The site was quiet for a long time and has very recently re-emerged to take on the tech industry - albeit from the perspective of the New York finance type.
A side note: If you claim that people are missing the point, then you need to state that point (and why). Otherwise you're just leaving those people confused and/or angry.
Satire makes people laugh at the absurdity of things, by means of exageration.
The point of satire is not always to "make a point". I don't think it is in this case anyway. But if you really want to see something you could see a criticism of the startup ecosystem that "puts bright people to work by making them shuffle bits of questionable value".
Satire is a genre of literature, and sometimes graphic and performing arts, in which vices, follies, abuses, and shortcomings are held up to ridicule, ideally with the intent of shaming individuals, corporations, government or society itself, into improvement.[1] Although satire is usually meant to be humorous, its greater purpose is often constructive social criticism, using wit as a weapon and as a tool to draw attention to both particular and wider issues in society.
This was surprisingly entertaining. There's some truth to it, but it essentially misses three things:
1) The intangible benefits of being at a startup (as a founder or early employee) -- working on interesting problems, with smart people, in a well funded environment. You learn things, meet people, get to use amazing tools. (Startups definitely aren't the only way to do this -- academia or, for engineering, some parts of the military or government or big enterprises have some awesome toys, and some world-class experts, and interesting problems, too. But in Silicon Valley, the barrier to entry is really low, and the problems are generally the right size for individuals or small groups to solve (partially) and quickly.
2) The downside to failure is exceptionally low. It's all other people's money (at least in Silicon Valley); your real cost is opportunity, but generally the market values a failed startup founder or early employee at enough of a premium over a member of a later stage team that you can catch up quickly.
3) The EV of upside is both the odds of success (correctly identified as low) and the magnitude of that success. 1% odds in an even game suck; 1% odds where you're given your wager by someone else and you get to keep 50% of the upside and the upside is potentially 10000:1 is pretty awesome. Doubling down on success, moving away from failure, and you can do this 5-10 times pretty easily.
I think you're responding to just one part of the claim, namely that a person would be better off doing something else than a startup.
The more interesting point, I think, is not the entrepreneur side of the equation, but the YC side. The author claims that YC is exploiting entrepreneurs. This claim is more interesting (in the social-studies sense) as it seeks to uncover a particular kind of exploitation that's a feature of our current age. First, it's important to point out that this question is completely orthogonal to whether the allegedly exploited person is better off or not. A capitalist could start an iPhone factory on an island full of starving people and pay each a loaf of bread a day; while the people are certainly better off, they're still being exploited.
YC specifically is most certainly not exploiting anyone, as on average it gives companies much more value than it takes. But the question remains on whether the Silicon Valley ecosystem in general is exploitative, and I think the answer to that is yes, although this kind of exploitation is rather mild – I would call it "taking advantage" more than "exploiting". I think those taking advantage are not VCs, but large tech companies. Rather than paying regular salaries to large research departments, the SV ecosystem encourages a lottery-style payoff. Lots of people work trying to invent a novel product, or find an unexplored market niche, and instead of paying them all for their efforts, there's a large prize offered to those who succeed. I think that large tech companies are taking much more value out of this arrangement than they're putting in, so there's probably some exploitation there (in fact, any lottery-style economic construct, be it based on "merit" or sheer luck, suggests some sort of exploitation taking place).
That's a bad example. I read your island example and thought to myself: "that's not exploitation." Is there a specific reason you think it's exploitation?
Certainly. Exploitation is taking advantage of the other party's lack of options – which results in its lack of bargaining power – for an unfair distribution, in this case the workers get far below their contribution, even when adjusting for the capitalist's risk. The meager payment ensures the workers will never have options.
The theoretical economic model for this case is the dictator game[1]. In the dictator game, one player receives an amount of money, and he has to offer the second player a portion of it. If the second player rejects the offer, neither gets any money. Often, the only distribution accepted will be 50% or close to it, but when a rich person plays a very poor person, the rich person knows that the poor player will take any offer rather than go home empty-handed. That's exploitation.
Now, a misguided free-market advocate, not familiar with both theory and practice might say that the islanders do have bargaining power, as they can invite another employer to their island in exchange for a loaf of bread plus a burger per day. But, of course, this can't happen, as the second capitalist knows the first will retaliate on their own islands. This is a digression, but in fact, in a saturated market, the best strategy for competitors of roughly equal size (even quite far from equal) is almost never to compete, certainly not on price. Lowering prices is not an option as your competitor has the resources to do the same, which will result in the same market distribution, only with all competitors worse off. Again, this is supported both by theory and practice.
FYI, a lot of the regulation in the US government came as a result of the US economy under the rule of the robber barons a little over one hundred years ago. Similar to the island story, some employers would pay their employees not in US dollars, but in their own currency, which the workers could only use in stores owned by the employer ("the company store").
Of course, the situation in Silicon Valley is not that of full blown exploitation, since startup founders are not without options. Still, large tech companies benefit from the lottery model, as they profit more from it than from large research departments; the founders, on the other hand, get an unfair share of the cake. In this case, the large companies are not exploiting the entrepreneurs lack of options, but are simply taking advantage of their psychological preference for the lottery. There is more to that, as all parties know that if the lottery were to go away (say VC money stops), and everyone would have to work for the large companies, salaries would drop (that's a sort of a sword those companies hold over the workers should anyone decide to rebel). We don't even need to speculate, as we know that large SV employers already colluded to lower salaries.
Okay, thanks for clarifying. I myself lean towards the free market side of this example, and don't necessarily agree with the idea that exploitation is taking advantage of another's lack of options.
Take the dictator's game. The flaw with your model is that it's not iterated. A more realistic dictator's game would be iterated (repeated). In which case over time a poor party can force the rich party to give it a higher share.
>Okay, thanks for clarifying. I myself lean towards the free market side of this example, and don't necessarily agree with the idea that exploitation is taking advantage of another's lack of options.
You think of exploitation as just something like slavery.
But slavery is too an example of taking advantage of another's lack of options.
In slavery it is: "You either do this or I kill you".
Which is not that different from "You either do this, or you and your family die of hunger / end up homeless".
You either have options -- so you get to pick and you're not exploited.
Or you don't have options, in which case, you either get a fair price for your work (compared to what value your employer gets out of it), or you are exploited.
Sharecropping, the post-slavery solution to keep poor blacks and whites in their place, was also exploitation, based on their lack of options.
I mean, your 2) point is critical: I am in Brazil, I am in a startup because I had no choice, and although I am getting paid with someone else money, if the startup crashes, I will go down with it, and go down I mean, get in worse situation than I already am... currently I am struggling to pay my rent and food, if my startup fails, I won't be able to pay rent and food, at all, considering my parents are having money issues too, this mean most likely I would experience real starvation, something that I am not much keen on experiencing.
Here's probably why rdl and a lot of people on HN disagree with the article. In SV, being at a funded startup as an engineer often (not always) means you left or declined a big company job, a job which is often higher-paying (in base salary). And if the startup fails, there will be no negative effect on your career, unless you failed for malicious reasons (e.g. blew investor's money on parties). If you are a founder, your startup experience will be perfectly valid experience to other companies. If you are an engineer, you will get a new job in no time (in the current climate).
The reason SV is relevant is because the article is specifically talking about YC.
> I am in Brazil, I am in a startup because I had no choice [...]
Would emigration be an option? Since you are on HN, I assume you can program. There are lots of companies in lots of places world wide looking for talent, and paying for it.
...your real cost is opportunity, but generally the market values a failed startup founder or early employee at enough of a premium over a member of a later stage team that you can catch up quickly.
Hmm. Is "generally" right here? Are founders really getting hired at a enough of a premium to earn the ~$100-200k they lost over 1-2 years while failing?
I think "person who is a top 10% but not top 5 Stanford undergrad CS senior" who then goes to found a YC-backed startup which ultimately fails after 2y is ultimately better off than the person who takes the "good dev job" at Google or Facebook. When the founder is looking for a job 2 years later, if it's via acquihire, it is probably a wash on cash (due to taxes...potentially quite ahead); has almost certainly had more public visibility and thus potentially is in a "bidding" situation for his talent, etc. I doubt the 90th percentile Stanford CS grad gets more than $150k cash, $250k total compensation, in year 1, and probably not more than 200k/300k in year 2, at a tech company.
A person at the 90th percentile, all things being equal, probably isn't good enough to get one of the $250-500k hedge fund programming jobs.
Taking the good dev job/employee #1 at the hot startup which happens to do well is better than being founder of the failed startup.
Obviously, the person who starts Facebook is ahead of everyone.
Partially it's that equity compensation (in an acquihire/earn out) is tax privileged, part is that it's essentially forced savings. From $100k to $200k, you lose a lot of your income to basically bullshit -- US/CA taxes and somewhat higher living standard, higher student loan repayment, etc. -- where if you can essentially bet that "pre-tax" on a startup, you probably come out ahead.
I'm not sure how this applies to someone in the bottom 90% of Stanford, or in the bottom 99% of the world. Probably the best bet is to somehow get into a top startup in a role where performance isn't so critical to the ultimate success of the company, usually after Series B, or at a big company.
Someone who is the top CS grad for the year, or who is later in career with exceptional talent, or who has a burning drive for a specific area (e.g. Steve Mann in wearables), has an entirely different analysis, too. At that point what actually matters is role.
I personally am happy doing a startup to accomplish my specific change-the-world goals and would be equally happy doing so at a large company; it's just that it would be much more difficult in ways I don't enjoy at most large companies (budget and multiple hats at a startup; stupid politics at a big company). (If I had more of an aero/engineering background, I'd probably prioritize space, and try to work for SpaceX; as it is, the only things I'd be qualified for there are IT, and their IT is windows shit, and not core to the success of the enterprise.)
> Probably the best bet is to somehow get into a top startup in a role where performance isn't so critical to the ultimate success of the company, usually after Series B, or at a big company.
Or just buy a lottery ticket. I'd argue the odds are much similar, with much less effort.
> (If I had more of an aero/engineering background, I'd probably prioritize space, and try to work for SpaceX; as it is, the only things I'd be qualified for there are IT, and their IT is windows shit, and not core to the success of the enterprise.)
SpaceX has several IT positions in roles where you're not going to touch a windows box. I know, because I check constantly. Their HR team is apparently not so hot at getting back to the Jobvite apps though, or the bits are dropping somewhere.
> Or just buy a lottery ticket. I'd argue the odds are much similar, with much less effort.
No one pays you a salary to buy lottery tickets.
Wage income or RSUs from Google, Apple, etc. are pretty low risk. Wage income and options from a post-B successful company are pretty low risk, too (e.g. if you're an IT guy at Dropbox, you probably make $80-120k in salary, and the bar to be hired as an internal IT support person is a whole lot lower than lead developer at a 1-10 person startup. You'll get some equity upside which is pretty much guaranteed to be worth something -- if Dropbox IPOs at $10b, it's worth $x, and if it goes up to $30-40b (which is speculative), it's worth more -- but it seems unlikely Dropbox would be worth <$5b, and very unlikely less than $1b, and your salary checks from the previous 4 years would not be taken back even if Dropbox somehow goes out of business.
Did you even read the article carefully? The 7% figure corresponds to $40MM+ exits for YC. There are a huge, absolutely huge number of YC startups that get acquired for less than that. Many of those are acquihires ($<1MM-5MM) where the founders make probably as much as they would if they had taken a corporate job, except they now have the invaluable experience and credibility of having founded a company; others are small acquisitions where the founders still make a profit ($5MM-40MM).
rdl is suggesting you pick top startups that are post Series B and which already have multi-hundred-million to billion dollar valuations (think: Stripe, Pinterest, Airbnb). He is not suggesting you join a 5 person YC startup that is still trying to get product market fit. Hugely different categories. rdl is essentially suggesting you work for the roughly one YC company out of every batch that becomes a great success - and that you make that leap when the startup had already proved itself.
From reading your other posts it seems like you are willfully misunderstanding his point.
Being engineer #1-5 at a doomed-to-eventually-fail company, say Color, is actually still a better bet than being engineer #102303 at Microsoft in a lot of ways. Your equity is worth less (often worthless, sometimes not), but you get other upside.
The investment banking industry basically invented the concept of OPM (other people's money) in the 1980s (okay, I'm sure it existed before that, but the 1980s was when it became a buzzword).
A great read if you're interested in learning more about the history and operating procedures of the sales & trading side of investment banking is Traders, Guns and Money by Satyajit Das. Its sections on credit default swaps and collateralized debt obligations are particularly interesting when you consider that they were written in 2006, pre-crisis (around the same time that Leveraged Sell Out was getting started, in fact).
It's easy to pull a quote like that and make it sound like a moral failing. If you read the comment it's quite smart observation:
1% odds in an even game suck; 1% odds where you're given your wager by someone else and you get to keep 50% of the upside and the upside is potentially 10000:1 is pretty awesome.
The fact is is someone else's money directly modifies the costs to you, and therefore changes the risk/reward calculation. There is no implication that you wouldn't work as hard simply because it isn't your money.
You might not work any less hard, but you'll certainly take more risks if you don't experience the downside.
Answer quickly - how much of your net worth would you risk on a bet with 1% chance of a 1000X payout? Now how much would you risk if you can hand off 90% of any loss you take to someone else?
Taking a crazy risk is what the VC is paying you to do. If it didn't take a crazy idea to make it big, everyone would see it, and many would be doing it. From the point of view of the VC: how much of your net worth would you bet on a 1% chance of a 10K payout, if you cold make dozens of such bets?
If you had a machine which would charge $1 for a 1% chance of winning $1000 in 1 year, you could fairly charge people somewhere between $5 and $9.50 per pull of the handle. You'd have an exceptionally long line waiting for that deal.
The whole point is rich people, investment portfolios, etc. have an entirely different risk profile than individuals. For an individual, low-probability high EV (high variance) is dangerous, which is why you buy insurance -- essentially negative EV (a 100% chance of losing either $1 or $2, but not losing your $1000).
I understand many on HN aren't particularly keen on getting a job with a normal wage, but saying that is a moral hazard is pretty extreme.
Re-read the comment.
An early employee is paid a salary, and they also get options. The OP's point is that receiving the salary and options means your risk profile is different.
There's no moral hazard here, unless you believe receiving a salary is a moral hazard.
I can't see how that's a bad thing in this context. The investor is fully aware that you'll take risks with his money - he's hoping that one of these risks will pay off hugely, if not with you then with some other startup he's invested in.
It works like this because most investors prefer winning 100x their investment 1% of the time. Business angel are a bit different but VCs really think that way.
the market values a failed startup founder or early employee at enough of a premium over a member of a later stage team that you can catch up quickly
This may be true for technical founders/employees[1]. I doubt it is the case for a non-technical founder who would otherwise work in the finance sector - which appears to be the case this story is about.
[1] I'm not convinced, but I'll concede it since there is another thread where that discussion is ongoing.
> The downside to failure is exceptionally low. It's all other people's money (at least in Silicon Valley)
i always feel disgusted by this sort of attitude. sure it mitigates risk, but as secular and reasoned as i like to think i am its just morally reprehensible as an attitude to take...
i treat other people's money with /more/ respect than my own. maybe thats just me being backwards.
always taken the attitude that if you need someone else's money to start then you aren't really ready to enter that business. maybe you should start a small business and build funds first... instead of taking a risk with other people's money when the sum total of your experience is approaching zero.
sure its their own fault for investing the money... but that doesn't make it easier for me to swallow.
i do not consider this irrationality to be a bad thing
A professional investor would be more angry with you if you took $1mm, promised you were going to make a high-risk higher-reward investment, but then secretly invested it in something safe, returning him 150% of the original amount in ~5 years, instead of taking a 1% chance at $10k.
This is why you take investment from professional investors on open and honest terms, not from people like "friends and family" who feel pressured to do so and may not be in a good position to accept the risk.
I think the programmers even in prop shops are playing with the firm's money, usually, vs. contributing their own capital. Especially the ones hired for their early career programming skill vs. a history of successful HFT.
There's an uncomfortable truth here. In the last 3 or 4 years, tech startups have started to become the fashionable choice for unthinking MBAs, taking the place of Investment Banking and Private Equity before it.
I was at a conference recently organised by University College, London (arguably the top science & engineering school in the UK). With no hint of irony, the organiser welcomed attendees - "we're all here because startups are the best way to get rich after college".
In the last week, I've been contacted by 3 separate people I knew from Law school asking me how they can get into startups.
As a YC founder I know exactly what I signed up for. YC is in the business of placing a series of low risk bets twice annually and then sorting through those bets looking for likely winners, doubling down and helping when possible
It doesn't matter though, they still lower my overall risk profile by being involved and (I believe) increase my odds of success. I believe it's a square deal.
I also believe that fundamentally if there's a time to aim high rather than minimizing downside risk in one's life, it's your 20s. Furthermore to a certain type of personality (mine) a secure life making a few hundred thousand dollars a year in an essentially mind-numbing profession that does little for humanity is unthinkably depressing.
It ain't for everyone, but I don't think it's fair to act as if it's some sort of sinister delusion projected by YC in order to benefit Paul Graham.
You can "aim high" working long days in your 20s, 30s, or 40s. But in your 20s maybe there's other stuff you want to do, like chasing college tail, or not having kids.
> secure life making a few hundred thousand dollars a year in an essentially mind-numbing profession that does little for humanity is unthinkably depressing.
You realize Wall Street bankers make a few million dollars a year doing mind-numbing work that does little for humanity, right?
Maybe others experience wealth differently but it made substantially no difference to my day to day happiness (once the newness of the money had worn off) - but working on a project I feel strongly about makes a strong and lasting difference.
May I ask, after you were acquired, how long did you end up working for them? How did you feel about it? Was it a jarring experience trying to transition back into more of a "traditional 9-5 mindset," or were you expected to work as hard as before? I've always wondered what that type of situation is like.
Just under 2 years, it was a nightmare. I gained weight and became depressed. I left and will never sell a company like that again. If there's an earn out it'll be 1 year, otherwise I won't do it.
Perhaps it's my own superego unable to understand experiences outside of my own mind, but I think you either didn't get enough money or haven't learned how to transmute it into happiness. Money is freedom and freedom is happiness. It's that simple. If money doesn't make you happy, nothing will. If you have enough money, you can do anything you want. If you don't have enough money, you can't do anything you want. If you can do anything you want, then by definition you either have happiness or you are unable to achieve happiness. It really is that simple.
The thing that makes me happy is sitting in a room with a few people I really like and building something I'm interested in. We already all live in nice houses and have the computers we want. We can eat wherever we'd like. If I want to take a vacation I can afford it.
How will having more money make it so I can better sit in a room with a few people I like and build stuff?
I mean it's not like being wealthier will make my Netflix have cooler stuff in it.
It's not the actual cash. Money is actually worthless in and of itself, it's the using of it that makes it worthwhile.
Money gets you access to resources to MAKE things, that is why R&D takes so much money. You have to pay a lot of people to think and work hard - only if it's your money you can pay them to think and work hard on YOUR idea and YOUR dream.
Money also gets you the ability to influence change, politically or otherwise. Right or wrong that is how it works, and deciding you are better than that and not playing the game won't stop that from being true - all that will mean is that it will be that much harder for you to actually influence.
So no, money is worthless, it's the things you can do with it that will find your contentedness.
Many of the things we all find contentedness through can be purchased with cash. I for one would love to take a multi-year round-the-world trip with my partner, or own a house and a grand piano I could use without having to worry about neighbors. Does that make me a materialistic hedonist?
Probably the biggest sign we're in a bubble[1] is that the Leveraged Sellout guy is back and has trained his focus on Silicon Valley.
1. Not saying we're actually in a bubble. Just pointing out that the last time he was around, he was poking fun at 22 year olds going into finance for absurdly high incomes.
My 2 cents: He is correct that YCombinator is running little risk doing what it does at this point. That seems pretty obvious now - though it was not when they started. Accelerators were a novelty back then, and YC could have fallen flat on its face.
YCombinator is a pretty low risk deal for entrepreneurs too, come to think of it. Perhaps the author misses this point. If your startup does fail and/or you get tired of the startup game, there's probably a large number of companies willing to take you on as an employee, given the skillset you likely had to get into YC.
Now there's some guy in every coffee shop claiming to have an accelerator without any idea how to succeed (specialize/differentiate). They're 95% wooly propositions with the occasional one that can sell nontrivial epsilon of value.
My favorite so far is this guy that hangs out at a cafe near Stanford that has alienated everyone in his potential "deal-flow" by anger outbursts on conference calls and generally acting like a dick.
This is faulty though, no? You're risking your best alternative to eating ramen over the course of those N years. That alternative is very, very high for anyone getting into YC at this point.
And when the check came, I passed it to Eric and watched his eyes widen at the total. The host came over, expecting his card. I could see Eric sweat. “Oh, this shouldn’t be a problem,” I assured him. I turned to the host: “You accept equity, right?” Her face contorted. I elbowed my cousin. “Eric – tell her about your startup.”
he's such a dick, I love it.
This is incredibly well-written. As someone who has a brother at Wharton and parents in the healthcare and legal fields I found myself smiling often. Was the iPad smashing too much though? Is that what rich people do?
If anyone is feeling bad for not necessarily knowing what to think about this piece, don't. I think it takes a while to realize this isn't a blog and the narrator isn't NECESSARILY the hero, but rather it's a story and there's a LOT to think about out of it.
My take is, of course, that the narrator is the villain, but that's just me.
I don't know to what extent this is a joke but I am not laughing. Yc is a school where they pay you, Paul Graham et al did not take over Airbnb or Dropbox... the people who founded those companies run them.
The idea that a life is worthless or wasted if you make less money is beyond flawed. It is the most american/capitalist/rewarding thing to make a go of building something of your own.
Being a wall street banker has virtually no social utility. Airbnb and Dropbox improve the collective productivity of society and make real markets in the case of Airbnb. If it takes hundreds of people and millions of dollars failing in an effort to make a few big winners so be it, and when Yc makes money in the process they deserve it. They are taking REAL risk, and it seems the people who emerge from their program are better for it even if their dreams don't all come true.
Finally, the girl next to him is an important part of this little story. Women love men who are passionate, who are alive and who take risks. If all of society fell apart I'd much rather be with a bunch of hackers than bankers, the hackers are creative, passionate, loving and ruthless when necessary. Women understand this and they they love it... because they know they are always safe with a man who can build something. They'd rather eat Mac & Cheese with a man who puts up a good fight before kneeling down THE MAN... or maybe never has to kneel at all.
I don't get it. What's the intended message for his younger brother?
That you should go into a steady, well-paying career because then you'll be able to impress women by picking up the tab at a fancy restaurant/bar? Or was it just poking fun at YC-as-a-cult?
I am still unsure whether the author was 1) seriously making some decent points about YC's model underneath a (self-aware and -effacing or just tone-deaf, I'm really not sure) veneer of old-school snobbery and greed, or 2) sarcastically making the opposite points by presenting the counterargument in such unappealing terms.
Either way, it left something of a bad taste in my mouth for both industries.
I'm pretty sure it was option 1. In general, it was pretty scathing and precise in its take-down approach. And any lingering doubt about where he was aiming was removed by his closing comment.
Well, if you're not setting out to read something clearly stupid into the author's intent, you might conclude that he's questioning whether equity in some early-stage startup is really worth anywhere near as much as what those who have/offer it talk like it's worth.
Entertaining to read all the comments on this thread. Great article and as a former investment banker, yes so true, really no difference from, what I observe for SV startup accelerators, and an investment banking approach of hiring the best. I guess the same could be said of other elite professions such as law etc. With respect to other derogatorary comments on this thread, about bankers and MBA's. I suspect most are written by people attempting to self justify there choice of startup vs a traditional careers. Good laugh re: the comments about the social utility of startups vs banks and how unproductive to society investment bankers are. But face it without these investment banking "parasites" who add no value to society, most startups who need to raise capital wouldn't exist. Anyway back to work on my bootstrapped startup!..
Great article and as a former investment banker so true. Good laugh reading the comments, I speculate mostly from insecure startup employees, executing their "post purchase rationalization" for taking the accelerator route.
The reality is that the accelerator model has more parallels to the investment banking model than many of the commenters are recognizing. Very entertaining to see some commenters trying as well to justify that startups have more benefit to society than bankers or MBAs, in fact hilarious as the reality is that without those "dumb" MBA investment bankers who can attract IPO money to feed the VC's to fund startups, many with questionable and untested business models, accelerators and most startups wouldn't exist.
Thanks for the entertainment, better not waste too much more time and get back to trying to bootstrap my startup.
I thoroughly enjoyed reading the article - yet I don't believe any of it. When you've got a wife, kids, mortgage, private school, etc, etc, etc, you've got to be a bit more risk averse. In this case, why not let the kid see what life is like when you're not a corporate drone?
Doing YC seems to me very similar to forming a band, writing a movie script, or attempting to become a successful actor, athlete, etc. If you go into the scenario expecting that failure is not an option, you will almost surely be disappointed. If you understand (really) that it is high risk/high reward, and the cost of failure can be as low as a teeny bit of your pride, it can be a great learning experience, providing you with a glimpse of a world outside the proverbial cubicle of a safe, predictable life.
YC didn't invent startups, and everyone should be able to do something they actually want to do all day at least once. And for their benefit it should be in their 20s.
This article just doesn't sound right. YC has much higher success than most VCs. But even if you weren't doing your startup at YC, I still feel it's far better thing than having a corporate tech job (let alone pseudo-tech job in finance). The thing is that, you choose what you want to do. Even if you choose selling newspaper, its better than a random "manager" with half the competency telling you to fix a random bug in some product you didn't even cared before. You setup your own culture. If you don't like meetings, you don't do it. If you like blasting music and have grill in your office, go ahead.
Above all, startups in SV is something that doesn't have downside to people coming out of college. Even with miserable failures, you would be most likely get aqui-hired with 3-5X better pay package than someone who had worked for a decade in that same company.
However I totally discourage people dropping out of school to do startup. I get truly disgusted when people suggest that option. As Guy Kawasaki used to say, stay in school as long as you possibly can. Rest of your life is very likely going to be in one job or another unless you hit a lottery.
I can't say I am entirely unsympathetic to the criticisms.
But to be plausible the author had to reinforce the investment banking alternative with a close personal connection between good cousin Eric and someone already established in the industry. It's not that YC's model is perfect, but at least it is nakedly tuned toward making money for YC rather than providing good jobs for one's buddies.
Remember that in all brilliant satire there are elements of both truth and absurdity circling around a key absurd truth. I think that key truth is: YC is a value investor by any reasonable definition of the term. That's not in any way to say they're not a symbiotic value investor.
It's interesting how one can take any phenomena and demonize the actors playing in it.
The author focuses on the tangible benefits of working at a startup vs. working in finance (e.g. corporate card, company car, free food), but leaves out the journey which drive so many entrepreneurs to continue to do what they do and what ultimately makes many of them come alive.
It's a stark contrast to finance where many engage in soul-crushing work and anxiously await their bonuses, so they can find a more fulfilling job.
Brainwashing youths to this or that habit of thinking and then to use them for a great good is an idea as old as humanity. All sorts of religious sects, political fractions even hobbyists are doing this.
What is going on around YC is absolutely nothing special from a psychological point of view. "If you want loyal workers pay them less, so they would escape from the pain of cognitive dissonance by leveraging the big idea" a textbook says, and goes on about in-groups dynamics and notion of us versus them.
What is interesting is that all this was not created and orchestrated by the evil mind of Paul Graham, and it is not even a sect with him as a great guru. The whole thing was bootstrapped applying that very same bottom-up process he advocated in his technical books about Lisp.
Another part why the whole thing works, which was not mentioned in the pamphlet, is analogy to insider trading. PG has reputation and connections so he could sell teams and/or technologies to "friends".
So, YC is rather remarkable example that good ideas work, while banal practices of housing young naive fools are exactly the same in investment banking or politics or whatever. And it is not risk offloading, it is mere business among connected guys in a valley.
One more subtle difference. Contrary to investment products, which is a cheating by definition, teams and technologies YC selects and sells are "fair" and we could see and use them in our everyday life. We also could see CDS and HFT and mortgage and stock market scams all over the place. This is the difference between finance and tech - it is much more difficult to cheat, and hence succeeded in tech.
YC is the same kind of success based on proper ideas as viaweb was at its time, you like it or not. The analogy with banking is selling piles of java crap to ignorant fools.
Considering this guy is running a finance/consulting parody website, I have to assume there's a measure of jealousy and regret that the website he is running does not have attractive enough characteristics to be let into Y Combinator, although he must swim in some of the same circles as these startups.
The main question I take away from reading this is how the average payout to a young college grad compares on wall street, to the elite VC/startup track, taking away the unquantifiable benefits and focusing on average hard dollars earned.
Of course - that's probably not the comparison to make. Most of PG's stuff was written for technical folks considering entry level technical jobs. I would guess that even considering survivorship bias, the average outcome for elite startup tracks versus entry level tech track is extremely good, considering the jobs it can lead to (would love to hear if otherwise).
It's a little harder to compare for the theoretical econ major from harvard contemplating a wall street track. wall street is not a normal business environment - oligopolistic, heavy regulatory protections - much more like joining a club earning economic rents off capital flows than a group doing much to change the world.
IMHO the main reason people work 100 hour weeks in finance is to prove they are willing to give up everything in their life to make it to the next rung - not because they are doing anything particularly noteworthy or unusual that demands intensive focus. from first hand experience, I've noted most M&A customers have sophisticated in house teams that can run the numbers plenty well on their own, which does raise the question what the six banks typically advising them are doing.
All I can say is - for the average econ major contemplating the future on wall street - it will be really interesting when Amazon (and/or others) decide to take on financial services. regulations can hold them off for a while, but as they eat the rest of the world, it's inevitable hungry eyes will aggressively turn to where the money is (literally) - only a matter of time I'm sure.
To be clear (from the guy who submitted this), leveraged sellout was an incredibly popular blog that covered wall street from a junior insider's perspective for years. It was generally ironic, but as a friend of mine once asserted, irony is kind of like absolute value -- the more ironic you are about something the more seriously you take it, and it becomes difficult to distinguish the intensity of your irony from real belief at some point. A lot of people (like myself) are still subscribed to this blog, and a lot of people (unlike myself) are still subscribed to an unironic version of its world view.
i used to read the site. he was an outsider observing finance (the roomate of a bunch of bankers) who launched a popular website instead of following "the path". high point was the book, which came out in 2008 - worst possible timing - and did not sell. bad luck. the same site in 2012 would have been funded for millions ... get some guest authors ... maybe sell to gawker media / huff post / etc ... no book required.
with regards to the content - if you take away the "irony" as cover for a legitimate argument, it's still an interesting question to contemplate. for the average econ major (but not CS major), with no edge in technology, compared to the safe average payouts available on wall street, it is probably a bad decision to pursue a tech startup ... which is what makes the parody work.
The site was quiet for a long time and has very recently re-emerged to take on the tech industry - albeit from the perspective of the New York finance type.
Outlandish and uncomfortably true.