Business = Try to get people to pay you for stuff

rocket launchSimplify businessPaul Graham’s latest article How to Start a Startup sums up business as “You just try to get people to pay you for stuff.” Too many people complicate business so they’ll look smarter, but the basics are incredibly simple and reading a balance sheet isn’t something you need to study extensively for like physics or chemistry.“You need three things to create a successful startup: to start with good people, to make something customers actually want, and to spend as little money as possible. Most startups that fail do it because they fail at one of these. A startup that does all three will probably succeed.And that’s kind of exciting, when you think about it, because all three are doable. Hard, but doable. And since a startup that succeeds ordinarily makes its founders rich, that implies getting rich is doable too. Hard, but doable.If there is one message I’d like to get across about startups, that’s it. There is no magically difficult step that requires brilliance to solve.”What is an MBA worth today?He also touches on a point that I’ve been mulling over for a while: should I get an MBA? I taught myself how to hack by reading everything I could get my hands on and programming everything I could think of, and it’s served me well in the business world. Instead of restricting myself to being a java or C++ programmer only, I’ve learnt how to understand a system and how to get it to solve problems for me. By “system” I mean any collection of interacting parts that contribute to the whole, regardless of whether those parts are computer chips or human beings.Now I’m working towards a BSc in software engineering part-time, so that I can have an official qualification next to my portfolio of existing work, and a lot of people have said that I should study towards an MBA afterwards. But is it really worth it? I don’t want to know the details of tax law and pricing of derivatives, so maybe it’s better to learn how to hack and just hire an MBA when the company gets big enough that it needs to deal with those esoteric details.“If you work your way down the Forbes 400 making an x next to the name of each person with an MBA, you’ll learn something important about business school. You don’t even hit an MBA till number 22, Phil Knight, the CEO of Nike. There are only four MBAs in the top 50. What you notice in the Forbes 400 are a lot of people with technical backgrounds. Bill Gates, Steve Jobs, Larry Ellison, Michael Dell, Jeff Bezos, Gordon Moore. The rulers of the technology business tend to come from technology, not business. So if you want to invest two years in something that will help you succeed in business, the evidence suggests you’d do better to learn how to hack than get an MBA.”Starting a Startup

  • Build something customers want
  • Aim for a niche market
  • Don’t write software for yourself. Programmers love writing software to make their lives easier, but all of them do it, so that market is flooded. Find a mid-sized non-technology company and watch how they use computers.
  • Write software for smaller companies: “while you can outhack Oracle with one frontal lobe tied behind your back, you can’t outsell an Oracle salesman. So if you want to win through better technology, aim at smaller customers.”
  • Start small. “In technology, the low end always eats the high end. It’s easier to make an inexpensive product more powerful than to make a powerful product cheaper. So the products that start as cheap, simple options tend to gradually grow more powerful till, like water rising in a room, they squash the “high-end” products against the ceiling.”
  • Skip the elaborate business plan. “…brief description of what you plan to do and how you’re going to make money from it, and the resumes of the founders.”
  • Regardless of how nice everyone seems, they’re looking after themselves. So be careful of investors, partners, etc. and make sure everything is on paper rather than basing it all on trust. The only people who will complain about doing this are usually the ones planning to screw you over later.
  • Intellectual property is painful. Make sure the founders know what they’ve signed over to other companies before you base your company on something it doesn’t own.
  • Value your company on it’s ideas and future potential, not on the physical assets created so far.
  • Don’t let a “mature and experienced” business person try to run your company when they know nothing about it.
  • Spend more money on improving your product and less on branding. Google wiped out their competition by delivering a better service, not by spending more on branding.
  • Start small and grow organically. Don’t hire hundreds of people to get big fast, as it will dilute your ideas and philosophy.
  • Put users before anybody else, including advertisers and your company.
  • Having venture capital doesn’t make you rich, generating revenues does.
  • A few smart people are better than lots of mediocre people. Don’t hire people to fill in the blanks in a corporate org chart, hire people that get things done. Having a lot of people working for you may make you feel powerful, but you’ll lose that when the company fails.
  • Spend less than you make.
  • Start a startup if you want to compress 40 years of working into 4, and only if you’re willing to lose the bet.
2005.03.11