6 ms·

Glorifying the binder full of maxed out credit cards here without even a hint of a mention of survivorship bias seems irresponsible. I'll happily believe that m

Glorifying the binder full of maxed out credit cards here without even a hint of a mention of survivorship bias seems irresponsible. I'll happily believe that most successful high growth startups have a "never give up" attitude but it's human psychology for readers to ignore the thousands or millions of similar people who failed and had to deal with that binder in spite of the same attitude and energy.

lotsofpulp 6y ago
I especially like > Any normal person would have given up already. I’d be interested to see how “normal” the kind of fall back options these founders had.
- jariel 6y ago
  Upper middle class is the sweet spot for these things. Not spoiled rich, but definitely no existential worries, probably some/mostly private schools. 'Good' parenting. I don't feel any of these successful founder kids had anything handed to them, however, they generally have a 'nice, clean journey' from birth to founding whereas most people face bumps, barriers etc.. But it's also a little unfair to generalize and there are absolutely opportunities for all types.
  - gowld 6y ago
    That's still pretty "spoiled". Esepcially if we're looking at $200k in high school tuition that could be put toward business startup capital.
    - jariel 6y ago
      A good opportunity for education is not 'spoiled' , it's fortunate. 'Spoiled' is the Lambo in high school for the kid with bad grades. Moreover, most private HS are not considerably better than good public schools, there are advantages but not giant leaps there. Much more advantageous is private College, but it's somewhat more competitive and at least partly meritocratic. These kids are not from massive homes, with baller cars and 1M follower instagram accounts. They don't have chefs, their Uncles are not Senators. They live in the suburbs in slightly better than normal homes, their parents drive Audis and they do their homework. They had braces as kids, and never had to worry about healthcare. Their 'Dentist' father is not 'connected'. They are really not that different from most kids, other than they never have to worry.
      - lotsofpulp 6y ago
        The private HS advantages are rubbing shoulders with other kids whose parents can afford private HS. You're much more likely to meet friends whose parents are in a position such that your friend can max out their credit cards. Same is not true of any private college, since the government hands out loans without discretion to anyone. A selective college, however, offers you similar benefits.
        jariel 6y ago
        It's an advantage to have peers who are also upper middle class and who can afford to take 3 years of risk. But it's probably a much bigger advantages to have 'Harvard' on your resume. And FYI it's not 'the money' quite as much as the 'stability, support and fallback cushion'.
      - Applejinx 6y ago
        Does it matter if there are bad grades? Is the difference between bad grades, and exceptional grades, a good reason to set a kid up with Lambo-grade back-up as far as resources and access to capital? I think it's pretty natural, if your resources are exceptional, to treat that as extending to your immediate family. Therefore it doesn't matter what grades the kid gets because there is nothing they can possibly do that's more important than being your kid, and so they'll automatically be your kid and have access to the resources of your family unit. I don't see a special moral dispensation for, 'this kid APPLIED himself and therefore it's okay that he never had to worry'.
        jariel 6y ago
        It matters a lot. "it doesn't matter what grades the kid gets because there is nothing they can possibly do that's more important than being your kid, and so they'll automatically be your kid and have access to the resources of your family unit." Just because you love your kid doesn't mean you give them everything. In fact, being superlatively rich probably comes with a whole bunch of extra challenges in raising a kid. No matter how many 'resources' a kid has access to, doing a 'good job' and having a little bit if self discipline are essential to having a good character, being civic, and also creating a positive future for oneself and ones community. Having a 'Lambo' is a very exceptional thing it stands out definitely more than one's peers. A poorly behaved, entitled kid who'll use that Lambo to rub it in the faces of his peers, who accomplishes little doesn't deserve it. Of course not everyone 'get good grades', it's entirely possible a kid is deserving in some way, by grades are at least some crude measure of applying oneself. Frankly, however much money I had I wouldn't even give my kid a Lambo, it's way too much attention and ostentatious luxury, children are not good at handling that. It's excessive and materialist. 'Access to capital' is an entirely different story as investing for the prospect of value creation is difficult than conspicuous consumption of luxury items.
- newnamenewface 6y ago
  Two were middle class and attended RISD and the third came from wealth and attended Harvard. I'm sure they all could've fallen back on parents to some extent (the wealthy one especially) but it's not like that's a atypical distribution of wealth among a group of three college educated people (which is I'm guessing the typical start up demographic).
  - shuckles 6y ago
    For better or worse, the startup mentality and YC’s content marketing reaches far more than elite college graduates these days.
- neilv 6y ago
  I've done the scary fistful of personal credit cards twice, while starting businesses, in addition to burning through personal savings, and strongly disrecommend it. I had no family safety net as a fallback, and had to pay off the cards in full, Lanister-style, including all the predatory 29.99% APR interest that kicked in on one when I was accidentally late on a payment. Funny: Sometime after paying off the first time, I was talking with a CSR at one of the credit card companies, and she looked at my account, and said, kinda awkwardly and with surprise, "You've been a very profitable customer...". I'm pretty sure that's not in any script. :) But I did have a stellar credit score by then. One of my businesses did some great and beneficial work that I feel really good about, but I should've used angel/seed investors from the start. That would've made things a lot less painful, helped me formulate a more profitable business, and helped the second business actually get all the way to launch before I couldn't stomach any more fistfuls of personal debt. How I see it now: no matter how much I'd prefer to focus solely on product and engineering, and not having to play business-person with investors, investors are so much more preferable to self-funding a startup as a non-wealthy person. If you can't convince investors, I'd advise being very skeptical of a survivor bias story from Airbnb, and instead find a way to modify or explain the business to convince investors. (You could just tell them: "we'll make money by disregarding existing regulations for a market, undercutting the competition." :)
  - gowld 6y ago
    I don't think it's predatory when you use a credit card for high-risk debt instead of getting a loan approved include a creditworthiness review.
  - offtop5 6y ago
    Unless you're already known in your industry investors aren't exactly lining up to write checks. For my current passion project, a video game , I plan on dumping between 10 to 20k in before trying to pitch it to publishers. When that likely fails I'm going to self publish , I really really enjoy programing with Unity so I'm not too worried about making my money back. I can't imagine anyone who's not well connected can walk into an industry conference and walk out with a seed round
- timr 6y ago
  > I’d be interested to see how “normal” the kind of fall back options these founders had. My history in SF weirdly intertwines with AirBnB. I first met them in 2007, at an "unofficial startup school afterparty" (this was before they were funded by YC). The party consisted of Brian and (IIRC) Joe, and a couple of bottles of booze and some soda in their apartment (the one they rented out to the first guests). Let me just say that they weren't living in luxury: there were mattresses on the floor. The only notable piece of furniture in the place was a table, and a bookshelf filled with white, blank-covered book galleys that Brian had gotten for free from some print-industry connection. I then worked at Justin.tv when these guys were getting advice from Michael and eating lunch with us on a regular basis. I bought them drinks because they were broke. The unsold Obama-O's boxes were sitting around the office. I'm as cynical as the next guy about the relative well-off-ness of a lot of startup founders these days, and I don't have any personal insight into their finances at that time. That said, as much as anyone in SF in 2008 had no fallback plan, the AirBnB founders seem to fit the bill.
  - lotsofpulp 6y ago
    I'm sure they might not have had silver spoons, but maxing out your credit cards is a luxury that people have when they don't have families to support (not to mention moving to SF). I'm not just referring to your own children, but if you have parents that need help, or siblings that need help. For example, if I was in these 3 gentlemen's shoes, I would have not maxed out my credit cards, because my parents were entering their 50s and they didn't have gold plated health insurance from government or a F500 company, so I knew I had to play it safe and be ready to be there if and when they need me for assistance with healthcare expenses. I don't mean to detract from any of their achievements, surely they put forth effort into getting into the right schools, studying the right subjects, and focusing their energy on something that netted them a very high ROI. The purpose of my comment was to shine a light on how being in a position to max out credit cards in SF in the first place without greatly negatively altering your family's trajectory qualifies you as "normal" in a very restricted sense of the word "normal".
  - breck 6y ago
    I disagree about the fallback plan. Please people, do not max out your credit cards, at least not until you are as good as what you do as they Airbnbs were in 2008. I think there's a cognitive bias at YC where they don't realize that most people (especially 20 year olds) are not very good at making things, and so on average the best advice you can give the general public is just to get better at making things. The Airbnbs were exceptionally skilled and hard working people. They made all sorts of weird stuff—and did it well. The cereal boxes were the tip of the iceberg. Brian and Joe could design (and throw a good party!). Nate was a terrific coder who did CS at Harvard. I would absolutely say they had the best fallback plan—they could make things. They could've gotten other jobs. That takes decades of hard work (I'm sure they started building things when they were very young). So if you can't make good things, DO NOT max out your credit cards. You will be setting yourself up for disaster. Instead invest in your skillset. If you aren't good enough to build something great, go out and get a job(s) and keep working on it. I like a poem written in 1916 about being someone who "delivers the goods" (https://breckyunits.com/deliver.html https://breckyunits.com/deliver.html)
- solumos 6y ago
  Well, we can certainly speculate: Chesky - Both parents are social workers, probably would have been in a rough spot taking on that debt. Would have moved somewhere else and gone back into industrial design. Gebbia - Father is/was a successful businessman in the Atlanta area, currently a city councilman. Probably would have been better off than Chesky, but the debt probably still would have stung. Would have gone back into industrial design. Blecharczyk - Upper middle class family + Harvard alum. Taking on the debt might have been painful, but he probably would have been fine eventually, especially with his technical background. I don't think their fall-back options were great. If they had "rich uncles" or something, I don't think they would have needed to max out credit cards in the first place. I think Chesky's level of conviction was simply unwavering. I'm certain there are much more affluent people who would have given up sooner.
  - conistonwater 6y ago
    Wait, why don't you think those were great fallbacks? You described them all as being solidly at least middle class. What would you consider a good fallback option?
    - solumos 6y ago
      Well, because ruining your credit and spending years to pay off a huge pile of debt is pretty "not great". Being independently wealthy or being able to take a high-paying job (FAANG+) would be a good fallback. Seems more founders these days have those.
jacquesm 6y ago
Exactly. Or the ones that ended up losing it all, including their shirts, relationships and in some cases their lives.
spaetzleesser 6y ago
There is a big difference between burning through your money knowing that your dad can eventually save you vs ending up complete broke and needing years to recover if you fail. My observation that a lot of startup founders who burn through credit cards and eat ramen noodles still have the knowledge that their well off family has the ability to save them. They work hard and sacrifice a lot but they aren’t risking their livelihood for years to come and won’t go homeless.
victorevector 6y ago
Everyone wants to be that 1 in 10 lottery winner :) Every hero needs to conquer some villain (e.g. credit card debt). It makes the victory that much sweeter.
cody3222 6y ago
It's pretty obvious that collecting a binder full of maxed out credit cards is a bad idea that most would avoid. The point PG is making is one of contrast - despite how dumb this is, they did it anyways (and it happened to pay off). He's not endorsing this action. Why can't we get back to a place of finding the good in every story/person instead of trying to tell everyone that they're doing something wrong? Also, holy cow! From credit card debt to billions. It makes the story that much better!
- nickelcitymario 6y ago
  > From credit card debt to billions... ...of also debt. 2.2 billion. I struggle to understand how their expenses are so high. Or why investors are happy to keep buying into a company that has failed to ever be profitable. Look at the cap tables. They've gone into massive deficit every year running an app. A $3B/year app.
  - cody3222 6y ago
    Would you rather invest in a $1B / year company that has a 10% profit margin and is growing 10% YoY or A company that is doing $1B / year with a 10% loss due to investment in growth but is growing at 30% YoY? Both options are reasonable investment strategies but for folks who will take a gamble to have a bigger pie, #1 is pretty reasonable. Especially if you can later cut costs and still have that 10% profit margin.
    - nickelcitymario 6y ago
      For me, I need to see a path to profitability. When Amazon spent years and years not making a profit, I understood: They were investing in infrastructure and taking on new industries. They could make a profit any time they wanted by simply not re-investing any further. Tesla, SpaceX, and many other companies necessarily have to invest heavily in the early days to build out their infrastructure and capabilities. I understand completely why they might not be profitable for years and yet still be good long-term investments. With Airbnb, I struggle to understand what they're investing in. There's no inventory. They own no real estate. That's supposed to be the genius of the business model. And yet they keep losing hundreds of millions each year. When you say they're investing in growth, what exactly are they investing in? What am I missing? What are they doing that costs $3B a year, and how does their cost-to-revenue ratio improve as the business scales? From where I'm sitting, it looks like the more business they do, the more money they lose.
exolymph 6y ago
One possible takeaway is that crazy risk tolerance = table stakes.

lotsofpulp 6y ago

I especially like > Any normal person would have given up already. I’d be interested to see how “normal” the kind of fall back options these founders had.

jariel 6y ago
Upper middle class is the sweet spot for these things. Not spoiled rich, but definitely no existential worries, probably some/mostly private schools. 'Good' parenting. I don't feel any of these successful founder kids had anything handed to them, however, they generally have a 'nice, clean journey' from birth to founding whereas most people face bumps, barriers etc.. But it's also a little unfair to generalize and there are absolutely opportunities for all types.
- gowld 6y ago
  That's still pretty "spoiled". Esepcially if we're looking at $200k in high school tuition that could be put toward business startup capital.
  - jariel 6y ago
    A good opportunity for education is not 'spoiled' , it's fortunate. 'Spoiled' is the Lambo in high school for the kid with bad grades. Moreover, most private HS are not considerably better than good public schools, there are advantages but not giant leaps there. Much more advantageous is private College, but it's somewhat more competitive and at least partly meritocratic. These kids are not from massive homes, with baller cars and 1M follower instagram accounts. They don't have chefs, their Uncles are not Senators. They live in the suburbs in slightly better than normal homes, their parents drive Audis and they do their homework. They had braces as kids, and never had to worry about healthcare. Their 'Dentist' father is not 'connected'. They are really not that different from most kids, other than they never have to worry.
    - lotsofpulp 6y ago
      The private HS advantages are rubbing shoulders with other kids whose parents can afford private HS. You're much more likely to meet friends whose parents are in a position such that your friend can max out their credit cards. Same is not true of any private college, since the government hands out loans without discretion to anyone. A selective college, however, offers you similar benefits.
      - jariel 6y ago
        It's an advantage to have peers who are also upper middle class and who can afford to take 3 years of risk. But it's probably a much bigger advantages to have 'Harvard' on your resume. And FYI it's not 'the money' quite as much as the 'stability, support and fallback cushion'.
    - Applejinx 6y ago
      Does it matter if there are bad grades? Is the difference between bad grades, and exceptional grades, a good reason to set a kid up with Lambo-grade back-up as far as resources and access to capital? I think it's pretty natural, if your resources are exceptional, to treat that as extending to your immediate family. Therefore it doesn't matter what grades the kid gets because there is nothing they can possibly do that's more important than being your kid, and so they'll automatically be your kid and have access to the resources of your family unit. I don't see a special moral dispensation for, 'this kid APPLIED himself and therefore it's okay that he never had to worry'.
      - jariel 6y ago
        It matters a lot. "it doesn't matter what grades the kid gets because there is nothing they can possibly do that's more important than being your kid, and so they'll automatically be your kid and have access to the resources of your family unit." Just because you love your kid doesn't mean you give them everything. In fact, being superlatively rich probably comes with a whole bunch of extra challenges in raising a kid. No matter how many 'resources' a kid has access to, doing a 'good job' and having a little bit if self discipline are essential to having a good character, being civic, and also creating a positive future for oneself and ones community. Having a 'Lambo' is a very exceptional thing it stands out definitely more than one's peers. A poorly behaved, entitled kid who'll use that Lambo to rub it in the faces of his peers, who accomplishes little doesn't deserve it. Of course not everyone 'get good grades', it's entirely possible a kid is deserving in some way, by grades are at least some crude measure of applying oneself. Frankly, however much money I had I wouldn't even give my kid a Lambo, it's way too much attention and ostentatious luxury, children are not good at handling that. It's excessive and materialist. 'Access to capital' is an entirely different story as investing for the prospect of value creation is difficult than conspicuous consumption of luxury items.
newnamenewface 6y ago
Two were middle class and attended RISD and the third came from wealth and attended Harvard. I'm sure they all could've fallen back on parents to some extent (the wealthy one especially) but it's not like that's a atypical distribution of wealth among a group of three college educated people (which is I'm guessing the typical start up demographic).
- shuckles 6y ago
  For better or worse, the startup mentality and YC’s content marketing reaches far more than elite college graduates these days.
neilv 6y ago
I've done the scary fistful of personal credit cards twice, while starting businesses, in addition to burning through personal savings, and strongly disrecommend it. I had no family safety net as a fallback, and had to pay off the cards in full, Lanister-style, including all the predatory 29.99% APR interest that kicked in on one when I was accidentally late on a payment. Funny: Sometime after paying off the first time, I was talking with a CSR at one of the credit card companies, and she looked at my account, and said, kinda awkwardly and with surprise, "You've been a very profitable customer...". I'm pretty sure that's not in any script. :) But I did have a stellar credit score by then. One of my businesses did some great and beneficial work that I feel really good about, but I should've used angel/seed investors from the start. That would've made things a lot less painful, helped me formulate a more profitable business, and helped the second business actually get all the way to launch before I couldn't stomach any more fistfuls of personal debt. How I see it now: no matter how much I'd prefer to focus solely on product and engineering, and not having to play business-person with investors, investors are so much more preferable to self-funding a startup as a non-wealthy person. If you can't convince investors, I'd advise being very skeptical of a survivor bias story from Airbnb, and instead find a way to modify or explain the business to convince investors. (You could just tell them: "we'll make money by disregarding existing regulations for a market, undercutting the competition." :)
- gowld 6y ago
  I don't think it's predatory when you use a credit card for high-risk debt instead of getting a loan approved include a creditworthiness review.
- offtop5 6y ago
  Unless you're already known in your industry investors aren't exactly lining up to write checks. For my current passion project, a video game , I plan on dumping between 10 to 20k in before trying to pitch it to publishers. When that likely fails I'm going to self publish , I really really enjoy programing with Unity so I'm not too worried about making my money back. I can't imagine anyone who's not well connected can walk into an industry conference and walk out with a seed round
timr 6y ago
> I’d be interested to see how “normal” the kind of fall back options these founders had. My history in SF weirdly intertwines with AirBnB. I first met them in 2007, at an "unofficial startup school afterparty" (this was before they were funded by YC). The party consisted of Brian and (IIRC) Joe, and a couple of bottles of booze and some soda in their apartment (the one they rented out to the first guests). Let me just say that they weren't living in luxury: there were mattresses on the floor. The only notable piece of furniture in the place was a table, and a bookshelf filled with white, blank-covered book galleys that Brian had gotten for free from some print-industry connection. I then worked at Justin.tv when these guys were getting advice from Michael and eating lunch with us on a regular basis. I bought them drinks because they were broke. The unsold Obama-O's boxes were sitting around the office. I'm as cynical as the next guy about the relative well-off-ness of a lot of startup founders these days, and I don't have any personal insight into their finances at that time. That said, as much as anyone in SF in 2008 had no fallback plan, the AirBnB founders seem to fit the bill.
- lotsofpulp 6y ago
  I'm sure they might not have had silver spoons, but maxing out your credit cards is a luxury that people have when they don't have families to support (not to mention moving to SF). I'm not just referring to your own children, but if you have parents that need help, or siblings that need help. For example, if I was in these 3 gentlemen's shoes, I would have not maxed out my credit cards, because my parents were entering their 50s and they didn't have gold plated health insurance from government or a F500 company, so I knew I had to play it safe and be ready to be there if and when they need me for assistance with healthcare expenses. I don't mean to detract from any of their achievements, surely they put forth effort into getting into the right schools, studying the right subjects, and focusing their energy on something that netted them a very high ROI. The purpose of my comment was to shine a light on how being in a position to max out credit cards in SF in the first place without greatly negatively altering your family's trajectory qualifies you as "normal" in a very restricted sense of the word "normal".
- breck 6y ago
  I disagree about the fallback plan. Please people, do not max out your credit cards, at least not until you are as good as what you do as they Airbnbs were in 2008. I think there's a cognitive bias at YC where they don't realize that most people (especially 20 year olds) are not very good at making things, and so on average the best advice you can give the general public is just to get better at making things. The Airbnbs were exceptionally skilled and hard working people. They made all sorts of weird stuff—and did it well. The cereal boxes were the tip of the iceberg. Brian and Joe could design (and throw a good party!). Nate was a terrific coder who did CS at Harvard. I would absolutely say they had the best fallback plan—they could make things. They could've gotten other jobs. That takes decades of hard work (I'm sure they started building things when they were very young). So if you can't make good things, DO NOT max out your credit cards. You will be setting yourself up for disaster. Instead invest in your skillset. If you aren't good enough to build something great, go out and get a job(s) and keep working on it. I like a poem written in 1916 about being someone who "delivers the goods" (https://breckyunits.com/deliver.html https://breckyunits.com/deliver.html)
solumos 6y ago
Well, we can certainly speculate: Chesky - Both parents are social workers, probably would have been in a rough spot taking on that debt. Would have moved somewhere else and gone back into industrial design. Gebbia - Father is/was a successful businessman in the Atlanta area, currently a city councilman. Probably would have been better off than Chesky, but the debt probably still would have stung. Would have gone back into industrial design. Blecharczyk - Upper middle class family + Harvard alum. Taking on the debt might have been painful, but he probably would have been fine eventually, especially with his technical background. I don't think their fall-back options were great. If they had "rich uncles" or something, I don't think they would have needed to max out credit cards in the first place. I think Chesky's level of conviction was simply unwavering. I'm certain there are much more affluent people who would have given up sooner.
- conistonwater 6y ago
  Wait, why don't you think those were great fallbacks? You described them all as being solidly at least middle class. What would you consider a good fallback option?
  - solumos 6y ago
    Well, because ruining your credit and spending years to pay off a huge pile of debt is pretty "not great". Being independently wealthy or being able to take a high-paying job (FAANG+) would be a good fallback. Seems more founders these days have those.

jacquesm 6y ago

Exactly. Or the ones that ended up losing it all, including their shirts, relationships and in some cases their lives.

spaetzleesser 6y ago

There is a big difference between burning through your money knowing that your dad can eventually save you vs ending up complete broke and needing years to recover if you fail. My observation that a lot of startup founders who burn through credit cards and eat ramen noodles still have the knowledge that their well off family has the ability to save them. They work hard and sacrifice a lot but they aren’t risking their livelihood for years to come and won’t go homeless.

victorevector 6y ago

Everyone wants to be that 1 in 10 lottery winner :) Every hero needs to conquer some villain (e.g. credit card debt). It makes the victory that much sweeter.

cody3222 6y ago

It's pretty obvious that collecting a binder full of maxed out credit cards is a bad idea that most would avoid. The point PG is making is one of contrast - despite how dumb this is, they did it anyways (and it happened to pay off). He's not endorsing this action. Why can't we get back to a place of finding the good in every story/person instead of trying to tell everyone that they're doing something wrong? Also, holy cow! From credit card debt to billions. It makes the story that much better!

nickelcitymario 6y ago
> From credit card debt to billions... ...of also debt. 2.2 billion. I struggle to understand how their expenses are so high. Or why investors are happy to keep buying into a company that has failed to ever be profitable. Look at the cap tables. They've gone into massive deficit every year running an app. A $3B/year app.
- cody3222 6y ago
  Would you rather invest in a $1B / year company that has a 10% profit margin and is growing 10% YoY or A company that is doing $1B / year with a 10% loss due to investment in growth but is growing at 30% YoY? Both options are reasonable investment strategies but for folks who will take a gamble to have a bigger pie, #1 is pretty reasonable. Especially if you can later cut costs and still have that 10% profit margin.
  - nickelcitymario 6y ago
    For me, I need to see a path to profitability. When Amazon spent years and years not making a profit, I understood: They were investing in infrastructure and taking on new industries. They could make a profit any time they wanted by simply not re-investing any further. Tesla, SpaceX, and many other companies necessarily have to invest heavily in the early days to build out their infrastructure and capabilities. I understand completely why they might not be profitable for years and yet still be good long-term investments. With Airbnb, I struggle to understand what they're investing in. There's no inventory. They own no real estate. That's supposed to be the genius of the business model. And yet they keep losing hundreds of millions each year. When you say they're investing in growth, what exactly are they investing in? What am I missing? What are they doing that costs $3B a year, and how does their cost-to-revenue ratio improve as the business scales? From where I'm sitting, it looks like the more business they do, the more money they lose.

exolymph 6y ago

One possible takeaway is that crazy risk tolerance = table stakes.