Positive. The author understands the gist of what's going on. Places like YC focus on Minimum Viable Product and doing just one thing that people want. These are great and wise strategies for both investors and entrepreneurs, but there's also another term for it that's not as flattering: bottom-feeding. Going after the little bits of value here and there, not being a hunter, existing by providing the least amount of value possible. There are huge bottom-feeders! Facebook is one of them. But it's little tidbit work. Stuff like reminding me when I like to scratch my nose, or a service for recommending dog groomers.
Negative. The problem here is that the author seems to think he knows where technology is headed, and that's always a foolish bet. His view is that we should be making complex things and solving hard problems. While I agree that hard problems need to be solved, I don't think you can decide ahead of time which problems are going to be the ones that gain traction. This is like the government or VCs "deciding" that one area of effort is going to give more results than another. Nobody knows. This is the risk of startups. It's why the smart move is to do the little stuff.
More to the point, there are two kinds of innovation (to steal from Kuhn). There is "normal" innovation, where people take existing tech and put it together in new ways to make trivially more usable things than existed before. Then there is paradigm-changing innovation, where completely new things appear.
By far, normal innovation is the norm. Probably 99.9% of all innovation is normal. Maybe more. Systems change from the ground-up, not from the top-down. Eventually a bunch of little things reach critical mass and a paradigm-changing innovation occurs. But hell, most of the time you can't force the little innovations to work, much less the big ones. I love the contrarian tone, but it's just not a realistic article.
Your description of Minimum Viable Product appears to classify the MVP as the end-point of the process. My thinking is that the MVP is the starting point of an iterative development process. Its value is that it allows users to participate in the product design, and from this feedback you can modify and extend the initial product with the things they actually want rather than the things you imagine they want. The MVP is the first question you ask your users "Is this what you want?". Users find it very difficult to engage with design documents or specifications, but put a product in front of them and they will understand you and tell you what they want different.
I agree with the author's critique of the trivial nature of most start-ups. Lots of guys are simply trying to make widgets more shiny, and that's a shame because they could do so much more.
I disagree that there is something we can do about it. It's the natural state of affairs.
(My rewrites always take 400-word explanations and turn them into 2 sentences. Writing is much like code golf. Sigh)
I agree that things seem more shiny than innovative. Maybe "easy" problems are a natural way of increasing our general software competency across the general population. Before we can get to the big-problem innovation in things like AI and nano tech we have some steps to take. That probably explains why it a seems so natural.
What constitutes a minimum viable product depends on the space. You still have a MVP even if you are in an ambitious space and building something with deep technology. Clustrix is a YC company and I assume they don't qualify as a bottom-feeder.
tl;dr - some little thing that the bottom feeder made for his dog nose scratcher recommender tool may prove useful in attacking cancer.
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Kuhn's paradigm shifts are an idealization. An extreme. Technology doesn't advance in sudden priorly unimaginable leaps of innovations by giants. See, I do not agree with your delineation nor your presentation but I do agree with your core premise. Because we cannot know what will be useful (your negative) we cannot say whether the bottom feeders or those pushing against the hard problems will have the biggest impacts. Likely some from both. The thing is "paradigm changing shifts" are of the same kind as "normal innovation". They are not grander or more special. Allow me to belabour.
Most paradigm shifts are the synthesis of lots of little disparate ideas that someone was crafty enough to put in a creative combination. Anyone with sufficient imagination (super intelligence not necessary), the requisite need and correct knowledge could have taken the necessary steps. Quantum Mechanics, Newton's principia, Calculus, special relativity, steam engine and most inventions are like this. There are exceptions (i can think of Cantor's set theory and Grassman's algebra from maths) but they number very few.
This is why it is not so surprising that we find often, all of a sudden the same inventions/discoveries appear around the same time by different people - some further along than others (but not necessarily the ones which gain recognition) but all containing pieces of what would come to be studied as a whole by latter generations. In order that these paradigm shifts be made all the requisite concepts needed to have been unlocked. Once so, those skilled at taking in and creating broad vistas of theory shine brightest.
As well often times, things are invented that the inventor did not think much of and were just tools on his or her path to something they felt was larger. Of particular relevance to this crowd, Church was trying to provide a foundation for maths and the lambda calculus was just a tool. Or consider that scholars thinking about grain yield for various patches of farm land would eventually lead the way to a theory of determinants and eventually matrices. Most paradigm shifts like zero seem so obvious in hindsight, we struggle to imagine that people took centuries to nail it.
In the same way these "big data" and facebook are pushing the state of the art in mining data, maintaining and querying large data stores and pushing computational intelligence, applying non-trivial techniques to solve very menial tasks - like reminding you to go to some club or providing stupid recommendations.. Various companies contributing bits and pieces some combination of which may prove to be vital tools in unravelling things like genetic disorders or cancer later on. Who would have thought that gambling in games of chance would later lead to the mathematics of probability and later to statistical inference and then machine learning.
The way I see it, what we need is a change in education. And I don't mean all this university is useless or public schools are failing chatter. Those are another story. What I mean is, as the problems become harder and the people working on them number larger, the silos of knowledge will inevitably become taller and deeper. Unless some framework is developed where it is easy to describe and transfer the core and relations of different theories; the ability to take a step back, look at the pieces and come up with a paradigm shifting generalization will become ever more difficult. With progress slowing as we continually reinvent the same broken pieces over and over again in our little corners of expertise.
“Facebook lets you keep in touch with your friends; for this profound service to mankind it will generate about $1.5 billion in revenue this year by bombarding its 500 million members with ads.“
This statement seems very indicative of the author’s cluelessness or hypocrisy. $1.5 billion from 500 million members means that they bombard each member on average with $3 worth of ads every year. I’m bombarded with more ads when buying three issues of Newsweek.
Facebook lets you keep in touch with your friends for $3 a year. That sounds like quite an impressive feat to me. There is much that is wrong with Facebook but I don’t think that they are making their money with ads is one of those things.
Not only is the author a troll -- as pointed out, he runs the Fake Steve Jobs blog -- his primary source, Nathan Myhyrvhvhlodold, is a troll.
Let me clarify:
Nathan might be a genius, but he's a genius whose words we can't ever risk taking seriously because of the raging conflicts of interest that imbue his every interaction with the press or social media.
His company:
> "Intellectual Ventures is a private company claiming to invest in "pure invention." Their business model has a focus on developing a large patent portfolio and licensing these to companies with infringing products."
Myhrvold brings smart scientists and thinkers into a room, picks their brains, and then he and his own very smart people sit down and come up with as many patents as they can.
They aren't driven by malice. They're driven by rational self-interest: presently, with our broken patent system, people who aren't actually going to go out there and try to solve the world's problems can sit in a room all day coming up with ideas and make money from that.
Let's run his statements through a conflict-of-interest filter:
"Silicon Valley is working on easy problems" translates to:
> Hey world, it's only cool to work on things that require large up-front investment on PATENT-FRIENDLY products, so people with lots of patents can make money by attaching ourselves to the necks of people who are actually making the world a better place instead of talking about it.
Tempting, Nate.
More to the point, it's tempting to get sucked into rebutting individual points, such as the fact that those heroes of the valley would have killed to have the resources available now to anyone with a credit card, Linode and Twilio.com. Or the fact that he's essentially complaining about low barriers to entry.
Or the fact that things that start easy and trivial, in the early stages, quickly get deep and techy. It's easy to mock things that look facebook-y, but it's hard to solve, say, 10k or 100k continuous connections, or to write fast evented code or contribute to libraries that make the whole world faster. We start simple and get smart.
But if you start rebutting these things, you've been sucked into a hole.
The issue is, he wants people to work on patent-friendly stuff. Fin.
But you can't patent an idea - you have to have an implementation!
Srsly - you have fundamentally misunderstood what a patent is. If it's "a method for mangling widgets" then you have to have built a real, working widget mangler too, and include the blueprints in the patent application.
This is not how the patent system currently works. Patents with broad application are constantly issued that don't have nearly enough informations attached to build a prototype of the invention (and the existence of said prototype is not verified by the patent office).
That's how it should work (and in a famous (if probably apocryphal) story Sam Loyd was denied a patent on the 15 Puzzle because it was fundamentally insoluble and therefore there could be no "working model"), but these days patenting ideas seems to be a done thing
A lot of people here seem to be calling foul. But whenever I read a list of startups that YCombinator has funded the formula in every case is:
Clone of (X) Targeted For Audience (Y)
The article is correct about a lot of things. Angel investors (including YC) don't really seem interested in investing in really game changing technology, they're interested in following a trend by buying lotto tickets for a few thousand dollars with the hopes that several will hit medium to large sized jackpots in the shortest possible time frame.
I can’t believe the expert quoted in the article is none other than Myrhvold. Now, I don’t know the guy, but I understand that his current line of work is something to the effect of: Abuse the current software patent mess by suing people who, you know, are actually creating things.
Talk. About. A. Troll. (edit: ah, no wonder. the author is fake steve jobs blogger)
This is almost as good as the article from the 90s making fun of the Internet and how useless it is.
...a place where smart kids arrive hoping to make an easy fortune building companies that seem, if not pointless, at least not as serious as, say, old-guard companies like HP, Intel, Cisco, and Apple.
"Easy fortune" huh? That's what you call those 15-20 hours days many founders pull? This writer owes an apology to the Valley.
Just another version of old dudes complaining about the new gen.
If you're not aware, most of the old guard companies pulled 15-20 hour days starting out too. And making a physical product is generally MUCH more frustrating than anything in web app land. Hurrying up and waiting, for a flawed product messed up by the machinists. Also much higher startup capital costs for anything nontrivial like semiconductors. Expensive equipment, office space, manufacturing space, all this stuff you need to start. Not just two or three guys with open source software working in a dorm.
Studying the physical sciences is also more mentally taxing than coding PHP. I've gotten paid for both. You can't compare designing aircraft in CAD and Excel (what I do) that could kill someone if done improperly, with setting up email verification for your social networking site. Not even close.
Nothing I said belittles the efforts of past Valley heroes.
As for it becoming cheaper to do a start-up now versus previously, well doh. That should not be an excuse to belittle today's start-ups as the author does so recklessly.
And where is the discussion headed anyways? I am sure it was harder for entrepreneurs in 1900 than 1950 on the whole.
Studying the physical sciences is also more mentally taxing than coding PHP.
You make it sound like that is all a start-up is: some php code. Most successful start-ups are a lot more than php code.
Also, having to walk ten miles before we had a means of transportation was more taxing than taking cars. What are we gonna do about that? Attack the whole world for not having it as hard as when folks had to walk 10 miles?
Studying the physical sciences is also more mentally taxing than coding PHP. I've gotten paid for both. You can't compare designing aircraft in CAD and Excel (what I do) that could kill someone if done improperly, with setting up email verification for your social networking site. Not even close.
You are not going to just go anywhere with just a social networking site. It's going to be much harder than that.
There is quite a bit of software in modern aircraft and I guarantee you that the guys that write it and review it are just as aware of the fact that their software could kill if done improperly.
It's very easy to think that your role (the designer) is the crucial one, but in the aircraft construction business there are very few jobs that require a less then 'mission critical' attitude.
Before our arrogant, materialistic society hits the next iceberg or 'crash', it would be wise to create technology for the long-term survival of humanity and habitability of Earth. What problems are more important to solve?
"The risk is that by focusing an entire generation of bright young entrepreneurs on such silly things, we’ll fall behind in creating the fundamental building blocks of our economy. The transistor and the integrated circuit gave rise to the last half century of prosperity. But what comes next? "If we distract people with the lure of easy money, with making companies that don’t solve anything hard, we’re going to wind up derailing the thing that has been driving our economy," Myhrvold says."
Indeed. He's going on about how modern silicon valley, and to be honest much of the rest of the world, is geared around the short term. How start-ups are now light and fluffy, with a focus on making the world worse - by getting their users addicted, in their millions, to menial activities.
I have been thinking about this recently, should the start-ups - which rely heavily on user addiction - be treated as gambling outlets, and therefore be regulated and watched closely? It would at least discourage that form of start-up.
> should the start-ups - which rely heavily on user addiction - be treated as gambling outlets, and therefore be regulated and watched closely?
No, definitely not.
You might as well outlaw television for entertainment and the writing of fiction and poetry.
Everybody gets to decide how they spend their time, that's an individuals freedom, and every company gets to decide what product they want to make.
In the past companies have worked hard to give us more productivity and therefore more leisure time. New companies have stepped up that capitalize on that leisure time.
The times when people had to be productive (in the developed part of the world, that is) every waking hour is fortunately behind us, and bringing it back by force is not a solution.
For ever addict there are 100's or even 1000's of 'normal' users of those same services, you can't penalize everybody because of an inability for self-control in a minority of the population.
"Facebook" or "Wow" or any other so called addictive product is only as addictive as you let it be.
In Buddhism, a lama assumes responsibility over his followers. The followers have a responsbility to hold the lama in check from becoming an egomaniac.
Startup CEOs should assume a similar responsibility over their users. If the entrepreneur really cared about the people, not the money, he/she wouldn't have a problem. If you watch how previous generations built their wealth, most of them did it by providing value and service for a fair price. Most of today's startups care about what's the new gold rush and how to get the most out. What really matters is how do you create the most value for society. If you do that, you will live a fuller life and people will respect you. Money usually follows if you stick to your principles.
Yep. Though, I think there are excellent start-ups out there, who are innovating for the long term - but those aren't the start-ups that attract the easy money, publicity and hype. At least not at the moment.
(b) we know what today's entrepreneurs are focused on
(c) we know what we are currently focused on will not help us achieve (a)
Counter:
(a) we don't really know what comes next
(b) heck, we don't really know what all stuff folks are working on. Just because there are two well-known start-ups called Twitter and Facebook does not mean there aren't dozens of start-ups doing stuff with hardware and medicine. Don't blame the media's love affair with Twitter and Facebook to entrepreneurs not working on challenging stuff.
(c) Lastly, these things the author sees as play may very well have a key role in solving the problems of tomorrow.
If we distract people with the lure of easy money...
The dot com bubble is back. You can get seed funding to the tune of 3/4 of a million dollars for any mediocre idea right now. If that is proving hard to accomplish in Silicon Valley, move your operations to NYC, where there is more money and the investors will invest in anything.
Yes, and hopefully it won't last too long. You just know the silly money is flowing again when you look at some of the stuff that gets funded and the amounts that are thrown at it.
It's sad, really that lessons from the past do not seem to stay learned, this cycle of extreme waste followed by extreme frugality isn't good for anybody.
A.) It's called intuition for a reason. No one in the current paradigm sees the next one out, except maybe the brave scientist or artist who is peering over the horizon.
B.) He or I never said there aren't ANY startups that are solving real problems, just that most are starting out chasing the shallow end of potential. Much of it can be attributed to people having to find a way to survive in a rapidly changing world.
C.) You can use all the rhetoric you want, the bottom line is: the more minds there are collaborating to realize human potential, eliminate needless suffering, and healing our planet, the better. There is simply nothing else worth pursuing that has lasting value.
...the more minds there are collaborating to realize human potential, eliminate needless suffering, and healing our planet, the better. There is simply nothing else worth pursuing that has lasting value.
Please explain how in the early days of Bill Gates and Steve Jobs you'd know that they were going to help humanity?
The whole heal-the-planet argument is very different from do-something-challenging. You and the author of the article seem to be confusing the two. Which one do you really want more entrepreneurs to work on?
Even in hindsight, it would be hard to see how the top 50 of Valley from the 60s and 70s were helping the planet heal.
Other than Bill Gates, everyone else is pretty up in the air as far them contributing to our planet. And even Bill G, it wasn't until he made all that money and decided to give it all away that he truly started having impact.
Now you can sight examples of how the iPod saved a life here and there and how Windows gave rise to the tech revolution etc...in which case, I'd counter that Facebook and Twitter have just as much potential and are in their very early days.
1.) They are not different at all. We have to 'do something' to fix our civilization's problems or 'heal our planet'. That doing part is where startups come into the picture.
2.) You ever read Steve Wozniack's autobiography? If you haven't, you don't know the full story. They believed a PC could do a lot more than just crunch numbers, it could realize creative and scientific potential. Steve J. believed computers were 'bicycles for the mind'. To this day, Apple is still focused on creating hardware and software that make life simpler and allows people to create easier. Whether they do or not, is all up to them...
3.) Bill G is not the only one, he is just the most famous one. This generation will yield many more scientists inspired to create technology that serves Earth.
They believed a PC could do a lot more than just crunch numbers, it could realize creative and scientific potential. Steve J. believed computers were 'bicycles for the mind'.
You seen the slide decks or talked to the founders in the Valley? If you are going on vision, trust me, today's founders are not short on it.
Now, how good of a job the founders are doing in bringing their vision to life? We don't know and won't know for a while. At best, we should hold judgement IMO.
This generation will yield many more scientists inspired to create technology that serves Earth.
May be. But that could also mean that you no longer need to be a scientist to build something that serves earth. You could just be some econ grad who gets an idea for a micro-lending site and launches Kiva.
Also, it's unfair that you see Facebook's mission of connecting people or Twitter's role during emergencies in a different realm to Apple making computing simpler.
Running Hackers and Founders SV, I think I have a pretty decent picture of what Silicon Valley is like on the ground floor, and as far as I'm concerned it's pretty frigging amazing.
There's tons of small teams doing amazing things with Big Data and real time analytics like Factual (making Open Data easier to manage and use), MixPanel (Real Time analytics for applications). There's a number of companies doing really interesting things with cool languages like Clojure and Erlang, even if they are "silly companies".
There's companies like Justin.TV which is the largest real time video streaming company in the world. Real time video streaming is very, very hard to do at scale.
AirBnB is revolutionizing the hospitality industry, and last I read are the largest provider of rooms in New York.
There are amazingly cool companies working on SSD database appliances, and on databases optimized specifically for SSD's. SSD add on cards for your PCIE graphics slot that give you 6x the throughput of a SATA port. Those companies don't exactly make for exiting reading in Newsweek, so they don't get a lot of press, though.
Yeah, there's a lot of people making Facebook apps. Sure, you can mock twitter because on it's surface it seems silly and trivial, but they have invented an entirely new communication protocol which companies like StockTwits are leveraging to allow individuals to broadcast their recent stock trades. And, not only that, but the article says that Twitter hasn't figured out how to make money yet. In fact, Business Week reports that they were profitable in 2009: http://www.businessweek.com/technology/content/dec2009/tc200...
Sure Zynga makes somewhat whimsical addictive games, but if you stop and crunch the numbers, Farmville's digital economy is probably mlarger than the real world economies of many developing nations.
So, if you'd like to believe that Silicon Valley has lost it's way go right ahead. But, from where I sit, things are just beginning to get interesting. Silicon Valley is just starting to fire on all cylinders since the tech bubble popped in 2000. If you want to know how I'm seeing Silicon Valley: I'm strapping in and getting ready for a great big ride.
Yeah, this is one of those debates that's going to generate a lot of heat, but not much light. Because, frankly, for every guy who thinks that it's a crime that the valley isn't 95% about battery technology and semiconductor startups, there's a guy who wants to breathlessly pronounce Twitter a "new communications protocol" (Twitter is a web service -- it uses the same protocols as everyone else on the web -- and it's only "profitable" because it made a few sweetheart, short-term deals with unclear renewal prospects).
There are certainly a few companies in the valley that are doing interesting R&D, but I tend to agree with the article that the vast majority of the crap we hear about on a day-to-day basis is fluff. It may be "Big Data" fluff, but it's still fluff, and popularity doesn't make it less fluffy.
From a technology perspective, cranking out database-backed web pages is a completely uninteresting problem. For that matter, so are most of the common "big data" applications (grinding through log files), or revolutionary companies (where the "revolution" usually boils down to killing a more traditional market...with a database-backed web app). Meanwhile, industrialists in other countries are developing more efficient wind turbines, new electronics manufacturing techniques, battery chemistry with greater capacity, and they're also investing hundreds of billions of dollars into pharmaceutical research. From a technological perspective, it's not even in the same universe.
I certainly understand and respect that these technologies are uninteresting to you.
At the same time in the past month, I've talked with government officials from 2 fairly developed countries, because they are trying to learn what makes Silicon Valley tick. In both cases, they understand that they will never be able to compete with Silicon Valley, but at very least, they want to cross pollinate their technology sector with ours.
I noticed that your profile says that you work at Yelp. I'd respectfully suggest that I haven't seen tons of interesting R&D happen up in San Francisco. There are an inordinate number of social media companies and iPhone app companies up at the tip of the peninsula. But, I tend to hang out in Mt View, Sunnyvale, San Jose and Palo Alto, and there's a much different flavor to the companies down here.
For that matter, so are most of the common "big data" applications (grinding through log files)
Dude you work at Yelp in Search? Seriously?
What about companies like Palantir? or Cloudera?
I understand Yelp's Log file might be full of shit, but there are countless companies out there which use the same Big Data technology for doing interesting analysis, right from companies like walmart who do transaction analysis to pharmaceuticals like pfizer which use the same technology in developing new drugs. Just because your log file is crap does not means all log files are crap.
Has HN affected your brain or what? You say you received PhD in Computational Biology? I seriously doubt that now.
Oh btw Yelp is surely one of those useless Web 2.0 companies like posterous. (at least facebook is building social infrastructure and drawing people towards internet ) Last heard you were accused of blackmailing restaurants. How is that working for you.
Before talking crap about Big Data, go out and read about its credible applications.
1)"OSI Level 7" (Social Networking, Web 2.0, Mobile Apps and Widgets companies).
2)"OSI Level 6" (Cloud, Big Data and BI/Analytics).
"OSI Layers 1-5" are more capital intensive and they are heavily underfunded.
My startup somewhere between the "OSI layers 5 and 6" and I fully agree with the people quoted in the article.
While using non-mainstream and exotic programming languages is fun, it has nothing to do with the actual problem domain.
One can build "Facebook for cats" using Erlang/OTP and "Twitter for dogs" using Clojure, but they still not solving hard problems, mere a pet entertainment problem.
I have nothing against these languages. I myself using Erlang/OTP for solving problems in Semiconductors industry.
You are not talking about the Open Systems Interconnection model, right? That's a protocol stack that died in the '90s and has been supplanted by a networking stack that was deliberately designed to not be like the OSI model. http://tools.ietf.org/html/rfc3439
If you didn't noticed, I always put "OSI Layer N" in the double quotes.
It's just an example of well known stack. My comment has nothing to do with networking protocols.
Recently some people refer to it, to explain some concepts.
Some even comparing Peninsula in Bay Area to OSI, where is San-Francisco is "OSI Level 7" and Cupertino is "OSI Level 1" ;)
Twitter...invented an entirely new communications protocol
Um...
Zynga...bigger economy than many developing nations
Possibly true. I admire the business acumen of both firms and think they have scaled their services quite effectively. But how productive are they? I mean, I remember seeing stockbrokers and lawyers standing in line at 8am to buy limited edition Beanie Babies because they were considered a smart investment.
You make several good points but I agree with the other posters questioning the degree of value creation taking place.
"We're boring people to death and making games that are harder and harder to play. For the most part, the industry has been rinse-and-repeat. There's been lots of product that looked like last year's product, that looked a lot like the year before."
The point of the article is that Silicon Valley used to be focused on hardcore infrastructure like semiconductors, networking, operational systems. Note that almost all companies you mentioned are related to either marketing, media or entertainment. Even Factual, their main customers are media-related.
What I think people are refering to is Technical Risk vs. Market Risk. Before Silicon Valley companies were working on stuff they don't know will work but if they did, they were basically guaranteed customers, Technical Risk.
For instance building a faster circuit, a startup whose goal is achieve such a mission has no way of knowing whether it would work, but if it did work there would be tons of people buying.
Lately, people are working on stuff with market risk. Stuff that are market risk tend to be well understood technically, but there is no guarantee that people will buy. For instance a Facebook clone, the chances are slim that people will move from Facebook to this new web application but there is no doubt on whether someone can build it.
Technical Risk generally has the property, if you can build, they would come. Market Risk generally has the property, everybody will build it, more than likely nobody will come[except to one or two].
"Sure Zynga makes somewhat whimsical addictive games, but if you stop and crunch the numbers, Farmville's digital economy is probably mlarger than the real world economies of many developing nations."
Which is probably what the author of this article would consider to be part of the problem.
Maybe this article is a PR piece. But I agree with that 'social' and non technology-focused startup ideas are overvalued currently by young enterpreneurs, by the media and by investors.
As if those problems which existed 10-20 years ago would not exist anymore. As if those problems currently solved by 'old companies' and generating incredible amount of money, could not be solved better by some startups. Not enough startups are competing _directly_ against those old products like Microsoft Office, Adobe Photoshop, etc... Not enough young companies are based on deep technology. Almost everyone want to be rich quickly adding very little technology-wise to exisitng open-source stuff like Ruby on Rails. To use Zed's terminology I am half a 'long beard' half a 'product guy'. So I am trying to create something which is a product for people, but potentially can go quite deep technology-wise.
Build things that people will ultimately find useful...
as opposed to products that are conducive to a quick sell to the angels and VCs.
Build a product that can potentially make money on its own merit. A 2 million dollar series A round should not be considered as a sign of a successful startup.
This article does raise some valid points (regardless of the intentions of the writer). Strike the part about Intellectual Ventures because it unfortunately overshadows the main point.
While I think there is some truth in the article, and the lack of innovation in SV, one should probably remind the author that some of the more interesting pure technology startups are still SV based. To pick two close to my interests
There is a lot more "noise" out there just because it's easier. I suspect it would have been the same in the past if the capital required was lower. That said we should be asking ourselves if what we are doing has a purpose? I meet too many people with a good "idea" but no purpose, and in the long term that might become a problem.
This article is full of it, but for more reasons than have been articulated so far.
One problem is that the article mistakes light for heat. Just because they get less press than Facebook doesn't mean that old-school high-tech engineering startups don't exist. Facebook et al are focused like a laser on getting their names out. That is what social networking is: word-of-mouth viral publicity. Whereas most hardware startups are born below the radar, and the majority die below the radar, and many of the successful ones get bought out by bigger companies and never rise above the radar under their own name. But that doesn't mean they don't exist. Some statistics would have been nice.
The balance of companies has shifted a lot over time, but that's because computing has grown and matured. Back in the 1970s Silicon Valley's only customers were nerds. That meant a lot of emphasis on nerdly products. H-P calculators. Oscilloscopes. Chipsets. After thirty years of work on mobile phones, broadband networking, and UX design, we've improved computing to the point where there are now many Valley firms whose customers are non-nerdly iPhone owners and Web users. That's a huge number of people. And it turns out that you can make as much gross revenue by selling a $2.99 app directly to 2 billion people as you can by selling a $2.99 part to a firm that will make 2 billion mobile phones, but the former requires much more marketing and makes a lot more noise.
But the big problem with this article is that it is trying to blame a forest-management problem on the individual leaves. If the USA is not investing enough resources in "alternative energy, better batteries, and nanotechnology", don't blame Silicon Valley startup culture. That's putting the cart before the horse. Entrepreneurs go where the money is, and who controls how much money goes into cutting-edge hardware research? The government, mostly. Either directly (by giving out research grants) or indirectly (by providing an artificial "market" with a single customer -- often the Department of Defense, but sometimes an entity like NASA -- that happily commits to spending money on the very latest high-tech toys; or by creating and enforcing the incentives that drive the market for, e.g., alternative energy).
The Internet got developed because the government commissioned it. Rocket technology got developed because the government commissioned and bought it. H-P and Intel became big companies by selling equipment and parts to the high-tech companies that sold to the government. The nanotech researchers I know are paid by the Department of Defense, the National Institutes of Health, or the National Science Foundation. Biotech research? Funded by the NIH or the DoD. Alternative energy? The size of our research efforts have tended to wax and wane with the size of the DoE budget; the economics of deploying alternative energy have everything to do with the cost of oil and gas (determined by forces outside of an entrepreneur's control, like taxes, and tax-funded highway projects, and tax-funded transportation projects, and zoning policy, and tax-funded military maneuvers, and government-mediated international agreements) and the extent of environmental regulation (determined by government and politics).
If you want to address these problems you must first analyze them correctly. If you're a rag like Newsweek it's easy and fun to pick on Mark Zuckerberg, but the real problem is economic and research policy: We've got an economy with flat or declining demand and lots of excess capacity (I, for one, could certainly be talked into applying my Ph.D. in EE to alternative energy problems instead of to PHP applications... if the price was right) yet our government officials are perversely engaged in an effort to further depress demand and raise our excess capacity by cutting spending. I wonder if there are any magazines that are ostensibly devoted to discussing problems in society, government and policy, instead of trading in mindless gossip, cheap shots, and PR hit pieces?
Both the US and German rocket programs were started by privately funded researchers. The governments only got interested when they saw working equipment.
The same was true of jet engine. Neither the German nor British governments had the slightest interest in it until they were shown flying jet powered aircraft. The US government specifically told Lockheed to stop work on jet engines and concentrate on war production.
A number of privately developed computer networks existed before the internet. Heck, anyone with two computers tried to connect them together.
> If the USA is not investing enough resources in "alternative energy, better batteries, and nanotechnology"
It's not the government's primary job to fund innovation. What we are seeing is that innovation is unable to sustain itself without government money.
There is a marketplace for alternative energy, better batteries and nanotechnology. This reminds me of AI. AI is all around us, yet, we don't call it AI anymore except for marketing purposes. So will AE, batteries and nanotech.
It's not the government's primary job to fund innovation. What we are seeing is that innovation is unable to sustain itself without government money.
You've got this backwards. It is specifically the government's job to fund innovation is currently is commercially untenable. Otherwise, who else would do it? Often times after the government's grant expires, the innovation is still commercially untenable. This makes sense because the research is exclusively targeting projects whose commercial viability is unclear. But other times we get things like the Internet, GPS, etc.
Now we can have a long and interesting discussion about specifies; i.e., whether said research is worth it in the long run, how soon should certain technologies be cut off, etc. But the fact that the government is funding technology that isn't able to sustain itself without government money is not a negative thing; that's exactly what the government is meant to do.
I suppose everyone has forgotten about all the privately developed and deployed networks before the internet as we know it - BIX, Prodigy, MCImail, Fidonet, UUCP, Telenet, the BBS systems, etc. To presume that without the ARPAnet there would be no internet is a huge stretch.
All the networks you listed are circuit switched, centralized networks; they really don't have anything to do with the Internet at all. The claim that without ARPAnet there would be no Internet is almost self evident, considering how fundamentally different the networks you listed are from the Internet. There's no way a commercial entity would have had the same design philosophy [1, Section 3] because a commercial entity has much different motivations.
As an aside, the best example that you could have given would have been Minitel (but still, centralized and circuit switched).
Most of those networks also evolved gateways to interconnect to each other. The history of technology is often one that starts out with proprietary interfaces that evolve under user pressure to standardized, open interfaces. We see that playing out yet again in the iPhone vs Android competition.
As soon as there were two computers, people tried to connect them. The more they got connected, the more universal people wanted those connections to be. If commercial companies wouldn't do it, non-commercial entities would (after all, look at linux and the enormous success of free software). Heck, even I worked on hooking computers together back in the 70's using ad-hoc parts and wires and (never having heard of arpanet at the time) even sketched out how a decentralized "web" might work.
The idea that a decentralized fault tolerant network is such a novel concept that it required a government to think of it doesn't make a whole lot of sense. Even the telephone system is decentralized. There are decentralized fault tolerant systems all around us as examples.
The idea that a decentralized fault tolerant network is such a novel concept that it required a government to think of it doesn't make a whole lot of sense. Even the telephone system is decentralized. There are decentralized fault tolerant systems all around us as examples.
It doesn't require the government to think of it, it requires the government to implement it. It would be a massively stupid decision from a business point of view to implement the Internet as it exists today. There's much more money in centralized networks. I think this should be obvious from the fact that (1) at the time all commercial companies were building centralized networks and (2) today text messages cost upwards of $1k per megabyte. The only reason why the Internet is architected the way it is today is because of government funding. One the government set the Internet in motion towards a decentralized, packet switched network, it could not be overcome by commercial companies.
FidoNet is the counterexample that shows the government was not required to implement a global, decentralized, fault tolerant network.
Before that, the phone system was a national, decentralized, fault tolerant network built without benefit of government funding, research, or protocols.
Before that, the phone system was a national, decentralized, fault tolerant network built without benefit of government funding, research, or protocols.
Which phone network are you talking about? Certainly not any I'm familiar with.
For another example, the telegraph and telephone networks in the US were built with private funding. Even the transatlantic cables were private ventures (at enormous cost).
A guaranteed monopoly lasting eighty years or so isn't a government subsidy?
It's not clear, and Cato's document doesn't explain, how anyone outside of major cities would have been able to get telephone service in the absence of monopoly guarantees. Universal service would have taken decades otherwise.
There is some hand-waving in the document comparing telephone service, which required expensive and widely distributed equipment, easements and infrastructure, with radio and TV (which itself was regulated out the wazoo). This comparison doesn't survive even momentary scrutiny.
The Bell System was the envy and standard of the world, and I don't see how it could have been anywhere near as successful at meeting the needs of the entire US population without those initial monopoly guarantees. Contrast the telephone system's universal service mandate with privately-operated electrical distribution networks: sizable chunks of New York City and Boston were still using DC power until the 1960s.
I think the biggest problem with the AT&T monopoly was that they were allowed to milk it for decades longer than was good for anyone, including the AT&T companies themselves. The company should have been broken up the minute they showed a net profit.
Even that opinion is debatable, though -- we didn't get the first laser from General Electric, or the first transistor from Hewlett Packard. Both these inventions and countless more came from a company that, by government fiat, could engage in long-term research beyond that needed to show an immediate profit.
So, yeah... that Cato position paper is pretty goofy, IMHO, and it's one of several that will be on my mind when it's time to re-up my own membership.
Just goes to show there is another side of the story besides the AT&T version.
I've never found a company yet that didn't believe that free market competition was good for everyone else, but that their market was unique and they should be protected from competitors.
The irony here is that at the time of the Kingsbury Commitment, phone networks were spreading across the country like wildfire. AT&T had already built its long distance network - it obviously didn't require a monopoly guarantee in order to do so.
From the article, there were 3,000 phone companies. Surely with that number plenty would do very well in places other than major cities where there weren't 2,999 competitors. Just as obviously, with so many competitors there were not high cost barriers to entry.
The irony here is that at the time of the Kingsbury Commitment, phone networks were spreading across the country like wildfire.
That's not good enough, though. The phone system was something that needed to be everywhere, including areas where poverty and/or population density could never have justified a business case.
Were those 3,000 phone companies all building compatible equipment? I don't know, but I'm guessing not. This would have been a problem when it came time to tie them into a single long distance network.
Perhaps some compromise could have been reached in which they would all agree to deploy compatible equipment... but is there really an economic advantage in having 3,000 regional monopolies all doing exactly the same thing, as opposed to one mega-monopoly? Either way the individual customer is going to have to deal with a monopoly.
Erm, it's most certainly a fact. Government funded projects produced the Internet, while commercial companies were producing centralized, circuit switched networks. It's self evident that no one else was doing it; every single commercial company in the world at the time was pursuing a drastically different design philosophy (the reason being that circuit switched networks were making money).
As an aside, it's not really worth joining the conversation if all you have to offer are one-line platitudes. I'd be interested in some evidence supporting your point of view, but you haven't bothered to provide any whatsoever.
I was typing it on my mobile phone. Which is not a good enough excuse I know but it's the only excuse I have.
Also I wasn't disputing whether Government funding produced the internet. What I disagreed with was the notion that the Internet deserved to be produced and therefore the Government was beholden to fund it. Such a discussion wouldn't be a debate that lent itself to the use of evidence for claims since its primarily a philosophical one.
You think the government is trying to depress demand and cut spending? The Federal Reserve intervention in the MBS / Treasury bond markets is intended to increase demand, and gov spending is rather high in historical context.
Well, one reason could be suggesting that government spending is the necessary ingredient for innovation, which is faintly preposterous. The government spends a huge proportion of the economy's earned wealth, so, yes, it's going to be involved in a lot of innovation. There are no controlled studies showing that as much or more innovation would not have happened regardless. Moreover, innovation is proceeding apace even thought some folks seem to think the government isn't spending enough.
It's kind of amusing to watch the ad-hominem arguments take flight.
While it's true Daniel Lyons is Fake Steve Jobs and that Nathan Myhrvold runs a company focused on thinking up ideas that could lead to products after some research and patent them before spending a dime making any real progress beyond writing them down, while at the same time extorting those who do, the argument against companies like Facebook or Zynga stand: what are they doing to improve the human condition? Are they doing more or less than companies like HP, Intel, Cisco, Apple and Google?
Not sure if you were paying attention, but Zuckerberg was on Oprah, and he is giving the state of New Jersey $100 million in Facebook stock, in a matching grant.
“If we distract people with the lure of easy money... we’re going to wind up derailing the thing that has been driving our economy”
It seems to me that if one were sincerely worried about this, the concern would be better directed at Wall Street, where many of the world's best minds go to be wasted on creating the next CDO or HFT/computerized-frontrunning technique while contributing nothing back to the world.
“the unknown engineers and professors who have good ideas. Are those people going to get funded or will they be talked out of it and told they should do something like Zynga, because virtual goods is where it’s at these days?”
One reason I like HN is that comments seem to lean more towards the Perceptive (vs Judgmental) end of the scale in the Myers-Briggs sense, compared to other sites. So it's sad to see many of the responses in this thread. Myhrvold/Lyons/Newsweek aren't the issue here, the issue is what you choose to do with your life.
In 1983 Steve Jobs recruited Pepsi's president to Apple by asking him to choose between changing the world and selling sugared water. Much of Valley's current output is closer to sugared water than to the Macintosh.
In 1983 Steve Jobs recruited Pepsi's president to Apple by asking him to choose between changing the world and selling sugared water. Much of Valley's current output is closer to sugared water than to the Macintosh.
I'm sure that the message of both the movie and this spin-off piece are skewed towards fantasy and there is great work coming out of SV all the time.
But let's face it innovation doesn't decide to shack up in one place, settle down and have a couple of kids, calling one place home for the rest of it's existence.
Hubs of both engineering and social innovation will dwarf SV in coming years. The only question is where...
Newsweek, a/k/a the poster boy of declining circulation, (from 3.1 million in 2007 to 1.5 or less in 2010) lecturing others on how to run their business?
I think Twitter has immense value. And I would be happy to see it go public and achieve $billions in market cap. Cant say the same thing about facebook or zynga.
sometimes i feel like facebook is that waste-of-my-time show that i get pulled into when i switch on my tv. it sucks up time from my life i will never get back.
Twitter has a strong impact on our culture, but without a rational business model, and several quarters of profitable growth, an IPO will never happen. I certainly wouldn't buy stock in a company which doesn't know how to make money, no matter how impactful their product is.
my bet is twitter will figure out monetization. im sure they have something in the works. look at ad.ly for instance - instream advertising. they seem to be doing well.
Just thought I'd add this, here in Europe (Switzerland to be precise) nobody I've ever met uses Twitter. Facebook is omnipresent (omnipotent? ;)), but most folk don't even seem to know of Twitter (apart from techies, but still no users). Of course, small sample size etc.
yeah they do very well. check out http://www.americaisretarded.com/. it is possible to make money without generating much value (like 'the situation' from jersey shore). facebook has a big market cap but imo it doesnt have much value.
So essentially his argument is that he prefers industry work to flashy consumer plays. I can't say I disagree. The only thing is that there's no indication that the "serious" stuff is any less significant than it was 50 years ago. Yeah, you have Madison Ave layered on top now thanks to the mainstream adoption of the internet, but should everyone just leave that money on the table in the name of "science"?
Twitter is a noisy circus of spats and celebrity watching, and its hapless founders still can’t figure out how to make money.
Anybody who says this is clearly just trolling, since everyone knows they are making a ton of money selling the data to the search engines before they even get started on the advertising, which they are working on. And as for "twitter is for celebrity watching", that meme died a year ago.
One might point out the irony of this being posted on a site called "Hacker News" where many of the most popular posts are about venture capitalists, investment, business models blah-di-blah-di-blah.
Geeze, does this guy understand the word prosperity?
We should be happy that "the computer problem" is solved (at least for now). Computer technology has plateaued and there is no hard engineering required right now. This is a good thing! It gives us time to experiment with software. So Silicon has gone the way of Northeast Steel. So what if the world changes?
If you want to do hard engineering, you go to the fields that require it - war inc. (looking for more efficient ways to kill our neighbors), space flight (the modern space race is exciting), industrial automation (eventually the populace of Asia will want to climb out of indentured servitude and we need to replace them with something). These fields still need smart engineers and big $ startups.
Yeah, it would be easier innovate on hard problems, Mr. Myhrvold, if you you weren't trying to strangle startups and small tech firms every chance you get with your Intellectual Ventures.
I'm not sure, but is his company every sued any startup for patent infringement. I read about his company in super-Freakonomics and he seemed to be genuinely caring about solving hard, big problems. He may be amassing patents to get protection but unless he actively screws small companies by buying patents, I'm not sure I would call his company a patent troll.
They create and acquire patents for revenue, not defense. They don't need protection from infringement suits because they don't sell any products (and their research should fall within US patent law's exemption for that purpose). There's also speculation they have backed some infringement suits raised by shell companies.
I'm torn. There ought to be some way to compensate researchers for actually solving hard problems (here I'm excluding a lot of poorly-examined software patents which basically claim the whole problem via the obvious solution) yet doesn't involve giving them an exclusive stranglehold on anyone using their work even accidentally.
The cure is worse than the disease at this point, the situation is such that the patents to tend to go overwhelmingly to those that troll rather than to those that have ideas and actually implement them.
That's kind of logical too, after all having an idea and writing it up in a patentable form is much less work than following through so while the 'doers' are stuck on their first one the 'patenters' are on their 10th or more.
SV innovation was once about creating the technological infrastructure that we all take for granted. Now, it's about using that technology in new, interesting ways to see what might happen.
I have met and spent time with Dan, before he became such a cynic. He was excited about the idea of being near startups and wanted to come up with an idea for his own. What I see when I read his pieces is sadness, disappointment. While I can't blame him, we should understand his point of view in context: he could-a been a contender.
Positive. The author understands the gist of what's going on. Places like YC focus on Minimum Viable Product and doing just one thing that people want. These are great and wise strategies for both investors and entrepreneurs, but there's also another term for it that's not as flattering: bottom-feeding. Going after the little bits of value here and there, not being a hunter, existing by providing the least amount of value possible. There are huge bottom-feeders! Facebook is one of them. But it's little tidbit work. Stuff like reminding me when I like to scratch my nose, or a service for recommending dog groomers.
Negative. The problem here is that the author seems to think he knows where technology is headed, and that's always a foolish bet. His view is that we should be making complex things and solving hard problems. While I agree that hard problems need to be solved, I don't think you can decide ahead of time which problems are going to be the ones that gain traction. This is like the government or VCs "deciding" that one area of effort is going to give more results than another. Nobody knows. This is the risk of startups. It's why the smart move is to do the little stuff.
More to the point, there are two kinds of innovation (to steal from Kuhn). There is "normal" innovation, where people take existing tech and put it together in new ways to make trivially more usable things than existed before. Then there is paradigm-changing innovation, where completely new things appear.
By far, normal innovation is the norm. Probably 99.9% of all innovation is normal. Maybe more. Systems change from the ground-up, not from the top-down. Eventually a bunch of little things reach critical mass and a paradigm-changing innovation occurs. But hell, most of the time you can't force the little innovations to work, much less the big ones. I love the contrarian tone, but it's just not a realistic article.