“More often than not, she relies on charts, graphs
and quantitative analysis as a foundation for a
decision, particularly when it comes to evaluating
people … At a recent personnel meeting, she homes in
on grade-point averages and SAT scores to narrow a
list of candidates, many having graduated from Ivy
League schools, … One candidate got a C in macroeconomics.
“That’s troubling to me,” Ms. Mayer says.
“Good students are good at all things.”
Kind of a stunning misconception right there. A person only needs to look in the mirror, to invalidate such an idea.
This is an unfounded and dangerous belief. Skills do not necessarily transfer. Ben Carson, for example, is by all accounts the most talented neurosurgeon to ever live. He doesn't give the impression of being qualified as a federal administrator. Another example -- back in school we had a physics Nobel Laureate who decided he was a biologist. Despite all indications to the contrary he was taken seriously in this endeavor.
No they are not real polymaths are incredibly rare and don't fit the mould that rote learning and getting a 4.0.
They only one close to a real polymath I know started a company when young sold it out for $$ at a young age then decided to get a Phd in music - after a bad accident whist in traction taught himself programming - oh and was also a session musician and played on top 10 hits
Your comments are hard to read because they parse ambiguously. It could be "No, they are not real. Polymaths are...", or it could begin "No, they are not real polymaths...". This makes me wonder how Latin could do without punctuation.
Look at Watson from Watson & Crick to see that even doing one thing well in a field doesn’t imply doing other good work in the same field, let alone the other issues.
> Kind of a stunning misconception right there. A person only needs to look in the mirror, to invalidate such an idea.
It's shocking because making a statement like that seems almost incompatible with being an intelligent person. If that quote isn't misrepresenting her beliefs, it really raises quite a number of questions.
I'm inclined to think that "good students" are very often intelligent people pleasers who will drive themselves to achieve in order to win the attention of teachers, parents, awards committees, and friends and neighbors. These students often are "good at all things"—if our evaluation criteria is earning good grades in school. Good grades in school, nevertheless, only means so much.
Perhaps Ms. Mayer is most comfortable hiring such people.
I got a C+ in linear algebra because it was the easiest math course I took in college. I barely studied for the final. I thought I could sleep through it and pass, so I skimmed the material and went to bed early, and then did really bad. I guess I’m not google material :’(
I had a calculus class at uni that started so easy that no-one was showing up after week one, and the module was 90% exam, 10% coursework, so people weren't bothering to do the assignments either. The people not showing up didn't seem to realise that the class ramped up to multivariable calculus by the end of term (Britain doesn't really separate calculus into numbered stages in the same way the US does), and the final revision lecture before the exam was completely full and the room had an air of absolute dread now that everyone knew what they'd been missing.
I had a class that was so easy that most students didn't bother to show up for lectures. Near the end of the semester the profesor got angry that nobody came to his lecture and decided to retroactively grade attendance with 70% of the grade. Most students flunked. I was fortunate that his class was in between two others I was taking, so I attended about half of the lectures and passed it with a grade that corresponds to the American C+/B-
I graduated with a GPA so low recruiters used to ask me whether it was on a 4-point scale, but I got a job at Google and eventually led a team there. Probably shouldn't freak out over one test.
I did some interesting work, wound up on a recruiter's list somehow, and nobody cared about anything other than my code in my interviews. Which is pretty much the same way everyone else winds up there.
If she doesn't have enough "good student" applications (according to her definition of "good student") in her company, which criteria will she relax? And even if she does have a large enough pool of "good student" applicants, how would she select one among them?
The phrasing is unfortunate. It's reasonable in that context, in that very high GPAs aren't that uncommon at her level. "All academic things." Naturally "all things" is much too broad.
To frame an assessment of an individual like that, risks throwing the baby out with the bath water.
It leaves no room for externalities and circumstance, and assumes the individual had all needs met, perfectly, at all times.
Facts are facts, even if someone came up short once or twice. Maybe blame is irrelevant, and excuses aren't a substitute for productivity, but simply put, that's not how you measure humans, and any human knows that.
What I don't think many people get is that these types of people and structures and institutions they exist in largely exist in order to perpetuate inequality in many ways.
It's not just google though, this is fairly widespread in America, and I bet many of these companies that practice hiring like that are either doing it because thats what everyone else has done (without realizing the reasons or not articulating the real ones), or because taking those kinds of candidates means not only do you get a potentially useful in their job employee, but you get access to another kind of elite-social capital.
People ignore the extent to which the signals they're using as input are simply correlated with the signals some previous gatekeeper used. Therefore, they vastly underestimate how much a person's resume is "all signal".
I'm a great case in point. At some point, scholarships I had earned became the justification for giving me more scholarships. Much of my early adult life was spent compiling signals and statuses. I absolutely tried to develop real capabilities along the way, but to say my "impressive" resume indicated significant real world value created outside my own life probably wasn't true until about age 30.
When I was a hiring manager, I tried to evaluate people on what they accomplished relative to what they were given.
I agree that this is a bad way of measuring humans accurately, but I would say that _accuracy_ is not exactly the correct or optimal goal for hiring.
Google (and other's) strategy is to optimize for precision rather than recall or accuracy, which is the optimal strategy when you receive several orders more candidates than you are capable or willing to hire.
To maximize precision, you need to minimize Type 1 errors (False Positives), and you don't really care about Type 2 errors at all (False Negatives, e.g. throwing the baby out with the bath water).
This is of course if you treat people like data points, which seems more and more common (and explicit) with larger companies.
That would be great if nobody ever tried to emulate other companies.
But they do. Look at all the people trying to pretend like they have problems that require Google's infrastructure instead of just three machines with a shitload of memory and some redundant networking hardware.
If you don't react to the fact that other people are copying your actions then your moral compass is broken.
And if company A can have the luxury of copying Google and ignoring perfectly capable candidates because they had a C+ in one exam, what is the issue? There is then company B that cannot afford not to have that candidate recruited and she might turn out great.
At the end of the day, GPA is an imperfect ordering of candidates by quality, but it is such an ordering, and companies with the sweetest offer (money, prestige) will be able to get the best candidates, be that they look at GPA or not.
And it is not as if someone with a C+ is banished from the workforce - just from Google and the other companies that can afford to be so exquisite.
Just to clarify, Google doesn't actually hire candidates based strictly on their academic performance. If you've had any side projects or prior jobs before applying, I'd say that's weighed more heavily.
This assumes a false positive is such a bad thing. I've heard a bad hire costs $X, where X is some surprisingly high number, but why must it be this way? And are these big companies even avoiding bad hires in the first place?
The other problem is sameness bias. I posit that those false negatives are disproportionately folks that are underrepresented, demographically. Therefore, this approach has concerning externalities.
>I've heard a bad hire costs $X, where X is some surprisingly high number, but why must it be this way?
Because most companies don't (and generally shouldn't) operate like pro football teams. "You've had a couple bad games; we're cutting you. Sorry it's just business." Most (though of course not all) people think that once you've hired someone, you should really try to make things work. Both because of the costs associated with someone getting up to speed at a company and because of the personal cost to the person being fired. Different companies have different philosophies of course.
I think there are humane ways to part ways with an employee who just didn't work out. Give generous severance and some warm intros to places that might be a better fit.
If you really screwed up, make that choice soon. In the more common borderline case, that person is still giving you decent value, so it's not a total loss, even if you invest effort in trying to coach them up to your high bar.
I like the sentiment, but I would rather a potential hire just apply cold than if a company told me to look at a candidate they just let go (even if it was google).
Warm intros from an entity that just rejected you would be a terrible signal.
Being precisely inaccurate isn't optimal. There needs to be a balance between precision and accuracy for a measure that's close to reality. Of course, there's going to be tradeoffs between the two, as well.
What's more valuable to a company or society... someone who can come up with one paradigm shifting idea and execute on it but fail in everything else or someone who can never come up with a paradigm shifting idea and execute on all the ideas they come up with or partake in?
Oh I absolutely agree it's an appalling approach to hiring, at least for a role that isn't heavy on macroeconomics (or whatever). I suppose I was only making the trivial point that very high GPAs are common in that sphere. But upon reflecting on your reply, maybe that is an undesirable self-perpetuating selection effect.
I think we have seen that an excess of qualified candidates, for some values of qualified, leads to problems with diversity in tech.
After all if you have enough candidates, you can choose to only hire clones if the founders. And completely miss out on the benefits of diverse experiences bringing out creativity.
Isn't this racist ? Why are you saying "diverse" candidates wouldn't be qualified ?
Google is well known, as are many other companies, to have the upper echelons of engineering filled with Stanford grads (and faculty), with their idea of diversity being the occasional Berkeley faculty member that's well liked there. (other companies, of course, have different universities they do this with, although Stanford certainly seems to have more than it's fair share)
So on the plus side, it's not racist. On the down side ...
Completely agreed, but that isn’t what seems to happen in reality. Im not a hiring manager but what seems to happen is when presented with too many candidates, hiring managers redefine qualified to be more like themselves.
Especially with an education system that's effective on only 2 out of 12 different brain arrangements [see Timothy Leary's "your brain is god"], it's hard to say that school marks are any predictor of how beneficial one will be to Humanity or the Planet.
I'm pretty sure that Google realized that this type of screening didn't work and dropped the GPA and associated requirements. There was a big article about it in the New York Times I believe.
I mean, if you look at the average Stanford CS student (as she was) they're probably at least mildly above average at all of the things they do academically. I know several with > 4.0 there while still being chess grandmasters or incredible in music.
If you're going by grades, then odds are what you're really selecting for is students who are good at the things they felt safe taking, not those who challenged themselves.
My university colleagues who got straight A's were mostly mediocre but had very good memory, learned only what was needed for the test, and occasionally cheated. Most of them didn't understand how things worked, but they memorized everything possible.
On the opposite side, I had colleagues who passed some courses with flying colors (sometimes going so far as to being exempt from taking the final test due to their prowess during the semester), but failed other, unrelated courses, because they simply didn't care.
“More often than not, she relies on charts, graphs
and quantitative analysis as a foundation for a
decision, particularly when it comes to evaluating
people …”
what a travesty that misses the entire point. seems she doesn’t hire people but rather resources.
In my experience, being an entrepreneur is all about taking on and managing risk well. An entrepreneurial spirit almost enjoys risk. At a firm, you usually don't get much material risk exposure to manage, so entrepreneurial individuals end up seeking out opportunities that can give them a more direct handle on their risk exposure (and any subsequent rewards). More often than not, this means starting a company where you largely decide which risks you're comfortable accepting, and which risks you prefer to avoid. The thrill is in navigating those risks using your guile to deliver value much above the expected risk premia for your domain. I worked in an investment bank for a few years, but the risk environment was too restrictive for me to really make a mark (from a job security perspective also, I'd often see lifers get the boot, so never really felt comfortable, even though on paper I should have been). Thus I quit, started my own company, took on a great deal more risk, but still experienced more work satisfaction. I think what I like most is the ability to take your professional future by the horns without any artificial constraints holding me back. For me, what it comes down to is this: entrepreneurs despise restrictions, and modern companies can't seem to exist without them.
you're equivocating. first you say it's about risk seeking/management and then you say it's about agency/independence. personally I strongly believe it's the latter. if you derisked my startup for me but let me stay in control I would be much happier. eating the risk is the premium /I'm/ paying for the agency - it's that opportunity that you don't have in a large company (trading risk for freedom).
Perhaps, but what I was trying to convey is that your own company gives you the freedom to choose your risks without restriction. Working for someone doesn't usually allow you to do that (as your boss decides your risk environment).
Traders choose high risk over low risk. Statistically, most day traders end up regretting that choice.
I suspect for a good proportion of entrepreneurs, the financial risks are low - it's either money you can afford to lose, or it's someone else's money, or both - the professional risk is low because a lot of companies will still hire you if you fail, and the personal risks are unknown and/or ignored.
Being a corporate employee is actually riskier. You can be fired at will with little or no safety net, for reasons that have nothing to do with your own professional skills or mistakes.
Quite the contrary in my experience. For most entrepreneurs, their first attempt is often make it or break it - i.e. the risk is high. The only thing is, the entrepreneur often knows that the odds are not as bad as they appear, because of their personal abilities at managing the risk. That's what they're hoping to get rewarded for eventually.
People choose risk based on their appetite. For sure, we try to minimise it, but if your statement were true, no one would ever cross a street or even drive a car. People will often take a higher level of risk in order to improve the potential reward.
Indeed, I was in the same boat - funding out of my own pocket. Now I still have full control of all my equity, which of course feels great. Otherwise, you risk becoming a glorified employee again and the control you worked hard for slowly fades away.
Source? I think one would find that most tech entrepreneurs are not backed by VC capital. VCs only invest in certain kinds of businesses that have the potential to grow to at least ten million dollars. YC looks for potential billion dollar companies. The VC business model just doesn't work for smaller businesses, which are probably the majority of tech businesses.
But that's the point - 2/3 of what you'd get from an established company, multiplied by a few years, is a very large amount of money.
If "maybe 1/3rd of what I’d get from an established company" was enough to pay mortgage and provide for a family of 3, then in the "not doing a startup" scenario you'd have earned&saved that money, and you effectively lose it if your startup doesn't work out.
Sure, but it’s not like I was living under a bridge or anything. My standard of living did not change one iota. The stereotype of a starving founder is just not true most of the time. In fact I’ve yet to meet a founder who did not pay him/herself a pretty good upper middle class living wage. Not millions, natch, but still six figures.
The point is not about living under a bridge or starving, the point is that this should be considered equivalent in most terms (except tax-wise) to earning your market-rate salary and choosing to invest 2/3 of that cash into the startup.
No matter how much you have left, the consideration of whether it's a good deal or not should include that choice to "spend" that amount of (potential) money on the startup versus whatever you would have done with that money otherwise. If you wouldn't have done anything, then there's choice of spending a few years on the startup versus having, say, half a million of savings for retirement.
Imaginary money you can't spend on anything, sure.
All of the time I have spent trying to build software at large, stable, safe companies has been wasted. Most of the time I have spent trying to build software at startups has been wasted, too. That's life in a field as young and uncertain as ours: most of what you do will turn out to be a waste of time.
So, what's that time actually worth? Same as what that software is actually worth: nothing, usually.
Not quite that imaginary. The opportunity cost is about 70-80k€ for a perm position, about 120 for freelancing. Plus the savings you’ll have to burn through. That’s a fuckton in my book
Well, sure, but if that's your measure of worth, then what are you doing making software? Go work in finance or insurance instead - that's where the real money is.
I have come to a conclusion: There are deductive style thinkers and there are inductive type thinkers. The deductive works from the abstract theory towards a proof of his reasoning. The inductive works from facts, and backwards to a theory or model.
The deductive 'type' can usually be a very good student and academic, but not so great as a practitioner. They can be very reliable within a very structured environment.
The inductive 'type' is usually better at doing things and learning from these and getting an intuition for how they work. They are not good at 'following' ideas and usual make horrible students and employees. They are pretty good at adapting in a more chaotic environment.
So the problem in tech (interviews)seems to me that the 'deductive types' get the best scores and signal themselves as being the 'brightest'. However in reality what you want in industry are 'doers' such as the 'inductive' type people ... but they are the ones failing at your ridiculous tests/puzzle questions.
Ideally a person should balance between the 2 modes (inductive and deductive) and be a master at almost everything.
He uses "credentials" the way "resume" is used here. Large companies allocate compensation & power based on credentials, including those you get in-company like seniority and job title. Startups let you succeed and fail based on performance instead of this poxy proxy for it. He goes in depth into the "grades problem" that Mayer seems to exemplify and several commenters here brought up.
I think pg was optimistic about this topic in 2008, and this article relates to his larger vision of a "high-resolution" economy where un-credentialed entrepreneurship plays a larger role, and corporate-bureaucratic credentialism plays a smaller one.
We'll soon have 3-5 trillion dollar companies (unicorn-eating dragons, technically). They're less "old fashioned" in their credentialism, but they're credentialist nonetheless.
I'm with Paul though, we need to figure out ways of having the economy that is less abstract.
Thanks for posting this. I think some people can become so specialized that they fit into specific roles and that some products rely on a group of professionals from different disciplines working together.
The most interesting point of the article to me is that fact that taxes above $100k were 70% - 90% until 1970. That seems like it nicely explains why income inequality and CEO salaries have increase since 1970. With a tax rate like that, you pretty much can't have much income inequality.
The tax code simultaneously strongly encouraged you to not consume goods/services but rather have a company consume them on your behalf. This is still pretty de rigeur in Japan, which results in situations like this regarding executive perks: Bob lives in an extremely desirable house, which he rents for hundreds of dollars per month. It is owned by the real estate arm of BigCo, where Bob is CEO. Bob doesn't own a car; BigCo has issued him a $250k company car. Bob's children attend private schools, receiving a scholarship from BigCo for emerging leaders like themselves. Bob is in reasonably good health, given his frequent use of a gym and country club (dues billed to BigCo), and his wife's cancer situation is entirely managed by their gold-plated health insurance policy. Bob is socially assured of a sinecure post-retirement like e.g. being on the board of directors of a company socially close to BigCo.
Bob's salary is $90k a year. Phew; income inequality, solved.
(The current standard in the United States is that most of the above fringe benefits would result in taxable income to the employee. This is close to the current formal rule in Japan, which adopted guidance very similar to the US' on about a 25 year lag, but the substantial give-and-take between tax authorities and employers/taxpayers makes the actual practice in Japan substantially more varied than in the US, including among firms which would consider themselves enthusiastically complying with the rules.)
Germany, like any other European country I know, charges 0% tax as long as a company doesn't pay it out to it's owners. Every other use (see next paragraph) is untaxed. In fact they pay less tax than individuals (no VAT). And of course, high incomes have such companies, that receive their salaries instead of them themselves. This is common and perfectly acceptable, in fact, as a consultant you are taken advantage of if you don't do that.
How does it work ? One pays "proper" tax on a nice income they pay themselves indirectly (but 1/3 or less of their real pay) and then invest it in something that's some form of capital replacement business (buy something - rent it out) and grow that business all their career, and of course use it for perks, like free dinners, vacations, health care, education, hotels, cleaning service, ... There's even the more blatant ways to get untaxed pay. For instance renting your own house (you put an office room in your mansion, then "rent" it to your own company for a very nice rent. Untaxed, and legal)
For tax purposes, of course, those aren't free dinners. Those are "sales negotiations", which are indeed also conducted in expensive restaurants. "Company conferences", not vacations. As for additional healthcare, that receives special tax treatment by default.
Company cars (aside from being a necessity. You're socially judged in Germany by the car you drive. You want "senior consultant" ? Don't arrive in a Renault, or generally any car under $50k. Hell I know people who hack this system by using rentals, removing the stickers and using those to go interview). Anyway company cars are untaxed (0%) as long as their "primary use" is company business. Wanna bet how often that is true for higher pay individuals ?
Oh and I've actually walked into the general management building of Deutsche Bank. I guarantee not one of the managers is paying a dime in tax on company perks, and yet ... that building is a palace. You can get free massages there. There's an exquisite restaurant (10 euro per meal). It's the best museum of German art in existence, by a HUGE margin, it's got sleeping rooms (which should be understood to be a free hotel service, because that's what they are), and of course, every business partner or "business partner" ... can be given access, again, for free. And all this service, for free, in the dead center of the city. Hell, the free parking alone is worth 500 euro per month.
Can we please stop with the idea that Europe is somehow a more egalitarian place than the US ? It's not. Also no European business will be caught dead paying half the salary you get in Colorado to a software engineer (you can get comparable to Colorado as a consultant with maximum "tax hacking" though, still nowhere near the valley). Lastly, at least in my experience, European companies are a lot less meritocratic than US ones (not that I'm seriously claiming there isn't a healthy dose of nepotism/favoritism in the US, but it doesn't tend to be 90%+ of the company, whereas that is very common in the EU).
This wall of text is a bunch of personal anecdotes that don't support your conclusion.
Europe, generally, is more egalitarian. Most of the countries operate on social democracies. Many countries have free health care. I would also like to point out countries in the EU are different. They're not like states in the US, they're very different.
The US has people without access to water. Huge trailer parks. Much higher rates of homelessness. Worse income equality. Smaller social welfare programs.
Whatever your personal experience of walking into a bank is, it doesn't matter and it doesn't make you right.
It's also a bit silly to point at a bank, which are notorious in all countries.
The software salary thing is very odd thing to point at too, the US has a disproportionate amount of the internet companies which is heavily inflating your software salaries due to demand.
I've seen pretty sizeable trailer parks without fresh water in Holland, too. Granted, nothing comparable to what you find in America, but finding regions of endemic poverty in Europe is not hard at all.
Most of the examples you cite are tax evasion, not avoidance. If you use the company car privately you need to pay taxes on it. They may even require you to log your tours (Fahrtenbuch) if they don't believe you.
If you rent out the office in your house to your own company for a too high price they will investigate you for "verdeckte Gewinnausschüttung".
There are of course margins to play with in which you can probably hide a lot of money, but generally this is tax evasion
That's why replacing corporate income tax with personal income tax, which many here advocate, won't work. However that issue can be mitigated by taxing companies on the value of perks
Huh. So when baby boomers were young they enjoyed all the cumulative public benefits of high taxes in prior years, but were never subject to such high taxes themselves? No wonder they look back at those times with admiration.
Taxes were even higher after WWII, gotta finance them somehow. Good thing the US isn't in a war today and doesn't have the need for high taxes to finance a bloated military. /s
The only reason that 70% tax didn't destroy the economy was because for much of the time after WWII, the US was the only first-world country stable and not rebuilding from the war. It was also possible because the effective tax rate was way below 70%.
This takes a very heavy analytical approach to the reasons for seeking an entrepreneurship path. I think it misses the larger point - most people go into it for highly personal subjective reasons. Mine, and most I feel like are simply choosing to chase after the dream of making real money, enough to buy our freedom from the rat race and live life on our own terms.
> the dream of making real money, enough to buy our freedom from the rat race and live life on our own terms
Quoting Steve quoting the paper's conclusion:
> The authors’ conclusion — Entrepreneurs think they are better than their resumes show and realize they can make more money by going it alone. And in most cases, they are right.
Mine is similar, but defined as having enough money to buy my freedom to survive. A job will not give me that. Or at least the jobs that are available to me.
One additional thing I would add to the article is that large companies have a harder time leveraging someone with multifaceted strengths, which the entrepreneurial route can better leverage. Large companies are about specialization and efficiency at scale for employees; their structure inherently has a harder time to get the most out of the the multiple strengths an entrepreneurial person likely possesses. Conversely, someone who is amazing at only one thing, eg software engineering, but lacks in leadership, sales, marketing, design, etc could have an amazing career in a large company but might have a harder time starting a company where there aren't already teams of people to compensate for his/her weaknesses.
Having been entrepreneurial itself becomes a signal that opens doors at companies -- even if the business fails. I don't know about hiring on and doing what you're told, but being the person who made sure it all happened -- including doing everything you haven't yet hired someone for. I've seen several folks who stepped out, failed at a business idea, and then stepped back into corporate at a higher level. Starting up a new company is like starting a new division. It signals that you can handle the complexity and diversity of responsibility. https://www.nytimes.com/2016/09/11/upshot/how-to-become-a-ce...
You got me thinking it over. It's a question (like "what are your three biggest weaknesses?") that you need to have an answer for. In my case, I said that, while I could do sales, I didn't like sales.
> No wonder the most successful Google products, other than search, have been acquisitions of startups not internal products: YouTube, Android, DoubleClick, Keyhole (Google Maps), Waze were started and run by entrepreneurs.
You're moving the goalposts. The blog post just spoke about "most successful products". And "innovative" is subjective. Moreover there was nothing like Gmail at the time it debuted (AJAX, huge storage, powerful search). Chrome was technically very innovative and also popularized UI things that have become standard - tabs at the top, omnibar.
Maybe I’m just misremembering, but I’m pretty sure Gmail had much better spam detection than anything else when it launched. Back when it was in beta, that was one of the main features I remember talking about when I ditched Hotmail.
Regardless of how innovative Gmail and Chrome were (and I agree they were), more of Google's "innovative" products are a result of acquisition. This supports the article's hypothesis that Google's internal product innovation is not as great.
Some examples of failed innovation at Google are Wave, Allo, Chat, Plus, etc. Having worked at Google, I can count way more product failures than successes that originated internally.
But in the real world too, way more companies fail than succeed. It would be weird if internally developed products didn't also fail a lot.
Some of the successful acquisitions (YouTube, Waze) were made at a time when they were already popular and had traction. YouTube wasn't the only video sharing site around at the time (there was even Google Video[1]) but it was obviously the most well-liked.
You're moving the goalposts too in your first comment: The original article never say there wasn't any very successful and innovative internally developed products.
Arguably, YouTube, Android, Maps and Double Clicks have much more impressive market shares and revenue impact than Chrome and Gmail.
When it was released, Gmail was on a class of its own. It was free, fast, and had ~1+ GB of storage (and it was increasing every second!).
I know that you might think offering more storage for the same product is not innovative, but here's the thing: Yahoo (pretty much the largest competitor at that time) offered an email service with 4 MB of storage.
Blank is using the word "entrepreneur" more in the skill sense, the mindset sense - an identity. Someone who is given a wider canvas to express creative ideas and to solve problems than the narrow surface areas offered by traditional employers (employers who mostly only seek cookie-cut identities to execute already established company ideas).
Well the opposite of someone whose resume doesn't sufficiently reflect their value is someone whose resume makes the candidate seem more valuable than they are.
Obviously it varies but personally the major reason I tend towards working outside organisations is the "quality" of my endeavour.
Within an established organisation, even great ones, getting things done involves often involves internal machinations - "buy in" etc. The best people at large companies are experts at this.
As an entrepreneur, this skill helps make a sale, or raise funds. But its directly linked to the problem you are solving. Its "how do I make a thing that does X" VS "how do I make this thing do X".
Its purer. Its more interesting. Its easier to romanticise - and easier to pass that feeling on. Its also liberating to have complete freedom (for awhile!) and no-one to blame but yourself.
I knew some “entrepreneurs” from college who couldn’t land a job upon graduation. They’re prideful, so they sugarcoat their situation and justify why it is meaningful, when really the opportunity cost was zero. This isn’t a knock against all entrepreneurs. It’s the difference between “billionaires are dropouts” vs “dropouts are billionaires”. Ironically, one of those “entrepreneurs” said “I’m a C student, therefore all of you will end up working for me.” Last I heard, they were smuggling medicine in the legal-grayarea across borders.
"In this case the entrepreneurs know something potential employers don’t – that nowhere on their resume does it show resiliency, curiosity, agility, resourcefulness, pattern recognition, tenacity and having a passion for products."
Those aren't really signaled by asking coding questions either.
My own career is an example of this, by all accounts and measurements used in HR in the US I shouldn't be earning as much as I do or as successful or sort after in my field.
Its always a shock to colleagues when they ask where I went to college and my response is that I'm still on my gap year that started 15 years ago. When I go into the details of what happened throughout that period the bias towards college education disappears.
And the paper is correct, I fully understand that my skills on offer are on par or better than what any C-level or senior exec can offer, but I only realized this after a few years of interacting and working with these people.
“I want to be my own boss.” “I love risk.” “I want flexible work hours.” “I want to work on tough problems that matter.” “I have a vision and want to see it through.” “I saw a better opportunity and grabbed it. …”
I've started several companies, and the reason was the same each time, I believed there was a market for an idea from which I could make money. Those other reasons never came into play. I suppose that starting a bussiness has different reasons for people who are already unhappy with their lives, but starting a business really shouldn't be undertaken to minimize stress and the number of working hours.
>> that explains a new theory of why some people choose to be entrepreneurs.
People don't 'choose' to be entrepreneurs - Choosing to be an entrepreneur is usually the first step but it doesn't make you an entrepreneur. It can take decades to reach the point where you can become one.
I've been trying for 10 years and I'm now only partially an entrepreneur in the sense that I earn a decent amount of passive income from a side business but I'm still also an 'employee' because I still have a day job too.
It takes a long time to build up the network that you need to become an entrepreneur.
In fact, many founders start businesses in industries and niches that, at first, they might have little, to no, connection to.
If you think a network is critical, probably the most effective (time-wise, maybe not so much cost-wise) way to acquire one is to go get an MBA or gain employment in a professional services firm (consulting, banking, accounting, law, etc.) that works in that industry.
You can open a Subway inexpensively, then work in it for yourself.
Everyone around me has a bunch of rent houses while they work normal jobs to pay everything off. Hell, my neighbor has 15 or so homes and lives in Europe most the year and has since the early 1990s.
Lots of different types of entrepreneurs and avenues to success. Capital is the key in my experience.
There are plenty of highly talwnted people who work for existing companies vs start their own thing. The fact that big companies often acquire startups I think has less to do with caliber of talent and more the focus of that energy. You are asked to move some KPI OKR whatever. And you are evaluated on how much you move it on at least an annual basis. Successful startups often take many years to become valuable or product revenue. It's too risky for most companies to hold off evaluating for that long.
> At a recent personnel meeting, she homes in on grade-point averages and SAT scores to narrow a list of candidates, many having graduated from Ivy League schools, …One candidate got a C in macroeconomics. “That’s troubling to me,” Ms. Mayer says. “Good students are good at all things.”
I disagree with her leadership style, but it's unfair to blame Yahoo!'s collapse on her. The company was doomed with or without her. She took on an untenable role in exchange for a big pay package.
This does not consider the fact that only a small segment of the population is capable of being entrepreneurs - at least in tech, in the first place. In order to leave a cushy job and start a startup you must:
1)Be born in a country that's rich with local talent that you can hire. Or have the ability to move to such a country.
2)Be free of debt, either from student loans or mortgage
3)Have affluent friends or families(the paper rightly notes that most early funding comes from friends and family) - so affluent that they are willing to invest in something they know will possibly fail, as most startups do.
4)Be the right age - if you're starting a family or paying off a mortgage, it would be completely irrational to abandon a stable job.
When you consider all this, there are perhaps a few hundred thousand people for whom it would be wise to become an entrepreneur - and by this I don't mean a local store, but with ambitions to scale up.
All these factors could explain the charecteristics: Immigrants from Asia and Europe tend to be richer than the average population there much more educated. They are young and largely free of undergraduate debt. Similarly, people who grow up in affluent families(relative to the median family) probably already have seed money, fall-back options and security that failure doesn't mean homelessness. Not everyone has that luxury.
Looking at the most popular entrepreneurs in the world - Bill Gates, Zuckerberg and Spiegel all grew up in very rich homes, while Jobs grew up right in the heart of Silicon Valley. Kalncik lived 3 years without a salary and moved into his parents house for a long time.
I strongly disagree with your second point. There are quite a few very successful entrepreneurs who have started companies while being mired in terrible financial circumstances. In fact, it's very common for these circumstances to be the stimulus that gets people moving in the direction of their own company. There are many, many stories of this, to the point that it's a cliché.
I myself started my first business at a time when I had virtually no money in the bank, and my car was literally repossessed one month before my business became profitable. If I had stopped and said "I can't afford this" and just given up and gone to get a job, I would have never seen the success that came later.
Also, you point out particular entrepreneurs who came from rich families. You completely leave out the wide array of entrepreneurs who did not. John Paul DeJoria, for example, was living on a friend's property because he was homeless and had almost no money. He started his business in those circumstances. He's estimated at somewhere in the ballpark of 3 billion net worth presently. There are quite a few stories of people with virtually no money building empires out of the rubble.
While I agree that there are a number of factors that feed into whether a startup is successful or not, I would kindly submit to you that one's attitude towards whether or not it can be accomplished is a very massive part of the picture. It takes focus and determination to get most businesses off the ground. Once you begin listing the reasons you can't accomplish it, you've begun setting up the circumstances such that you won't.
For me (formerly well-paid executive at IT companies in the US, originally from Italy), #2 (plus, some reserve money) was absolutely necessary to convince myself to leave my last job and start a company, last year.
>>I strongly disagree with your second point. There are quite a few very successful entrepreneurs who have started companies while being mired in terrible financial circumstances
Textbook example of self-selection bias and survivorship bias.
Even if you compiled a list, it would tell you nothing about the number of people who would have started companies had they not been mired in terrible financial circumstances.
If you compiled a list of all successful entrepreneurs and it was overwhelmingly full of ones who were poor when they started, it would suggest that such circumstances raise the chance of being able to succeed as an entrepreneur. More analysis of different stats would have to be done to elevate that beyond just a suggestion. Personally I feel that at least to some degree it could be the case. (Necessity is the mother of invention, and limitation actually helps creativity far more than abundance) I didn't grow up poor necessarily, though there were times growing up that things were limited quite a bit. I do believe these times are disproportionately responsible for my abilities today, as well as happiness.
5) Not start a 'startup' that requires funding or hotshot coders to grow at 10x every month, but instead start a regular tech-oriented business that doesn't require any of the 4 other points.
Tech entrepreneurs do not necessarily have to start 'startups' in the HN sense of the word and I know there are plenty on HN who have taken the slower, bootstrapped path without rich friends, lack of debt, or even being based in ideal countries.
I don't really see how you separate tech from other entrepreneurs? Entrepreneurship is vast and mostly outside of tech and high-paying organic-vegan-glutenfree-catering tech-startups. If you run a hair salon your education level will most likely be much worse than most tech founders and your "seed money" is a high-interest rate from your local bank. Your margins are so slim that at the end of the month you are indeed an entrepreneur but paid under minimum wage on an hourly basis. To me tech founders seem to be in a much better position to start a company - all things equal - contrary to your description.
This is plain wrong. You don't need to create a billion dollar company to be a successful entrepreneur, even though that's what investors want you to think. By Steve's definition, you just need to make more than you would at your corporate gig.
1) The world is moving towards remote work. You don't need to be in a rich country with talent. So long as there's good Wi-Fi.
2) If you have debt then you'll have to raise money and take a salary.
3) You don't need to do a friends and family round, or raise at all. We're bootstrapped, never raised a dollar.
4) I've met many entrepreneurs with young children or wanting to start families. Certain startups (eg. SaaS) can have very reliable income once you get your first several customers.
You see everything from a US centric perspective, I have a contrarian view:
1) Not clear what you call a rich country but Argentina has a lot of entrepreneurs and it is considered an underdeveloped country.
2) Best universities here are free and everyone in the world can study here. The average student study and work at the same time.
3) Lots of bootstrapped companies, limited access to capital.
4) Obviously age and family matter but you don't need to be the first founder who take all the risks. It is possible to join an existing company as a cofounder starting part time if you have critical skills to contribute.
Not saying that starting a company is easy, just saying that the world offers many different perspectives to the same problem.
> The number of famous and wildly successful startups outside of the US says otherwise :(
You are not understanding this thread. The discussion was about the difficulties people find starting a company that are mainly connected to economical issues. If you look at the successful companies, the major part had access to capital that eliminates this line of reasoning.
Argentina is not an underdeveloped country. It used the be the richest country in south America. It became poor again but thats nothing comparable to a country that never knew development.
I have a mortgage, student debt, and do not know anyone particularly well off, I quit a very stable job, and am in the middle of launching a tech startup.
People get so hung up on privilege these days that they lose sight of the power of merit and strategy. I think it is a dangerous mindset.
2) Again true, lots of friends opted to buy houses etc, but i felt it was going to limit me so i avoided this form of debt, and thankfully so as servicing it would have probably prevented me from starting the company.
3) Affluent co-founders in my case.
4) I was 24. Just old enough to know enough, young enough to be dumb enough to try + have the freedom to try.
I'd also add a 5th) You need a solid chunk of savings (Ideally a year or two worth). I dropped my income by 76% to work on the startup and saw no increase from pre-startup income for a while thereafter. But 6 years later my salary income (forget the buyout portion of money) was up 1191% from where it was before i left my job.
2) Buying a house is not necessarily a bad decision. I bought a place an year ago. My mortgage + housing related expenses are less than renting.
Rent went up from $1600-$2500 in a couple of years. My mortgage remains almost fixed except for property taxes.
So I think it’s a decent risk. My plan is to moonlight to a minimum delightful product. Once I have validation, and my feet touch the floor, I can quit my job and go
Entrepreneurship I agree is all about managing risk/reward.
Throwing money away in rental is far, far, far dumber.
In my case I would have had to pay more money for the rental than what I’m paying now with a mortgage.
The difference is that in a couple of years I don’t have to pay anymore and I will own an house that already doubled in price, while if I was renting my rent would have skyrocketed.
And with 50k$ in the bank I probably could have survived for 1 year here.
That's only true if you live in a place with an unsustainable market, i.e. permanently growing rents and house prices. There are places with stable house and rental prices, and in those - buying tends to be a worse choice financially.
And many would argue that places with skyrocketing property prices are going to run into significant issues in the future (if they aren't already at breaking point, hi bay area).
The comment I answered to was expressing a very narrow minded opinion on how everyone that buys an house instead of renting is doing the most stupid thing in the world.
I proved to everyone that is not true and that most likely he is not as smart as he reckons if this is what he believes.
Yeah, that is how I saw it too. But honestly, not everyone thinks the same or wants to start a company...for some people not buying right away could just cost them more in the long run i suppose. Personally I feel even in that case the life experience of renting and moving around is probably healthy, but each to their own!
Add to that: once you've had one "hit" (even if it's a small one off $100k exit) then you're basically hooked for life.
You'll realise it's almost always easier to make money from a successful business (no potential constraint on earnings if you solve a large enough problem) than it is working a job (time limited, limited opportunities for promotion based on age or company, etc)
But I agree, not everyone is made to be an entrepreneur.
A lot of startups seem to be started by groups of people tired with the bullshit bureaucracy at large firms who want to make real projects and sell that. I wonder if feeling frustrated like that is an important motivation as well.
I’ve worked at companies of different sizes. I think the important realization is seeing how much people are paying for something you’ve built, and that you’re getting very little of it.
AAMGF tech behemoths make almost a million per employee, yet the median salary is 15% of that.
Going it along, you could probably build a better product in another niche market and take a bigger cut. It’s a risk/reward bet.
In the Us, if you have the income FHA is 3.5% down and you could buy a double so most if not all of your mortgage could be paid for. Not saying there wouldn't be hassles/distractions but its an option for some.
The tax man also (depending on the country) levies stamp duties upon purchase and annual property taxes.
Owning a house also generally means low liquidity (should you want to sell), money going to repairs that you could otherwise just forward to the landlord and the requisite of putting up a deposit (money that can't be invested in say the stock market -- meaning you lose out on yield).
"Our primary finding is that successful entrepreneurs are middle-aged, not young. The mean founder age for the 1 in 1,000 fastest growing new ventures is 45.0."
2,3,4 can be more generalized to be: "have access to sufficient capital to address the opportunity". Which in general I would guess that there are more 45-year olds with access to entrepreneurial capital in some form than there are younger entrepreneurs in the original stipulation of 2,3,4.
You can look even further ahead. Because the past few decades have been so strongly concentrating wealth upwards, one might predict that there will be fewer individuals with the personally owned capital to start businesses so the number and the 'risk level' of ventures to be shifting downward over time. The risk level would go down because the commitments of capital become more committee based the more people need to approve of it - and so you get fewer Elon Musk type investments, and more safe-looking investments in better paperclips (or the next social network ad app...).
Your points about family are largely correct. If you make that choice, your responsibilities are quite set, until you either have enough savings (or raise investment) to take a risk or your children become adults.
You do not have to be free of debt. Your monthly debt payments have to be reasonable, something you can pay as part of routine monthly bills.
You absolutely do not need affluent friends or family. That's the least of all requirements anyone needs to start a tech company. First of all, it often doesn't take much capital to get started with tech companies these days. Second, your premise precludes someone having even a modest amount of savings (your theoretical person must be from a rich country, but they must have no money saved despite working a cushy job, odd combination).
You do not have to be a particular age. You're assuming everyone has children or a big mortgage. Birth rates in the developed world are at all-time lows, a lot of people are forgoing children or pushing it off until much later. You don't need a big mortgage, you can rent; most of the US does not look like NYC, SF, LA, Seattle in terms of cost of living.
You most certainly do not need to own a home. Multiple of your points put the theoretical person into that position.
> Looking at the most popular entrepreneurs in the world
Popularity is a pretty terrible reference point (why would that matter?). There's this group:
Larry Ellison grew up in a very broken home, his family didn't have much money. Paul Allen comes from an entirely ordinary middle-class background. Michael Dell's success required no special setup for what he did other than his own effort (assembling & selling custom PCs out of his bedroom, paid for out of his own savings), he grew up in an upper-middle class family. Elon Musk boot-strapped everything he did after moving to Canada, lived poorly and on a shoe-string budget after moving to the US. Jensen Huang of nVidia, was a first generation immigrant from Taiwan, with the deck stacked against him if anything; got his first degree from Oregon State University. Mark Cuban, who is more famous than Spiegel, grew up in an entirely middle-class background in Pittsburgh, and entirely boot-strapped his first success (MicroSolutions), which then paid for him to found Broadcast.com. Mark Andreessen grew up in farm country in both Iowa and a tiny town of 2,000 people in Wisconsin, his family had no special financial position. Ev Williams grew up on a farm in Nebraska, his family had no special financial position. Jack Dorsey grew up in a middle-class family in St. Louis, his family had no special financial position.
Maybe that's why most startup founders are at 45 years on average, by that age kids are maturing, family finance should be relatively stable, you might be reaching on your career ceiling, and you're getting older but yet not too old -- so you want to give it a shot. All combined the 45-average-founder-age makes sense to me.
Not to mention the most important part in my opinion, having the experience in your field to create a successful startup. Having a light bulb idea when you're young is all well and good, but without the experience I would imagine your odds of failing are much higher.
About being 'not too old': 45 is an average, meaning there will be more or less just as many around 60 as there will be 30.
At ~55 the kids will be gone, giving you even more time to start up something.
I think your list is mostly correct, but I don't think there's any reason it needs to stay that way. Technology is about lowering barriers to entry, and digital goods and services have high margins and very little (if any) marginal cost.
Maybe in the next 10-15 years we can convince high schoolers that if they spent their free time programming they could be capable of creating a revenue generating asset at 18.
The combined power of a nation of kids that could create rails SaaS sites or reusable 3D models would be an awesome sight to behold. It's a skill they would keep and even pass on.
Tech is largely new, and we really haven't bothered to teach it yet.
> I don't think there's any reason it needs to stay that way
There is actually a very good reason, namely that acquiring knowledge, skills, wisdom, etc. is at odds with acquiring assessment signals. The only way to become a good entrepreneur is to basically become unemployable.
I don't think they're at odds. They are definitely not 100% overlapping though.
I would disagree that the only way to become a good entrepreneur is to become unemployable. The best way is, as you say, to have knowledge and skill to create a useful product. Then, having a market that allows you to easily get paid for your work helps.
I mentioned high school specifically because I know that I would have loved something interesting to work on. It's a perfect time to work on skills rather than assessment signals. Lots of kids don't even bother with the assessment signals...
> The best way is, as you say, to have knowledge and skill to create a useful product.
Sure. Once you've actually created a product that's useful, or at least impressive from a technical and/or design perspective, then you're easily employable at that point. But for most people there is still going to be a several year gap between when they start focusing on acquiring those skills and when they've actually built something impressive enough to function as its own signal.
I have seen this over and over with people that have eventually built incredible products or services. The company/product/service etc. can work as a signal eventually. An “entrepreneur” is a lot like a scientific researcher. It isn’t until after the experiment has been shown to work that your risk is then rewarded. The people with high agency that have a fair amount of confidence in their abilities and don’t view themselves as a statistic tend to be able to weather this period the best emotionally.
"Be free of debt, either from student loans or mortgage" ... if the price of your mortgage is the same as renting, why is your statement true? If you run out of money, mortgage or rent, you've got a problem.
When you run out of rent money, your landlord kicks you out, and you move in with your parents, or couch-surf until you get your shit in order, or become homeless. The net hit to your finances is maybe a thousand dollars, or however much a moving truck or a plane ticket costs.
When you run out of mortgage money, your home is seized and sold, you will piss away tens of thousands of dollars of equity in foreclosure, realtor, and legal fees. Hundreds of thousands of dollars if you're in a down market, and you go underwater. You'll get to enjoy a ruined credit score... And, on top of that, all the other problems that you face when you can't pay rent.
I'd much rather be locked into a $1000/month rent for 30 years, then a $1000/month interest-mortgage for 30 years.
Another reason is that the housing market is grossly inflated (UK). I would get a better house to rent for £1000/month rent than a house for £1000/month interest-mortgage, in addition to the professional "flexibility" off not having the mortgage "to loose". I am a contractor, so I move around with the work, and certainly earn more income doing so also. The long term, is that I make it big, and then outright buy a house. All or nothing! And in the meantime, I pick up the phone when the house needs maintenance :)
It's also worth taking into account the level of finish. As a landlord it’s almost always not worth spending more for good quality items, as they usually won’t increase your returns. It’s more important how the property looks, than the quality, which I’d say is why IKEA is so popular nowadays.
If you want an induction hob, a good mattress, proper ventilation system so the windows don’t have condensation and something other than paper thin walls, you are pretty much out of luck in the UK. On the other hand if you are fitting out your own place, upgrading to better quality items like this doesn’t really cost that much more (e.g. £200 for an induction hob vs £100 for a ceramic hob).
Errrrr ... you can always sell your house. In the last 5 years prices have almost doubled in many Livable cities.
Suppose you bought a house for $300k, paid down $100k of it and sold for $600k. You’d be walking away with a decent amount of cash. In rental when you get kicked out, you get nothing.
Renting is paying someone else’s mortgage. If you know you’re gonna stay in one place for a long time, and the market is stable or booming, buying always makes sense.
I think your first point is the only one that bears truth. There are huge numbers of tech founders for whom 2, 3, and 4 are not true - sometimes all at once.
I've been an entrepreneur for years, and when I got started, I wasn't free of debt, and I wasn't "the right" age. However, I don't disagree that a certain amount of affluence and particular set of circumstances are huge contributors to entrepreneurial success.
I agree with your points, but is it realistic or are those excuses? Has anybody quantified actual entrepreneurship? Yes, your example are complete home runs but most entrepreneurs would end up with a small business and not unicorns.
"Entrepreneurs start companies" would be a tautology.
"Why entrepeneurs become entrepreneurs" is a question that can be answered (to some degree). If more than one answer is possible, as here, it doesn't really make sense to complain that the question is a "tautology".
Even the best tech needs foundations, buildings and services to function. Get off your high horse. Money is where friction is, not nessarrily, or even usually, advancement in tech. Not to mention non tech companies are dying at a much slower rate than tech ones if you plotted them all.
