7 ms·

"Obviously the spread of computing power was a precondition for the rise of startups." If you live in San Francisco (or are visiting) you can visit the USS Pam

by rsync 11y ago

"Obviously the spread of computing power was a precondition for the rise of startups." If you live in San Francisco (or are visiting) you can visit the USS Pampanito - a retired WWII submarine.[1] One thing I think you will notice is the manufacturers plaques attached to every little piece of equipment in the submarine ... every one of them the plaque of some tiny little supplier that you have never heard of. Some little Detroit Turbine Supply Company or American Radio Corporation of Maryland ... Seriously - every single component has a label on it from a firm you have never, ever heard of. I guess I don't have a deep knowledge of military procurement and supply circa 1942 (or whenever) but it sure looks like startups to me ... [1] http://www.maritime.org/tour/index.php http://www.maritime.org/tour/index.php

kuschku 11y ago
Yes. This concept of small manufacturers that excel in their niche has been the oldest business model in history. Especially in Japan and Germany many companies have existed for over a millenium like that, and even today half of the made profits are by small, (50 people or less) companies that are hidden champions. You probably never heard of http://www.walterwerk.com/en/ http://www.walterwerk.com/en/, but they’re the world’s leader in machines that produce ice cream cones. As you said, it’s not just since computers that these companies existed – they’ve existed for centuries. But what is different this time is that for the first time investors are trying to invest in these small businesses, and try to make a huge profit out of them.
cushychicken 11y ago
Good observation. Paul's definition of "startup" seems to be "company that grows explosively to a massive size/valuation in a short number of years". The sort of businesses you cite seem to fall under the "small business" moniker, and would probably be one of the mouse-sized companies he referenced in the essay as one that tried to avoid trampling by the elephants of BigCo.
- gotchange 11y ago
  Here's the specific part in question: " People did start their own businesses of course, but educated people rarely did, because in those days there was practically zero concept of starting what we now call a startup: a business that starts small and grows big. That was much harder to do in the mid 20th century. Starting one's own business meant starting a business that would start small and stay small."
  - walshemj 11y ago
    Hmm so explain Fairchild and Intel and all the spin out companies in SV.
    - gotchange 11y ago
      I don't know what you're talking about. I didn't write the article. I just quoted the guy where he laid out the definition or his understanding of the term of « startup » which IMO is in line with the current common and broad idea of startups in that they're a special breed in the small businesses category that possess specific qualities that make them rather distinct from other business ventures and establishments.
  - _delirium 11y ago
    That part is a bit questionable. Educated people starting small companies that grew big is not something new in American business. Not even educated people starting small technology companies that grew big. It's possible there has been a quantitative change, with it being more common now (I'd need to see numbers to be convinced of that, but it's possible). But "practically zero concept" prior to the 1980s?
    - _____________- 11y ago
      Actually, the rate of new business creation has been falling ever since the 80's. According to [0], “Unfortunately, new firm formation has waned since the 1980s, and the recession accelerated the decline." [0] https://www.washingtonpost.com/blogs/on-small-business/post/united-states-new-business-formation-rate-continues-dropping-steadily/2012/05/02/gIQAjKOewT_blog.html https://www.washingtonpost.com/blogs/on-small-business/post/...
tacos 11y ago
You can extend this point to the first wide-ranging standardization efforts. Those plaques and part numbers were mandated to facilitate not openness, but interoperability. https://en.wikipedia.org/wiki/United_States_Military_Standard https://en.wikipedia.org/wiki/United_States_Military_Standar...
golergka 11y ago
That seems to be just small businesseses, not startups. Startups either go Facebook or go bust, they're not created to stay stable at small scale.
- jacquesm 11y ago
  > Startups either go Facebook or go bust, they're not created to stay stable at small scale. Nonsense. Plenty of companies start out as small companies and suddenly find themselves on the upwards slope of a hockey stick, others start out as aiming for that hockey stick and end up being 'just' sustainable businesses. This whole start-up naming thing denies 125 years of objective reality. You can't start a scalable company deliberately any more than you can reliable write an evergreen book. Time will tell what you've got, not your label of it.
  - angersock 11y ago
    Amen, brother. It's odd to me that people assume that just because you've got a small business you won't jump at a market opportunity that could lead to something bigger...even Apple at one point was just a few folks selling stuffed PCBs and doing drugs.
  - edanm 11y ago
    But wait, some people start a pizza place or a grocery store or something similar. Those kinds of businesses are definitely new businesses, and people who start these kinds of businesses is what was traditionally meant by the word "entrepreneur". But startups are qualitatively different - they are usually started with the express (and usually only) purpose of growing very large, very fast. Call them startups or not, but we definitely need a term for the kind of company that behave in this "go big or go home" fashion, and startup is the generally recognized term for it.
    - jacquesm 11y ago
      Sure, but a start-up is more of a determination after the fact than something you decide to build. The only reason it works out for YC is because they start so many companies that a few of them due to the expected distribution end up being home runs. They still influence things as much as they can in that direction but there are absolutely no guarantees and quite a few of the go-big-or-go-home companies end up going neither big nor home, they end up being normal companies. So unless you're willing to apply the start-up label only after the fact to the successful companies you're going to have to be a bit more inclusive than to just use it to describe Facebook, dropbox, google, Uber and AirBnB. > But startups are qualitatively different - they are usually started with the express (and usually only) purpose of growing very large, very fast. No, that's the exception. The rule is that start-ups were started to be companies like any other. At some point during their life span they found a groove that supported the property of very fast growth (almost always these are companies with some kind of network effect) and then retrospectively applying your criteria you can call those companies start-ups. Anyway, no need to believe me, you can simply prove me wrong by deliberately starting a start-up that will scale. I'll bet you 1:50 that you won't make it. The hard part then is this: your company has a fairly good chance (10% or so) to become just another company. Now supposing this is the case, will you then follow through on your 'go big or go home' slogan and go home and kill that company? Or will you do what everybody else does in that situation and just run it and milk the cow? And even pizza places or grocery stores can end up scaling way beyond the original aim of the founders. McDonalds is a nice example. If you want a single word that identifies companies that are growing very large, very fast I'd suggest this one: lucky.
danblick 11y ago
This idea: "Obviously the spread of computing power was a precondition for the rise of startups." seems closely related to the concept behind the book "Design Rules" (2000, isbn 978-0262024662). Here's a summary from the book flap: "[The computing industry] has experienced previously unimaginable levels of innovation and growth because it embraced the concept of _modularity_, building complex products from smaller subsystems that can be designed independently yet function together as a whole. Modularity freed designers to experiment with different approaches, as long as they obeyed the established _design rules_. Drawing on the literatures of industrial organization, real options, and computer architecture, the authors provide insight into the forces of change that drive today's economy." https://scholar.google.com/scholar?q=related:L9DylaW-KYkJ:scholar.google.com https://scholar.google.com/scholar?q=related:L9DylaW-KYkJ:sc...
lkrubner 11y ago
Multiple studies have shown that startups are dying in the USA. The great era of startups in the USA was in the mid 20th Century. At least since the 1970s, new business formation has been dying: http://econweb.umd.edu/~haltiwan/dhjm_jep_5_17_2013.pdf http://econweb.umd.edu/~haltiwan/dhjm_jep_5_17_2013.pdf http://www.brookings.edu/~/media/research/files/papers/2014/05/declining%20business%20dynamism%20litan/declining_business_dynamism_hathaway_litan.pdf http://www.brookings.edu/~/media/research/files/papers/2014/... Here is the abstract of that last study: "Business dynamism is the process by which firms continually are born, fail, expand, and contract, as some jobs are created, others are destroyed, and others still are turned over. Research has firmly established that this dynamic process is vital to productivity and sustained economic growth. Entrepreneurs play a critical role in this process, and in net job creation. But recent research shows that dynamism is slowing down. Business churning and new firm formations have been on a persistent decline during the last few decades, and the pace of net job creation has been subdued. This decline has been documented across a broad range of sectors in the U.S. economy, even in high-tech." And here is the start of the first: "The pace of business dynamism in the U.S. has declined over recent decades. The decline in business dynamism is evident in a pronounced declining trend in the pace of both gross job creation and gross job destruction. An important component of these declining trends has been the decline in the firm startup rate. The decline in the startup rate has yielded a significant decline in the share of employment accounted for by young firms – this share has declined by almost 30 percent over the last 30 years. " And please, please, please note that a country can have an incredibly dynamic, innovative industry, but that nation can still be in long-term decline. See here for details: http://www.smashcompany.com/business/if-the-usa-is-the-most-innovative-nation-on-earth-then-how-can-it-have-a-period-of-economic-decline http://www.smashcompany.com/business/if-the-usa-is-the-most-...
- jessriedel 11y ago
  Are those studies equating "starting a small business" with "startup"? Paul Graham only uses "startup" to refer to business that start small but grow large is a short time, as he says in the OP article itself (and elsewhere). If you equate those two ideas, you won't be able to talk clear about this topic.
HillaryBriss 11y ago
Interesting. That reminds me of the fact that, after WWII, US domestic producers, to a far greater extent than today, satisfied the US domestic market for all kinds of products. (I think this was largely due to the literally bombed-out industrial base of some US competitors.) And that amounted to a large number of jobs which are no longer available to US workers.

by rsync 11y ago

kuschku 11y ago

Yes. This concept of small manufacturers that excel in their niche has been the oldest business model in history. Especially in Japan and Germany many companies have existed for over a millenium like that, and even today half of the made profits are by small, (50 people or less) companies that are hidden champions. You probably never heard of http://www.walterwerk.com/en/ http://www.walterwerk.com/en/, but they’re the world’s leader in machines that produce ice cream cones. As you said, it’s not just since computers that these companies existed – they’ve existed for centuries. But what is different this time is that for the first time investors are trying to invest in these small businesses, and try to make a huge profit out of them.

cushychicken 11y ago

Good observation. Paul's definition of "startup" seems to be "company that grows explosively to a massive size/valuation in a short number of years". The sort of businesses you cite seem to fall under the "small business" moniker, and would probably be one of the mouse-sized companies he referenced in the essay as one that tried to avoid trampling by the elephants of BigCo.

gotchange 11y ago
Here's the specific part in question: " People did start their own businesses of course, but educated people rarely did, because in those days there was practically zero concept of starting what we now call a startup: a business that starts small and grows big. That was much harder to do in the mid 20th century. Starting one's own business meant starting a business that would start small and stay small."
- walshemj 11y ago
  Hmm so explain Fairchild and Intel and all the spin out companies in SV.
  - gotchange 11y ago
    I don't know what you're talking about. I didn't write the article. I just quoted the guy where he laid out the definition or his understanding of the term of « startup » which IMO is in line with the current common and broad idea of startups in that they're a special breed in the small businesses category that possess specific qualities that make them rather distinct from other business ventures and establishments.
- _delirium 11y ago
  That part is a bit questionable. Educated people starting small companies that grew big is not something new in American business. Not even educated people starting small technology companies that grew big. It's possible there has been a quantitative change, with it being more common now (I'd need to see numbers to be convinced of that, but it's possible). But "practically zero concept" prior to the 1980s?
  - _____________- 11y ago
    Actually, the rate of new business creation has been falling ever since the 80's. According to [0], “Unfortunately, new firm formation has waned since the 1980s, and the recession accelerated the decline." [0] https://www.washingtonpost.com/blogs/on-small-business/post/united-states-new-business-formation-rate-continues-dropping-steadily/2012/05/02/gIQAjKOewT_blog.html https://www.washingtonpost.com/blogs/on-small-business/post/...

tacos 11y ago

You can extend this point to the first wide-ranging standardization efforts. Those plaques and part numbers were mandated to facilitate not openness, but interoperability. https://en.wikipedia.org/wiki/United_States_Military_Standard https://en.wikipedia.org/wiki/United_States_Military_Standar...

golergka 11y ago

That seems to be just small businesseses, not startups. Startups either go Facebook or go bust, they're not created to stay stable at small scale.

jacquesm 11y ago
> Startups either go Facebook or go bust, they're not created to stay stable at small scale. Nonsense. Plenty of companies start out as small companies and suddenly find themselves on the upwards slope of a hockey stick, others start out as aiming for that hockey stick and end up being 'just' sustainable businesses. This whole start-up naming thing denies 125 years of objective reality. You can't start a scalable company deliberately any more than you can reliable write an evergreen book. Time will tell what you've got, not your label of it.
- angersock 11y ago
  Amen, brother. It's odd to me that people assume that just because you've got a small business you won't jump at a market opportunity that could lead to something bigger...even Apple at one point was just a few folks selling stuffed PCBs and doing drugs.
- edanm 11y ago
  But wait, some people start a pizza place or a grocery store or something similar. Those kinds of businesses are definitely new businesses, and people who start these kinds of businesses is what was traditionally meant by the word "entrepreneur". But startups are qualitatively different - they are usually started with the express (and usually only) purpose of growing very large, very fast. Call them startups or not, but we definitely need a term for the kind of company that behave in this "go big or go home" fashion, and startup is the generally recognized term for it.
  - jacquesm 11y ago
    Sure, but a start-up is more of a determination after the fact than something you decide to build. The only reason it works out for YC is because they start so many companies that a few of them due to the expected distribution end up being home runs. They still influence things as much as they can in that direction but there are absolutely no guarantees and quite a few of the go-big-or-go-home companies end up going neither big nor home, they end up being normal companies. So unless you're willing to apply the start-up label only after the fact to the successful companies you're going to have to be a bit more inclusive than to just use it to describe Facebook, dropbox, google, Uber and AirBnB. > But startups are qualitatively different - they are usually started with the express (and usually only) purpose of growing very large, very fast. No, that's the exception. The rule is that start-ups were started to be companies like any other. At some point during their life span they found a groove that supported the property of very fast growth (almost always these are companies with some kind of network effect) and then retrospectively applying your criteria you can call those companies start-ups. Anyway, no need to believe me, you can simply prove me wrong by deliberately starting a start-up that will scale. I'll bet you 1:50 that you won't make it. The hard part then is this: your company has a fairly good chance (10% or so) to become just another company. Now supposing this is the case, will you then follow through on your 'go big or go home' slogan and go home and kill that company? Or will you do what everybody else does in that situation and just run it and milk the cow? And even pizza places or grocery stores can end up scaling way beyond the original aim of the founders. McDonalds is a nice example. If you want a single word that identifies companies that are growing very large, very fast I'd suggest this one: lucky.

danblick 11y ago

This idea: "Obviously the spread of computing power was a precondition for the rise of startups." seems closely related to the concept behind the book "Design Rules" (2000, isbn 978-0262024662). Here's a summary from the book flap: "[The computing industry] has experienced previously unimaginable levels of innovation and growth because it embraced the concept of _modularity_, building complex products from smaller subsystems that can be designed independently yet function together as a whole. Modularity freed designers to experiment with different approaches, as long as they obeyed the established _design rules_. Drawing on the literatures of industrial organization, real options, and computer architecture, the authors provide insight into the forces of change that drive today's economy." https://scholar.google.com/scholar?q=related:L9DylaW-KYkJ:scholar.google.com https://scholar.google.com/scholar?q=related:L9DylaW-KYkJ:sc...

lkrubner 11y ago

Multiple studies have shown that startups are dying in the USA. The great era of startups in the USA was in the mid 20th Century. At least since the 1970s, new business formation has been dying: http://econweb.umd.edu/~haltiwan/dhjm_jep_5_17_2013.pdf http://econweb.umd.edu/~haltiwan/dhjm_jep_5_17_2013.pdf http://www.brookings.edu/~/media/research/files/papers/2014/05/declining%20business%20dynamism%20litan/declining_business_dynamism_hathaway_litan.pdf http://www.brookings.edu/~/media/research/files/papers/2014/... Here is the abstract of that last study: "Business dynamism is the process by which firms continually are born, fail, expand, and contract, as some jobs are created, others are destroyed, and others still are turned over. Research has firmly established that this dynamic process is vital to productivity and sustained economic growth. Entrepreneurs play a critical role in this process, and in net job creation. But recent research shows that dynamism is slowing down. Business churning and new firm formations have been on a persistent decline during the last few decades, and the pace of net job creation has been subdued. This decline has been documented across a broad range of sectors in the U.S. economy, even in high-tech." And here is the start of the first: "The pace of business dynamism in the U.S. has declined over recent decades. The decline in business dynamism is evident in a pronounced declining trend in the pace of both gross job creation and gross job destruction. An important component of these declining trends has been the decline in the firm startup rate. The decline in the startup rate has yielded a significant decline in the share of employment accounted for by young firms – this share has declined by almost 30 percent over the last 30 years. " And please, please, please note that a country can have an incredibly dynamic, innovative industry, but that nation can still be in long-term decline. See here for details: http://www.smashcompany.com/business/if-the-usa-is-the-most-innovative-nation-on-earth-then-how-can-it-have-a-period-of-economic-decline http://www.smashcompany.com/business/if-the-usa-is-the-most-...

jessriedel 11y ago
Are those studies equating "starting a small business" with "startup"? Paul Graham only uses "startup" to refer to business that start small but grow large is a short time, as he says in the OP article itself (and elsewhere). If you equate those two ideas, you won't be able to talk clear about this topic.

HillaryBriss 11y ago

Interesting. That reminds me of the fact that, after WWII, US domestic producers, to a far greater extent than today, satisfied the US domestic market for all kinds of products. (I think this was largely due to the literally bombed-out industrial base of some US competitors.) And that amounted to a large number of jobs which are no longer available to US workers.