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How to Not Fail Like It's 2001
August 15, 2012 10:34 AM   Subscribe

How to Not Fail Like It's 2001
posted by stoneweaver (52 comments total) 12 users marked this as a favorite

 
If launching an AI into space, prioritize teaching it Asimov's three laws over "Daisy, Daisy..."
posted by justsomebodythatyouusedtoknow at 10:37 AM on August 15, 2012 [15 favorites]


I live in Minneapolis but for 10+ years worked for several different Silicon Valley companies, including startups. The thing that struck me every time I was on-site there was how incredibly insular and disconnected everyone was from anything outside Silicon Valley.

So yes, what this article said.
posted by mcstayinskool at 10:44 AM on August 15, 2012 [2 favorites]


diversity in your customer base is a good thing - the broader your reach, the less likely that a given sector's problem will hose all your business.
posted by rmd1023 at 10:44 AM on August 15, 2012


I guess, but getting 100 customers, all in SV, for your SaaS and selling to google is a valid exit. Isn't that the shift we are seeing? The product is a "team audition" so to speak. Who wants to scale up a company to support customers? That's no fun.
posted by Ad hominem at 10:44 AM on August 15, 2012 [1 favorite]


That's how you, an individual business, can avoid failure. How do we, as a society, avoid it? Regulation.
posted by DU at 10:47 AM on August 15, 2012 [3 favorites]


I guess, but getting 100 customers, all in SV, for your SaaS and selling to google is a valid exit. Isn't that the shift we are seeing? The product is a "team audition" so to speak. Who wants to scale up a company to support customers? That's no fun.

I would respond, but I'm feeling nauseous.

Also, you forgot the step of "building up a bullshit patent portfolio"
posted by mcstayinskool at 10:48 AM on August 15, 2012 [3 favorites]


This is why we can’t have nice things: When being ‘acquihired’ is a startup’s only option.

Recentish article about why being acquired by Google is bad for innovation.
posted by stoneweaver at 10:51 AM on August 15, 2012 [1 favorite]


I would respond, but I'm feeling nauseous.

Oh come on. I am just explaining the thought process behind getting "auqihired". What 21 year old CS grad wants to build out a call center, or spend night and day replying to user complaints about uptime. They want to write cool software.
posted by Ad hominem at 10:59 AM on August 15, 2012 [3 favorites]


Yes. The "talent acquisition" thing needs to die, and it needs to die quickly.

Corporations should not be allowed to purchase other corporations, unless they demonstrate a good-faith attempt to preserve the other business's products as a going concern.

This needs to be codified into law immediately, because these talent acquisitions are quickly becoming poisonous to the economy, and directly contradict the spirit of the free market. Sorry, Google, but you're being pretty evil here.
posted by schmod at 11:04 AM on August 15, 2012 [1 favorite]


"...The Creamery, a popular Silicon Valley hangout."
Weird choice as a reference point.
posted by lothar at 11:05 AM on August 15, 2012


Hacker News had a few good threads on this a few weeks ago. This one seems to be the most active.
posted by schmod at 11:07 AM on August 15, 2012


Still, in re: acquiring talent, I think there's a cultural improvement over the way the dot coms managed to fail ten-plus years ago... I remember one particularly offensive phrase describing the practice of "hiring for tribe..."
posted by Graygorey at 11:08 AM on August 15, 2012


Is he referring to The Creamery in SF? (I had to look it up because I hadn't heard of it before) There's quite a few tech companies in that area (Zynga etc) but not nearly as many as in the Valley itself.
posted by TwoWordReview at 11:08 AM on August 15, 2012


rmd1023: "diversity in your customer base is a good thing - the broader your reach, the less likely that a given sector's problem will hose all your business."

If you can maintain a diverse range of customers, achieve high retention, and focus on a few core competencies that you genuinely do better than anybody else, you've just achieved the holy grail of running a service-based business.

It's a lot easier said than done. That said, there do seem to be a lot of startups that don't even try to reach out...
posted by schmod at 11:09 AM on August 15, 2012


This needs to be codified into law immediately, because these talent acquisitions are quickly becoming poisonous to the economy, and directly contradict the spirit of the free market. Sorry, Google, but you're being pretty evil here.

What that HELL are you talking about? Seriously it's not like the company being acquired doesn't have a say in the matter, and it's obviously not like the barrier to entry is so hard that someone else can't do the same thing.
posted by aspo at 11:12 AM on August 15, 2012 [6 favorites]


What 21 year old CS grad wants to build out a call center, or spend night and day replying to user complaints about uptime.

Many of them, actually. They're the ones who deserve investor money. The other ones deserve nothing more than a ream of resume paper.
posted by incessant at 11:12 AM on August 15, 2012


schmod: Oh hell yeah. I took the article as pointing out to startup folks that, in fact, there is life outside your apartment your coastal enclave.

Also, the term "aquihire" makes me twitch. And not in a good way.

posted by rmd1023 at 11:14 AM on August 15, 2012


It isn't like google is doing some sort of hostile takeover of catpics.com and selling it for scrap.

The "aquihire" is really just an expression of the today's prevailing wisdom in software development. That software is easy but teams are hard. Who wouldn't want to get a proven team. The real answer is software "tiger teams" that can go in to a company and own a project.
posted by Ad hominem at 11:15 AM on August 15, 2012


Is he referring to The Creamery in SF?

I assume he's referring to the Creamery in Palo Alto, which is one of the crappiest fake diners I have ever encountered. If people in the industry are actually having lunch there more than once, it's a bad sign indeed about their ability to make reasonable judgments.
posted by escabeche at 11:16 AM on August 15, 2012 [3 favorites]


Corporations should not be allowed to purchase other corporations, unless they demonstrate a good-faith attempt to preserve the other business's products as a going concern.

Thanks. I almost fell off my chair laughing. We can't stop usury, for god's sake.
posted by mrgrimm at 11:16 AM on August 15, 2012 [5 favorites]


[...] and it's obviously not like the barrier to entry is so hard that someone else can't do the same thing.

Except that all the patents get acquired with the company, and those are weapons grade uranium as far as doing the "same thing".
posted by stoneweaver at 11:17 AM on August 15, 2012 [1 favorite]


Many of them, actually. They're the ones who deserve investor money. The other ones deserve nothing more than a ream of resume paper.

Point taken, that is pretty much how I spent my 20s. I really did appreciate all the pats on the back but in retrospect I would have liked some of that sweet sweet google money.
posted by Ad hominem at 11:17 AM on August 15, 2012


I assume he's referring to the Creamery in Palo Alto, which is one of the crappiest fake diners I have ever encountered.

Yes, and yes. The other cultural reference point here would be Buck's in Woodside.
posted by mrgrimm at 11:18 AM on August 15, 2012


Here's my other problem with "acquihiring" -- it's just another version of working on spec. "Go ahead, do all the work for free, take all the risk. Maybe we'll pay you for it if we like it, but let's not rush things, mmmkay?"
posted by incessant at 11:19 AM on August 15, 2012


Palo Alto Creamery.

It's not really that bad. There are far worse crappy fake diners.
posted by mrgrimm at 11:19 AM on August 15, 2012


Except that all the patents get acquired with the company, and those are weapons grade uranium as far as doing the "same thing".

So fix the patent system. Please.
posted by aspo at 11:21 AM on August 15, 2012 [2 favorites]


But really, if a company makes a product that they can't keep running because they are dependent on 1-3 dollar one time fee (minus a 30% cut!) for a piece of software that needs regular maintenance and server costs and feature additions and it's just not possible because even with a megahit that ends up being not that much money, well maybe $2.99 as an "expensive" app isn't a good model for anyone but the runners of the appstores.
posted by aspo at 11:23 AM on August 15, 2012 [1 favorite]


There's an interesting study on the "acqui-hire" phenomenon floating around this month. Why, if a company is floundering, wouldn't the key employees just defect for a hiring bonus at Google? Why pay the investors back anything at all? The key points were:
1. It's better for founders and employees to say they were acquired than to say they were poached. Even though it might be financial "worse" for founders/employees than a straight defection.
2. It's better for investors because they get something rather than nothing (i.e. if a company goes bust or everyone quits), and in such a small tight network of investors it's good to keep investors happy (even for buyers, who will undoubtably source deals from these investors again)
3. Tax benefits: capital gains rather than income taxes, which might alleviate lost revenue to employees/founders in point 1.
Stuff that didn't matter:
1. Value of a "team" versus individual employees; most of the sales/marketing/support team is chaff to the acquirer.
2. Non-compete/other contractual obligations (most of this happens in California, which generally does not look kindly on work restrictions)
3. Potentially valuable IP
Pretty crazy stuff really, which illustrates the tight capital -> investor -> buyer lifecycle.
posted by 2bucksplus at 11:28 AM on August 15, 2012 [2 favorites]


I think the housing market bubble was a mere premonition of what's to come. We've been operating under the fallacy that the U.S. can just become a service economy.

Problem: People don't need this proliferation in services. People can't afford all these services. It doesn't make economic sense. What we're not making is things that people actually need.

We're not investing in our own infrastructure, we're not investing in our own people. We're letting our freight lines get turned into bike paths for rich suburbanites, we're letting our working waterfronts get turned into shorefront condos.

The US economy is running on batteries.
posted by dunkadunc at 11:36 AM on August 15, 2012 [6 favorites]


I also strongly disagree with this article. The shit that failed in 2000 NOBODY wanted, not even the jerkoffs in Silicon Valley.

Today, the jerkoffs in Silicon Valley manufacture the desire for the rest of the U.S. and as a result, the world. Does Peoria/Dubai want Instagram, Twitter, Tumblr, Pinterest, and Foursquare? Of course they do.

What we're not making is things that people actually need.

We passed the "need" barrier long, long ago. We still make a shitload of food. ConAgra, Monsanto, and Coca-Cola are still making barrels of money, and Americans are still shoving their products down their gullets as fast as possible.
posted by mrgrimm at 11:40 AM on August 15, 2012


And also phones.

In other words, the article sux.
posted by mrgrimm at 11:41 AM on August 15, 2012


He's shocked, SHOCKED, to find billions of dollars in economic activity between the coasts. As someone from between the coasts who has lived on them, duh.
posted by C.A.S. at 11:48 AM on August 15, 2012


mrgrimm: "We passed the "need" barrier long, long ago. We still make a shitload of food. ConAgra, Monsanto, and Coca-Cola are still making barrels of money, and Americans are still shoving their products down their gullets as fast as possible."

I would suggest the ConAgra, Monsanto and Coke aren't making things people need.

And what about household items, clothes, electronics, et cetera? Everything is made for a fraction of its true cost, subsidized by miserable conditions and environmental devastation overseas.
We're not paying the true cost of production.
posted by dunkadunc at 11:55 AM on August 15, 2012 [3 favorites]


We can't just send everyone back to the steelmills. We cannot race China to the bottom, it is like America was 150 years ago over there. No regulation, no regard for the lives of the seemingly endless supply of cheap labor. Nobody wants to live in company housing and get paid 2$ a day here. That situation isn't going to last forever.

Even the dumbest online service has an upside. Nobody needs to stick it on a boat and ship it to where the people who can afford it are. Rich people from all over the world, even China, can use catpics.com. I don't need to spend money manufacturing it, I just pay the server bills.

I think we will see a return to small scale manufacturing and "craft" in America. We don't have millions of people employed as typists and adding machine operators anymore. That was just a momentary blip in the history of industry. Those people are freed up to handcraft mittens that won't fall apart after wearing them once and jams out of heirloom fruit and all sorts of stuff that is impractical at large scale.
posted by Ad hominem at 12:02 PM on August 15, 2012 [3 favorites]


Today, the jerkoffs in Silicon Valley manufacture the desire for the rest of the U.S. and as a result, the world. Does Peoria/Dubai want Instagram, Twitter, Tumblr, Pinterest, and Foursquare? Of course they do.

A bubble's still a bubble. Just because there's greater demand for fluffy apps this decade doesn't mean it might not all come crashing down spectacularly. The question is in what different way they will crash this time.
posted by Apocryphon at 12:11 PM on August 15, 2012 [2 favorites]


Even the dumbest online service has an upside.

I agree with your general point, but that's a bold claim.

A bubble's still a bubble.

I agree there's a bubble, but it's plain and simple overvaluation, not the fact that Silicon Valley doesn't want the same things middle america does.

Like it or not, the Internet hit mainstream status somewhere 2000-2010. The geeks are now the minority.
posted by mrgrimm at 12:20 PM on August 15, 2012


It's not like Exodus didn't have a very useful product and network. He's ignoring the problem that there were 200+ other companies dog piling into the server co-location and Internet services niches based on faulty Gartner reports about the size of the industry. It wouldn't have mattered where in the US Exodus had customers (and they had them from all over). There were at least 20 other companies dramatically cutting prices for similar services to try desperately to get enough customers to stop the hemorrhage of money from building out capital intensive infrastructure in the Internet services space.

I do agree that the Silicon Valley and places like it are too insular. But he picked a bad example, and he doesn't acknowledge what the drivers are. Flying out to Peoria for multiple trips to do technical sales costs money, money that underfunded start ups that are trying to develop costly *disruptive* technology can't afford. It's not the executives of start ups that focused the priorities of the company on fast growth over sustainability, it's the VC's who were demanding a minimum return on their investment that would seem insane to any traditional industry mentality. Your success or failure as a technology start up was determined as much or more by how much funding you could secure as it was by your customer base, and big surprise, if you have a complex solution in development you are basically paying your customers to be customers until it's past the alpha stage.

My anecdotal experience that doesn't really prove anything (I merely offer it as a counterexample). I worked for two failed Silicon Valley start ups, and the first did have customers from all over along with adequate funding. Despite having a useful product in Peoria, it still failed miserably from "insular thinking". In this case the insular thinking of ex-IBM employees who were used to the idea of owning their own corporate infrastructure and couldn't see the small scale start up reality that you have to outsource some of it or you can't take in enough money to pay off the capital expenditures in time. The second one focused exclusively on building local customers, and failed partly because they couldn't get funding from VC's who'd already been burned in that market space, and partly because we were too early in the window for running mission critical business software over the Internet (cheap Internet connectivity not being reliable enough yet in 2000). It's worth noting that the technology that was sold in the collapse of the second company was used pretty much as is by several organizations from all over the US despite being developed in exactly the silicon valley insular manner this guy is decrying.
posted by BrotherCaine at 12:37 PM on August 15, 2012 [1 favorite]


ahem,

o/` haters gonna haaaaate
posted by gorestainedrunes at 1:01 PM on August 15, 2012


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It’s that simple!
Apparently he didn't fail hard enough the first time. Maybe this time will do it.
posted by ennui.bz at 1:03 PM on August 15, 2012 [1 favorite]


Here's my other problem with "acquihiring" -- it's just another version of working on spec. "Go ahead, do all the work for free, take all the risk. Maybe we'll pay you for it if we like it, but let's not rush things, mmmkay?"

They take the risk but also the reward. Launch something huge? You get a very nice payday to go work for the acquiring company. If you manage a real hit, say Instagram, you're getting VERY well rewarded.

If you built Instagram while working for Google or Facebook, you'd get your salary and maybe a little extra bonus. You wouldn't get the kind of payday they actually got by taking the risk.

Obviously most companies don't get the huge payday --- but thats because they didn't build something that amazing and/or popular, frankly.

I'm not a huge risk taker when it comes to money, which is why I work for a big company and forego the potential huge upside to have a more stable income.
posted by wildcrdj at 1:26 PM on August 15, 2012 [1 favorite]


Yes. The "talent acquisition" thing needs to die, and it needs to die quickly.

I would urge you to rethink your position on this. All startups face several possible exit outcomes. Some are better than others. The worst being failure. The customers lose the product they loved, the employees lose their jobs, and the investors lose their money. The best outcome is becoming huge, filing for IPO and becoming the next Apple. The former is the most common scenario. The latter basically never happens. Its a fluke. Being acquired for your company's talent is a great outcome for the founders, investors, and employees. Yeah, it sucks if the product gets cancelled in all that, but keep in mind the most likely outcome for all startups is complete failure. I'd rather the customer lose their product than the 30 employees lose their jobs.
posted by braksandwich at 2:00 PM on August 15, 2012 [1 favorite]


They're the ones who deserve investor money. The other ones deserve nothing more than a ream of resume paper.

What is this "deserve" thing you are speaking of?
posted by spaltavian at 2:12 PM on August 15, 2012 [1 favorite]


I read the title of this post without looking at the article and immediately thought it was a guide for Democrats on how not to lose this election cycle.


Oh well.
posted by dave78981 at 2:38 PM on August 15, 2012


Ad hominem: "We can't just send everyone back to the steelmills. We cannot race China to the bottom, it is like America was 150 years ago over there."

That's a false dichotomy. You can have industry and not have 100ft visibility from smog and child workers losing hands in machinery.

American industry has been sold out so that the wealthy few can have short-term gains. What is the true cost of having everything made on one side of the world and shipped over? What will the true cost be when we run out of oil and we're fucked because we didn't invest in sustainable industry? We won't have solar-powered container ships.

These tech startups- Do they provide something people want? Probably. Do they provide something that people need, something that has a net positive for society? Most of them don't.

What Americans want and what Americans need are largely separate. And don't get me started on what Americans deserve.

So much investment that should be going into building a resilient, sustainable economy is instead being frittered away on stupid tech stuff. We're pretending we can make our economy work by providing services, writing JavaScript and making lattes for each other.
posted by dunkadunc at 3:22 PM on August 15, 2012 [1 favorite]


The U.S. is still the top manufacturer in the world, you know. Manufacturing _jobs_ have declined but output is still very high thanks to automation. The service sector growth has outpaced manufacturing but it's not like the US has conceded that to the rest of the world.
posted by wildcrdj at 3:49 PM on August 15, 2012 [1 favorite]


We won't have solar-powered container ships.

Though I imagine that, with modern materials and technology, one could make a sailing ship that's a lot faster and more efficient than the 19th-century ones. Between lightweight, super-strong materials (spidergoat silk, composites) and computerised control systems with input from local sensors, GPS and weather radar, one could have a ship that captures more of the wind's energy (as kinetic energy and/or electric power) and doesn't need a vast amount of manpower to keep it going. Perhaps if oil does get more expensive, we'll see automated sail freighters plying the high seas.
posted by acb at 4:10 PM on August 15, 2012 [1 favorite]


They take the risk but also the reward. Launch something huge? You get a very nice payday to go work for the acquiring company. If you manage a real hit, say Instagram, you're getting VERY well rewarded.

Yes, let's look at the lottery winners to prove that the lottery is a good idea.
posted by incessant at 4:31 PM on August 15, 2012 [1 favorite]


Yes, let's look at the lottery winners to prove that the lottery is a good idea.

Thats not at all what I was saying. You claimed the big companies were just outsourcing risk. They're also _giving up the potential reward_ by doing so, it's an even trade.

If you don't want that risk, don't go work for a startup. The whole point of the startup culture is high risk / high reward. But the vast, vast majority will fail.

I spent 5 years at software startups and close to 10 at big companies. The risk/reward calculus is pretty well balanced. I fail to see where anyone is being exploited.
posted by wildcrdj at 5:13 PM on August 15, 2012


That's a false dichotomy. You can have industry and not have 100ft visibility from smog and child workers losing hands in machinery.

It isn't a dichotomy at all. I didn't say would couldnt make anything, I said we can't create employment by sending people back to the steelmills.

We need to compete on cost or quality. We can't beat China on cost so we have to compete on quality. And by quality I don't necesarily mean craftsmanship. "Cool" is a quality we can compete on. Why does an iPod sell more than a grey market knockoff made in the same plant in china.

But Wildcrdj already said it. We make tons of stuff, just with less people. We really can't turn back the clock and replace all the CNC machines with a guy and a lathe.

My grandfather used to tell me about his years as a union rep at the Carborundum plant in western New York State. He told a lot of tall tales so it might not be true, but I view tall tales as allegories, almost like bible stories.

One day one of the workers was fired and she came to him, the reason given was that none of her work passed QC, everything was off because she couldn't read a micrometer. He went through all the contracts and found that in no place did it say that employees must be able to read a micrometer, so it was up to the plant to provide a method to tell if the peice was correct. He said, and I'm not sure I believe this, that they ended up having to hire new workers to read the micrometerf or each punch press operator.

Now we have machines that will do the entire process for us.
posted by Ad hominem at 5:26 PM on August 15, 2012 [1 favorite]


justsomebodythatyouusedtoknow: "If launching an AI into space, prioritize teaching it Asimov's three laws over "Daisy, Daisy..."

There's a very good reason for why HAL knows Daisy! HAL knows its heritage.

posted by barnacles at 9:33 PM on August 15, 2012


Perhaps if oil does get more expensive, we'll see automated sail freighters plying the high seas

There actually are sail-augmented freighters out there, using a variety of sails, rtaditional sails or things like Magnus-effect rotors or turbosails (see). I don't think they've been especially successful, but as you say, maybe as oil prices rise…
posted by hattifattener at 9:56 PM on August 15, 2012


I read the title of this post without looking at the article and immediately thought it was a guide for Democrats on how not to lose this election cycle.

Curious what you voted on in 2001? ;)

We make tons of stuff, just with less people.

And that's been the inherent growing problem since the mid 19th century: too easy to make stuff; too hard to find satisfying work for the entire population. I have no problem with make-work programs--as long as they have a positive, progressive goal, of which there seems to be plenty of possibilities. We just have to want it and work for it.

I've long wished for a strong government to direct the aims of private business, but then again I suppose I'm a communist.

We're pretending we can make our economy work by providing services, writing JavaScript and making lattes for each other.

Services--like, oh, heart surgery or hip replacement, or massage/acupuncture/chiropracty, or live music performances, or wedding/funeral planning, or childcare; JavaScript--selling custom software/developing Web sites still seems to be a valid industry; making lattes--food preparation is about as basic an industry as it gets ... those aren't part of a viable economy? We need to stop making so much stuff and base our economy more on services. The future of the planet depends on it.
posted by mrgrimm at 7:54 AM on August 16, 2012


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