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Gosh this column is muddled. It's no wonder there's a problem. If you can't think clearly about an issue it's highly unlikely you're going to be able to shed li

Gosh this column is muddled. It's no wonder there's a problem. If you can't think clearly about an issue it's highly unlikely you're going to be able to shed light on it. Startups are businesses that make something people want that are highly scalable. So no, "startups" and "small businesses" are different things. Your dentist has a small business. At the same time, it's very possible to make something that people want and simply have no desire to scale. That's what I'm seeing for a lot of American startups. Yes, there are all the wide-eyed younger folks who are out to imitate Zuck and be the next Facebook, but for every one of those there are a hundred people out in the hinterland who aren't out to conquer the world. Why? Lots of reasons. First, people who change the world get punished. They get punished by competitors, by the government, and sometimes even by the popular opinion of the people who use their startups. Why make yourself a target? Second, a disruptive startup's relationship to the government is far from clear. Is AirBnB an appointment service or a hotel service? Do the guys that offer ride shares run a taxi business? Or a bulletin board? The government, over time, has come up with thousands of little boxes that businesses are supposed to fit inside. Depending on which box you fit in, various rules apply. What this has done is create lots of stovepipe business systems. So when a business comes along that crosses many boxes, which ones apply? A lawyer can help here, but she's just going to be able to offer an legal opinion, not protect you from possible problems. Third, there's the big business overhead hit. There's a huge difference between 3 guys in a garage and 3 thousand guys in an IT center. You need all sorts of administrative resources for the IT center, and lots of training for management on how to act. That doesn't come overnight, and you don't get there without taking a productivity hit. Now, if you're Google and revenue figures give you the slack to know you're going to be around for a while, you take the dive and go through the hassle. But if you're some fly-by-night, just-getting-started business which might have a huge staff for just one year and then disband? You can't make the overhead numbers work. I can't go out and hire 3 thousand guys to build my human-powered recommender engine for next year. It'd take a year or more of scaling just to approach that level of staffing. And even then I'd probably screw it up. All those laws to make sure "big business" behaves properly have an assumption that the business is an ongoing concern -- they have lots of money and lots more on the way. That assumption is not always true. Finally, even if you had an idea to conquer the world, do you really want to be an executive? You can be a Derek Sivers and have all the money you want and the lifestyle you choose, or you can spend your time managing bureaucratic systems and endless people problems. Does that second forty million spend any differently than the first forty? The idea of what it's like to be a business overlord and the reality are vastly different things. The smart choice for many might be to ditch the fast-growth and large-scale scene entirely. I constantly see wonks who understand little bits and pieces of the startup scene -- that young, fast growing startups count more than small businesses in general, for instance -- yet miss out on huge chunks of what's really happening. They offer to tweak the existing environment by adding still further complexity, thinking they are helping out. They are not. There's not a lack of people creating business opportunities that are scalable. There's a lack of people wanting to scale businesses. Totally different thing.

ippisl 15y ago
>> There's a lack of people wanting to scale businesses. Isn't this the role of experienced managers: join the business at a point it has shown possibility to scale(and big profits) and make the scaling happen ? And if you've got a successful and growing business you could manage to hire a good manager to do this ? or there's a lack of people who are fit for this task ?
- DanielBMarkham 15y ago
  You would think so, wouldn't you? This is a bigger discussion than I have time to do justice, but there's an entire field of business books around the "valley of death" -- this huge hole that businesses go into and never come out. It's not a linear-scaling thing. 10 people aren't just 10 times harder to manage than 1. The reason you see lots of 20-50 person IT shops is that they never made it out of the valley. There's this huge consulting field dedicated to helping businesses who get stuck here. (Whether they actually help or not is up for debate). For instance, if you have 500 people, you'll have a full HR staff full of people becoming experts in various areas of corporate staffing law that affect you directly. If you have 100, you don't have the funds for those guys yet you are still affected by the same laws. It's that way for a hundred things -- the overhead is okay if you are big but unmanageable if you are crossing the line between small and medium. If you have enough acceleration, yes, you can bulldoze your way through. Just start writing checks. Google and others did this. But it's not like server scaling where for each bit you grow you can just add more management. Wish that it were so simple! Instead there are these regulatory plateaus you reach where it's an entirely different world past that. Then there's just the issue of scaling a lot of people working together, which gets harder in an exponential fashion. None of this is fun -- and what it does is stifle all the companies without the huge accelerations.

ippisl 15y ago

>> There's a lack of people wanting to scale businesses. Isn't this the role of experienced managers: join the business at a point it has shown possibility to scale(and big profits) and make the scaling happen ? And if you've got a successful and growing business you could manage to hire a good manager to do this ? or there's a lack of people who are fit for this task ?

DanielBMarkham 15y ago
You would think so, wouldn't you? This is a bigger discussion than I have time to do justice, but there's an entire field of business books around the "valley of death" -- this huge hole that businesses go into and never come out. It's not a linear-scaling thing. 10 people aren't just 10 times harder to manage than 1. The reason you see lots of 20-50 person IT shops is that they never made it out of the valley. There's this huge consulting field dedicated to helping businesses who get stuck here. (Whether they actually help or not is up for debate). For instance, if you have 500 people, you'll have a full HR staff full of people becoming experts in various areas of corporate staffing law that affect you directly. If you have 100, you don't have the funds for those guys yet you are still affected by the same laws. It's that way for a hundred things -- the overhead is okay if you are big but unmanageable if you are crossing the line between small and medium. If you have enough acceleration, yes, you can bulldoze your way through. Just start writing checks. Google and others did this. But it's not like server scaling where for each bit you grow you can just add more management. Wish that it were so simple! Instead there are these regulatory plateaus you reach where it's an entirely different world past that. Then there's just the issue of scaling a lot of people working together, which gets harder in an exponential fashion. None of this is fun -- and what it does is stifle all the companies without the huge accelerations.