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Well put, although I'm not quite sure "optimism" is the right term. Is it optimistic or egotistical for every SV engineer to believe that they are capable of c

Well put, although I'm not quite sure "optimism" is the right term. Is it optimistic or egotistical for every SV engineer to believe that they are capable of creating a company worth a nine-figure IPO or acquisition - or, alternatively, that they can personally increase an established company's bottom line by a million a year? Somewhere in between, I'd guess. Partly it's overestimation of the market, partly it's overestimation of the self. Either way, it does seem to be a difference between SV and elsewhere. SV entrepreneurs believe they can succeed because it never even occurred to them to believe otherwise and of course nobody else would suggest such a thing. Entrepreneurs elsewhere are generally more aware of doubts and concerns, but consciously intend to prove the nay-sayers wrong. Is one approach or mindset better than the other? It's tempting to say that the financial success of SV validates that approach, but I don't think that success occurs in a vacuum. Could those SV companies get where they are without past contributions from MIT or Bell Labs, current ones from Austin or Seattle? I don't think so. An army needs more than one kind of soldier, an industry needs more than one kind of company, and just because SV seems to hog all the glamour doesn't mean other places are somehow lacking.

mgkimsal 15y ago
"SV entrepreneurs believe they can succeed because it never even occurred to them to believe otherwise and of course nobody else would suggest such a thing. " And many of them would be the first to also trot out the old cannards of "90% of all startups fail" and so on, they just don't really believe it, or don't believe their project will fail, regardless of the evidence.
- wisty 15y ago
  And every WWI soldier believed he'd make it through the barbed wire and machine gun bullets, otherwise none of them would stick around. I guess the difference is, finding out the hard way that you burnt through all your funding and have to look for another job is hardly comparable to getting shot. And some of them (at least, enough to make the VC firms stick around) do succeed.
socratic 15y ago
Apple, Google, and Facebook all make around $1m revenue/employee and employ around 100,000 people. (Profit/employee is about $300-400k, incidentally.) While the average SV engineer isn't working at one of these companies, doesn't this mean that there are perhaps tens of thousands of engineers who are on average producing $1m/year in revenue? (If not, it seems like you need to argue for an extremely skewed distribution of the value that individual engineers are adding based on quality or area of expertise.) If one of these $1m revenue/year ("1MRPY") engineers starts a company with n 1MRPY engineer friends, is it so crazy to suggest that they might produce $x * n million worth of value over x years? (Even if they just build infrastructure and never turn a profit?) Or that they might be worth $4 * n million in revenue over a four year earn-out to an acquiring company?
- CPlatypus 15y ago
  "doesn't this mean that there are perhaps tens of thousands of engineers who are on average producing $1m/year in revenue?" No. Just because total revenue divided by total headcount comes out to a million doesn't mean every engineer is contributing a million. For one thing, a lot of that revenue is return on investment - in the code, in customer relationships, in the "brand" generally - in previous years, nothing to do with current headcount. For another, the distribution is exponential. A few people contribute many times that million, while the majority contribute less, and many of those at the high end aren't engineers. So yes, engineers who contribute a million dollars to the bottom line do exist, but they're a very small minority. I've even been one myself, but not every year. Everyone in SV seems to think they're firmly established in that elite category. 99% of them are wrong. "If one of these $1m revenue/year ("1MRPY") engineers starts a company with n 1MRPY engineer friends, is it so crazy to suggest that they might produce $x * n million worth of value over x years?" It's not totally crazy, but it's very unlikely. Such engineers are rare enough, and in such high demand, and self-directed enough, that you're unlikely to get more than a couple of them to follow one vision even if you're friends. Then you have to find people with non-engineering skill sets who are as good in their respective fields, and convince them to join you. Then you'll probably still fail due to factors other than the quality of your personnel. What we're facing here is the compounding of two errors. Everyone thinks they're in the top 1%, and that being in the top 1% for one skill set is enough to ensure success. In reality, most startups have average teams and many non-technical obstacles to overcome. I've been in nine startups myself. I'd hardly discourage anyone from trying, but overconfidence can prevent people from doing what they really need to, and overconfidence seems to be California's most abundant crop.

mgkimsal 15y ago

"SV entrepreneurs believe they can succeed because it never even occurred to them to believe otherwise and of course nobody else would suggest such a thing. " And many of them would be the first to also trot out the old cannards of "90% of all startups fail" and so on, they just don't really believe it, or don't believe their project will fail, regardless of the evidence.

wisty 15y ago
And every WWI soldier believed he'd make it through the barbed wire and machine gun bullets, otherwise none of them would stick around. I guess the difference is, finding out the hard way that you burnt through all your funding and have to look for another job is hardly comparable to getting shot. And some of them (at least, enough to make the VC firms stick around) do succeed.

socratic 15y ago

Apple, Google, and Facebook all make around $1m revenue/employee and employ around 100,000 people. (Profit/employee is about $300-400k, incidentally.) While the average SV engineer isn't working at one of these companies, doesn't this mean that there are perhaps tens of thousands of engineers who are on average producing $1m/year in revenue? (If not, it seems like you need to argue for an extremely skewed distribution of the value that individual engineers are adding based on quality or area of expertise.) If one of these $1m revenue/year ("1MRPY") engineers starts a company with n 1MRPY engineer friends, is it so crazy to suggest that they might produce $x * n million worth of value over x years? (Even if they just build infrastructure and never turn a profit?) Or that they might be worth $4 * n million in revenue over a four year earn-out to an acquiring company?

CPlatypus 15y ago
"doesn't this mean that there are perhaps tens of thousands of engineers who are on average producing $1m/year in revenue?" No. Just because total revenue divided by total headcount comes out to a million doesn't mean every engineer is contributing a million. For one thing, a lot of that revenue is return on investment - in the code, in customer relationships, in the "brand" generally - in previous years, nothing to do with current headcount. For another, the distribution is exponential. A few people contribute many times that million, while the majority contribute less, and many of those at the high end aren't engineers. So yes, engineers who contribute a million dollars to the bottom line do exist, but they're a very small minority. I've even been one myself, but not every year. Everyone in SV seems to think they're firmly established in that elite category. 99% of them are wrong. "If one of these $1m revenue/year ("1MRPY") engineers starts a company with n 1MRPY engineer friends, is it so crazy to suggest that they might produce $x * n million worth of value over x years?" It's not totally crazy, but it's very unlikely. Such engineers are rare enough, and in such high demand, and self-directed enough, that you're unlikely to get more than a couple of them to follow one vision even if you're friends. Then you have to find people with non-engineering skill sets who are as good in their respective fields, and convince them to join you. Then you'll probably still fail due to factors other than the quality of your personnel. What we're facing here is the compounding of two errors. Everyone thinks they're in the top 1%, and that being in the top 1% for one skill set is enough to ensure success. In reality, most startups have average teams and many non-technical obstacles to overcome. I've been in nine startups myself. I'd hardly discourage anyone from trying, but overconfidence can prevent people from doing what they really need to, and overconfidence seems to be California's most abundant crop.