it would be a true statement. But in an article I strongly agree with, this sort of thing... I'm not even sure what to call it, misinformation? Makes the rest ring hollow.

The networks here have vastly lower costs of entry and way fewer secret handshakes. But they still have them, and for many groups of people those costs are much higher than the median. It would have been easy to acknowledge that without diminishing the core point.

But he goes on to describe the Y Combinator insider network as extremely valuable, which seems to contradict the statement you quote:

> Our network works because it has very strong connections. Founders are generally closer to their earliest investors and less close to their later investors. They are closest of all to the peers they were around when struggling to get their start. Therefore, YC founders are typically willing to do anything they can to help another YC founder. ...

> I often ask founders what surprised them most about going through YC, and a common answer is the degree to which YC is a "meta-company". ... the connection is so strong that alumni companies get significant benefits from each other. Most YC founders tell us they get more help from other YC founders than all other friends of the company, advisors and investors put together.

I dunno - he explains his reasoning in the same paragraph: "It’s standard practice to ask people you’ve just met for help – and as long as you aren’t annoying about it, they usually don’t mind."

The problem, I imagine, this creates is thousands of requests for help from innocently ignorant founders to a single valuable connection in SV. Each founder may only make one naive request, but important individuals are bombarded by enough to exhaust them. I admire the patience of those who continue to offer thoughtful advice and feedback, but I imagine it's quite tiring. I think resources like Sama's free startup class at Standford are a great solution.

My impression is that Silicon Valley (like NYC) is a destination. Move to St. Louis and everyone asks where you went to high school. Not here. It doesn't take long to make a name, and there's a tradition of helping "the next one."

I agree that accessing the right networks will help tremendously, but I also believe that Sama's statement is accurate. One doesn't need pre-existing connections. This almost subtle, yet much more important condition was included shortly after the quote you mentioned: "If you build something good, people will help you."

A grand vision alone won't get someone nearly as far as it may have in the late 90s. A prototype that is nearing that vision with each quickly released new iteration seems to be the entry barrier for someone with no pre-existing connections.

I don't think he's saying that there is no network, or that the using the network isn't helpful. It seems like his primary point here is that your relationship to this network doesn't need to be pre-existing. If you know nobody in SV, but build something great, you will quickly get to know people.

You're right that it's partially true. Why the idealistic spin from @sama? Consider the incentives. One of YC's macro strengths is a silicon valley onramp.

I took his statement as hyperbole to make the point that those connections are less important in SV. But I don't know him, so its just my inference.

I love the way people in the Startup community talk about how New York is oriented around finance. It is totally true, from the perspective of a certain group of people. New York also has a history and cultural identity that puts monetary success and business above other concerns that can arguably be traced back to its founding by Dutch traders as New Amsterdam.

That said, New York is only oriented culturally around finance from the perspective of a tiny subgroup of self-important people. The overwhelming majority of people living, working, and creating in NYC do not feel that "finance" dominates the culture, the connections, or the emphasis.

New York is the dominant hub (or close to it) for several genres of music, for television, for fashion, for theater, for many counter-culture political movements, textiles ... the list goes on and on and it will be boring if I continue to explain.

Basically, it's the kind of thing you can say if you really know nothing about New York.

Thank you for this. I absolutely can't stand the comparison between the two environments. According to NYC's labor statistics [1], Finance as a whole (including all of commercial and investment banking, insurance, and real estate) makes up about 12.5% of the city's private sector jobs, and employs about as many people as the NYC local government does. For comparison, the Education and Health Services sector employs almost twice as many people (~24%), and Leisure and Hospitality about the same (11.4%).

Its much harder to find good statistics on the Bay Area because its comprised of so many different municipalities, but I would bet the Tech industry employs way more than 12.5% of private sector employees there. There's also no real "runner-up" in the region; Finance is one of the industries here, Tech is the industry in the Bay Area.

[1] http://labor.ny.gov/stats/nyc/index.shtm

Well put. I live here and can go months before meeting someone who works in finance. There are lots of big corporations here as well as lots of artistic/creative jobs.

As a software developer not-in-SV, life is great. I don't make a shit-ton (~90) but my spouse also works (~50), (and we are both young) we have no debt, our insurance is fantastic, our commute is about 15 minutes each, our house is 1/5th the cost of SV, and we are in a very good neighborhood (meaning public school district is better than any private school unless you're going for ivy prep), and shopping for practically anything is about 5 minutes away. Oh and neither of us work more than 40 hours a week.

So... yeah. There is actual life outside of SV.



at least on average, there is some serious question if Silicon Valley "works" at all well.


> One of the biggest misconceptions about us is that you need to have pre-existing connections to get value from the network. Remarkably, you don’t.

Well, as I recall, Sam, from one of your lectures in your current course at Stanford, both Marc Andreesseen and Ron Conway made it quite clear that they no longer take proposals from "over the transom" and, instead, learn about new investments only from their "network". Sounds quite closed and not very "open" and, instead, like an echo chamber from the past with not a very good view of the future.

Or, NSF, NIH, and DARPA will take proposals from strangers, but not Sand Hill Road.

I'd be interested to see a comparison of something like "dollars of revenue at ten years of age per dollar of initial investment" between Silicon Valley startups and newly formed companies of other kinds. That seems like a reasonable measure of the actual worth of a company to me, and so a decent test of whether Silicon Valley works or not.

Looking at valuations or even market caps is much less useful, because that tells you more about what's going on in investors' minds than in reality.

You have a point, but in this context necessarily works has to mean making money for the limited partners (LPs) and, there, more money than the alternatives, e.g., an index fund of the NYSE. Well, follow the link I gave to AVC.com and Fred Wilson's table of data there and have to conclude that on average information technology venture capital, and, thus, nearly necessarily also Silicon Valley, doesn't work very well.

I did mention NSF, etc.: There, Ike wanted pictures. The U-2 was not getting it done. So, one day Lockheed's Kelly Johnson walked in with a pile of papers and proposed a new plane, fly at 80,000+ feet, at Mach 3+, for 2000+ miles without refueling, and essentially impossible to shoot down. The project was approved; the plane flew as planned; and we got the pictures.

So, Kelly had a very ambitious start-up, and delivered as planned, with the project approved from work essentially just on paper.

Such work can be done. Other cases include the F-117, GPS, passive sonar, Keyhole (essentially a Hubble but before Hubble and aimed at earth instead of space).

It really is possible to do accurate evaluations of ambitious projects just on paper and, then, go forward with a quite high batting average. And this fact does partly respond to your point.

Well, NSF, NIH, DARPA, CIA, DoE, etc. can work this way, but Silicon Valley just flatly refuses to. Instead, they want another SnapChat with traction and f'get about anything more, and that means that they can't do the really valuable projects. And that's why, on average, they don't make the big bucks.

My biggest concern with Silicon Valley is that it will become so expensive that many potential startups are prevented from coming here. Sam also stated that housing costs were the biggest weakness.

I wonder what YC could do about this problem for it's companies. I think it would be interesting for YC to build a few high-rise live-work spaces for smaller YC companies to foster and grow the tightly-knit community. Maybe like a high-tech college campus?

> build a few high-rise

The dominant political view in the area is that building high-rise anything anywhere is something that should be stopped at all costs

True in much of Silicon Valley (especially places like Palo Alto, which want to retain a suburban layout), but there's some moderate densification going on in San Jose. It lulled for a bit during the financial crisis because a bunch of projects' financing fell through—some apartments under construction had work stopped for ~2 years. But construction seems to be back in swing again now.

Sam is right about "the wildly-out-of-control housing costs, which is probably the biggest weakness here right now". FYI, some Mountain View tech workers volunteer for an organization called MV Voters for Housing Diversity. See who we endorse for City Council at www.mvhousing.org, and vote tomorrow! http://www.sos.ca.gov/elections/find-polling-place.htm

In Palo Alto, there's a similar organization called Palo Alto Forward, which I know some Palantir employees are involved with. www.paloaltoforward.com

Recent thread on So You Want To Fix The Housing Crisis:


Basically, people need to vote if they want to see any changes.

Not sure where they would build "high-rise" anything - zoning laws would preclude that in most places in the bay area.

Political action to allow higher density?

Silicon Valley is already a dubious value proposition for most startups, if not outright terrible.

> One of the biggest misconceptions about us is that you need to have pre-existing connections to get value from the network. Remarkably, you don’t. Silicon Valley is a community of outsiders that have come together. If you build something good, people will help you. It’s standard practice to ask people you’ve just met for help – and as long as you aren’t annoying about it, they usually don’t mind.

There's some truth to this, but it's not entirely accurate. The spectrum of who, what, when, where, why and how is very broad here. The top of the food chain in Silicon Valley is just as insular as Wall Street, Hollywood, etc.

> Yes, the approximately 700 YC companies are all totally independent legal entities – but the connection is so strong that alumni companies get significant benefits from each other.

Not often discussed: some of those benefits are benefits until they're not. A lot of accelerator-backed startups count other startups from the same accelerator as their largest customer segment and a source of early sales traction. When the business cycle turns and "other startups" is no longer a viable customer segment, however, a lot of startups are going to see their sales decimated because they have little to no diversification.

> Unlike other cities where people are mostly focused on cash compensation for this year, in Silicon Valley more people talk about equity than salaries (assuming, of course, that they can afford the wildly-out-of-control housing costs, which is probably the biggest weakness here right now).

This is simply not true. Most angel and venture-backed startups in the Bay Area today offer early employees miniscule amounts of equity, and engineers demand market rate compensation (where market rate compensation equals "what Google or Facebook would pay me if I could get a job there").

If you're a startup offering higher equity in lieu of salary, you will have a very difficult time hiring in the Bay Area. Most engineers are hip to the fact that this isn't likely to work out in their favor.

Good article. It provoked a thought:

In an increasingly digital world, how long will physical proximity be an advantage?

The notion that a region could somehow have its own brand of patriotism centered around startup success merely due to density is somewhat difficult to rationalize. You can't deny SV's success relative to other technology hubs, but I'm wondering how far in the future physical proximity will continue to carry such a steep advantage

> how long will physical proximity be an advantage

There is a number of articles and research papers on the subject. In short, distance matters even within the same building.


The reason why Silicon Valley works is because of the intense greed that it provokes amongst everyone that comes here. Maybe "greed" is too strong of a word, because people aren't necessarily selfish, maybe "money-focused" is probably more accurate. And because anyone can come here and become a millionaire/billionaire, it draws in an immense number of hard-working people which just generally increase the level of competence, and unfortunately competitiveness, which has a positive feedback loop which causes these smart people to want to work even harder over time.

Outside Silicon Valley, all you hear about is billionaires being made day-after-day, and smart people they look at this nonsense and think "I can do that". Once the come to Silicon Valley, they get sucked into a vortex of work and money-focus that is so strong that the only way to get ahead is by working long hours and taking risks.

Think about it this way: a person who makes 120k/yr with 2 kids and a spouse who stays at home will be considered the "working poor" here. I feel sorry for anyone who tells me they have a spouse, 2 kids and a house in any place other than NYC, and are contemplating moving to the Bay Area. Everything is priced perfectly to the point where no one can afford to live in a good neighborhood with a good commute with good schools. It's like the CAP theorum, except it's more like "Good Job, Good Neighborhood, Good commute: pick one" (unless you're rich).

So, in order to get ahead, both spouses need to work, and they need to work very good jobs with long hours in order to "make it well". If you have Dual Income No Kids, it's a bit easier, but you still need to deal with oppressive traffic and high rent. It's so expensive, that all you do is think about money. And you fall into fallacies where if both spouses make #120k/yr, for a total of basically $250k/yr, you start thinking "why don't I feel rich?" or "why am I working so hard with nothing to show for it?" It's because you work 10 hr days, and then you're spending 2 hrs a day commuting, and you get into a zone where all you do is think about work, and how to buy the next iPhone because at least you have something to show for your money. Meanwhile, none of my friends outside of SV have iPhone 6's let along iPhone 5S's, many are still using iPhone 4's which are perfectly good but a bit slow, but you wouldn't be caught dead in SV with one of those relics.

So all of this money-focus necessarily squeezes out as much productivity from the best and smartest in Silicon Valley, which is why you have so much success here. If you compare SV to place like Japan or China, where the population is generally better educated, you don't get anywhere near the same level of productivity. In Japan you get high prices and long work, but there's no payoff like there is with Silicon Valley because of the social impedances, so you'll never have a Silicon Valley in Japan. In other places that purport to be another SV, even places like Austin, there just isn't the same level of greed/money focus like you have here, so I don't think you'll be able to get as much productivity. It's the sky-high prices, work-life imbalance, the startup-millionaire stories that create this unique pressure cooker environment that can't be duplicated.

On the living part: My folks live in Concord and their next door neighbor just moved into assisted living at 95. Her house sold within a week for 700k to a young couple. It's a 3 bed 1 bath single story in Concord with drainage problems, mind you. Lets do the math here shall we: What is the mortgage and taxes(thanks prop13) on a place like? Well, at 4.05%, good credit, and 15% down, it's 2857.80/month just on the loan, then we have taxes at about 729.16/month and ancillary insurance and repair will round us up to about 4k/month (48k/year) on just housing for a 3 bed 1 bath. Since spending about 1/3 of your income on housing is normal, you'd need about 150k/year as a couple to afford the house next to my folk's. You simply cannot get a job out in Concord for that salary, so you need 2 working people at ~75k, which is just out of Concord's range for a young person. The only place you are going to find salary at that price is in the South Bay or the City. So now you have to ride Bart or 680 for an hour each way, putting you at at least 10 hour days. Oh, and the closer you get to SF or the further south you go, the more the houses cost. You can't win.

Mind you, they live next to my folks who pay about 120.00/month for the house since my Dad was a GI and got the house for 70k in the 70's. Same Levit-town style house, 40 fold cost difference. Neighbors with completely different lives.

And they say there isn't a bubble?

> sold within a week for 700k > got the house for 70k in the 70's

For perspective, the S&P 500 was at 68.56 in 1975 and began 2014 at 1848.36, a 27 fold gain. You also wouldn't be paying ongoing real estate taxes, etc. So the house bought in the 70's wasn't that great of an investment, long term.


You can't also live in the S&P 500 though.

Nor can you get 10:1 leverage to invest in SPX.

Pop is a mechanic and will likely die under a car (we've come to accept this). His know-how of the S&P is suspicion at best as he has no formal algebra-2 training (due to Vietnam and all). He did not buy the house to generate a return, he bought it because he needed a pot to piss in, a bed to sleep in, and a house to raise a family in. Our home is not worth only money.

My intent is not to judge your pop, but to put the 10 fold increase in the value of the house in perspective.

BTW, when I work under my car, I put two sets of jack stands under it, and don't work alone. When I was a kid I jacked up my car and put cement blocks under it to hold it up. Before I slipped under it, the blocks crumbled and the car collapsed onto the ground. Yikes! Glad I was able to learn that lesson the easy way. Best regards to your pop!

I took dying under a car to mean, never retire, never surrender.

No, I meant it quite literally. He uses jacks and has seen many friends die for lack of them. It's not an accident that will kill him, just old age or a heart attack of a sort. We are pretty sure that Mom will walk out to the garage one day and find him dead under a car with what he really loves to do.

I know :-)

Traditionally, real estate was not a great investment. Only recent boom/busts have turned it into a money maker (for some).

Historically America residential property has been a zero return investment. It kept up with inflation and that was it. It's only recently that America has seen the boom and bust property cycles that affect other parts of the world

If it's so bad, why aren't people moving out of the valley?

My guess is, anecdotally, that there is very high turnover, but still net positive population growth. I participated in YC but really had no desire to be in SV and thus moved back to Boston where I feel life/culture/people are much more balanced. Being in SV for work, I felt like I was in a perpetual startup/tech bubble.

I think the parent commenter paints a gloomy but somewhat realistic picture - it 'works' because there's a high volume of people looking for success, but it can be very stifling for some (such as myself).

I think they are.

I've worked here in SF as a Rails consultant for the past four years. It's quite obvious that the work force skews younger. My best friend just became a CTO and his bosses are both 20. He's 41. :-0

When you look to start a family, the pressures of working in the valley are going to bubble to the surface. You can either endure a 60 minute drive (that should really only be 20 based on distance) to a child's dr. appt for which you endure wall-to-wall traffic with a screaming child, you try to ride bart with a child in stroller and packed cars, or you shuttle a car seat to and from an Uber.

Or, you pay 30-60K for a nanny and let them handle those headaches.

It's hard to live in SF with a family. Really hard.

> or you shuttle a car seat to and from an Uber.

Hmm, seems like a business opportunity here, for Uber/Lfyt etc. to offer a car seat as an extra (in which case the car arrives with seat all set up and ready).

The data tell us that some people leave California in search of cheaper housing. A much larger number come from other countries (India, China, etc) for high-paying jobs. Net migration from Mexico has been very low recently.

source? Thanks!

Two things:

1) lots of other stuff rocks, so you don't want to leave and you can downgrade your living space to something smaller that is more "affordable" to get most of what you want

2) people are leaving, but at a slower rate than they are coming. Basically, come here, work hard, burn out, and go somewhere else. Or maybe you get a job on the periphery, like say san jose, and then you live way out in Morgan hill or gilroy or in the cheaper parts of san jose. Or you get a job in Dublin/Pleasanton and then live in like antioch/pittsburgh/tracy.

Hello from Portland.

Anecdotally, it seems like they are moving out of there and moving in here. (Disclaimer: there's an alarming number of people here that are opposed to that. I'm not one of them.)

Thing to consider, though. There still isn't nearly the concentration of VCs (and thus networks) here as there are there. Depending on where you're at with your project/startup/company, that's got to be a sizable consideration when thinking about moving to/moving from the valley.

Anecdotally, the Northwest has been complaining about people from CA moving up and "ruining the place" for decades. (see: "Californians driving up our housing costs", "Californians don't know how to drive", etc. I grew up in the Seattle suburbs, and it was a common refrain in the 80s and 90s, and I'm sure it goes back at least to the 1962 World's Fair, if not the early days of Boeing.

Also anecdotally, I moved to the Bay Area, my parents moved (back) to SoCal after 40 years in the Northwest grey. Plus, I have 4 dot-com era friends who have moved from the Seattle tech boom to the Bay Area tech boom, all in their late 20s/early 30s (so not just-out-of-college types), and I know a few others who are considering the same. And I don't know a soul from here who moved north, except for people who came down here for college and then returned home.

I guess it's like they say, "the plural of anecdote is not 'data'".

I did. Now I'm in Manhattan where it's cheaper, funnily enough.

Manhattan is expensive, but I think you benefit a bit more from the efficiencies of extreme urban living. With the exception of a few neighborhoods, it's much harder to get by in SF without a car. In fact, SF is sort of in the worst of both worlds - dense enough that it's quite difficult to own a car, not so dense that it's easy to get by without one.

I'm not convinced they aren't. I live in Sunnyvale with a wife, 2 kids and a single income. Many of our friends with similar circumstances are considering leaving and some already have.

There'll always be new blood that offsets people leaving. I think the housing shortage is so bad that even if people were leaving it wouldn't decrease pressure right away.

I've seen a steady trickle of senior engineer peers departing for the midwest and nyc because they're both cheaper.

They are, but there is a near bottomless pool of people ready to take their seat.

If there is any constant to the Valley over the decades it's the old fashioned American pioneer success story; strike it rich and take the money home.

I'm guessing that the housing market is dancing with the maximum value of "1/3 of the typical house-buying population's salary" that buyers are willing to pay. If a lot of house-buyer are couples and they make $75-100K each, then that is balanced against maximum-tolerable commute time and voila, prices drop off once you get to Hercules, Tracy or Gilroy.

Because of economic opportunity. People seem to forget that individuals have choices in a market economy.

Do we have any evidence that they aren't? The only people I personally know who have moved there are fresh college graduates.

Everybody expects a greater fool will move in after them, it's the standard response.

And this is why I'm working in Austin, Texas, and not in California after graduation!

Bingo, I'm in Colorado now. 700k in a good school district is 3 stories, 5 bed and 3 bath with an acre in the back. Also, the beer and slopes are nicer here.

Don't live in BFE Concord? Could get a 3/1 on the Peninsula for a bit more (say, 800-850). Less if you're willing to live in Daly City or EPA or something.

Single-family or townhome/condo? In the Mountain View/Sunnyvale/Los Altos area you can get a 3/1 townhome for about $800K, but if you want a single-family home with a postage-stamp yard those start at around $1.2M.

SFH. Obviously you're going to pay out the nose for MTV or Los Altos. I haven't shopped in Sunnyvale but that comparison (to the other 2) surprises me. I'd expect it to be cheaper than, say, Redwood City.

I remember back in '06, places in MTV were cheaper than Santa Clara. Should have bought back then! I remember thinking Google couldn't get any bigger, it was already a huge company. Guess I couldn't have been much more wrong.

For 1.2M you can get a decent-sized 3/2 or 4/2 of maybe 1800sqft. Not in Mountain View, obviously.

And they say there is no inflation

What you are talking about is a new phenomenon. Silicon Valley in 2008 was different - rents were lower, and $120K with 2 kids and one income was OK. There has been a dramatic increase in rent/real estate prices in the last 6 years that has completely schewed the system and the culture. Silicon Valley has thrived in years when rents were OK, people were not greedy and yet great Companies were built.

I remember going out of Stanford in 2003 - at the time a job at Oracle for a CS MS grad was awesome - and yet, people went on to create Facebook, LinkedIn, and all these Companies, and rent were OK, salaries were good, and you had this mindset of "I am going to give this a shot" everywhere that is at the heart of Silicon Valley.

Extreme greed as you describe is a new thing. It may have been there in 99-01 but I can tell you none of that was there in 01-04 and it was much less profound in 06-09.

The reality is that all things work in cycles. People who genuinely love tech will stay, others will go back to Wall Street or Consulting.

It isn't a new thing, it was rampant in 1998, some say it was rampant in 1982 as well.

Having lived through the dot com crash of the late 90's I have thought a lot about what went into that event. It is easy to be dismissive and "blame the suits" or the "bankers" but the reality is much more nuanced than that.

I have come to conclude that it depends on what goal is driving the bulk of the community. During a 'non-boom' the driving force is often engineers and designers who are spending all of their capital on solving a problem, or changing the efficiencies of an existing system to favor a different part of the value chain. You get a lot of folks thinking like that and eventually you get a couple of winners. That winning inspires other engineers to either work around similar spaces to see if they can replicate the success. A "wave" is started, whether it is "microprocessors", "the web", or "social media" or any other technology, it generates some success for people who get the value and can plug it into the bigger economy.

As that happens it starts generating economic value which gets translated into cash (the thing everyone thinks they understand).

That cash then attracts a different kind of person. Someone who can use cash to make more cash, they are meta-engineers if you will, playing off the second derivative of innovation, the change in cash flow over time. Their secret sauce is that they perceive the forces that are changing the cash flow and they speak to non-technically inclined folks about tapping that flow to send some cash their way. Imagine everyone in the world had gone wild for buying tulips, these people come in and find the folks who see people getting rich on buying and selling tulips, but don't understand tulips, or the attraction in tulips, and whisper that they know a farm that is growing outstanding tulips and will be harvesting soon.

What this other set of people have done, is to start influencing capital toward the 'new thing' but through their fingers. And they take a cut of course.

The truth is though that there has always been (and perhaps always will be) more capital than Silicon Valley can successfully convert into improvements into systems or new solutions to problems. And so this capital sits on the sideline until the third actor in our play arrives.

That is the person who is going to "get rich" in Silicon Valley. These people spin stories, stories that sound enticing and world changing. Stories about frictionless sharing or paradigm shifting. Stories about turning opportunity into massive shifts of economic power, political power, or both. They spin the story of changing the world, if only there was someone with the courage and the vision to back them in their quest. And at some point, that capital that is sitting on the sidelines "missing" this opportunity, sets aside the common sense its managers had and starts to make some big bets. Because everyone knows you need a lot of money to make a lot of money.

And that is where things have gone off the rails, at least twice before and perhaps now for a third time. Money begins to flow in, it goes to some great people, it sometimes knocks good projects off course, and it goes to some folks who are just good at talking. The the number of 'good' things that are happening with it, goes down quickly. When the diligence drops below the minimum sustainable level, the game board is set for some spectacular failures. And those failures are unavoidable, like a train engineer seeing a car on the tracks half a mile away, knowing it takes over a mile to stop the train, even with all wheels locked.

While I feel like I've analyzed the dot com crash enough to understand the mechanisms in play, I have yet to figure out any scheme or system which could prevent it from happening. That makes me sad.

This is human nature. You have these guys in NYC, in DC, in LA, in Connecticut - everywhere where there is money. Even among investors at second or third tier firms, you have folks with a lot of money but nothing to show for it. This is a sad face of capitalism, and something you have to come to terms with. But this is not Silicon Valley - this is a byproduct of Silicon Valley.

TL;DR: Every time there is a wave of genuine innovation, it attracts wannabes. Some of them are not good makers, but they have the skills to attract a lot of capital. Then there is too much money for too little economic activity and too great expectations of growth, and it ends with a crash.

No. I've been in the Valley since the Netscape IPO. It's always been like this since at least the mid 90s.

You don't know because you came out of school at essentially the nadir of the dot-com bust, you only know how things went from shit to great to bubblicious in the last 10 years. Sure, rents have gone insane in the last 2-3 years, but rents have always been high. From 2001 to 2004/5, rents were low, traffic was great, etc, because of the sheer number of jobs lost. Per capita, the number of jobs lost in SV from the bust was worse than Detroit.

But during the dot com bubble, it was definitely like this, and the one thing you also don't realize is that the house prices were not affected by the bust, money moved from the stock market into real estate in the Bay Area. House prices went nuts during this time, until the housing bust and only now have prices surpassed 2007 prices.

But SV has always been about greed and making money.

Except for the phone observation, he matches what I saw in say '90 completely. And replies like yours were also common even back then.

I'm inclined to agree that it's about the money.

I'm not sure that it's a good thing but it's certainly an engine that's spinning hard.

I strongly disagree that the high cost of living is beneficial for startups. Keep in mind the very term Silicon Valley comes from chip companies (Fairchild, Intel, etc.) who came to SV because it was cheap, open farm land. There isn't a business in the world that doesn't want to optimize on costs.

Take a look at a modern SV company now: Apple. It creates lots of jobs in SV, but far more in China.

SV succeeds in spite of the costs, not because of them.

> Keep in mind the very term Silicon Valley comes from chip companies (Fairchild, Intel, etc.) who came to SV because it was cheap, open farm land.

It's funny you mention Intel here -- since the 70s/80s they've continued to expand in Hillsboro, Oregon (a suburb of Portland), where they bought a lot of cheap farmland. It's worked really well for them and the ~16k people they employ in the state. The only downside is a sort of "employer lock-in" for the employees, especially the more specialized ones.

> The only downside is a sort of "employer lock-in" for the employees, especially the more specialized ones.

That downside is not a downside for Intel. Having employer lock-in keeps costs down and turnover low.

Back in 2005, I was accepted into Portland State for a grad CS programme, and I recall a large chunk of the accompanying leaflets read like a giant recruiting advert for Intel. I never gave it much thought back then because I wasn't going there anyway, but your point sort of explains it!

I strongly disagree that the high cost of living is beneficial for startups.

You're absolutely right. High COL is good for well-connected people who get funding easily for stupid startups, because it makes the labor pool more captive. It's bad for the quality of startups.

Take a look at a modern SV company now: Apple. It creates lots of jobs in SV, but far more in China.

And then the murderous, unionbusting thugs who run the sweatshops buy real estate in California, pricing the locals out of their own housing. It's the circle of life... ?

Having lived in NYC too, the greed there trumps the greed in Silicon Valley. The greed in NYC is money for it's own sake. The greed in Silicon Valley at least has the pretense of creating good products. The greed in Silicon Valley requires creation of value in addition to capturing it. NYC is all about capturing in.

A $4,000/month apartment in Silicon Valley gets you a good school. A $5,000/month apartment in NYC gets you a public school where 90% of the kids fail the state exams.

Two observations:

- Plenty of 4k/month San Francisco apartments get you into terrible public schools.

- Inverting your point, at least people in NYC / finance are generally honest and upfront about their desire to make lots of money for its own sake; many in the SF area go around preaching nonstop about how their only motivation is to reshape society with their paradigm-shifting value-adding "wearable social network for dogs app" that will end all hunger and global poverty, and pick up your drycleaning, too.

After the wildly successful IPO, they still rehash this line; only now it's from the deck of their custom yacht moored on a private dock by their much nicer house.

Well, SF runs a lottery system, so your rent was largely irrelevant until recently (the system is changing to give some preference to people who reside in a school district).

That said, you really should investigate SF public schools a bit more. There are a large number of very high performing public schools, as well as some terrible ones. That's actually no different from the 'burbs, it's that if you live in the Gunn district in Palo Alto, you get to go to Gunn. If you live in a particular school district in SF, you aren't guaranteed a slot in that school.

Having a large chance to have your kid land in a poor quality school is reason enough not to live someplace. (Unless you can afford private)

We probably disagree about the extent to which the chance of a bad placement is "large". I have two kids in SFUSD, and I really do believe that if you do your research and create a balanced list of good schools (without focusing on the "trophy" schools, your odds of getting a good school placement reasonably close to home (certainly closer than you'd get with a local school in the burbs) is good. That said, yes, there is a chance you'll be disappointed and need to look for other options, and this simply doesn't happen in well off suburbs, where you can convert a high mortgage payment into a guaranteed spot for your kid in a high performing school.

So even though I disagree with you that the odds of a bad placement is "large" (I'd say it is non-trivial rather than large, but I don't have numbers either) this process appeals more to poor or middle income people than wealthy ones. If you're poor or middle income, you're choosing between no chance of a good school (you can't afford the top districts in the burbs) and a decent chance (SF). For a rich person, you're choosing between a guarantee (burbs) and a decent change (SF). Again, we disagree about "large".

One thing - have you looked at greatschools.net and checked out the number of elementary schools in SF with high test scores? SFUSD a very high performing urban district. It's fine to disagree, but if you haven't done this yet, I really do urge you to review the data before forming your opinion. I think the notion that SF schools are mainly bad is an incorrect myth. There are problems, but the notion that good elementary schools are few and far between is false.

High schools aren't quite as good, but they aren't nearly as bad as people make them out to be (it's not just Lowell - check out the data. Balboa high, in a relatively low income southern part of SF, scores as high as many reasonably good suburban districts).

Middle schools seem to be the weak link right now, though again, please review the data before forming your opinion - the conventional wisdom is almost always more dire than the reality where it comes to sfusd. Middle school is a tricky one - you may notice that the private model rarely splits out 6-8 grades, going with the k-8 model, so the entire approach may be flawed here...

My comments and data are more on NYC. (I moved to Silicon Valley in part based on the terrible public schools in NYC, and picked my new location based on zoning)

The school I was zoned for had ~90% of the kids failing the state math and reading exams, with ~50% getting the poorest scores possible. When I publicly questioned the education department officials, they said, "The tests might not be measuring the learning that's occurring." I applied to 20 non-charter public schools, and we didn't get into any. I applied to 20 gifted and talented programs, and 40 charter schools as well. It's insanity.

To the point of SF... There is a very high switching cost whether you buy or rent. If you move somewhere and don't get into the right school, there are costs ($ and hassle) for changing your mind a year later. This is why people lock in.

And I'll throw out the question - why shouldn't the majority of the schools in large cities be good? It's not easy making it happen, but the awful quality is a societal failure.

The strange thing is when you recruit into the Wall Street jobs, you are supposed to pretend that the reason is anything but the money.

Manhattan is not NYC. You can rent a 1 bedroom for $1600 a month with a 20 minute train commute to Manhattan (and even less rent further away) in a great school district in Queens. I've lived in NYC my whole life, and worked in Manhattan my whole school and working life, and never paid more than $1400 a month in rent for 2 bedrooms - living with my wife and in only completely safe neighborhoods.

Somewhat off-topic, but if you don't mind sharing, what would you say is the optimal Queens neighborhood for proximity/price/schools?

Closer but more expensive: Astoria/LIC, Flushing/Jackson Heights

Farther but cheaper: Ozone Park, Forest hills, elmhurst, kew gardens

cheapest but farthest: glen oaks, floral park, douglaston

Check out Woodside and Maspeth.

The greed in Silicon Valley does not require much more than an idea, a good network and some luck. Very few start out wanting to change the world, their companies just might end up doing it.

At least New York is honest.

Huh? High schools in NYC are merit-based. If a kid is in a school where kids can't read, it's not the city's fault.

High schools are. K-8 are of dubious merit. It's based on IQ testing of 4 year olds, a very weak science, especially in the backdrop of prepping. It is very much a system of haves and have nots.

Why are you comparing the suburbs (SV) to the city (NYC)? You know NYC has suburbs with great public schools too?

I would say very good in NY suburbs - I wouldn't go as far as great. (Without going into too much detail, I've done quite a bit of research)

The difference is that Silicon Valley has a lot of jobs, and is the area of the original story. If you're in the NYC suburbs, you are likely commuting into NYC for a good job.

All this is part of the reason why I've strongly been thinking of going back to school to become a doctor. What follows is mostly a rant, just to be upfront about it.

It's a really radical transition, but I really, really dislike the city-centric focus of software engineering. I hate the idea of being a contractor (I just want stable, life-long work), and I can't tell you how tired I am of crippling traffic causing me not to even want to drop by the grocery store until it's almost time for it to close. I'm not in the Bay Area, but am in one of the five largest cities in the US. I went to college not giving a shit about money or how much of it I would make, and now I find myself thinking about it most days because I have to confront the fact that I can't afford any housing near where I work. I wouldn't be so upset about it if it weren't for the traffic which makes commuting from far out an absolute nightmare.

In terms of raw numbers, it's a transition that doesn't really make sense, not for a relatively skilled developer anyway. The salaries aren't that much higher outside of surgery and a few ultra-competitive specialties, and the time and debt involved in the training are immense. Depending on any number of factors, it could be better or worse than a life in technology. The two things that are for sure are that you're not going to have financial difficulties and you're not going to be subjected to ageism (quite the opposite). If you want to be rich, medicine's probably a pretty bad choice; but if you want stable, well-paid, life-long, rewarding employment wherever you want in the country, it's among the very best options.

The most amazing part of it is that you get to directly help people every day (so you don't have to wonder if your crazy ass startup is actually "changing the world" or not), there's more demand for doctors in rural areas (not less), and most non-surgical specialties can easily work comfortably into their mid-60s (or even later, health permitting). You're also surrounded by people who, at least in the beginning, were motivated out of passion and not money- and status-seeking. (Of course, some people will change as they age and grow more successful, but not all.)

I'm married to a doctor and have considered medicine, but probably won't go for it.

On your individual points: 1) City-focus of software engineering. Have you considered trying to work remotely? That isn't for everyone (I couldn't do it), but it would probably solve your problem

2) Salary wise, I would worry too much unless your first priority is to really help people (more on that below). I've interacted with a lot of doctors and frankly if you are smart developer you'll most likely have a leg up intelligence wise on all but the most in demand specialities.

3) I wouldn't necessarily count on being able to directly help people every day. It depends on your speciality and where you work. A lot of private pratice places often push unnecessary procedures to make money. If you are in a non-procedure speciality or at an academic center you probably won't have those pressures. That being said, if you want a comfortable life where you can actually help people, a job at an academic center outside of a major city sounds like a great fit. I doubt you'd make much more than a software engineer though.

4) I'm not sure how to parse your statement about status-seeking. A lot of people who go into medicine are status seeking.

> I'm not sure how to parse your statement about status-seeking. A lot of people who go into medicine are status seeking.

My point, I suppose, is that spending an extra 7+ years in school/residency and taking out a ton of debt is not a very efficient way to get money and status unless you plan on being among those who get into a hyper-competitive residency.

I agree that working remotely would solve my problem, but I have serious concerns over (1) long-term stability; (2) being totally isolated from coworkers.

I have those same concerns about working remotely, but some have made it work.

In any case, good luck to you.

Uh - remote? I've spent most of my professional life working from home.

With some extra effort, you can earn an SV salary but live in an area that has a very un-SV cost of living.

Traffic isn't an issue either.

You can network remotely. You can build companies remotely. You can even find investors remotely.

A few people are doing this already. More and more will in future.

(Are we really supposed to believe it's always better to build Internet companies in meatspace? Hmmm.)

I know there are downsides to remote working. Guess what? There are epic, catastrophic downsides to working in SV meatspace too.

I'm looking forward to the day a few decades from now when what's left of SV gets turned into a museum, while the rest of the planet gets on with doing cool fun stuff... elsewhere.

Do you really think working remotely is anywhere nearly as stable as working as a doctor? I'm asking honestly. If I were convinced that it were, I'd consider that path. But most companies I've been involved with have clearly preferred developers to actively be part of the office (I guess I need to actively seek out the exceptions), and the areas I would like to live in aren't necessarily ones I'd want to find myself unemployed in (due to lack of technology companies -- I'd either have to find another remote job or uproot my whole life).

I'm also not confident at all on the longevity of most software companies. Part of me does not feel comfortable growing roots somewhere while working for a company that I don't expect to survive the course of even my own career, with very few other local options to fall back on.

Also, for what it's worth, I really do enjoy physically being around coworkers and interacting with people. The lack of interaction is one of the things that bothers me with software development. I think, if I worked remotely, I'd have to start a family just to keep myself feeling connected to the world.

Honest question: how does one get started working remotely? I understand that it's easy to keep finding remote work once you've already done a few remote gigs. But how do you break in?

Either you apply to a remote job - there are plenty here on the monthly "who's hiring" threads. Or you get your current company to allow it as part of negotiations. An annual review makes a good setting - ask for a big raise, then offer working from home as an alternative (it'll save me money on my commute, so I won't need the increase).

Maybe not as stable as being a doctor but these guys from Wufoo built a company working entirely remotely: http://startupclass.samaltman.com/courses/lec07/

Pretty cool.

This sounds like a fairly idealized vision of what working in medicine is like. I have heard doctors say the same sort of thing about being a software developer. Is the grass really greener?

We all have different things that we're looking for in life. For instance, most of the things that I commonly hear people complain about in software development have never once bothered me (bureaucracy/incompetent managers, deadlines, long hours, etc.).

A doctor who isn't interested in any of the benefits of the career that I listed may indeed end up resenting their choice to take on a lot of debt (and study for at least seven additional years) just to end up in a big city alongside programmers with no debt making a similar amount of money.

Like I wrote, if you're motivated by money, medicine is a fairly bad choice. How many doctors are neurosurgeons? About half a percent. Of those, how many are department chairs? Just a handful.

If you want few working hours, medicine is probably a bad choice. How many doctors are radiologists who co-own a business and take half the year off? I don't have a percentage for this one, but very few. Most will work 50-60 hours a week.

How many programmers know that their startup is still going to be around in 40 years? Very few. How many programmers have the option of working where they want without taking a pay cut or working as a contractor? Very few.

The grass certainly isn't always greener. If it were, then I might have picked law, or architecture, or construction, or any of a vast number of other options. But none of those fits the list of criteria that I now know are important to me in life (but may not be important to you).

I'm afraid the reality of being a doctor is not quite so rosy as all that. Take a look at these before you make the decision:

- https://encrypted.google.com/search?q=doctors+suicide

- https://encrypted.google.com/search?q=doctors+unhappiness

To add to your data point, I recently transitioned as a software dev for a e-commerce company to Bioinformatics research place.

The e-commerce recently IPO'd but I didn't like the culture and lifestyle for all the reasons you've already stated in your post.

Funny enough I also applied for a software position for a hospital but I didn't take it as I consulted many of my friends who are in residency and EMR software field where they said that hospitals are onerous with regulations. So coding can be frustrating experience and turn-arounds are slow with specialists/business analysts ensuring compliance with patient privacy and clinical data accuracy.

If you're looking for a place where there's a lot of smart people who are not motivated for money, there are many software opportunities in NGOs, life sciences research where lifestyle is much more relaxed, pays actually pretty well (because people won't accept the fake carrot of big equity payout) and you get more job satisfaction IMHO. Best of luck to you.

Cities are a great place to live if you find one with decent public transport. If you're already talking about a major life upheaval, have you considered coming to Europe? There are pretty cool software industries in London and Berlin at least.

YMMV, but I found living in the country pretty unpleasant, particularly as a relatively shy single person with less-mainstream hobbies; you have to drive everywhere, you have to plan a lot more in advance (just trivial things like doing your grocery shopping ahead of time), and there aren't the kind of entertainment options you get in a city.

If you can get in medical school and can take the income hit during your coursework and residency, go for it. Programming is best kept as a hobby (imho) unless you are building your own company. Get into a non ageist profession. Have fun. Good luck.

Before you do that: become very familiar with the concept and consequences of RVUs (and, ideally, ask an active GP).

I hear you friend, but I knew a few doctors that are getting pretty tired of the all the insurance nonsense they have to deal with.

Traffic is atrocious. The driverless, grid-connected cars can't get here soon enough.

I don't think the cars are the problem, as much as the tech bubble driving real estate prices through the stratosphere. That's not going to be fixed by... more technology.

In other words, this may be the HNest comment I've ever seen.

Driverless cars are going to automatically fix the problem of traffic, once and for all.

Yeah, right.

SV is like the 1849 California gold rush. A few people got rich and everyone else just got dirty.

Which why the clever entrepreneur sell tools for the gold-diggers.

This explains so many start-ups. Especially the ones with .io domains.

One of the Lectures encouraged new startups to come up with something that other startups would find useful. Indeed, it seems like a good 60-70% of startups fall into this "startup tools" category.

I compare it to the Klondike gold rush: most of the people who got rich did so by taking money from suckers.

I live a 20 minute drive (after 10am or 7pm) from ~all the startups in SF (in SOMA or Midmarket). My rent would be ~$1800-2500/mo for a 1BR. (GF owns the condo, so no rent now). While Oakland is moderately "real", I've never "had to use the AK" -- it's realistically about as safe where I live as in SF (I live near a Whole Foods, after all). I do spend about $660/mo on commute ($260 parking, $100 bridge toll, $300 or so on gas and vehicle operating expenses). I could do a 50 minute BART ride for $0/mo total if I wanted, and it'd be 30 minutes if I lived a little closer to BART and worked at Twitter or Lookout instead of by Caltrain.

There are probably >10k jobs in that commute footprint I could have within a week at $150k base plus $100-300k/yr in equity. If I were a competent 5-10y experience frontend developer, maybe 50k jobs in the same range. That's without even touching Silicon Valley itself, or remote-but-through-SF-connections.

This is the advantage of SV as an employee. You can work for a startup knowing that you'd literally have a new job before the day is out if your company imploded in the morning.

>You can work for a startup knowing that you'd literally have a new job before the day is out if your company imploded in the morning.

While the bubble is still going, yes. Once it pops, not so much.

I think it's witty/funny that the OP is "Why Silicon Valley Works" while your comment aptly describes "How Silicon Valley Works".

Also, I totally agree with your comment on Japan. I think start-ups have a very tough time sustainably generating value through innovation in Japan. Taking the national psyche and tendency for risk aversion into consideration, most likely, it needs to come from either big companies or government programs (like in the 60s-80s).

It's vastly easier to become a millionaire in finance than in tech.

Can you elaborate? I'm genuinely interested in hearing from someone with experience in both industries to weigh in on this. Especially once the risks on both sides have been calculated in, since otherwise the comparison is largely meaningless.

I've worked in banking (algo pricing for an eFX trading desk), built a startup and worked for a VC.

From the financial perspective of a developer if you want to bank a couple of million dollars over 10-15 years then you should go work for a bank. If you want to bank ten million dollars you should start a startup, but it comes with a higher risk.

If you're a good developer, with reasonable people skills and a willingness to learn the business side, then becoming a millionaire in banking is pretty straightforward with a decent saving strategy. It's just a matter of time.

The risk level is pretty low, if you work for a hedge fund the risk is higher but you can earn more money faster and if the fund fails you can get a job at a bank pretty easily. The banking industry has a problem with hiring good devs just like everyone else does.

The financial reason for starting a startup is that you have the potential to make lots more money more quickly. But that also comes at a higher risk.

From my completely non-finance, non-startup, third-party point of view, I gather some finance workers are able to establish a direct link between their work and their pay ("Your bonus is 1% of the profits your software makes"). Startup workers can only make big money if they are lucky enough to get in on a big exit- their personal performance is only weakly tied to payout.

Finance is actually more meritocratic than software, these days. That may change. Right now, the douche factor is much higher in software startups that that clouds the game. Of course, many of those douches came from (cough failed out of) finance and management consulting.

Traders who top out at $500,000 per year are considered failures. Quants and programmers often get to (and, sometimes, past) that level, but more slowly (maybe 35-45 on average; obviously, there are outliers who get there faster).

For a contrast, the mediocre engineer gets such a small amount of equity that it's less than a finance bonus at liquidity. Then there's dilution and cliffing. Sometimes engineers (usually, ones who joined early and were later judged to have "too much" equity) are pressured into non-exercise of options on reputation threats (i.e. "you're fired, but if you don't exercise your options on that 2%, I won't have to give you a bad reference.")

Finance is harder to get into, but once you're in, you have a certain status that Silicon Valley just doesn't give to engineers except for a couple hundred with international reputations.

There's also much better career planning in finance. Don't make any obvious wrong moves and you will move forward. It might not happen as fast as you'd like, and you probably won't get to the $50M net worth level, but you can make a decent life for yourself and you won't be tossed out like yesterday's garbage at age 40.

Finance does have a lot of job volatility. The business is cyclical and layoffs happen. That said, so do startups. Finance compensates you for this risk by (a) compensating you well, and (b) being professional about it when layoffs happen, so your reputation is intact. The slimy tech companies, on the other hand, don't compensate your risk except with platitudes about "changing the world" and, when times are bad for them, hide layoffs with stack ranking and dishonest PIPs.

I will probably try to go back into finance in a year or so, honestly. (I'm already putting out feelers.) Tech is a nice idea, but the software industry, as it actually is with the "agile" micromanagement and the stupid startups and the general incompetence of its upper management (I won't call them "leadership" because they're not) is basically a waste of time for talent. At banks, I know that many of the MDs are at or above my talent level, and that almost all of them worked really hard to get there. Non-techs (including executives) in tech companies are basically 95% morons because the capable non-techs generally have better options in other industries.

It's hard to go back to finance, from startups, because the typical startup CV has a high jobs-to-years ratio and finance is still pretty bigoted about "job hoppers". (Finance is meritocratic once you're in, if you get a good job, but getting in can be a hassle.) In startups, one job per 2 years is normal; in finance, it fucks you in the ass if you change jobs that often.

What did you do in finance? I'm guessing trading? It seems like it's a rather hard field to break into, as you've mentioned. I remember reading that even for people coming out of Harvard Business School only a few make it into trading.

Regardless, that's a small subset of finance jobs, no? What I've read about the investment banker side is that the job is absolutely dreadful; if you get into private equity, it gets better, but you're still working like a dog generally. Also, sans trading, the jobs tend to require a very different type of person than your typical software engineer. As you move up, your sales/pitch skills become more and more important, as your ability to win clients/deals for the firm is what brings in revenue, not your ability to use excel.

Quant trader. It was fun. That said, I'm more suited for programming and quant work than for "guts and glory" trading, especially now that I'm older. I don't think I could ever work a floor.

I remember reading that even for people coming out of Harvard Business School only a few make it into trading.

Business school is about connections, but you need smarts to be a quant or a trader, and I'm still smarter than 99% of the people at HBS. I don't have the connections to get a Partner job at Sequoia, but I have the raw ability that most of those people don't have.

What I've read about the investment banker side is that the job is absolutely dreadful

Entry-level (analyst) jobs are pretty awful, and the hours are inhuman. It gets better as you move up the ranks. MDs work 9-to-6. VPs and EDs work 8-to-7, and there's enough status to the job (and the work is usually interesting, at that level) that it isn't so bad.

As you move up, your sales/pitch skills become more and more important, as your ability to win clients/deals for the firm is what brings in revenue, not your ability to use excel.

There's some of that everywhere. We failed at keeping politics out, at high levels, in the Valley. It's just hard to make merit matter more than being well-liked no matter what industry you're in. I don't know of any industry that has figured that problem out.

I wouldn't say "vastly", at least not now. It is probably easier if you come from a "target" background ( went to a prestigious school, graduated MBA, worked 100-120 hr weeks as an analyst... ). But for the average joe off the street? Tech is "vastly" easier to become a millionaire. That is to say, you have zero chance of becoming a millionaire in finance without the required background, but as someone with, say, an English degree you can start a startup, get it to a series A round and presto, you're a millionaire on paper. Get it to a B round, and you're a millionaire for real.

You're vastly overestimating how easy it is to raise a series A - the majority of YC companies don't make it to series A. The chances of an inexperienced non-tech founder raising a series A are small; there are hundreds if not thousands of such founders who try and fail for everyone who succeeds.

Investment banking is also far from homogenous, the requirements for being in sales at a mid-tier commodity fund in Chicago are vastly different from being in M&A at Goldman in New York. You can be pretty far down the pecking ladder in banking and still easily bank $1m+.

There is no need to reiterate how difficult it is to build a successful startup. My point was that even after controlling for this difficulty, for the average developer it's going to be "easier" to make $1mm by starting their own startup. The vast majority of finance professionals with target backgrounds won't break 200k in income per year. There are outliers in every profession and sure there are some hotshot salespeople and quants that make 1mm+/yr, but: when I look closely, and from talking with friends who work at namebrand banks and PE groups, it seems they're no more prevalent in finance than successful startup founders are in tech (i'd still like to see hard data on this because there are so many ways to compensate people and most have no incentive to report this, in both industries).

Now on to compensation: comparing apples to oranges, a Goldman Sachs VP's total compensation is about 240k, or roughly what a senior software engineer at Google makes. If I were a brilliant developer, I would rather work at Google and make the same amount than going through the meat grinder than is your IB to become a GS VP.

I agree. I am an ex-trader in his late 20s, and most of my peers who stayed in finance have at least a million dollars in savings+assets.

Is there a 'too late' to get into finance? I might have to change my focus. All this JavaScript and Objective-C can stay a hobby.

I really think it's a bad idea to go into finance for the salaries. You're going to be miserable, and no, you are not guaranteed a million dollars by 25. Obviously, there are many different career paths in finance, but all of the ones that involve making a lot of money include one or all of the following: stress, long hours (80-100/week), and risk (think how many financial crashes tend to happen. guess who loses their jobs?)

Of course, if you're willing to persevere through all that, and have very good people and/or sales skills, then sure, you might be able to join the ultra elite who own their private jets and have an island in Thailand. You'll need some luck for that too, though.

I think the only people that will 'make it' in finance are those that are genuinely passionate enough to endure the horrible work conditions and lifestyle while possessing the people/sales skills to be successful. Remember, to make it to the top in finance firms, you need to bring in revenue. With the exclusion of trading, this generally involves sales skills. Same goes for management consulting and probably law as well.

You could always become a developer in the finance sector, there are plenty of finance devs in the $200k-$300k range. If you're a top-tier dev working in front-office/hedge-fund you can make $600k-$700k/year.

There isn't much time for hobbies if you work in finance.

Eh, not too bad a trade off, I don't have any hobbies right now to lose out on. Trying to make millions either way.

You want to start focusing on low-level programming: learn about C++ and assembly languages and cache behavior. Or possibly get into functional programming. I could see Haskell getting bigger in trading. Learning some statistics and math won't hurt.

I don't think there's a "too late", but there's a different skill set you need, especially to get a good job in finance.

I hear there are arguments for the thesis of the high greedeenness / productivity of the SV people. What strikes me is the everlasting ability to pick some facts to build a narattive.

'cause I hear you. Living in Paris, France, I could complain about the same thing. How you end up consumed by your lifestyle with nothing to show up for in your late thirties despite your top 10% career.

Still, my preffered theory about why SV works is that European middleage adventurers went west, up to California. And that the hippie movement with drug-induced introspection moved some people enough to motivate others to build their dreams, which is currently happening under our eyes.

That's just another narrative. You have to pick your facts. Both may well be true. Or simplistic as well.

Lévi-Strauss taught me I shall not pretend being an observer of the world I live in so we might ultimately never know why SV "works". Let's focus on the how, and dream of the why.

To be fair to Altman - his article touches on costs: "(assuming, of course, that they can afford the wildly-out-of-control housing costs, which is probably the biggest weakness here right now)"

Interesting take though, you argue that the issues generally considered the biggest problems of SV, are the cause of its success.

Housing cost is the #1 reason I moved away, and the #1 reason I stay away.

I lived in Mountain View 2007 to mid-2008 for my job at Google. We were renting a house close to campus at the time and contemplated what it would cost to put down roots and stay -- most likely buying a condo or house. Every time we ran the numbers, it made no sense, so we voted with our feet and moved back to Chicago. I would love to live in the Bay Area again (there's a soft spot in my heart for the running trails of Marin County, in particular), but it still makes no financial sense. The lower cost of living in Chicago adds directly to my personal financial runway and allows me to work on what I want, when I want.

While the cost of living here is brutal, it seems a lot of people are stuck here due to the supply of tech jobs. It would be a lot more risky to live somewhere that does not have such a supply. As someone with a solid software background, if I were to wake up tomorrow and find myself without a job, I'm reasonably sure that after at most a few months of searching I could line at least something up. If that happened in another city, I'd be in panic mode, wondering how many months of living expenses I had left in the bank account and where my family would be moving to next. When you're not in an area with a healthy job market, it's terrifying to be out of a job without severance, and 1 or 2 months away from bankruptcy (ask me how I know this).

I'm not so sure. I think instead the panic might be more acute due to the exhorbitant cost of living. The salary difference is significant, but it's not necessarily enough to confer a rate of savings sufficient for the typical American household (2.5 kids, mortgage, student loan debts, etc.) to withstand more than a few weeks of unemployment, let alone months.

Right now I'm reasonably confident that I can go from being dumped out of my contract to having an equal (or higher) paying contract in a matter of a 2-3 weeks. If (when) that changes, I'll pack my family up and move, probably to Chicago. It's easier and less stressful to save a few months' worth of runway earning $120k in Chicago than it is earning $150k-$180k here. If other personal issues weren't impeding it, I'd already have done so, but circumstances are more likely to keep me here for at least a few years. The hot market here won't last, and it seems to me the hottest parts of the job market now are becoming even more narrowly focused on a segment of the labor market I'm simply not a part of (young, willing to work 50-60 hours a week for no overtime, below-market compensation + an equity lottery ticket and kitschy foosball-table nonsense).

Just as a comparison.. In my city outside the valley I'm confident that with at most a week, I could land a brand new gig that meets my previous rate requirements.

And the same is true for virtually everyone here currently playing the software game.

Many very good job markets exist in the US.

You are over selling the risk of moving out os the Bay Area. The original commenter mentioned Chicago which is also going through a tech boom with plentiful software jobs to be had.

I'd also add that there is something to be said for diversification of industry. Anecdotally at least, it seems like the last time the tech bubble burst, the bay area was hit the hardest. Other cities had more to fall back on in other industries that need tech (finance, insurance, medical etc). The real advantage to SV is 1) access to VC and 2) it comes back faster after a down cycle.

The article talks about long term compensation for entrepreneurs. You're in it for the big payout, to change the world, to build something better. He's not talking about SV working for your everyday salary men/women who wants cheap housing and high quality of living or work life balance.

You can't build a large company with only the founders, or first couple dozen employees, to grow beyond a certain point, you are going to need those "salary men/women."

Check out these guys from Wufoo... Definitely an outlier, but flips your "You can't..." statement...


Given the broad geographic footprint of the HN community, I'm curious what folks here think about how much of a role that a tolerance of failure plays in Silicon Valley's track record of supporting commercial innovation.

I don't know if others agree (and it's no doubt an over-generalization), but my intuition is that commercial failure lacks the stigma in Silicon Valley that it does in most other places. Much ink has been spilled on the topic and some have even suggested that Silicon Valley has a "Failure Fetish".[1]

It seems popular to trace the roots of this and other cultural features of Northern California (e.g., 60s counterculture) to the Gold Rush of 1849. But perhaps it simply another artifact of startup density that Sam suggests is so critical?

[1] A sampling from various forums: http://nymag.com/daily/intelligencer/2014/03/silicon-valley-... http://www.npr.org/2012/06/19/155005546/failure-the-f-word-s... http://www.inc.com/eric-markowitz/brilliant-failures/why-sil... http://www.entrepreneur.com/article/225202 http://blogs.berkeley.edu/2010/10/18/silicon-valleys-greates... http://paw.princeton.edu/issues/2013/03/06/pages/1054/ http://techcrunch.com/2010/10/17/japan-to-fix-your-economy-h... http://www.bizjournals.com/sanjose/blog/2012/12/does-silicon... http://www.quora.com/How-has-Silicon-Valley-developed-and-su...

Just as a counterpoint, what about all the free/open source software (and hardware) that is integral to the foundation and current success of SV?

So you start out criticizing greed, yet seem to judge lifestyle entirely on the cost of creature comforts?

Dude. If you feel purpose in your work, live in Silicon Valley. If you are driven by creature comforts, go live in a place where that's easy to afford.

This sounds just like London.

sounds like it's not the place for you. a household making "only" $120k, no matter where you live, puts you in the top 15% by income in the US--hardly the "working poor" (see census data).

trying to keep up with the joneses, on the other hand, can warp your sense of relative privilege. top 15% in the US is among the top few percent in the world. keep that in mind, and that'll help assuage the negative feelings that can arise from comparing yourself to those you otherwise consider your peers.

"No matter where you live" ?

The 80th percentile for household income in 2012 was $160,000. This does really crazy things to a relatively static housing supply:


This isn't just about "keeping up with the Joneses." Most families want a) a decent home, and b) a good education for their children. I had to pay an obscene amount for a) in SF, and I was holding my breath while figuring out how to pull off b). My quality of life otherwise was relatively ordinary: I drove a Toyota and didn't go out all that much due to the newborn.

I made a princely sum compared to the average American. Had I lived in average America, I would have lived like a prince (you could literally buy a mansion for the price of my 3BR home in most places in the US). But since I lived in SF, I could only barely afford the basics. This has nothing to do with skewed expectations on quality of life — it's about the skewed economics of the city.

that $160k figure is for residents of san francisco, not the nation as a whole, which is what i was quoting, and is the whole point of what i posted. you're comparing yourself to your neighbors, not the nearly 7 billion other people on the planet or the 270 million americans who are less well-off than you. relatively ordinary is relatively amazing for the rest of the world. it's about perspective.

You don't understand what it costs to live here. Keeping up with the Joneses means envy for new and shiny, not wanting a modest house, cars, kids, and retirement savings. And here, that means an income of $250k is tough to do -- one bedrooms in sf are $3500; condos in the peninsula sell for $700k+ and houses cost $1100/ft^2.

$240k married filing jointly w/ 2 kids means $5900 hits your bank account twice a month. Essentially all of one of those paychecks will go to housing in sf, or a mortgage + taxes on the peninsula. That leaves $6k per month to live off -- which is certainly doable, but between childcare (at least after school w/ both parents working, possibly more), utilities, telecomm, cars, savings, groceries, and all the miscellaneous costs of life such as clothes, doctors visits, etc -- you aren't saving much money.

ps -- it's stupid to look at national statistics for income when this is the #1 most expensive housing market in the US. At least nyc has good transport options between Manhattan and Brooklyn / Queens. Here we have caltrain or the 580.

I mean, here's a home right here [1] -- 4 bedrooms for $315k! Of course, it's in Madison, WI -- but that shows housing prices are just fine in sfbay :rolleyes:

[1] http://madison.craigslist.org/reo/4668467650.html

@smtddr: we're not discussing what most people have; we're discussing what you can get in the bay area on $240k. Otoh, if you're now claiming that keeping up with the joneses == a middle class life, ie wanting a modest house, cars, kids, and retirement savings, then the plutocrats have won.

>>not wanting a modest house, cars, kids, and retirement savings

I'm going to go out on a limb here and say most people in USA don't even have all those things.

But most people want them, and arguably deserve them.

The "kill my neighbor's cow so everything is even" is an even more toxic thought pattern than the Prisoner's Dilemma that constitutes our mainstream.

Think big, man.

Yeah, that thought pattern does explain much of the dysfunction in american government

   The salient fact of American politics is that there are fifty to seventy 
   million voters each of who will volunteer to live, with his family, in a 
   cardboard box under an overpass, and cook sparrows on an old curtain rod, if 
   someone would only guarantee that the black, gay, Hispanic, liberal, 
   whatever, in the next box over doesn’t even have a curtain rod, or a sparrow 
   to put on it. - Davis X. Machina, balloon-juice.com
that perfectly captures the zeitgeist of the 90s on...

Interesting take on the libertarian-as-socially-enlightened you have there.

What I'm trying to say is... I'd be more interested in getting a bigger chunk of society to catch up to our level than us complaining, getting more and widening the gap between us and the rest of middle class USA. Basically, I think bayarea tech folks are doing pretty good and the ones who are truly suffering are the ones not in tech. The imagery[1] in my mind is like those 3-legged races where 2 people tie one of their legs to each other... the bayarea-tech guy is in full speed mode and the other person is being dragged on the floor, taking all kinds of scratches. Can we at least give everyone else a chance to catch their breath before we talk about dashing ahead even further than we already are? And we definitely are ahead.

1. http://i.imgur.com/LTZOFlC.png

...and I've talked about this before: https://news.ycombinator.com/item?id=8154909

As Peter Thiel has observed, if we tried to bring the world up to an American middle class standard of living without changing anything else, we'd quickly destroy the planet. So your choices are a: leave everyone else poor (a.1: wait til the oil runs out so we're poor too), or b: find some way to get us off oil and other things that keep us from raising that standard of living globally.

Silicon Valley, at its best, is doing exactly that. And sure as hell isn't anyone else trying.

Which really only furthers the point of discussion IMO.

Having always lived in the Bay Area, I find it hard to imagine it is tough to live on a combined income of $250k. That's at least top 10% of household incomes in the Bay Area. No, you won't get any neighborhood there is, but 80+% of places are open to you.

First, $5900/month is a huge amount to spend on housing. Large houses on the peninsula rent for around the $4500 range; you only hit $5900/month for 4 bedrooms in the hottest neighborhoods of SF.

Paying $5900 (after tax deductions, including property taxes) for owning a house implies a $1.3M mortgage, so maybe a $1.5M house(?) which is high-end. Houses that cost over $1000/sq foot are very rare; most are in the $600 range looking at Zillow on mid-peninsula.

Also, note that owning a $1.1M house is a form of retirement savings, so you can adjust accordingly.

And housing costs differences of $800k over 30 years (your Madison link vs. a $1.1M Bay Area house) is about $3300/month. You need to earn maybe $70k (before taxes) more in the Bay Area to have equal non-house income. I find it hard to believe that earning $180k in Madison combined (top 8%) is struggling.

Finally, there's always the Easy Bay: great houses in great neighborhoods for $800k.

A home requires: pmi (possibly, often on jumbos) until 80% ltv; insurance, at $300-$350 per month per million dollars; taxes, at roughly $1k per month per million dollars; earthquake insurance, particularly if you're near a fault line; and maintenance, of which I'd budget $5k/year on a million dollar home. Maybe more for CAs housing stock. So that $6k becomes $4k for a mortgage.

Using a house for retirement savings is for idiots; that's an enormous gamble on the future of CA 35 years from now.

The Madison house, btw, is in a location walkable from many offices; Madison is more competent than the bay area, so while buses aren't great, the roads are very drivable in many directions. Someone with even an hour long round trip commute has a very long commute there (except, perhaps, after snowfall.) So you could probably use one car, or one commuter car and one beater car for a couple. Not two cars as you need on the peninsula or sf for a couple with kids.

Not to mention that $70k doesn't capture all the other things significantly cheaper in Madison: food, daycare, and education (many Madison schools are quite good) being the most important. Many peninsula schools are quite good, but not in sf.

Cost wise, I did ignore insurance costs, but yours needs to factor mortgage interest deduction. You might be getting income taxes reduced by $2k/month.

If you view it as plausible your house value will collapse, you shouldn't buy a house. If so, you'd rent and you'd be looking at much lower housing costs.

With regards to cost of living: some things are much more expensive in Madison; e.g. utilities (no A/C needed in Bay Area; heating rarely needed).

Not entirely sure that owning a $1.1M home (now) is a form of retirement savings; I wouldn't be surprised if, by the time I retire in 40 years or so, Silicon Valley looks like Detroit. A bunch of parallels are there: single-industry region, large amounts of shoddily-built tract housing, and a mobile, transient worker population chasing the latest hot industry.

If you believe this, you should not buy a house in the Bay Area.

To reinforce this point, here's a 2BD in the up-and-coming (e.g. highest crime-rate) Mission neighborhood priced at $1030/sf: https://www.openlistings.co/p/2558MISSIONST94110-2

Anecdotally, I know a gainfully employed senior engineer who was literally couch surfing with his wife and daughter for a month after losing their house. The excessive price of living caused by the housing shortage in the bay cannot be understated.

I cannot fathom these prices.. Homes in tampa, fl go for 110/sqft on the upper end nowadays. It was in the 200s during the housing bubble..

ridiculously cheap compared to London!

The sf means "square foot", which is a weird way of pricing somewhere.


This flat in hackney is £675 per week and is 1700 square feet. (That's £2925 per month, or $4678 per month).

That price does not include council tax or utilities. Council tax at the lowest but full rate is £864.96 per month. That's roughly $1385 per month.

Compared to the worst neighborhoods in London? Because the Mission is one of the worst neighborhoods in SF.

Also, please note the /sf (per square foot) of his price quote. I also thought it was way too cheap even for the Mission in SF, until I noticed the /sf.

Being in the top 15th percentile of income might not be as much of a consolation if you live in the second most expensive metro area in the U.S.

If house prices are as bad as HN indicates I can understand how that income could put a person if not in the "working poor" then into the lower middle class.

look at this map: 2 bedrooms under $3500/mo in sf


know that competition is tight enough that if the apartments are decent, they will be rented on the spot during the showings, and often for much more than the asking price. An acquaintance was looking for months and finally got an apartment because he and his roommate offered $250/mo over asking.

East bay is pretty reasonable if you work in SF:


Dude. You come to SV to make it. Kids, house, schools... they all need to be taken into consideration, sure... but you can't just choose one part of your lifestyle while assuming that you'll be able to continue on with no effect on the other...

Yes, it's a cooker. So what? You want the cooker, sign up... You don't want it, then pass, and start counting your already-existing chickens...

This is only tangentially related to "Why Silicon Valley Works", but am I the only person who is frustrated by "famous" VC's saying that "founders should stop worrying about their valuation"?

I can't get over this. This is like a used car salesman telling you not to worry about the cost of the car, just to remember that there are free weather mats included!

I feel that there is a connection here as to "why Silicon Valley" works from the perspective of VC's in a position to influence founders. However I'm not feeling particularly eloquent today and haven't fully formed these ideas.

I thought about the valuation problem for a little bit when my company finished raising its Series B, and I came to the conclusion of not worrying about the valuation independent of hearing the quotes, as an engineer. Here's the important point - the valuation means little until an exit. Any valuation beforehand is only a step in that direction. All work needs to be done to maximize the value of the company in preparation for that day - anything along the way is a distraction from that end goal.

Granted, it is a necessary distraction for many of these companies, since they require VC funding in order to expand operations.

>> The focus in Silicon Valley on long-term compensation is also important. Nearly everyone wants to get rich but they’re willing to wait to do so. Conspicuous consumption isn’t that cool; not too many people drive Ferraris or talk about their vacation homes.

Instead, they talk about how healthy they are, their diets, or the climbing gym.

I'm no fitness master myself, but, far from begrudging the paleo-crossfit-organicos out there on their latest PR (am I using the lingo right?), I'd like to say, from those of us nodding and smiling:

Being healthy is great! Keep it up! :)

I think that the point is that it is the new status-symbol.

In my experience (not Silicon Valley), status symbols in the form of material possessions have taken a back seat to status symbols in the form of fitness and "experiential materialism" (frequent travelling, exotic and varied experiences).

I don't disagree with the thrust of what you are saying, and I am particularly amused that in the age of almost infinite variation deliverable through the internet there is a kind of odd counter-signalling effect to avoiding that (I also like travel and have been doing it constantly for more than a year, though, so what do I know).

Describing physical fitness as "the new status-symbol" seems pretty bizarre to me, though. As a status symbol it probably predates humanity.

Physical fitness itself isn't a status symbol, per se. How people conduct their personal physical fitness is what has elevated it to a status symbol. Things like when, where, how often, how public, what activities/exercises, and even what they wear to work... that's the new status symbol.

A ridiculous recent example is the Trulia co-founder rowing to Hawaii with his wife for the cause of...

wait for it....

the fight against sugar.

Thanks for mentioning this I hadn't heard of it! Sorry, I think it's awesome, and not because I care what other people eat.


Totally. I'm so sick of hearing people talk about the twenty countries they went to last spring. If you like traveling, that's totally fine, but with a lot of people, it just feels like they're checking boxes to try to seem more interesting.

Worst part is when people say "We did Country X..."

Is that...bad?

While it's not conspicuous consumption, it is conspicuous. I'd argue it falls in a broader category of conspicuous lifestyles.

Is there bad about owning a Ferrari?

Sam misses some hugely critical pieces, for example:

1. Good IT infrastructure

2. Plurality of high tech companies' headquarters

3. Proximity to major technology focused academic institutions

4. Legal infrastructure that enables innovation

All discussed previously here:


and here:


Another reason I think the valley works so well is the audience its news outlets have. If you have a great product but can't get news coverage on it, its going to be hard to get growth without a large marketing budget. However, if you're friends with a friend of a Techcrunch write, its much easier to get covered and start to get a core group of users who love your product - and are tech savvy enough to understand that features that don't exist yet will be coming, and they should be patient.

If you try to bootstrap a startup without using SV's media outlets (as would be the case for people who don't have connections to these folks), you're going to have a much harder time.

I think you're vastly over estimating the impact of tech news sites. A decent front page article on techcrunch will get you a couple of thousand visitors, the vast majority of which won't be in your core customer group.

The main advantage of tech news sites is that they're read by potential investors, partners, employees, etc. rather than because they get you users.

You really need to get your early users through graft, tech news coverage won't really help you except in exceptional circumstances.

Is asking tech journalists you've just met to write about your startup considered annoying?

All depends on the "how". If you make the effort to show that you understand their coverage niche, and make sure that you actually fit into it, and also have (or can package) your story as something newsworthy then go for it.

I think the physical location is kind of a fallacy. For example, there are so many super smart and talented developers in DC working for government contractors because they may not be exposed to the startup option. Most people now have to move to Silicon Valley to focus on long term compensation, but often there is a stronger force of their local network (friend, family & significant others) who keep them stationed near by. Having quality startups in new geographical areas is probably the key ingredient to bringing in talent and capital, not the other way around.

> so many super smart and talented developers in DC

As one of those developers working in DC I can tell without a doubt that the majority of us do it because we get paid a large amount of money.

I make more here than I ever could in Silicon Valley. Plus the cost of living is around half. Last I checked a one bedroom in SF was around $4k per month. I pay just over $2.5k here in DC (with a parking spot!).

Interesting to hear YC classes framed as "we help each other." I thought there was a fair bit of internal fighting to end up as a "featured startup" from the batch. Conversely, my startup just went through the Hackers and Founders accelerator, where each startup is given equity in the other startups in the class. This is a great incentive to help the other founders in your incubator.

Throw-away account for obvious reasons:

> "Silicon Valley works because there is such a high density of people working on start-ups and they are inclined to help each other"

Bull shit. With all due respect to Sam--who no doubt knows what he's doing and saying and has become very successful--he is undoubtedly living in a bubble of his own. While I've found people generally open to the idea of chatting over a coffee, I've run across very few people that go out of their way to help. In fact, I more often find people who will either offer to help, and don't, or are so self-absorbed that they can't stop talking about how great/impressive they or their startup is without bothering to ask about you or what you're doing. I've even asked for a meeting with and gotten the following response: "I'm very busy. Let me know how you think you can help me and I'll think about it."

I've been trying to tell myself that it's just my luck: That it's not socio-economic or pedigree based (race or school) or that some people here don't have basic people skills and don't know how to carry on a conversation. That maybe it's just the luck of the draw that I run into more people that I'd classify as "ass holes" than not, but I'm coming--very late--to a sad reality: it is about socio-economic status--even more than that, it is about pedigree (yes, both race and the school you went to). It is about manners--most people don't have them. AND, it's about gender as well! I'm not a woman, but I'm willing to bet that if I was a woman, things would be a shit ton harder for me than they already are. I'm not a 20-something white male that went to Stanford and it's impossible for me to imagine how hard things would be if I had a vagina [0].

These are things we don't want to talk about. Thank god a conversation about gender is taking place, but there's another conversation about elitism and race that hasn't even started yet.

> "One of the biggest misconceptions about us is that you need to have pre-existing connections to get value from the network."

Complete and utter bull. Maybe in Sam's world, sure! White? 20-something? No-kids? Harvard/Stanford? B2C? Let’s chat!

Early-40's/Late-30's? Not-white? Married w/ kids? Not-Harvard/Stanford? B2B? Nope. (Don't bother to apply to YC either).

The reason Silicon Valley works is because there's a new-boys network that helps out those that check most of the right boxes. But here’s the good news: There are other networks. Networks of people in their 40’s. Networks of people that are from a specific ethnic group. Networks of people that went to the same (non-Harvard/Stanford) business school as you that are willing to help out. Are most of these networks as big and powerful as the circles Sam roles in? Absolutely not. But are they out there? Yes. One of the marvels of Silicon Valley is that because there are so many people out here, there’s a semi-decent chance you might find someone in one of these networks that will meet you for a coffee, offer to help, and try to make something happen for you. Is it likely? No, but possible, yes? And that—the possibility of something working out despite the odds—is what entrepreneurship is about. [0] - What It's Like Raising Money As A Woman In Silicon Valley (http://www.forbes.com/sites/jeffbercovici/2014/08/07/what-it...)

I'm sorry you're having a bad time, but you sound like you're caught up in a few delusions.

When someone gets coffee with a stranger they are "going out of their way to help". What more are you asking for in these conversations? Agreed, nobody's going to fund some random biz guy with no track record and "an idea" (my guess from your post, sorry if I'm wrong). Reading that as racism/elitism is counterproductive and most likely inaccurate.

Build something people want (get users) and the investor types you sound like you're pursuing will want to talk to you. Sure, a good resume can get you in the door, but the best resume isn't a list of stodgy institutions, it's a list of successful projects.

EDIT: FWIW, I agree that the deck is completely stacked against the poor. It is much easier to build something when you can borrow $20k from a rich uncle to live on for a while. It's much easier to talk to investor types if you're familiar with their world. But what I'm getting at above is that those things stop mattering the minute you've built a product people are using.

some random biz guy with no track record and "an idea"?

Now that's delusional. Clearly you wish that to be the case. It is not. SV is all about the gate-keepers, and they are all about profiling, which they call "signaling". If you don't fit into that mold, you are not going to receive a warm welcome; I don't care how good you are.

Read Peter Thiel's Stanford class CS183 notes. Peter explicitly says this, "It's like getting a degree at Berkeley. Okay. It's not Stanford. You can [have] a complicated story about how you had to do it because your parents had a big mortgage or something. But it's a hard negative signal to get past."

If you are a white male, in your early 20's and went to Stanford, go for it. If you're not, don't even try to play the game; it's rigged to use you, not help you.

`git commit -am "something people will use" && git push heroku master`

Understanding that line is the only true gate.

> Complete and utter bull. Maybe in Sam's world, sure! White? 20-something? No-kids? Harvard/Stanford? B2C? Let’s chat! > Early-40's/Late-30's? Not-white? Married w/ kids? Not-Harvard/Stanford? B2B? Nope. (Don't bother to apply to YC either).

YC does not discriminate in this way. We fund lots of people working on B2B and enterprise ideas, who are married with kids, who are in their 30's, 40's and yes older too. This claim is just plain false.

While that may be true to a certain extent I'd be willing to bet a sizable amount of money that the majority of founders that YC funds are in fact white, male, hailing from a wealthy family, graduated from a prestigious college, and are under 30 years old.

And while you or other YC partners may defend that fact with the fallacy that it's just a numbers game, as in those are the majority of applicants, I can't help but remind you that age discrimination and class warfare is rampant in the valley.

What do you think of this bit?

In "Why not to start a startup"


"9. Family to support"

"This one is real. I wouldn't advise anyone with a family to start a startup. I'm not saying it's a bad idea, just that I don't want to take responsibility for advising it. I'm willing to take responsibility for telling 22 year olds to start startups. So what if they fail? They'll learn a lot, and that job at Microsoft will still be waiting for them if they need it. But I'm not prepared to cross moms."

Can you see how a statement like this might make people with kids more reluctant to apply to YC?

That's interesting, and good to hear.

Would YC be open to sharing anonymized data on the sitribution of YC-ers (at time of entry) by age, married (binary), # of kids and race?

I'm curious what kind of help you're looking for. I actually find it a bit odd when I hear over and over that others "offering help" is a strength of SV. Mostly because you really need to do two things, 1) make a product that addresses a need 2) and work to get people using it. You can get opinions on 1 or 2, but I can't imagine not getting them crushing your business. You can seek investment and if you're doing 1 or 2 well people will want to introduce you to investors. And if you're not doing 1 or 2 well you need to figure out how to do something valuable.

I'm not saying SV isn't biased, it is flawed like anywhere else, but I think this whole "startups helping other startups" thing is a bit fluffy in the first place.

"not too many people drive Ferraris or talk about their vacation homes" unless you're in Palo Alto, Atherton, Woodside, Saratoga, Los Gatos, Los Altos, etc.

That's probably why there's been a geographic shift to SF.

It does work if you are a VC. Tons of talented folks living in dorm like conditions (some living out their car), working long hours, in the hopes of striking it rich one day. Most fail. Some succeed proped by blogs owned by VCs. It is a nice machinery. The world mostly gets another music discovery app or another ad targeting company.

This is a pretty thoughtful and to the point article. You might summarize it by saying that SV success is defined by Community and Capital. It makes a lot of sense that rich networks backed by money make an area successful. It would be interesting to explore the effect of capital from within the community vs external capital inflow.

> Conspicuous consumption isn’t that cool; not too many people drive Ferraris

99.9% sure I saw Sam pulling out of De Anza College at SUS 2014 in a Lotus Elise.

"I wrote this for the FT, but it's behind a paywall. Since I wrote it, I feel like it's probably ok for me to post it here."

Well legally it's either ok and the contract (written or otherwise) allows you to post a copy or it doesn't.

'This seems like the future to me – large groups of independent companies, loosely tied together.'

This could also work against YC (Or many startups in the valley) very easily. I mean all these companies are being created in a time of easy money, what happens when the money dries out? Will they all fail? Since they are so correlated with each other's success.

Will they all fail?

Not all of them, no, but a lot will.

"Nearly everyone wants to get rich but they’re willing to wait to do so.

... A focus on making a lot of money in the long term at the expense of short-term opportunities is essential to building companies that have a huge impact – they take a long time."

Sounds like a good advice for CEOs and politicians in DC. Focusing on the long term goals...

The Silicon Valley works because of the toxic culture of "work until you die". [1]

[1] I grew up there. Never going back.

I would like to ask a.radical question. Is Silicon Valley actually working? Because if you throw a lot of money at something, even if it is bad, will make it better. Given the amount of money banks an investors are throwing at the valkey, is it successful given the output?

It strikes me, as do a few other posts and comments from YC that this is an incredibly American centric view of the world. I've heard PG say "just consider moving here" but without a visa as a startup that's very difficult.

For anyone interested, I have compiled many of Sam's interviews at http://newslines.org/sam-altman/

Another weakness of the valley is the lack of a visa. We would have atleast 5 times the number of startups, if there was an easy way to remain in the united states and start a company for immigrants.

'I wrote this for the FT, but it's behind a paywall. Since I wrote it, I feel like it's probably ok for me to post it here.'

If the FT paid you to write it, I feel like it's probably not ok to post it where you'd like.

Depends on the contract. Here's the contract I've been bound by when writing freelance for The Guardian:

You grant irrevocably and unconditionally to GNM the following rights ("the licence") to use, publish, transmit or license the contribution throughout the world. Unless expressly identified otherwise, all rights granted in this licence shall subsist for the full period of copyright in the contribution including all renewals, reversions, extensions and revivals of such period and shall be exclusive.

With the exception of Spot Sales where royalties are payable as set out below, GNM pays freelances commission fees covering all of the following rights. The value of these rights is reviewed annually.

1 Right to use, publish or transmit the contribution in all editions of the relevant Licensed Publications anywhere in the world.

2 Non-exclusive right after use in the Licensed Publications to publish the contribution in Guardian Weekly and similar publications and in other collections of material published by GNM in paper form and on-line anywhere in the world.

3 Non-exclusive right to use, store, publish or transmit the contribution in internal archives and databases and External Archives and databases including but not limited to CD-ROMs and websites published by GNM and/or third party databases and/or archive publishers.

4 Right to authorise the Newspaper Licensing Agency ("NLA") to distribute or license the distribution of the contribution for the NLA's licensed acts and purposes as amended from time to time.

5 Right to Syndicate throughout the world after use in the Licensed Publications. For the avoidance of doubt such Syndication rights include the right to enter into contracts with third parties under which such third parties may reproduce content previously published by GNM.

6 Right to make Spot Sales throughout the world for a period of 3 months after use in the Licensed Publications and the non-exclusive right to make Spot Sales thereafter. Attributable revenue shall be split between you and GNM on a 50:50 basis and your share shall be remitted to you within 28 days of each sale.

All other rights are reserved by you.

It's better not to go on feel either way. In most cases, a freelance writer retains copyright and the publication that paid for the work (in this case FT) is given an implicit license to use it.

they didn't pay me.

get paid

Since he's not an FT employee, it's likely this could fit under the category of work made for hire, but unless his contract explicitly specified this is case, I believe he would retain the copyright: http://en.wikipedia.org/wiki/Copyright_law_of_the_United_Sta...

Either way, considering the 'value' of sama to them, the FT will probably not make an issue out of this.

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