would you start if you suddenly decided to get rich? I think that the best solution would be to start a new company - a startup, or join an existing one. This method has proven to be effective for hundreds of years. The word "startup" itself originated in the sixties of the last century, but what was happening at that time was very similar to the adventurous trade travel that was undertaken in the Middle Ages.
Usually the concept of a startup is associated with high technologies. So strong that the term "tech startup" is almost a tautology. Typically, this is a small company that has tackled a complex technical problem.
Many people become wealthy without knowing anything about what this essay is about. You don't need to know physics to be a good trader. However, understanding some basic principles can help. Why should startups be small companies? Do they have to stop being startups if they grow up? Why are they almost always developing new technologies? Why are so many startups selling new drugs or software, and so little sunflower oil or detergents?
Thesis
From an economic point of view, a startup can be viewed as a way to squeeze your entire working life into a few years. Instead of not working very hard for forty years, you work as hard for four years as possible. This is especially important in high technology, where success depends on the speed of your work.
Let's speculate. Let's say you are a good hacker (in the original, positive sense of the word) for 20-25 years.You can get a job with a salary, for example, about $ 80,000 per year. Such a hacker must perform work, the cost of which will be at least $ 80,000 per year, just in order not to be at a loss for his company. Suppose now that you can work twice as much as an ordinary employee, and if you work hard enough, you can do three times more in an hour of work than usual. [1] Getting rid of the incompetent manager standing over you can double or triple your efficiency. Now think about how much smarter and more efficient you are than your position suggests? Perhaps two or even three times. Now add up all of these factors, and my claim is that you can be 36 times more productive than expected in any corporate job.[2] And if a good hacker in a large corporation makes $ 80,000 a year, then a great hacker who works very hard without all this corporate bullshit can do three million jobs.
As with other rough calculations, mine also has a lot of wiggle room. I will not argue whether the numbers will really be exactly as I said. But I am sure that the calculation scheme is correct. I am not saying that the multiplier is exactly 36, but it is definitely more than 10 and sometimes even approaching 100.
If three million seems too much for you, then remember that we are talking about the extreme case: when you not only have no free time, but you also work so hard that it can damage your health.
Startups are not magic. They do not change the laws of the universe. The Law of Conservation still holds true: If you want to make a million dollars, you have to withstand the equivalent of that amount. For example, one way to make a million is through a lifetime job at the post office, where you have to save every cent. Imagine all the stress of fifty years of mailing and condense it into four. You will, of course, get some discount if you buy all that stress in bulk. But you cannot deceive the fundamental conservation law. If starting a startup was easy, everyone would be doing it.
The internal structure of many companies resembles the communist regime. If you believe in the free market, why not make your company look like it?
Hypothesis: a company will be maximally profitable if it pays for the work of its employees in proportion to the profits they bring.
Millions - not billions
While for some people three million may seem like a huge amount, for others it is not so much. Three millions? Better tell me, how can I become a billionaire like Bill Gates?
Okay, let's leave Bill Gates alone for now. It's not good to use celebrities as examples. The press usually writes about the richest, but they get out of the picture. Bill Gates is a smart, determined and hardworking person, but being that way is not enough to make as much money as he has. Besides all this, you must also be very lucky.
There is a large element of randomness in the success of any company. The guys you read about in the newspapers are smart and determined people, but they also managed to win the lottery. Bill Gates is undoubtedly a very smart and very determined fellow, but Microsoft is also fortunate enough to benefit from one of the most prominent mistakes in business: the DOS license agreement. Of course, Bill did everything in his power to get IBM to make that mistake, and he did a great job, but if there were only one person with brains on IBM's side, Microsoft's future could be very different. At this stage, Microsoft had little influence over IBM. In fact, they were component suppliers. If IBM demanded an exclusive license, as they should have, Microsoft would still have entered into an agreement.It would still mean a lot of money to them, and IBM could easily get the operating system somewhere else.
Instead, IBM has used all of its market power to let Microsoft control the PC standard. From that moment on, Microsoft acted as planned. They never had to make risky decisions. They just took a tough stance on licensing and made innovative products as quickly as possible.
If IBM hadn't made this mistake, Microsoft would still have been a successful company, but it wouldn't have grown that much and that fast. Bill Gates would be rich, but he would be somewhere at the bottom of the Forbes 400 along with other wealthy people his age.
There are many ways to get rich, and this essay is just about one of them. This essay is about how to make money by creating value. There are tons of other ways to make money, including lottery, speculation, legal marriage, inheritance, theft, extortion, fraud, bribery, counterfeiting and so on. Most of the greatest fortunes are likely to have been made using some of these techniques.
Value creation, as a way to make money, has advantages not only because it is more legal (many other methods are now illegal). But also because this method is more direct. You just have to do what other people need.
Money is not value
If you want to create value, then you need to understand what it is. Values are not the same as money. [3] Values have existed throughout human history. Money was invented relatively recently.
Values are fundamental. This is what people need: food, clothing, houses, cars, gadgets, travel to interesting places, and so on. You can be rich even if you have no money. If you had a device that could make a car if you wanted, or make you dinner, or do your laundry, or do anything else you want, you don't need money. Or, for example, if you were in Antarctica with nothing to buy, the amount of your money would not matter either.
Values are what can satisfy your desires, they are not money. But why, if values are such an important concept, is everyone talking about how to make money? Money is a way of exchanging value and in practice it is interchangeable. But they are not the same thing, and unless you plan on becoming a counterfeiter, talking about how to make money can only make it harder to figure out how to actually do it.
Money is a side effect of specialization. In a specialized society, you cannot do most of the things you need on your own. Whether you need a potato, a pencil, or shelter, you get it all from other people. How can you get the person who grows potatoes to give it to you? Only by giving him what he needs in turn. However, if we directly exchange things with the people who need them, we will not get very far. If you make violins and none of the local farmers need them, what will you eat?
The solution that society found as it became more specialized was to break down the trading process in two steps. Instead of directly exchanging violins for potatoes, you exchange them for, say, silver, which you then exchange for anything else you need. The intermediate - the middleman of the exchange - can be anything that is rare enough and can be easily carried around. Historically, metals were most often used for this purpose, but relatively recently, they have been replaced by another intermediary, which is called the dollar and does not actually exist physically. However, it can act as an intermediary because its value is guaranteed by the US government.
The advantage of using such an intermediary is that it makes trade possible. The disadvantage is that it often obscures the real meaning of trade. People are starting to think that business is about making money. But money is just an intermediate link, just the equivalent of what people actually need. What most companies are doing now is value production. They produce something that other people need. [4]
When starting your own business, it's very easy to start thinking that people want what you want. During the dot-com boom, I had a chance to talk to a woman who loved to walk in the fresh air. And I was going to make a portal dedicated to this topic. Do you know what kind of business you need to open if you like fresh air? Data recovery from damaged hard drives.
What's the connection? Yes, no. It's just my point of view. If you want to create value (or in other words, do not starve), be very critical of plans to create a business that is related only to what you enjoy doing.
The Pie Myth
A surprisingly large number of people learn from childhood the idea that there is a fixed amount of wealth in the world. Yes, in any normal family at any moment there is a certain amount of money. But they are not the same thing.
When wealth is spoken of in this context, it is often described as a pie. “You can't make the pie bigger than it is,” politicians say. When it comes to money in a particular family or money collected by the government through taxes for the year, this is true. If one person gets more, someone else should get less.
I remember when I was little I believed that if a few rich people own a lot of money, then less of it remains for other people. It seems like a lot of people continue to believe in something like this when they grow up. Usually this pie is always implied when you hear someone speculate that X percent of people own Y percent of wealth. If you are planning to start a startup, whether you like it or not, you are about to expose the Pie Myth.
What makes people wrong is that money is abstract. Money itself is not wealth. They are only what helps to exchange values. And while there may be a fixed amount of money available to trade with other people at a particular moment in a particular place (for example, in your family this month), the amount of wealth in the world is not constant. You can increase the amount of wealth in the world. Values have been created and destroyed (and then re-created) throughout human history.
Let's say you have a broken car. Instead of sitting on your couch next summer, you can spend some time renovating it. By doing this, you are creating wealth. The world, and especially you, will become richer by one workable machine. And not only in a metaphorical sense. If you sell a car, you get more for it than for a broken one.
By repairing a broken car, you made yourself richer. Nobody got poorer. Therefore, there is no World Pie. When you look at a problem from this point of view, you wonder how anyone could have thought otherwise? [5]
Artisan
The people who best understand that the world's wealth is impermanent are the ones who are good at making things with their own hands, the artisans. Their homemade work can often be sold in the store. But with the growth of industrialization, the number of such people decreases. One of the largest remaining categories of artisans is programmers.
A programmer can sit in front of a computer and create value. A good program is a value in itself. If someone sits down and writes a superbrowser that won't buggy (great idea, by the way), the world will be much richer. [6]
People in the same company work together to create wealth. Many of them (like HR managers or drivers) don't actually directly produce anything. Programmers, on the other hand, literally pull the product right out of their heads, line by line. Therefore, it is more obvious to them that wealth is something that is produced and not distributed by some imaginary uncle.
It is also obvious that the quality of wealth generated can vary greatly. We had a programmer at Viaweb who was some kind of super-productive monster. I looked at what he did in one working day and realized that he was increasing the company's market value by several hundred thousand dollars every day. A super programmer like this can create million dollar wealth in just a few weeks. The average programmer will probably produce zero, if not negative (adding a few bugs) wealth over the same period.
This is why most good programmers are liberal. In this world, you either float or sink, extenuating circumstances do not bother anyone. When people far from the direct production of values - students, reporters or politicians - hear that the richest 5% of people on the planet own half of all the money in the world, they begin to think that this is unfair! An experienced programmer is likely to think, "is that all?" The top 5% of the world's programmers probably write 99% of good software.
You can create value for more than just being sold. Scientists, at least until recently, actually donated their knowledge to the world. We all benefit from the invention of penicillin, and people are less likely to die from infections. Values are what people need, and keeping life is definitely a must. Programmers often contribute to the common pot by developing open source software. I got much richer by getting the FreeBSD operating system running on my computer. Or Yahoo, which uses it on all of its servers.
What is work
In industrialized countries, people usually belong to some institution, at least until they turn 20. After many years, you get used to referring yourself to some group of people who wake up at about the same time in the morning, go to the same buildings as you, and, as a rule, do things that they do not really like. Gradually it becomes a part of your personality: name, age, role, institution. If you are talking about yourself, or someone else introduces you, it usually looks like this: John Smith, 20 years old, student of such and such a college.
It is assumed that when John Smith graduates, he will go to work. For him, it is like joining another group of people. Without going into details, work is almost the same as college. You choose the companies in which you would like to work and send them your resume. If they decide to take you, then you become a member of the new group. You wake up in the morning and go to other buildings and do things that you usually don't like to do. There are a few differences: life has become less fun, and you get paid. But the differences are much less than coincidences. John Smith turned into John Smith, 22, a developer at such and such a company.
In fact, John Smith's life has changed more than he thinks. From a social point of view, working for a company is very similar to going to college, but if you look closely, the differences are much greater.
In order to exist, a company must make money. And most of them do it by creating value. Incidentally, it is not only those companies that are engaged in production that can create value. Think of that magic machine that would produce food, clothes, and more for you. She would be of little use if she sent the things she created somewhere in Central Asia. If values are what people need, then transportation companies create them too. The same is with the rest of the companies that do not produce anything material. Almost all companies in the world exist to do what other people need.
And this is exactly what, in theory, you should be doing in the company. There is, however, one point that is usually immediately invisible. Your personal contribution to the work of the company is averaged by other employees. Sometimes, you may not think at all how much other people need what you are doing. Your contribution may be indirect. But the company as a whole has to produce things other people need, or else it won't make money. If your salary is X dollars a year, then at least your job should bring that money back to the company, otherwise it will spend more than it earns and eventually go out of business.
The college graduate is told, and eventually he himself begins to think that he needs to find a job. As if it is very important to join a group. It would be more direct to say that he should start doing what others need. And for this it is not necessary to join any company. A company is just a group of people who work together to end up doing what others need. [7]
For most people, going to work for an existing company will be a good decision. You just need to understand that work is a process of value production, the results of which are averaged by the rest of the company.
Work harder
Averaging brings with it a number of problems. I think the biggest problem is that it is difficult to evaluate the performance of each employee individually. In a large company, you are paid a fixed amount for your work. You are not expected to be incompetent or lazy, but they are not required to devote your whole life to work.
In fact, the principle of economies of scale applies here too. With the right business, someone who devotes a substantial part of their life to work will be ten or more times more productive than an average employee. For example, a programmer, instead of sitting and fixing the existing software, can write a new one and thereby create another source of profit.
As a rule, the organization of companies does not allow to reward such people. You can't go up to your boss and say that you want to work ten times more, could they increase your salary ten times? If only because it is believed that you already work as well as you can. But a much bigger reason is that the company doesn't have a tool to measure your performance.
Sellers are an exception to this rule. Their contribution to profits can be easily measured and they usually receive a percentage of their sales. If a salesperson wants to earn more, he just starts working harder, and this happens automatically.
There is one more exception to the rule - high-level managers. And also for the same reasons: their performance can be measured. Their job is to increase the productivity of the company as a whole. And in this case, we are already dealing with specific numbers, and if the company's affairs are bad, this concerns top managers directly.
A company that could pay all of its employees a remuneration proportional to their work would be incredibly successful. Most salaried workers would work better if they could get more for it. Even more important, such a company would attract those people who would like to work especially hard. Such a company would easily defeat its competitors.
Unfortunately, companies cannot pay everyone the same as salespeople or top managers. Salespeople work alone, while ordinary employees tend to be tied together. Imagine a company that manufactures some devices. Engineers develop functionality, designers design looks and packaging, and then marketers convince everyone that this product is exactly what they need. How can you calculate what percentage of the total profit belongs to a particular group? Or how do you determine what exactly increased the company's reputation after the release of the device? Even if you could read the minds of your customers, you would still find that all these factors influence each other.
If you want to quickly move up the career ladder, then you will face the problem that your work is related to the work of other employees. It is impossible to measure the performance of an individual in a large group. And the rest of the participants will slow you down.
Measurement and Leverage
In order to become rich, you have to make your productivity measurable, otherwise you will not be able to make more profit from improving the quality of your work. Another condition is that there must be room for leverage in your work, in the sense that the decisions you make must have a noticeable effect.
Measurement alone is not enough. An example is piecework at a candy store. Your productivity can be measured and your work is paid according to it. However, there is no lever. The only thing you can control is the speed of your work, and with it you can increase your income by a maximum of two or three times.
An example of a job in which both are present is that of a film actor. Its performance can be measured by the film's screening fees. And the quality of his game has a significant impact on their value, which is the lever in this case.
I think that all people who have the ability to influence their incomes are in a situation in which their productivity can be measured and they have where to apply the leverage. At least, all those who come to my mind: top managers, film actors, managers of investment companies, professional athletes. A sure sign that a job has leverage is the potential for failure. Where there is an opportunity to win a lot, there must also be an opportunity to lose a lot. Actors, stock traders, athletes, they all live under the sword of Damocles. As soon as they start working weakly, they go out of business. If you work in a safe position, you will never get rich, because where there is no danger there is almost certainly no room for leverage.
You don't have to become an actor or a top manager to get into this situation. All you need to do is join a small group of people to solve a difficult problem.
Small = Measurable
While it is impossible to accurately measure the contribution of each individual employee, it can be done roughly by measuring the work of a small group.
One of the levels at which the contribution of each employee can be measured is the level of the company as a whole. The smaller the company, the closer you are to accurate results. I believe the maximum size of a viable startup is ten people.
Working in a startup is very close to where you can go up to your boss and tell him to pay you ten times more to do ten times better. But with two differences: you say it not to the boss, but directly to the consumers (after all, the boss is only an intermediary between you and them), and you say it not on your own, but together with your other colleagues.
Typically, a startup is a group. With rare exceptions, a company cannot consist of one person. Therefore, it is in your best interest for the rest of the participants to be good enough, since it is their work that will average yours.
A large company is like a huge galley with a thousand rowers. Two things keep the galley's speed constant. The first is that the individual rower does not see any change because the rower is stronger. The second is that the average rower prefers to remain average.
If you take ten oarsmen from this galley at random and put them in a separate boat, they will most likely be able to sail faster. The energetic rower will be encouraged by the fact that he has a significant effect on boat speed. And if someone is lazy, the rest will quickly notice and be able to reason with him.
But the even greater advantage of a ten-seat boat is when you put ten of the best rowers there. They will be additionally motivated by the fact that they work in a small group. It is much more profitable when your work is averaged by hardworking people.
This is the real meaning of a startup. Ideally, you start working with people who also want to get better for doing better, much more than they could get in any big company. And since startups are usually created by people who know each other well, the accuracy of measuring the contribution of each participant is much higher. A startup is not just ten people, it is ten people with similar qualities.
Steve Jobs once said that the success of a startup depends on the top ten employees. I agree with him. But it’s not so much the size of a startup that makes it able to kick the ass of big companies, but rather the ability to select the first employees. You should not be just a small company, you should be a small company of the best.
The larger the group, the more its average member prefers to remain average. All other things being equal, a capable person in a large company will be in worse conditions than in a start-up, as his productivity will be reduced by the lower productivity of other employees. Of course, money may not be as important to him as stability, but if it is important, then he had better leave and work among equals.
Technology = Leverage
Startups give everyone the opportunity to find themselves in a situation in which their work can be measured and leveraged. This is possible because, firstly, they are small, and, secondly, they are engaged in the development of new technologies.
What is technology? Technology is a method, a way by which we do different things. And if you invent a new way of doing something, its value will be multiplied by all the people who use it. This is the difference between a startup and, for example, a restaurant or a hairdresser. You only fry eggs or cut hair for one person at a time. If you are solving a technical problem that affects many people, you are helping all of them. This is the lever.
If you look at history, it turns out that most of the people who became rich by creating value did so by developing new technology. No one got rich by frying eggs or cutting their hair faster. The Florentines became a wealthy nation after they devised a way to make a high-tech product of the time in the thirteenth century - beautiful woven clothing. The Dutch - after invented a new way of making ships and navigational instruments in the sixteenth century, which allowed them to dominate the Far East.
Fortunately, there is a natural link between startup size and the ability to solve complex problems. In order to be at the peak of technology, you need to move very quickly. What is considered high technology today will not be worth a cent in a few years. It is much easier for small companies to stay on the cutting edge, as they are not burdened by the burden of bureaucracy. In addition, new technologies tend to emerge from unconventional approaches and smaller companies are less constrained by regulations.
Large corporations are also capable of inventing new technologies. They just can't do it quickly. The size makes them slow and does not adequately reward employees for the outstanding efforts that are required in such developments. Thus, in practice, it turns out that large companies usually take on development in areas that require a lot of capital, such as the production of microprocessors, power plants or airbuses. And even here they are heavily dependent on startups to produce components and ideas.
It is clear that biotech or software startups are solving complex technical problems. However, I think that sometimes this can be true for those businesses that, at first glance, do not deal with technology at all. For example, McDonald's, which got rich by developing a system and brand, which were then copied around the world. McDonald's restaurants are controlled by rules so strict that they can be treated almost like a computer program.
Make tough problems not only your main goals, but also key points in your work. At Viaweb, one of the right-hand rules was to run up the stairs. Suppose you are a small, stocky guy and a huge fat fat man is chasing you. You open the door and find a staircase behind it. Where will you run, up or down? I advise you to run up. Down the fat man, most likely, will run at the same speed as you. If he runs up, then his size will immediately become a disadvantage for him. It is difficult for you to run upstairs, but it is doubly difficult for him.
In practice, this meant that we were specifically looking for difficult tasks for ourselves. If we had to choose between the implementation of two possibilities in our program, and their cost was the same in terms of quality to complexity, we chose the more complex one. Not only because it was better, but much more because it was difficult. Thus, we forced our big and clumsy competitors to catch up with us on shaky ground. I remember that sometimes we were just exhausted fighting a tricky technical problem, but I enjoyed it because if it was difficult for us, it would be impossible for the competition.
In fact, this is the only way a startup works. Investors know this and they even have a special expression: barriers to entry. If you go to a venture capitalist and ask him to invest in your idea, the first thing he will ask you is how difficult it would be for someone else to develop the same thing? [8] And you better prepare something more convincing, why is your technology can't be copied by competitors? Otherwise, as soon as some big company realizes that your product starts to threaten it, they will do theirs the same, and their brand, capital and distribution network will help them to throw you out of business.
One way to create barriers is through patents. But, unfortunately, they are not very helpful. As a rule, competitors find ways to circumvent the restrictions imposed by patents. And if they can't get around, then they can just score on them and force you to sue them. A large company is not afraid of lawsuits, for them this is an ordinary matter. They will make sure that the process is long and costly. Ever heard of Philo Farnsworth? He invented television. And you haven't heard of him because his company couldn't make money from it. [9] But the other, RCA, succeeded, and all Farnsworth got was ten years of litigation.
Best defense is attack. If you can develop a technology that is difficult for your competitors to replicate, you don't need other barriers. Start solving a difficult problem, and then, whenever you need to make a decision, choose a more difficult one. [10]
Traps
If the problem was just how to perform better than the average employee and get more for it, it would be obvious that you need to start a startup. Until a certain moment, it would even be funny. I don't think a lot of people like the slow pace of big companies, and all the endless rallies and stupid managers.
Unfortunately, there are a few unpleasant moments. One of them is that you cannot, for example, decide that you will work two or three times as much, get more money for it and live happily ever after. When you start a startup, your competitors will judge how hard you work and decide to work like you or even stronger.
Another complication is that your profit is proportional to your efforts only on average. As I said, there are many random factors that affect its value. And in practice, it turns out that the multiplication factor will be somewhere between zero and a thousand. Most startups fail, and not just the proverbial dog food portals we all heard of when the Internet bubble burst. This is a common story when a startup develops a new supertechnology, delays a little with its release, spends all its money and goes out of business.
Startups are like mosquitoes. The bear can crush them, and the crab is protected from them by a shell, but the advantage of mosquitoes as a species is that there are many of them. Although, of course, this is a little consolation for an individual mosquito.
Startups, like mosquitoes, have to act on an all-or-nothing basis. Viaweb, too, sometimes had to go ahead. Our trajectory looked like a sinusoid, but luckily we were bought at the top of the cycle. While we were negotiating with Yahoo in California to sell our company to them, we had to borrow a negotiation room to convince investors not to stop funding.
Of course, no one likes this aspect in startups. The developers at Viaweb were people who avoided risk at all costs. If there was a way to just work really hard and be guaranteed to get paid for it, it would be great. We would rather have a 100% chance of making a million dollars than a 20% chance of making ten million, even though the second option is theoretically twice as profitable. Unfortunately, in today's world, there is no business where you could get the first option.
You can get almost guaranteed profits by selling a startup early on, thereby ditching big (but risky) profits in favor of small (but sure) ones. We had such a chance, but we completely stupidly, as we thought then, missed it. Right after that, we were ridiculously eager to sell out. For a year or two, if anyone showed even the slightest interest in Viaweb, we would try to sell the company to them. But since no one was interested, we had to work further.
We would then be a very good buy. But companies big enough to buy someone are also big enough to be pretty conservative. And the people who make these acquisitions are even more conservative because they tend to come from business schools at a late stage. They prefer to pay extra for safer options. Thus, it is easier to sell a startup when its future has already been determined, even for a huge amount.
Recruit users
I think selling the company is a good idea. Starting a business is not the same as running it. Plus, selling a company will allow you to invest in something else. What would you say about a financial manager who would invest all his money in the shares of only one young company?
What do you need to do in order to be bought? In fact, it is almost the same as what you would do if you were not going to sell the company. For example, make a profit. However, there are many more tricks beyond that, and we spent a lot of time trying to figure them out.
Potential buyers of your business are constantly delaying the purchase as much as possible. The hardest part about selling a company is getting them to act. For most people, the most powerful motive is not the opportunity to make money, but the opportunity to lose. For potential buyers, fear of being bought by their competitors is the strongest motivation. From what we understand, this fear drives top managers out of their minds. The next most powerful fear is that you will start to grow very quickly and cost more or even become their competitors.
You probably think that the company that is going to buy you will deeply study what you are doing and based on this make a purchase decision? Absolutely not. All they want to know is how many users you have.
Potential buyers think that consumers know better whose technologies deserve attention. And it's smarter than it looks at first glance. Users are the only proof that you've made something of value. Values are what people need, and if they don't use your software, maybe it's not because you are bad marketers, but because you didn't do what they needed?
VCs have a list of bad signs to look out for. One of the main ones is the following: the company is run by technicians deeply absorbed in solving technical problems and does not deal with its users. As a startup, you don't just solve difficult problems, you solve problems that bother users.
I advise you to do the same as potential buyers of your business. To optimize your work, measure startup performance by the number of users. In optimizing a computer program, measurement is key. If you are just trying to guess where it is slowing down and what can fix it, then you are most likely wrong.
The number of users may not be a very accurate test, but close enough to it. This is what the potential business buyers care about first. This is what the profit depends on. This is what makes the competition suffer. This is what impresses journalists and new users.
Among other things, such a test will allow you to avoid another problem that worries venture capitalists - too long product development. Avoid continually improving the program. Release version 0.1 as soon as possible. Until you have enough users, you optimize by guesswork.
Always remember that values are what people need. If you are going to get rich by creating value, you need to know what people want. So few businesses really pay attention to making their users happy. How often do you go to the store or call a company on the phone while feeling afraid? Is it possible that when you hear: "Your call is very important to us, please stay on the line", you think: "Oh my God, finally everything will be all right?"
The restaurant can sometimes afford to serve a burnt lunch. But in technology, any difference between your product and what users want multiplies many times over. You can say that you satisfy or disappoint consumers in bulk. The closer you are to what they need, the more value you generate.
Wealth and power
Producing value isn't the only way to get rich. Throughout most of human history, this method was not very common. Just a few centuries ago, the main sources of wealth were mines, slaves, land, and cattle, and the only ways to get them all quickly were inheritance, marriage, conquest and confiscation. The wealth had a bad reputation.
Two things have changed since then. The first was the rule of law. At all times it was so that if someone was lucky and he had wealth, the ruler or his servant found a way to take it away. But something new happened in medieval Europe. A new class of merchants and manufactures appeared in the cities. Together, they were able to confront a sovereign or a local feudal lord. For the first time in history, the owners stopped robbing their subordinates. This was a giant step, perhaps this is what caused the second change - industrialization.
A huge amount of literature is devoted to the causes of the Industrial Revolution. But it is absolutely certain that its necessary condition was that people who were fortunate enough to make a fortune could enjoy it in the world. The proof is what happened to the countries that tried to revert to the old model, the Soviet Union and, to a lesser extent, England in the 1960s and early 1970s. Take away from people the opportunity to get rich and technological progress will stop.
Remember, from an economic point of view, a startup is a way of saying, I want to work faster, pay me more. Instead of slowly saving up money and receiving a regular salary for fifty years, I want to get everything as quickly as possible. A government that does not allow this is forcing people to work slowly. They don't mind you making three million dollars in fifty years, but they don't want you to make it in two years. They are like your boss, whom you cannot approach and say that you want to do ten times better and get ten times more for it. The difference is that you cannot leave and found your country.
Slow performance does not mean that technical innovation is slow to emerge. It usually means that there is no innovation at all. You only start desperately looking for challenging tasks when you want to accelerate profit making by solving them. The development of new technologies is a nail in your ass. This, Edison said, is one percent inspiration and ninety-nine percent sweating. Without the opportunity to get rich, no one will do this. In principle, engineers would work on inspiring projects like a fighter jet or a lunar module, but more mundane technologies like a light bulb or semiconductors are being invented by entrepreneurs.
Startups are not just what has happened in Silicon Valley over the past few decades. Ever since it became possible to get rich by creating value, everyone who has done it has used the same recipe: dimension and leverage. This recipe was the same in Florence in the thirteenth century, and it remains the same today.
Understanding this will help answer the question: why is Europe so strong. Is it because of its geographic location? Or is the European race something better? Or maybe it's because of religion? The answer is that Europeans are betting on a great new idea: give those who managed to get rich the opportunity to keep their wealth.
Once you do this, people who want to get rich will start creating value instead of stealing it. At the same time, technological progress will transform not only into wealth, but also into military power. The theory with which the stealth plane was built was developed by a Soviet mathematician. But since the Soviet Union did not have a computer industry, it remained a theory for them.
In this sense, the Cold War teaches us the same lesson as World War II and the rest of human wars. Don't let the ruling class put pressure on entrepreneurs. What makes a person rich makes a country powerful. Let people keep their wealth and you will rule the world.
Notes
[1] One of the great things that seems to be the only thing in new companies is that you can work without distractions. If you distract someone who is looking for errors in the text every fifteen minutes, their productivity will decrease slightly each time. But programming is even worse, often it takes at least an hour to just grasp the essence of the problem. Therefore, the cost of calling you to the accounting department to fill out a form can be very high.
[2] Faced with the idea that people in young companies can be 20 or 30 times more productive than those in large corporations, managers usually wonder how they can make their employees work as efficiently ? The answer is simple: pay them.
[3] Until recently, it seemed to me that even the government did not understand the difference between money and values. Adam Smith sometimes said that they were trying to preserve the country's wealth by banning the export of silver and gold. But a large number of "middlemen of exchange" will not make a country richer. If there is more money than the material values it represents, only higher prices will result.
[4] The concept of "value" has many meanings. I'm not going to figure out which one is more correct now. Here I discuss the somewhat technical meaning of the word. Values are what people give money for. This is a pretty interesting type of value to study because it keeps you from starving to death. And what people give you money for depends on them, not on you.
[5] Strictly speaking, you could still make the world a little poorer by microscopically polluting the environment. But that still doesn't equal the amount of wealth created. Alternatively, you could just screw something on and not contaminate anything.
[6] This essay was written before Firefox was released.
[7] Many people experience depression at this age. Life seemed so fun in college. And now, you have turned from a guest into a service staff. In fact, life can be fun in this new world too. After all, you can now freely walk through the doors labeled "Staff Only". But overall, such a change is a shock.
[8] When they asked us about it, we usually answered that it was impossible at all. However, I think we looked naive or liars.
[9] Few technologies were invented by one person. Usually, if you know the inventor of something (telephone, airplane, light bulb), it means that his company was able to make money from it. If you don't know, it means that another company made the money.
[10] This, by the way, is generally a good way to make decisions in life. If you are faced with a choice, choose a more difficult solution. If you are choosing between going exercise or watching TV, go exercise. I think the reason this trick works very well is because when you have two paths, the simple one you choose is only out of laziness. And subconsciously, you know about this, choosing a more difficult path just makes you realize it.
Translation: Alexander Nikulin