Hackers & Painters: Big Ideas from the Computer Age

by Paul Graham

An example of a job with both measurement and leverage would be l...

CEOs also have both measurement and leverage.

athletes. A good hint to the presence of leverage is the possibility of failure. Upside must be balanced by downside, so if there is big potential for gain there must also be a terrifying possibility of loss.

If you’re in a job that feels safe, you are not going to get rich, because if there is no danger there is almost certainly no leverage.

All you need to do is be part of a small group working on a hard problem.

Smallness = Measurement

A startup is not merely ten people, but ten people like you.

Steve Jobs once said that the success or failure of a startup depends on the first ten employees.

but small in the sense of an all-star team.

Technology = Leverage

What is technology? It’s technique. It’s the way we all do things. And when you discover a new way to do things, its value is multiplied by all the people who use it.

Big companies can develop technology. They just can’t do it quickly.

required. So in practice big companies only get to develop technology in fields where large capital requirements prevent startups from competing with them,

A McDonald’s franchise is controlled by rules so precise that it is practically a piece of software. Write once, run everywhere. Ditto for Wal-Mart. Sam Walton got rich not by being a retailer, but by designing a new kind of store.

Use difficulty as a guide not just in selecting the overall aim of your company, but also at decision points along the way.

Like guerillas, startups prefer the difficult terrain of the mountains, where the troops of the central government can’t follow.

barriers to entry.

You’d be like guerillas caught in the open field by regular army forces.

One way to put up barriers to entry is through patents. But patents may not provide much protection. Competitors commonly find ways to work around a patent. And if they can’t, they may simply violate it and invite you to sue them. A big company is not afraid to be sued; it’s an everyday thing for them.

defenses. Start by picking a hard problem, and then at every decision point, take the harder choice.9

When you’re running a startup, your competitors decide how hard you work. And they pretty much all make the same decision: as hard as you possibly can.

Most startups tank, and not just the dog food portals we all heard about during the Internet Bubble. It’s common for a startup to be developing a genuinely good product, take slightly too long to do it, run out of money, and have to shut down.

A startup is like a mosquito.

but a mosquito is designed for one thing: to score. No energy is wasted on defense. The defense of mosquitos, as a species, is that there are a lot of them, but this is ...

Startups, like mosquitos, tend to be an all-or-not...

but companies doing acquisitions are not looking for bargains. A company big enough to acquire startups will be big enough to be fairly conservative, and within the company the people in charge of acquisitions will be among the more conservative, because they are likely to be business school types who joined the company late.

it is easier to sell an established startup, even at a large premium, than an early-stage one.

Potential buyers will always delay if they can. The hard part about getting bought is getting them to act.

the most powerful motivator is not the hope of gain, but the fear of loss.

the most powerful motivator is the prospect that one of their comp...

The second biggest is the worry that, if they don’t buy you now, you’ll continue to grow rapidly and will cost more to acquire...

In both cases, what it all comes down...

Users are the only real proof that you’ve created wealth.

Treat a startup as an optimization problem in which performance is measured by number of users. As anyone who has tried to optimize software knows, the key is measurement. When

Until you have some users to measure, you’re optimizing based on guesses.

A great deal has been written about the causes of the Industrial Revolution. But surely a necessary, if not sufficient, condition was that people who made fortunes be able to enjoy them in peace.

One piece of evidence is what happened to countries that tried to return to the old model, like the Soviet Union, and to a lesser extent Britain under the labor governments of the 1960s and early 1970s. Take away the incentive of wealth, and technical innovation grinds to a halt.

possible. So governments that forbid you to accumulate wealth are in effect decreeing that you work slowly.

The problem with working slowly is not just that technical innovation happens slowly. It’s that it tends not to happen at all. It’s only when you’re deliberately looking for hard problems, as a way to use speed to the greatest advantage, that you take on this kind of project.

decades. Since it became possible to get rich by creating wealth, everyone who has done it has used essentially the same recipe: measurement and leverage, where measurement comes from working with a small group, and leverage from developing new techniques.

allowing those who made a lot of money to keep it.

Once you’re allowed to do that, people who want to get rich can do it by generating wealth instead of stealing it.

entrepreneurs. The same recipe that makes individuals rich makes countries powerful. Let the nerds keep their lunch money, and you rule the world.

When people care enough about something to do it well, those who do it best tend to be far better than everyone else.

it doesn’t occur to most kids that wealth is something that has to be generated. It seems to be something that flows from parents.

wealth is not money. Money is just a convenient way of trading one form of wealth for another. Wealth is the underlying stuff — the goods and services we buy.

In the real world, wealth is (except for a few specialists like thieves and speculators) something you have to create, not something that’s distributed by Daddy.

To say that a certain kind of work is underpaid is thus identical with saying that people want the wrong things.

The only thing technology can’t cheapen is brand. Which is precisely why we hear ever more about it. Brand is the residue left as the substantive differences between rich and poor evaporate.

in a modern society, increasing variation in income is a sign of health.