Thursday, May 03, 2007

Success Videos - Paul Graham on Startups

Below is a classic video from Paul Graham, programmer, entrepreneur, founder of startup incubator Y Combinator and , importantly for this site, master next-generation business philosopher.

Graham has the extremely rare ability to reflect on his own process, and to articulate the nature of the explosive and limitless business epoch we are now in. And his wry wit is a double-rarity.

A few of Paul Graham’s ideas as I see them:

He is a tireless proponent of business startups (especially web startups).
He believes there is no limit to the number of potential business startups, because there is no limit to the amount of new ideas that people want. And, he implies in this video, there never has been, in all of human history.

Graham’s vision is that creating a startup company, getting rich, end completing the “chore” of earning a living early in life is a viable option for many many young people, and clearly he sees this path as much closer to a mainstream career option is common.

I might add that there are, as I see it, many reasons for this to be true.

Products are now often mostly informational: digital not physical.

Since products are both created and delivered via information, the huge capital requirements to create an industrial-age product have shrunk dramatically.

In the Industrial age, the huge economies of scale needed to make affordable products, could only be achieved by hugely capitalized, enormously large companies. Often these products were simple products as well. Oreos. Corn Flakes. Bathroom tissue. Now, a huge capital base is not required to create an attractive, cheap product, and furthermore, products can be complex and detailed. This also, as a corollary, implies that huge variety of differentiated products can be created.

Similarly, in the Industrial Age, distribution was difficult. Physical objects had to be distributed and there was limited shelf space. There were costs. Bottlenecks. Middlemen. In the Digital Age, none of these concepts apply. Distribution is perfect and instantaneous. Products can be nearly free, and highly differentiated. We can use more products, on our desktops, in a day, than our grandparents used in a lifetime.

Back to Paul Graham:
In this video, besides articulating his breakthrough vision of the new primacy of startups, he articulates remarkable insights into the startup process. In many ways he recalls the ability of a Peter Drucker to synthesize and explain the dynamics of startups. One of Drucker’s dicta: “The Purpose of a business is to create a customer” is, in essence restated by Graham: the main focus of a startup is to attract users. There are many more key points in the video that reflect classic business principles, although he refashions them to focus on the startup space:

Speed is a key driver of success.
Continuous improvement is key (also a big-business concept, and epitomized by Toyota).
Stay flexible. Let the customer shape the business.
Commitment is more important than brains.
Avoid excuses that prevent new initiatives.

Graham’s vision is the pulse of the age. He reminds me simultaneously of Emerson, Brian Tracy, Drucker, and Edward DeBono.

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