Paul Graham – Why Smart People have Bad Ideas

Back in 2005, programmer, writer and investor Paul Graham teamed up with some friends to conduct an experiment.

They decided to give seed funding to a bunch of new startups during the summer so that college student could participate.

Their objective was to find the lower boundary of who could successfully run a startup.

After sifting through 227 applications they uncovered an interesting insight.

We expected to divide them into two categories, promising and unpromising. But we soon saw we needed a third: promising people with unpromising ideas.

Many would have taken this insight and moved on but Paul dug deeper. He asked “Why?”. Why do smart people have bad business ideas? To answer the question he began with introspection.

Let’s look at our case. One reason we had such a lame idea was that it was the first thing we thought of. I was in New York trying to be a starving artist at the time (the starving part is actually quite easy), so I was haunting galleries anyway. When I learned about the Web, it seemed natural to mix the two. Make Web sites for galleries– that’s the ticket!

If you’re going to spend years working on something, you’d think it might be wise to spend at least a couple days considering different ideas, instead of going with the first that comes into your head. You’d think. But people don’t.

After getting negative feedback from gallery owners, Paul realised that he had created a service he wanted to work on rather than one that people wanted to pay for. He had created a solution to a problem that didn’t exist.

One of the most valuable things my father taught me is an old Yorkshire saying: where there’s muck, there’s brass. Meaning that unpleasant work pays. And more to the point here, vice versa. Work people like doesn’t pay well.

When we started Artix, I was still ambivalent about business. I wanted to keep one foot in the art world. Big, big, mistake. Going into business is like a hang-glider launch, you’d better do it wholeheartedly, or not at all. The purpose of a company, and a startup especially, is to make money. You can’t have divided loyalties.

Which is not to say that you have to do the most disgusting sort of work, like spamming, or starting a company whose only purpose is patent litigation. What I mean is, if you’re starting a company that will do something cool, the aim had better be to make money and maybe be cool, not to be cool and maybe make money.

So people work on projects for which there is no demand out of a passion for an idea. This begs the question “Why did so few applicants really think about what customers want?”.

I think the problem with many, as with people in their early twenties generally, is that they’ve been trained their whole lives to jump through predefined hoops. They’ve spent 15-20 years solving problems other people have set for them. And how much time deciding what problems would be good to solve? Two or three course projects? They’re good at solving problems, but bad at choosing them.

But that, I’m convinced, is just the effect of training. Or more precisely, the effect of grading. To make grading efficient, everyone has to solve the same problem, and that means it has to be decided in advance.

Paul notes that people often skip the important, early stage of finding a real, tangible problem to solve because they are intimidated by the perception of business.

We lacked confidence in our ability to do a mysterious, undifferentiated thing we called “business.” In fact there is no such thing as “business.” There’s selling, promotion, figuring out what people want, deciding how much to charge, customer support, paying your bills, getting customers to pay you, getting incorporated, raising money, and so on.

There are many developers out there. Many are hugely talented but few realise that finding the right problem to work on makes them disproportionately more likely to build a successful company.

A hacker who has learned what to make, and not just how to make, is extraordinarily powerful. And not just at making money: look what a small group of volunteers has achieved with Firefox.

I’d like to start providing a short take away from each of the posts I write. Doing so is a lesson issued by Gian-Carlo Rota. For this one, I think it’s fairly straight-forward:

Make something people want.

Hey. I’m Alex Murrell. I'm a Planner at Epoch Design in Bristol where I help deliver highly creative, innovative and effective pack, instore and online communications for some of the world’s biggest FMCG brands. Want to know more? You can find me on Twitter or LinkedIn.

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