Well, actually, I think startup founders actually need this kind of slight delusion. In my more rational moments, I think my ideas suck, my plans are hollow and I'm going to be a wage slave for the rest of my life because of my obligations. I look at the mountain of obstacles ahead and think, "No way that can ever be moved. Learn to be content. Life is such." But the other voice inside me always chimes in later with, "But you're different. You can move mountains. That isn't even a mountain anyway. Put your will to it, and it will shatter. KEEP GOING."
I am sure that there are people out there who can look at a mountain, see a molehill, and stomp it flat. I'm just not sure I am one of them. But I do think that if you want to start a business, you need the arrogance to at least act like you believe you are, because conventional wisdom says, to borrow your analogy, that you will lose at that lottery. So I think it does take some arrogance and self-delusion to believe that somehow you will beat that lottery and emerge a winner. If you don't, why the hell are you playing?
If you build something that solves a problem that people have (ie. is useful), and you arrange for people get to know about it somehow, then I think you can't help but be successful. But "successful" might not be a goldmine/lottery; it just might be making an adequate living, in a lifestyle business - like a fish n chip shop (as DHH denigrates). I think it's actually quite hard to fail at this, if you are aiming at creating something useful + communicating it.
You might see this as being an independent software vendor where the total value you produce is comparable to an ordinary employee - except that you are free to formulate your own projects etc (which has +'s and -'s.)
Another aspect is that if you create something useful... that's amazingly cool and valuable in itself. As for the lottery, win or lose, doesn't matter.
"If you build something that solves a problem that people have (ie. is useful), and you arrange for people get to know about it somehow, then I think you can't help but be successful. But "successful" might not be a goldmine/lottery; it just might be making an adequate living, in a lifestyle business - like a fish n chip shop (as DHH denigrates). I think it's actually quite hard to fail at this, if you are aiming at creating something useful + communicating it."
This is what I'm doing, with some success. Now, if you don't count the net worth growth implicit in how the company is growing, I'm not making what I would be working for other people, but I think I'm a success. I set my own hours, my baseline expenses are covered, and when I hustle, I can make a lot of money. when I don't, like the last few months, well, like I said, my baseline expenses are covered. Also, eh, I've probably grown my reputation enough that my credentials now look better than they would had I spent this effort on college.
I don't know if I agree with the "can't help but be successful" part, though. I poured most of my income and spare time into projects like this for many years before I hit upon a project that actually worked. Now, part of that might be because I'm no superman... my IQ barely makes it into the 98th percentile, which really is kinda dumb. I never went to college, and, uh, I'm pretty lazy. I got a 2.16GPA in one of the worst high schools in the state. I mean, yeah. no two ways about it, I'm lazy.
So yeah, uh, if you are a Paul Graham, maybe starting a lifestyle business is easy. Maybe. but for me, it was a lot of work. Now, it was work that I liked doing; I think I enjoyed building my company more than I would have enjoyed taking the money and buying a porsche (and I'd be able to buy one with the cash I dumped in before it became profitable... two or three if I got a reasonable rate for the time I spent before the company became profitable.)
On the other hand, maybe what you mean is that you can choose to run a lifestyle business in such a way that you don't really fail until you choose to fail. This is what I did. When I ran out of money, I'd do more contracting, or get a full time job. When I was flush, I'd work more on my business. Really, I could have continued spending 3/4th of my income and time on the business for the rest of my life; unlike a startup with investors, there isn't anyone around to say "give it up" - it's just me. as long as I'm willing to work, there will be money.
I didn't mean that definition of "fail", but I guess I was cheating a bit with the "creating something useful", in that I was assuming that you already know what would be useful - whereas that is often the difficult part.
In my defence, I say that finding something to create that is useful enough to give a modest one-man income, is a lot easier than finding one giving a multi-billion dollar payout. The main way to make it easier is to specialize: a niche that is complex enough to require a lot of work, yet small enough to not be worth >1 person's time to serve. From there, you can grow to other segments if you want, or just enjoy your little place in the world. The key is to know about those specific problems, so it's invaluable to have worked/studied/played in a field. Hence the saying a problem is an opportunity.
Of course, we all have different motivations/passions and abilities, and that influences what niche will be doable and satisfying for each individual. Currently, I have a technical/academic idea about data integration and evolution that I really want to make work, which isn't specific to any industry (except the data integration and evolution industry, I guess). My last idea was about a specific problem I encountered in industry, and that was much easier to create and sell. Much easier.
>in that I was assuming that you already know what would be useful - whereas that is often the difficult part.
Me, I focused on "what can I do" and "what would I buy" - I think a reasonable, though very limiting, starting point.
My first problem was that amazon radically changed the market for storage (I started by selling storage) - my second problem was that sharing pagecache? bad idea. My third problem was that I thought using obsolete hardware was somehow a good idea.
So, uh, yeah. of my major problems, only one, really, was external. the rest were me being stupid. I guess that could fall into the "finding something useful" category. But then, I am mostly filling unserved price niches in existing markets. When I started there were already VPS providers out there; linode was one. I do believe I was the first to switch to xen.
>I say that finding something to create that is useful enough to give a modest one-man income, is a lot easier than finding one giving a multi-billion dollar payout.
I assume it's harder to make the 'big exit' companies... not that I would know. It's certainly a very different game, one that would be /much/ harder for my particular skillset. most 'big exit' companies seem to be more focused on selling to investors than on day to day cashflow. In my industry, if I sold out tomorrow, I'd get the value of my servers, plus about a years revenue. Now, there's no way I'd sell at that price, but that's market for a ISP or hosting company. Compare that to the valuation MySpace got. They got a valuation that assumed myspace would be the dominant social networking site for a long time. The valuations for friendster and facebook both reflected that same assumption. To me, that assumption seems ridiculously irrational.
Now, if you are going for a 'big exit' usually you have more than one founder, and some startup cash from someone else. Certainly, more work is put in, but is any one person's contribution more than what they'd have to contribute to get their own lifestyle business off the ground? I don't know. Once you involve investors, though, and people depending on investor money, you are much more likely to get yourself in a situation where you have no choice but to close the company.
Of course, my negative tone is entirely sour grapes, because my skilset means that I'd be a very minor player in any "swing for the fences" venture, while I can handle my lifestyle business just fine.
I think the hard thing about the multi-billion dollar exit isn't the extra work needed, but the probability of it working out. Maybe one estimate of the odds is how many projects are started, verses how many cash out (this should include projects that are abandoned even after only a few weeks, if they would have continued had they got a little traction.) Massive survivorship bias, when only the huge payouts are publicized.
I don't think the initial founder/s necessarily must have the right skillset, but someone, sometime must come on board with that skillset. Rather tragically, these people seem to quite often eject the founders. One book ("Crossing the Chasm") even claims that the initial founders don't deserve the big pay-out because they don't have the skillset (and they're more interested in making cool stuff and being their own boss than in making money). Ugh.
To be captain of your soul, master of your destiny is worth more than all the riches and fame in the world - they merely tighten the shackles of the worldly and the opinions of others, not freedom of any kind, only dominance (says me, sans riches and fame. actually, I think it would be great fun).
BTW your 98th percentile puts you squarely in the "smarter than average, but not a genius" camp, which is where I am, and where I think most entrepreneurs are. In business, extremely high intelligence seems to be liability. I think what really counts is something like boldness + quick recovery. I could certainly do with some more of that.
I agree with you about MySpace etc, it's too unpredictable; too easy to switch (mind you, I said that about Google too; I thought their massive PR efforts was one of their few competitive advantages, I wonder if they've become complacent recently.)
> MySpace employs 1,000 employees, after laying off 30 percent of its workforce in June 2009
> By late 2007 into 2008, Myspace was considered the leading social networking site, and consistently beat out main competitor Facebook in traffic. When Facebook launched new features in an effort to attract a variety of users, Myspace found itself in a continuing decline of membership. As of July 2010, the site was ranked 25th in Internet traffic,[3] opposed to the 2nd position held by Facebook. http://en.wikipedia.org/wiki/MySpace
Kids love cool stuff, which means they switch all the time. Maybe the sustainable business model is a business that generates (or promotes) social sites? (analogous to music publishers always touting the next cool band - most bands have limited lifespan, but the publishers live on)
I actually agree with you about the definition of success. I would consider my next project a success if it somehow generates enough profit to allow me to dump the day job. However, that in itself is a lottery (the one I was referring to), since it is by no means certain that I will succeed. In this case, winning the lottery actually matters a lot to me personally, because it would give me the freedom to try and build more cool stuff.
I see what you mean about that being a lottery. I guess the amount of money made does have a lottery aspect. But it still seems reasonable to me that one man can generate one man's worth of value, whether employed or independent. But whether one man can generate 10... 10,000... or 10,000,000 man worths is more of a lottery.
The doesn't matter was paraphrasing a passage within a speech by Winston Churchill (which I got wrong), which ends: Let us therefore brace ourselves to our duties, and so bear ourselves that if the British Empire and its Commonwealth last for a thousand years, men will still say, 'This was their finest hour.'http://en.wikisource.org/wiki/Their_Finest_Hour
eh, maybe. But you need to be /very careful/ with that. It's /very easy/ to get yourself in a whole lot of debit. I know two people who will be in debit for the rest of their lives because they were overconfident, made mistakes and weren't able to pay taxes on large amounts of money that then got pinned on them personally rather than the failing corp.
I mean, you need to be able to take some risks... but you also need to temper that with 'I might fail' because especially the first time? you probably will. Personally, my low point was around $15K that I was personally on the hook for. Considering my income potential, it's a reasonable number; I paid it off through contracting in a reasonable amount of time, and if worst came to worst, it wasn't tax debit; While I had to personally co-sign, I could have declared personal bankruptcy.
But, my point is that yeah, you need to take risk... and taking risks where the downside means you have to work for a year or two for other people if you fail seems pretty reasonable to me. Taking risks where if you fail, you will never get to try again, ever, seems like a bad idea.
So yeah; confidence is great, and you need some of it. But cover your ass because the worst case does sometimes happen. Be /especially/ careful of debits you can't get rid of through bankruptcy- e.g. don't fuck around with your taxes, get someone who knows what they are doing. The system is complex and even when you make honest mistakes, often the assumption seems to be that you were trying to cheat.
If you can learn from your failures and try again, you have a much higher lifetime chance of success than if you only have one shot.
I am sure that there are people out there who can look at a mountain, see a molehill, and stomp it flat. I'm just not sure I am one of them. But I do think that if you want to start a business, you need the arrogance to at least act like you believe you are, because conventional wisdom says, to borrow your analogy, that you will lose at that lottery. So I think it does take some arrogance and self-delusion to believe that somehow you will beat that lottery and emerge a winner. If you don't, why the hell are you playing?