paul graham startup ideas essay

What surprised me the most is that everything was actually fairly predictable!

You haven't seen someone's true colors unless you've worked with them on a startup.

I would rather cofound a startup with a friend than a stranger with higher output. Startups are so hard and emotional that the bonds and emotional and social support that come with friendship outweigh the extra output lost.

One thing that surprised me is how the relationship of startup founders goes from a friendship to a marriage. My relationship with my cofounder went from just being friends to seeing each other all the time, fretting over the finances and cleaning up shit. And the startup was our baby. I summed it up once like this: "It's like we're married, but we're not fucking."

I didn't realize I would spend almost every waking moment either working or thinking about our startup. You enter a whole different way of life when it's your company vs. working for someone else's company.

I think the thing that's been most surprising to me is how one's perspective on time shifts. Working on our startup, I remember time seeming to stretch out, so that a month was a huge interval.

It's surprising how much you become consumed by your startup, in that you think about it day and night, but never once does it feel like "work."

The emotional ups and downs were the biggest surprise for me. One day, we'd think of ourselves as the next Google and dream of buying islands; the next, we'd be pondering how to let our loved ones know of our utter failure; and on and on.

How hard it is to keep everyone motivated during rough days or weeks, i.e. how low the lows can be.

Your most basic advice to founders is "just don't die," but the energy to keep a company going in lieu of unburdening success isn't free; it is siphoned from the founders themselves.

I think you've left out just how fun it is to do a startup. I am more fulfilled in my work than pretty much any of my friends who did not start companies.

I'm surprised by how much better it feels to be working on something that is challenging and creative, something I believe in, as opposed to the hired-gun stuff I was doing before. I knew it would feel better; what's surprising is how much better.

Everyone said how determined and resilient you must be, but going through it made me realize that the determination required was still understated.

If you are persistent, even problems that seem out of your control (i.e. immigration) seem to work themselves out.

I've been surprised again and again by just how much more important persistence is than raw intelligence.

I'm continually surprised by how long everything can take. Assuming your product doesn't experience the explosive growth that very few products do, everything from development to dealmaking (especially dealmaking) seems to take 2-3x longer than I always imagine.

The top thing I didn't understand before going into it is that persistence is the name of the game. For the vast majority of startups that become successful, it's going to be a really long journey, at least 3 years and probably 5+.

Because we're relaxed, it's so much easier to have fun doing what we do. Gone is the awkward nervous energy fueled by the desperate need to not fail guiding our actions. We can concentrate on doing what's best for our company, product, employees and customers.

It's much more of a grind than glamorous. A timeslice selected at random would more likely find me tracking down a weird DLL loading bug on Swedish Windows, or tracking down a bug in the financial model Excel spreadsheet the night before a board meeting, rather than having brilliant flashes of strategic insight.

I learnt never to bet on any one feature or deal or anything to bring you success. It is never a single thing. Everything is just incremental and you just have to keep doing lots of those things until you strike something.

There is no such thing as a killer feature. Or at least you won't know what it is.

Build the absolute smallest thing that can be considered a complete application and ship it.

Doing something "simple" at first glance does not mean you aren't doing something meaningful, defensible, or valuable.

Now, when coding, I try to think "How can I write this such that if people saw my code, they'd be amazed at how little there is and how little it does?"

I learned to think about the initial stages of a startup as a giant experiment. All products should be considered experiments, and those that have a market show promising results extremely quickly.

When you let customers tell you what they're after, they will often reveal amazing details about what they find valuable as well what they're willing to pay for.

Normally if you complain about something being hard, the general advice is to work harder. With a startup, I think you should find a problem that's easy for you to solve. Optimizing in solution-space is familiar and straightforward, but you can make enormous gains playing around in problem-space.

When someone is determined, there's still a danger that they'll follow a long, hard path that ultimately leads nowhere.

Fast iteration is the key to success.

Now I don't laugh at ideas anymore, because I realized how terrible I was at knowing if they were good or not.

Companies that seemed like competitors and threats at first glance usually never were when you really looked at it. Even if they were operating in the same area, they had a different goal.

All the scares induced by seeing a new competitor pop up are forgotten weeks later. It always comes down to your own product and approach to the market.

Competitors riding on lots of good blogger perception aren't really the winners and can disappear from the map quickly. You need consumers after all.

I had no idea how much time and effort needed to go into attaining users.

Getting people to use a new service is incredibly difficult. This is especially true for a service that other companies can use, because it requires their developers to do work. If you're small, they don't think it is urgent. [ 4 ]

YC preaches "make something people want" as an engineering task, a never ending stream of feature after feature until enough people are happy and the application takes off. There's very little focus on the cost of customer acquisition.

There is an irrational fear that no one will buy your product. But if you work hard and incrementally make it better, there is no need to worry.

In retrospect, it would have been much better if we had operated under the assumption that we would never get any additional outside investment. That would have focused us on finding revenue streams early.

If someone offers you money, take it. You say it a lot, but I think it needs even more emphasizing. We had the opportunity to raise a lot more money than we did last year and I wish we had.

They don't even know about the stuff they've invested in. I met some investors that had invested in a hardware device and when I asked them to demo the device they had difficulty switching it on.

VC investors don't know half the time what they are talking about and are years behind in their thinking. A few were great, but 95% of the investors we dealt with were unprofessional, didn't seem to be very good at business or have any kind of creative vision. Angels were generally much better to talk to.

The degree to which feigning certitude impressed investors.

A lot of what startup founders do is just posturing. It works.

I didn't realize how much of a role luck plays and how much is outside of our control.

When we started our startup, I had bought the hype of the startup founder dream: that this is a game of skill. It is, in some ways. Having skill is valuable. So is being determined as all hell. But being lucky is the critical ingredient.

The immense value of the peer group of YC companies, and facing similar obstacles at similar times.

How advantageous it is to live in Silicon Valley, where you can't help but hear all the cutting-edge tech and startup news, and run into useful people constantly.

One of the most surprising things I saw was the willingness of people to help us. Even people who had nothing to gain went out of their way to help our startup succeed.

The surprise for me was how accessible important and interesting people are. It's amazing how easily you can reach out to people and get immediate feedback.

In social settings, I found that I got a lot more respect when I said, "I worked on Microsoft Office" instead of "I work at a small startup you've never heard of called x."

If you pitch your idea to a random person, 95% of the time you'll find the person instinctively thinks the idea will be a flop and you're wasting your time (although they probably won't say this directly).

It surprised me that being a startup founder does not get you more admiration from women.

Your job description as technical founder/CEO is completely rewritten every 6-12 months. Less coding, more managing/planning/company building, hiring, cleaning up messes, and generally getting things in place for what needs to happen a few months from now.

I knew the founder equation and had been focused on it since I knew I wanted to start a startup as a 19 year old. The employee equation is quite different so it took me a while to get it down.

I'd say 75% of the stress is gone now from when we first started. Running a business is so much more enjoyable now. We're more confident. We're more patient. We fight less. We sleep more.

Starting a start-up the Paul Graham way

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Ever wonder if you have the chops to start your own business? In this new essay , Paul Graham walks readers through the steps of launching a start-up. Graham has some street cred in this area; he started Viaweb in the 1990s and later sold it to Yahoo . But Graham also has a straightforward and very readable writing style. If you write code for a living, or want insight into the minds of those who do, his book Hackers and Painters is a good read – even if you disagree with his strong opinions or his programming language of choice . Graham uses this latest essay, How to Start a Start-up, to explain why companies should aim for niche markets, why it’s better to grow slow and why good people are more important than good ideas.

Some excerpts: On having people with business smarts help run the company: Do the founders of a startup have to include business people? That depends. We thought so when we started ours, and we asked several people who were said to know about this mysterious thing called “business” if they would be the president. But they all said no, so I had to do it myself. And what I discovered was that business was no great mystery. It’s not something like physics or medicine that requires extensive study. You just try to get people to pay you for stuff.

On starting small: Start by writing software for smaller companies, because it’s easier to sell to them. It’s worth so much to sell stuff to big companies that the people selling them the crap they currently use spend a lot of time and money to do it. And while you can outhack Oracle with one frontal lobe tied behind your back, you can’t outsell an Oracle salesman. So if you want to win through better technology, aim at smaller customers.

On keeping it cheap and simple: In technology, the low end always eats the high end. It’s easier to make an inexpensive product more powerful than to make a powerful product cheaper. …It’s very dangerous to let anyone fly under you. If you have the cheapest, easiest product, you’ll own the low end. And if you don’t, you’re in the crosshairs of whoever does.

On finding angels: Once you’ve got a company set up, it may seem presumptuous to go knocking on the doors of rich people and asking them to invest tens of thousands of dollars in something that is really just a bunch of guys with some ideas. But when you look at it from the rich people’s point of view, the picture is more encouraging. Most rich people are looking for good investments. If you really think you have a chance of succeeding, you’re doing them a favor by letting them invest. Mixed with any annoyance they might feel about being approached will be the thought: are these guys the next Google?

On VCs: And as you go down the food chain the VCs get rapidly dumber. A few steps down from the top you’re basically talking to bankers who’ve picked up a few new vocabulary words from reading Wired. (Does your product use XML?) So I’d advise you to be skeptical about claims of experience and connections.

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Paul Graham: the best startup ideas come from solving problems

I recently read a great piece by Paul Graham that talked about getting startup ideas. In the well thought out essay about entrepreneurship and the various ways startup ideas have come to some of the world’s biggest innovators, Graham finds a central concept at their core: problem solving.

Graham is one of the founders of the widely popular YCombinator, a startup incubator that has funded more than 450 startups, including Dropbox, Airbnb, Stripe, and Reddit in the last seven years.

As an investor Graham knows a thing or two about startups and good ideas. He reckons that startup ideas shouldn’t just be ideas for the sake of ideas.

The veteran investor argues that good ideas are more often a response to “some external stimulus”, citing Bill Gates’s Eureka moment with Microsoft and Drew Houston’s Dropbox clincher.

If you look at the way successful founders have had their ideas, it’s generally the result of some external stimulus hitting a prepared mind. Bill Gates and Paul Allen hear about the Altair and think “I bet we could write a Basic interpreter for it.” Drew Houston realizes he’s forgotten his USB stick and thinks “I really need to make my files live online.” Lots of people heard about the Altair. Lots forgot USB sticks. The reason those stimuli caused those founders to start companies was that their experiences had prepared them to notice the opportunities they represented.

Graham attributes the success of companies like Microsoft and Dropbox to finding what is missing and then fixing it. He reckons entrepreneurs need to live in the future — that way they can search for things that are missing.

“Once you’re living in the future in some respect, the way to notice startup ideas is to look for things that seem to be missing. If you’re really at the leading edge of a rapidly changing field, there will be things that are obviously missing. What won’t be obvious is that they’re startup ideas.”

He takes it step further and suggests that when entrepreneurs are living in the future they are able to not only solve the problem of what is missing but also build something that is interesting.

Finding startup ideas is a subtle business, and that’s why most people who try fail so miserably. It doesn’t work well simply to try to think of startup ideas. If you do that, you get bad ones that sound dangerously plausible. The best approach is more indirect: if you have the right sort of background, good startup ideas will seem obvious to you. But even then, not immediately. It takes time to come across situations where you notice something missing. And often these gaps won’t seem to be ideas for companies, just things that would be interesting to build. Which is why it’s good to have the time and the inclination to build things just because they’re interesting.

Read Graham’s full essay .

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16 lessons from Paul Graham on starting a startup

Paul Graham runs Ycombinator, a Silicon Valley based startup incubator. He previously started and sold Viaweb to Yahoo.

Paul’s essays have had a tremendous impact on how I think about projects, business, and life.

Below are just a few of my own reflections as I’ve read through a few of the posts on his website.

Perhaps these lessons might help someone on their own startup journey.

Lessons from Paul Graham’s Essays

• Create an easy way for people to pay you for it.
• Create something that “a small number of people want a large amount”.
• The initial customer should initially be a single human, not an enterprise. While it may be an enterprise in the future, the first delivery channel should be via solving a unique and specific problem for someone.
• In order to do this, keep a list of stuff that annoys you, stuff that irritates you… Use it as fuel for the company.
• As the founder, you should use the product all the time.
• The problem should be easy for the founder to solve.
• Consistency is the greatest predictor of success.
• Execution wins 99% of the time, and persistence wins all of the time. 
• You will be able to make headway and really push the ball forward because the project is fresh in mind. 
• An unscalable process can become a service-based business, which can later be productized. Service co’s are easier to brute-force into existence.
• The activation energy of a service co. is much much lower than a product co. 
• Remember, users have other important stuff to think about besides your co.
• This can be done via a niche community that you are in some way a part of. If you’re not part of any special-interest groups, find one on reddit, twitter, or facebook groups from which to create a spark of interest. 
• Get the MVP in front of users ASAP. Leverage ChatGPT. Today is a unique and rare time with this new technology.
• Think of your initial version not as a product, but as a trick for getting users to start talking to you after they initial icebreaker. The MVP is just a way to have those 2nd level conversations with users.
• Use a medium that lets you work fast and doesn’t require much commitment up front… such as spreadsheets, notion, performing a service, typeform, stripe, email, airtable, google sheets, convert kit, etc. Lookup “email first startups” for more ideas
• Be careful if you charge for the core component… you may charge for add ons.
• Use the scientific method to formulate hypotheses about the “killer feature” in the product.
• Conversations with users are your way of testing the hypothesis.
• Even if the project itself is a failure, you’ll still be better from it.
• You need at least one reference-able customer and sale. This will help with future projects and customer acquisition.
• Could even write about “following the PG Approach”… basically just following Paul Graham’s advice that he shared on building a startup.
• Refer to the “micro-saas” movement on making modest but adequate stream of money. 
• Pick a name that you buy the .com of.

Anti-advice: follies to avoid

• Avoid risk & ruin.
• Avoid anything that feels scammy or incurs undue financial, regulatory, or compliance risk.
• Avoid creating a company that relies on yourself or another’s “personal brand”.
• Don’t build something that is bad for people.
• Don’t try to build a marketplace, and definitely don’t try to build a 2-sided marketplace.
• Don’t worry about competition.

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Paul Graham 101

There’s probably no one who knows more about startups than Paul Graham. Having helped thousands of startups through Y Combinator, the startup accelerator he co-founded, there’s a thing or two to learn from his essays. And Graham’s wisdom isn’t limited to startups either; his essays, read by millions, touch on education, intelligence, writing, society, the human mind, and much more.

I’ve read all of Paul Graham’s published essays (200+), ending up with enough notes to fill a book. This post tries to summarize the parts I’ve found most insightful and provide an accessible starting point for someone new to Graham.

Whenever possible, I’ve included links to his essays so you can easily go to the source when something interesting catches your eye. (Indeed, I recommend it - use this post as a gateway to the good stuff rather than a complete account in itself).

If my description of Graham’s idea sounds interesting, expect his essay to be 100x better. Always go back to the essays, where the ideas are fleshed out in full. This post is a very shallow overview.

Nevertheless, I hope this post inspires you to read Graham’s essays. They’re worth your time.

Boring disclaimer stuff:

• I made a Google Docs version of this post, in case that's easier to navigate.
• I’ve included all essays that were published before November 2021 ( Beyond Smart is the latest essay included). You can find a list of all essays on Graham’s site .
• The info included is based on my interests at the time of reading the posts. Had I read an essay a year earlier or later, I’d likely have included something else. Plus, with over 200 essays, I’ve just downright overlooked and forgot important stuff. Again, I recommend you explore the essays yourself.
• This post does NOT cover Paul Graham’s thoughts or essays on programming / coding. I’m simply not interested in or knowledgeable about that stuff, so I didn't think it fair to talk about it. He’s written a lot about coding, so if that’s your interest, explore his essays yourself.
• Finally, if something seem off or missing, let me hear about it and I’ll fix it: [email protected] / Twitter

Okay, let’s jump in.

Paul Graham on Startups

Unsurprisingly, many of Graham’s essays are startup-related. Given his experience on the topic, there’s a lot to unwrap, including some classics like “Ramen Profitable”, “Do Things that Don’t Scale” and “Maker’s Schedule, Manager’s Schedule”. Let’s start with an overview.

Startups in 13 sentences :

• Pick good co-founders.
• Launch fast.
• Let your idea evolve.
• Understand your users.
• Better to make a few users love you than a lot ambivalent.
• Offer surprisingly good customer service.
• You make what you measure.
• Spend little.
• Get ramen profitable.
• Avoid distractions.
• Don't get demoralized.
• Don't give up.
• Deals fall through.

For a detailed account, try How to Start a Startup . 

This section presents some of Graham’s core ideas around startups, including the principles above.

Essays mentioned in this section:

Startups in 13 sentences

How to Start a Startup

Startup = Growth  

How to Make Wealth

After Credentials

The Lesson to Unlearn

The Power of the Marginal

News from the Front

A Student's Guide to Startups

What Startups Are Really Like

Before the Startup

Hiring is Obsolete

Why to Not Not Start a Startup

The Hardest Lessons for Startups to Learn

Organic Startup Ideas

Six Principles for Making New Things

Frighteningly Ambitious Startup Ideas

Black Swan Farming

Crazy New Ideas

Why There Aren't More Googles

Ideas for Startups

Jessica Livingston

Startup FAQ

Earnestness

Relentlessly Resourceful

A Word to the Resourceful

The Anatomy of Determination

Mean People Fail

Why It's Safe for Founders to Be Nice

Design and Research

A Version 1.0

What Microsoft Is this the Altair Basic of?

Beating the Averages

Do Things that Don't Scale

Ramen Profitable

Default Alive or Default Dead?

Maker's Schedule, Manager's Schedule

Holding a Program in One's Head

How Not to Die

Disconnecting Distraction

Good and Bad Procrastination

Don’t talk to Corp Dev

The Top Idea in Your Mind

The Fatal Pinch

Startups are fundamentally different

Startups aren’t ordinary businesses. “ A startup is a company designed to grow fast ”, it is fundamentally different from your standard restaurant or hair salon. All decisions reflect this need to grow. Indeed, Graham says : “If you want to understand startups, understand growth”.

“Economically, you can think of a startup as a way to compress your whole working life into a few years. Instead of working at a low intensity for forty years, you work as hard as you possibly can for four. This pays especially well in technology, where you earn a premium for working fast.” (From How to Make Wealth )

Startups are also vastly different from your school experience. Your tests at school can be hacked, but success at startups is unhackable. At school, you learned that the way to get ahead is to perform well in a test, so you learned how to hack the tests . But in startups, you cannot really trick investors to give you money; the real hack is to be a good investment. You cannot really trick people to use your product; the real hack is to build something great. Valuable work is something you cannot hack.

So you don’t need to be a good student to be a good startup founder. In fact, if your opinions differ from those of your business teacher, that may even be a good thing (if your business teacher was excellent in business, they’d probably be a startup founder). In a startup, credentials don’t really matter - your users won’t care if you went to Stanford or got straight A’s. (Related: A Student's Guide to Startups ) . 

Starting a startup is fundamentally different from a normal job , too. In a startup, experience is overrated . The one thing that matters is to be an expert on your users and the problem; everything else can be figured out along the way. “The most productive young people will always be undervalued by large organizations, because the young have no performance to measure yet, and any error in guessing their ability will tend toward the mean.” (From Hiring is Obsolete ). By starting a startup, you can figure out your real market value.

So, startups are fundamentally different from other companies, school and “normal work”. But why don’t more people start them? Graham has listed common excuses (and rebuttals) in Why to Not Not Start a Startup .

Startups are wealth-creation machines

So, startups are fundamentally different. You cannot really understand them by looking at other things. But what are they then?

Startups are one of the most powerful legal ways to get rich. If you’re successful, you can, in a few years, get so rich you don’t know what to do with all the money. But perhaps even better than the money is all the time a successful founder saves:

“Economically, a startup is best seen not as a way to get rich, but as a way to work faster. You have to make a living, and a startup is a way to get that done quickly, instead of letting it drag on through your whole life.” (From The Hardest Lessons for Startups to Learn ) 

In How to Make Wealth , Graham shows why startups are optimized for wealth-creation. (And for clarity, wealth is different from money: wealth is what people want, while money is merely the medium of exchange to get it. So a startup doesn’t actually create money, it creates wealth; in other words, it creates something people want, and people give money for that. This distinction may seem small but it’s important: “making money” seems really complicated while “making something people want” is far easier.)

Why are startups optimized for wealth-creation?

Leverage: If a startup solves a complex problem, it only needs to solve it once, then scale it infinitely with technology. So a startup, once it cracks the code, can create a lot of wealth rapidly. 

Measurement: The performance of every employee in a startup is easier to measure than the performance of every employee in a big organization. So if you perform well and create wealth, you’re in a better position to get paid according to your value in a startup.

More detail in How to Make Wealth . 

Good startup ideas come from personal need and they don’t sound convincing

While there are many ways you could get startup ideas, Graham has observed that most successful startups were founded because of a personal need. Fix something for yourself, and don’t even think that you’re starting a company. Just keep on fixing the problem until you find that you’ve started a company. (From Organic Startup Ideas )

He’s also observed that good ideas tend to come from the margins - places you’d not expect. The idea is often very focused - like a book store online or a networking site for university students - so it isn’t obvious how it would change the world; we dismiss the idea until it becomes obvious.

So, good ideas don’t initially sound like billion-dollar ideas - what even is a billion-dollar idea? Certainly not something we could recognize in advance. Indeed, the initial idea is usually so crude and basic that you’ll ignore it if you’re looking for a billion-dollar idea. The really big ideas may even repel you - they are too ambitious. 

A good idea doesn’t sound convincing because, for no one to have already taken it, it must be a bit crazy or unconventional. “The most successful founders tend to work on ideas that few beside them realize are good. Which is not that far from a description of insanity, till you reach the point where you see results.” (From Black Swan Farming )

Indeed, when someone presents a crazy new idea to you, and if they are “both a domain expert and a reasonable person”, chances are that it’s a good idea (even if it sounds like a bad one). “If the person proposing the idea is reasonable, then they know how implausible it sounds. And yet they're proposing it anyway. That suggests they know something you don't. And if they have deep domain expertise, that's probably the source of it.”

Graham also emphasizes that it is not the idea that matters, but the people who have them. 

Oh, and "Don't worry about people stealing your ideas. If your ideas are any good, you'll have to ram them down people's throats." ( Graham quoting Howard Aiken )

Nevertheless, if you’re in need of inspiration, Graham has some good starting points for coming up with startup ideas.

Founders make the startup

“ The earlier you pick startups, the more you’re picking the founders. ” Throughout his essays, Graham emphasizes the importance of the founders. More than anything - target audience, trends, TAM… - a startup’s success is influenced by the founders. (Obviously, the other employees matter, too. But founders are special, they are the heart and soul of the startup.)

“Cofounders are for a startup what location is for real estate. You can change anything about a house except where it is. In a startup you can change your idea easily, but changing your cofounders is hard.” (from Startups in 13 Sentences ). 

Indeed, Graham notes that most successful startups tend to have multiple founders .

Earnestness and resourcefulness make a good founder

If the founders are the most important factor for a startup’s success, it is critical to understand what makes a good founder. Indeed, this is the topic of numerous essays.

According to Graham, a good founder is:

“The highest compliment we can pay to founders is to describe them as ‘earnest.’”

An earnest person does something for the right reasons and tries as hard as they can. The right reason usually isn’t to make a lot of money, but to solve a problem or satisfy an intellectual curiosity. This is why it’s important to figure out your intrinsic motivation or embrace your nerdiness (both of which we’ll discuss later).

“A couple days ago I finally got being a good startup founder down to two words: relentlessly resourceful.”

Relentless = make things go your way

Resourceful = adapt and try new things to make things go your way

Relentlessly resourceful people know what they want, and they will aggressively try things out and “hustle” until they get what they want. Consider the Airbnb founders and selling cereal .

Graham noticed a pattern around resourcefulness: when he talks to resourceful founders, he doesn’t need to say much. He can point them in the right direction, and they’ll take it from there. The un-resourceful founders felt harder to talk to. 

It is not the most intelligent who succeed, but the most determined . Smart people fail all the time while dumb people succeed just because they decide they must. 

"Make something people want" is the destination, but "Be relentlessly resourceful" is how you get there.

Oh, also: good founders aren’t mean. Mean People Fail and can’t get good people to work with them while startup founders who are nice tend to attract people to them .

Make something people want

If there’s one piece of startup advice to take from Graham, it’s this: “Make something people want”. (As you may know, this is also Y Combinator’s motto)

Yes, it is obvious. But it’s also pretty much the only thing that matters in a startup: if you just make something people want, you’ll attract users, employees, investors, money. “ You can envision the wealth created by a startup as a rectangle, where one side is the number of users and the other is how much you improve their lives .”

Indeed, many early-stage startups are “ indistinguishable from a nonprofit ”, because they focus so much on helping the users and less so on making money. Funnily, this approach makes them money in the long term.

“In nearly every failed startup, the real problem was that customers didn't want the product. For most, the cause of death is listed as ‘ran out of funding,’ but that's only the immediate cause. Why couldn't they get more funding? Probably because the product was a dog, or never seemed likely to be done, or both.” (From How to Start a Startup ) 

So how do you make something people want? Get close to users, launch fast, then iterate.

Get close to users

“The essential task in a startup is to create wealth; the dimension of wealth you have most control over is how much you improve users' lives; and the hardest part of that is knowing what to make for them. Once you know what to make, it's mere effort to make it, and most decent hackers are capable of that.” (From Startups in 13 Sentences ) 

“You have to design for the user, but you have to design what the user needs, not simply what he says he wants. It's much like being a doctor. You can't just treat a patient's symptoms. When a patient tells you his symptoms, you have to figure out what's actually wrong with him, and treat that.” (From Design and Research )

Since you may not precisely know who your users are and what exactly are their needs before you launch, it’s useful to yourself be a user of your product. If you use and like the product, other people like you may, too. This is why successful startups tend to arise from personal need.

Launch fast, then iterate

“The thing I probably repeat most is this recipe for a startup: get a version 1 out fast, then improve it based on users' reactions.”

The importance of iterations is highlighted in “ A Version 1.0 ”, “ What Microsoft Is this the Altair Basic of? ” and “ Early Work ”, among others. (If you understand the importance of iterations, then you understand that you must release a version 1 as soon as possible, so you can start iterating sooner.)

Some ideas from these essays:

• Don’t be discouraged by people’s ridicules of your early work. Just keep on iterating. (There will always be Trolls and Haters . Don’t mind them.)
• Don’t compare your early work with someone’s finished work. (If you wanted to compare your work to something, it’d optimally be a successful person’s early work. But people tend to hide their first drafts, precisely because they don’t want to be ridiculed.)
• When in doubt, ask: Could this really lame version 1 turn into an impressive masterpiece, given enough iterations?

Iterating and getting through the lame early work never gets easy. But Graham has listed some useful tips to trick your brain in “ Early Work ”.

Execution is a pathless land, but there is advice to be given

Mostly, a startup shouldn’t try to replicate what other startups do:

“If you do everything the way the average startup does it, you should expect average performance. The problem here is, average performance means that you'll go out of business. The survival rate for startups is way less than fifty percent. So if you're running a startup, you had better be doing something odd. If not, you're in trouble.”

Startup execution is a pathless land; there’s no formula to follow, even though many blog posts and thought leaders want you to believe otherwise. This is why it’s so important for the founders to be earnest and relentlessly resourceful: they need to figure it out themselves.

Even though there isn’t a connect-the-dots type of way to succeed in the startup world, Graham has observed hundreds (if not thousands) of startups from a very close distance, so he has identified general principles that help:

Do Things that Don’t Scale

“Think of startups not only as something you build and you scale, but something you build and force to scale.” 

“Startups take off because the founders make them take off. If you don’t take off, it’s not necessarily because the market doesn’t exist but because you haven’t exerted enough effort.”

At some point, your startup may grow on autopilot. But before you’re there, you need to do seemingly insignificant things, like cold emailing potential clients, speaking to people at conferences or offering “ surprisingly good customer service ”.

The “Do Things that Don’t Scale” advice helps us remember that building something great is only one part of the equation; we must also do laborious, unscalable work to get initial growth, no matter how great the product is.

Get Ramen Profitable

Ramen profitability = a startup makes just enough to pay the founders’ living expenses.

“Ramen profitability means the startup does not need to raise money to survive. The only major expenses are the founders’ living expenses, which are now covered (if they eat ramen).”

Significance: Ramen profitability means that the startup turns from default dead into default alive . The game changes from “don’t run out of money” into “don’t run out of energy”. While running a startup is never not stressful, reaching ramen profitability does take a weight off your shoulders.

To increase your startup’s chances of succeeding, increase your chances of survival; to increase your chances of survival, reach ramen profitability.

Maintain a Maker’s Schedule

To get into the making/building mindset, you need big chunks of time with no interruptions. You can’t build a great product in 1-hour units in-between meetings; “that’s barely enough time to get started”. If you think of the stereotypical coder, they prefer to work throughout the night, probably because no one can distract them at 3am.

“When you're operating on the maker's schedule, meetings are a disaster. A single meeting can blow a whole afternoon, by breaking it into two pieces each too small to do anything hard in.”

If you want to create great stuff, you need to be mindful that a manager and a maker operate on very different schedules. If you’re the manager, try to give big blocks of time for the maker; if you’re the maker, try to schedule all meetings on two days of the week so the rest is free for creating.

Holding a Program in One's Head expands on some of these ideas.

What not to do

Graham has also figured out something about the inverse: what not to do. Or, as he puts it, “ How Not to Die ”. 

• Keep morale up (don’t run out of energy)
• Don’t run out of money (for example, hire too fast)
• Don’t do other things. The startup needs your full attention. ( Procrastination is mostly distraction . Avoid distractions and you’ll avoid procrastination. Note, though, that you can procrastinate well .)
• Make failing unbelievably humiliating (to force you to give your everything)
• Simply don’t give up, especially when things get tough

To summarize this part on execution, here are Paul Graham’s Six Principles for Making New Things : 

• Simple solutions
• To overlooked problems
• That actually need to be solved
• Deliver these solutions as informally as possible
• Starting with a very crude version 1
• Then iterating rapidly

The more you focus on money, the less you focus on the product

Graham doesn’t often talk about money, and when he does, I get this weird feeling. It’s like “sure, we’re talking about money... but I’d rather we talk about the product instead.” Let me explain:

In Don’t talk to Corp Dev , Graham says all a startup needs to know about M&A is that you should never talk to corp dev unless you intend to sell right now. So it’s better to focus on the product until you absolutely must think about M&A.

In The Top Idea in Your Mind : “once you start raising money, raising money becomes the top idea in your mind”, instead of users and the product. So your product suffers.

When you get money, don’t spend it . “ The most common form of failure is running out of money ”, and you can avoid that by not spending money, not hiring too fast.

One instance when you should think about money is if your startup is default dead . “Assuming their expenses remain constant and their revenue growth is what it has been over the last several months, do they make it to profitability on the money they have left?” If you know you’re default dead, your focus quickly shifts to turning the ship around and reaching profitability; avoiding The Fatal Pinch .

In the long term, it’s obvious that the company that focuses more on the users and product beats the company that obsesses over investors and raising money.

Paul Graham on What to work on

What to work on is one of the most important questions in your life, along with where you live and who you’re with. While Graham’s treatment of this question definitely leans on the side of startups, you can also view his ideas from the perspective of side hustles, hobbies, projects (in or outside of a career) and so on.

What Doesn't Seem Like Work?

Why Nerds are Unpopular

Fashionable Problems

How to Do What You Love

You Weren't Meant to Have a Boss

A Project of One's Own

Great Hackers

Follow intrinsic motivation

If it’s something you’re intrinsically motivated about, that’s something where you have infinite curiosity, and that’s something you’ll eventually do well in. (Later, we’ll discuss how curiosity leads to genius.)

“ If something that seems like work to other people doesn't seem like work to you, that's something you're well suited for. ” Put another way: the stranger your tastes seem to other people, the more you should embrace those tastes. 

Because of the internet, you can make money by following your curiosity. This is a revolutionary shift : in the past, money was gained from a boring job, and you satisfied your curiosity during the weekends. But now, you can make real money just by following your curiosity, whether it’s from a startup or a YouTube or Gumroad account.

The two greatest powers in the world - money and curiosity - are getting more aligned each day. There has never been a greater time to follow your intrinsic motivation. Now, the important question is what to work on, not how to make money, because if you figure out an answer to the former, the latter question will answer itself. 

Turns out, nerds are far closer to figuring out the answer than non-nerds. (Nerds - or earnest people - do something for the sake of it, not to become popular or rich). Nerds in high school tend to be unpopular , not because they couldn’t figure out how popularity works and game the system, but perhaps because they don’t really want to be popular. That makes high school a tough time for them, but real life becomes much more fulfilling: while others are stuck in the popularity/status rat race and compete to work on Fashionable Problems , the nerds can follow their own curiosities, thus work on stuff no one else is working on, thus discover new things, thus succeed. Plus, they have a much nicer time doing so.

A question to figure out your intrinsic motivation and what to work on: “What are you a big nerd on?”

Let’s end this part with a sharp and practical observation from “ How to Do What You Love ”: 

“To be happy I think you have to be doing something you not only enjoy, but admire. You have to be able to say, at the end, wow, that's pretty cool. This doesn't mean you have to make something. If you learn how to hang glide, or to speak a foreign language fluently, that will be enough to make you say, for a while at least, wow, that's pretty cool.”

You should be working on your own projects

The logical conclusion of following your intrinsic motivation is that you should be working on your own projects (or other people’s projects where you have significant ownership). 

You may have noticed that projects you start on your own feel fundamentally different from tasks handed to you by a manager or teacher. And there’s a reason for that: “ You Weren't Meant to Have a Boss ”.

In that essay, Graham makes the argument that even though working in a large organization is the default now, it’s not how we evolved to work. A large organization is similar to the modern diet - consisting of pizza, candies and other processed foods - while a small group (like a startup) is the hunter-gatherer diet. One is easy and safe and appealing in the short term (but terrible over time) while the other is hard and unappealing, but more natural and better in the long term.

While working in smaller groups makes you happier and gives you more freedom, it’s also the way to do great work, as Graham argues in “ A Project of One’s Own ”. If a project feels like it’s your own, you have motivation and skin in the game that you don’t otherwise have. You’re much more willing to obsess over the details and make something great.

Work on things that you want to take over your life

“It's a mistake to insist dogmatically on ‘work/life balance.’ Indeed, the mere expression ‘work/life’ embodies a mistake: it assumes work and life are distinct. [...] I wouldn't want to work on anything I didn't want to take over my life.” (From “ A Project of One’s Own ”)

For startup founders, the startup is their life - there is time for little else, even sleep. Why would they willingly work 80+ hours a week and eat nothing but ramen , with no guaranteed financial reward, when they could work 40 hours a week and eat lobster at a big company? Because the startup is a project of their own, and they have - hopefully consciously - decided it’s something they want to take over their lives. “People will do any amount of drudgery for companies of which they're the founders.”

How do you know if something has taken over your life? Here’s a simple test: Do you think about it in the shower? 

In “ The Top Idea in Your Mind ”, Graham argues that if something is really important to you, then your mind will think about it subconsciously and ideas will appear in your head whilst walking or showering. Indeed, if this does not happen, you’ll have trouble doing great work - that’s your sign to reconsider what you work on.

Paul Graham on Thinking & Decision-making

Startup founders are an interesting group of people: they seek to change something about the status quo, which means they see something non-obvious that could be improved and they believe in that improvement so much that they’re willing to work 80+ hours a week and eat ramen until their vision becomes a reality.

What drives them? It can’t be just money - there are so many founders who’ve already gotten rich, and they still work in their companies and start new startups. And why aren’t there more founders? What qualities are there in a founder that you don’t find in non-founders?

By trying to understand this group of people, Graham has discovered a lot about thinking, decision-making, and the human mind in general.

The Four Quadrants of Conformism

The Two Kinds of Moderate

Orthodox Privilege

Novelty and Heresy

How to Disagree

How to Think for Yourself

The Bus Ticket Theory of Genius

Is It Worth Being Wise?

Beyond Smart

How to Work Hard

Mind the Gap

Being a Noob

How to Be an Expert in a Changing World

How Art Can Be Good

Taste for Makers

The Island Test

Independent-mindedness vs conventional-mindedness

Independent-minded people prefer to think through things for themselves, and because of this, they may seem weird to conventional-minded people (who follow the average and agreeable). Hence, it is almost a tautology to say that new ideas and new startups are the work of independent-minded people.

In The Four Quadrants of Conformism , Graham goes a bit deeper and differentiates between aggressive and passive forms of independent-mindedness and conventional-mindedness. Notably, aggressively independent-minded people tend to question existing norms and rules, working against them, while aggressively conventional-minded people work to maintain the norms and rules. There’s a clash between the groups, so it’s important for independent-minded people to “be protected”, be given space to innovate, break norms and come up with new ideas and things. (These “protected areas” are important for innovation. You could think of Silicon Valley as one.)

If you know someone is conventional-minded, you know a lot about them. Their beliefs and actions match the average, and you know what the average is. Whereas, if someone is independent-minded, you don’t really know them; they think things through for themselves, and thus they may arrive at conclusions you can’t imagine. In fact, on one issue, independent-minded people can be in the political left, and on another issue, in the political right; they are politically moderate by accident . A conventional-minded person is more likely either in the left or right for every issue.

Conventional-minded people have what Graham calls Orthodox Privilege : it seems to them that everyone is safe to express their opinions because everything they think about is conventional and uncontroversial. “They literally can't imagine a true statement that would get them in trouble.”

So if you do express your controversial, new ideas to them, they may regard them as untrue heresy. Novelty and Heresy go hand-in-hand. “It doesn't seem to conventional-minded people that they're conventional-minded. It just seems to them that they're right.” To them, anything that is unconventional is likely to be false; to the independent-minded, anything too conventional seems suspicious. So if you express your independent-minded thoughts publicly, you may want to learn How to Disagree .

In How to Think for Yourself , Graham shows there are some types of work that you can only do well in if you think differently from others: Scientists aim to discover something new, so being conventional-minded won’t get you very far; an investor who thinks exactly like everyone else will not get rich; a startup founder who shares the same ideas as everyone else won’t build great new stuff. You need to be right and most other people need to be wrong.

Of course, not every type of work is like this. You can be a good administrative worker without thinking differently from others; it’s not essential that everyone else is wrong. Generally, independent-minded people want to work in areas where newness is rewarded.

In How to Think for Yourself , Graham shares some exercises for training your independent-mindedness muscles.

Genius comes from infinite curiosity, intelligence, hard work and courage

We tend to think some people are just blessed with genius, that it’s an innate thing. But Graham has taken this black box apart and argues genius is something you can influence.

“ Those who do really great work have an unexplainable obsession about something ”. Infinite curiosity leads to surprising discoveries, simply because you think about and play with the topic more than any rational person would expect. And all that thinking and tinkering feels like play to you (but looks like work to others) because an obsessive interest “is a proxy for ability and a substitute for determination”. 

Intelligence

There’s a difference between wisdom and intelligence . If wisdom means a high average outcome across all outcomes, intelligence is a spectacularly high outcome in a few situations. If we think of “genius”, it tends to fit the latter description: you can be a terrible fool about everything else, but if you discover relativity, you’re a genius. 

High curiosity in something + high intelligence in that domain are a great beginning. But not necessarily enough to discover important new ideas. As Graham elaborates in Beyond Smart , there are smart people, and then there are those who have important new ideas; “There are a lot of genuinely smart people who don’t achieve very much.”

Intelligence and curiosity are perhaps necessary to become a genius, but not sufficient; you also need hard work to uncover new ideas and courage to pursue them, as developing something new challenges your ego (and irritates the conventional-minded people).

Hard work and courage

Even when you’re undeniably brilliant, you cannot avoid hard work. (Indeed, just knowing How to Work Hard can get you closer to sheer brilliance.) Hard work in itself isn’t the goal, though. Output matters (output being, in this context, important new ideas): “ If I paint someone's house, the owner shouldn't pay me extra for doing it with a toothbrush .”

When you start to do or learn anything new, you’ll Be a Noob at it first. But “the more of a noob you are locally, the less of a noob you are globally.” In How to Be an Expert in a Changing World , Graham notes that if your opinion was right once, it may not be right anymore because the world has changed. So it takes intellectual humility and courage to update your opinions to the new world, instead of clinging to the opinions you formed in the old world.

Putting together Graham’s thoughts, it seems like genius is not an innate quality that you can’t influence, but a combination of multiple qualities like curiosity, intelligence, hard work and courage.

Good taste is necessary for good work

Good taste is a quality related to genius. Some people seem to have an “eye” for design or an “ear” for music, but Graham shows, again, that taste is something you can develop.

”Taste is subjective” isn’t true, and you see it as soon as you start designing or writing or building things. There’s good art and there’s bad art , good writing and bad writing, nice design and less nice design. Saying “taste is subjective” is lazy and won’t help you improve your work.

So if you want to create better stuff, you need to realize that you may have poor taste and you need to develop good taste, normally by getting better at your craft or studying those who have good taste. “Good work happens when you see something is ugly, understand why, and have the ability to fix it into something beautiful.” (From Taste for Makers )

So what is good art or design? Graham gives a list (I redacted a few points):

• Solves the right problem
• Often slightly funny
• Uses symmetry
• Resembles nature
• Often strange
• Often daring 

Good work isn’t necessarily the most popular work; “There are sources of error so powerful that if you take a vote, all you're measuring is the error.” But if you do good work, eventually, people will appreciate it.

Is your argument testable?

If you read Graham closely, you notice that often when he makes an argument, he immediately considers what kind of test is needed to validate the argument. He’s thinking like a scientist: only accepting an argument if it’s testable.

Watch him do it in How to Do What You Love :

 “To be happy I think you have to be doing something you not only enjoy, but admire. You have to be able to say, at the end, wow, that's pretty cool. This doesn't mean you have to make something. If you learn how to hang glide, or to speak a foreign language fluently, that will be enough to make you say, for a while at least, wow, that's pretty cool. What there has to be is a test.”

And in The Island Test , he presents a test to figure out what you’re addicted to: 

“Imagine you were going to spend the weekend at a friend's house on a little island off the coast of Maine. There are no shops on the island and you won't be able to leave while you're there. Also, you've never been to this house before, so you can't assume it will have more than any house might.

What, besides clothes and toiletries, do you make a point of packing? That's what you're addicted to.”

In some cases, the way to make a point (and make it practical) is to devise a test. In How to Start a Startup , Graham explores what makes a good startup employee. He could just say “they are determined and will do whatever it takes”, but that’s not a testable argument, and not very practical for someone who’s hiring. 

Instead, Graham devised a test: “Could you describe the person as an animal?” If you could say “Jaakko is an animal” and don’t laugh but rather take the description seriously, that’s the person you want in your startup. An animal of a salesperson simply won’t take no for an answer; an animal of a programmer will stay up all night to finish the code; an animal of a PR person will pitch every newspaper in the city until your startup gets featured. 

Fun evening activity: Go through an essay you’ve written and see if each of the arguments you make is testable.

Paul Graham on Writing

Paul Graham is known for incredibly clear and simple writing. Each of his essays is easy to understand, no matter how complicated the topic. 

You can learn a lot about writing just by reading Graham, and doubly so if it’s an essay on the topic of writing. Fortunately for us, there are many such essays.

For starters, Graham has summarized his writing philosophy in Writing, Briefly . It’s an entire writing course, condensed into one (long) sentence. I recommend you read it now before continuing below.

Writing, Briefly

Writing and Speaking

The List of N Things

Persuade xor Discover

General and Surprising

The Age of the Essay

How to Write Usefully

Write Simply

Write Like You Talk

Economic Inequality

Writing is how you get ideas, develop ideas and improve your thinking

If you read Writing, Briefly , as you should, you noticed this:

“I think it's far more important to write well than most people realize. Writing doesn't just communicate ideas; it generates them. If you're bad at writing and don't like to do it, you'll miss out on most of the ideas writing would have generated.”

From an idea perspective, being a good writer is better than being a good speaker. You need good ideas to have good essays, but you can do a good speech without saying much at all. Though speeches can be better for motivation and personal touch, writing is better for ideas.

Don’t write to persuade, write to discover something new and useful

There are roughly two types of essays: those where you know exactly where it’s going before you start, and those where you have no clue where it’s going. 

We’re taught to write the first type of essay in school: we write the thesis statement in the introduction and ensure that the rest of the essay supports that thesis. We’re writing to persuade the reader, so that they’ll accept our thesis. A listicle is equivalent to that type of essay, and writing one doesn’t help you discover new ideas or knowledge. “ I worry that if I wrote to persuade, I'd start to shy away unconsciously from ideas I knew would be hard to sell .”

Paul Graham is a supporter (and practitioner) of the second type, writing to discover. In his mind, an essay is supposed to be two things: new and useful.

An essay should be new

If an essay doesn’t share something new or surprising, what good is it? When we write to discover, we want to surprise ourselves and the reader. Most surprising = furthest from what people currently believe . 

But just anything new doesn’t cut it. There’s constantly new info and news, and that doesn’t make a difference in our lives. What we should aim for is something General and Surprising . “Ordinarily, the best that people can do is one without the other: either surprising without being general (e.g. gossip), or general without being surprising (e.g. platitudes).” If you can do some combination of general and surprising (at least to some people), you’ve got a winning essay.

“ Essays should aim for maximum surprise. ”

An essay should be useful

What does it mean for an essay to be useful? Graham offers some ideas in How to Write Usefully : 

• When something is useful, it’s correct. If it’s merely persuasive, it could be false. “Good writing should be convincing, certainly, but it should be convincing because you got the right answers, not because you did a good job of arguing.” (From The Age of the Essay ) 
• “Useful writing makes claims that are as strong as they can be made without becoming false.”
• “Useful writing tells something important that people didn’t already know” (again, going back to the “surprise” idea)

Good writing is rewriting (in particular, rewriting to make the text simpler)

Just like in anything involving skill, the way to get better is through iterations. Good writing is rewriting . Because we can’t see someone’s drafts and rewrites, we compare their end product to our Early Work , then get discouraged looking at the gap. Instead, we must appreciate that something bad now could become great, if we iterate enough. 

“My strategy is loose, then tight. I write the first draft of an essay fast, trying out all kinds of ideas. Then I spend days rewriting it very carefully.” (From How to Write Usefully ) 

And when you rewrite, your main goal is to make your writing simple . Most of the time, the simplest words and simplest sentences are better than decorative, complicated words. Your purpose is to convey an idea, not to use fancy words and make the reader “do extra work just so you can seem cool.”

In Write Like You Talk , Graham shares a trick for writing simply: explain your ideas to a friend by talking; then, use that transcript as a draft for your essay. The spoken and written version of your idea should be as close to each other as possible. “If you simply manage to write in spoken language, you'll be ahead of 95% of writers.” 

When possible, find a metaphor for your idea

This is not direct advice from Graham (though he does recommend you write simply, and what’s simpler than a great metaphor?) 

Instead, this is a theme you notice if you read a lot of Graham. Metaphors are a weapon he wields often.

Some of my favorite metaphors from Paul Graham:

“There's an Italian dish called saltimbocca, which means ‘leap into the mouth.’ My goal when writing might be called saltintesta: the ideas leap into your head and you barely notice the words that got them there.” (From Write Simply )

“People don’t realize that scrapping things together is how big things get started. They unconsciously judge larval startups by the standards of established ones. They're like someone looking at a newborn baby and concluding ‘there's no way this tiny creature could ever accomplish anything.’” (From Do Things that Don’t Scale )

“The list of n things [listicle] is in that respect the cheeseburger of essay forms. If you're eating at a restaurant you suspect is bad, your best bet is to order the cheeseburger. Even a bad cook can make a decent cheeseburger. And there are pretty strict conventions about what a cheeseburger should look like. You can assume the cook isn't going to try something weird and artistic. The list of n things similarly limits the damage that can be done by a bad writer.” (From The List of N Things )

“Sometimes it's because the writer only has very high-level data and so draws conclusions from that, like the proverbial drunk who looks for his keys under the lamppost, instead of where he dropped them, because the light is better there.” (From Economic Inequality ) 

“If I paint someone's house, the owner shouldn't pay me extra for doing it with a toothbrush.” (From Mind the Gap ) 

“I'm not sure why. It may just be my own stupidity. A can-opener must seem miraculous to a dog.” (From Taste for Makers )

“A startup is like a mosquito. A bear can absorb a hit and a crab is armored against one, but a mosquito is designed for one thing: to score. No energy is wasted on defense. The defense of mosquitos, as a species, is that there are a lot of them, but this is little consolation to the individual mosquito.” (From How to Make Wealth ) 

“The independent-minded thus have a horror of ideologies, which require one to accept a whole collection of beliefs at once, and to treat them as articles of faith. To an independent-minded person that would seem revolting, just as it would seem to someone fastidious about food to take a bite of a submarine sandwich filled with a large variety of ingredients of indeterminate age and provenance.” (From How to Think for Yourself )

Paul Graham on Society

Startups turn into big companies, startup founders turn into billionaires , products used by hundreds turn into products used by millions... If you’re working to help startups, you’re working to change society in a big way. 

The Refragmentation

Inequality and Risk

What You Can't Say

“Reducing wealth inequality” isn’t as great as it sounds

As we established earlier, a startup is a wealth-creation machine. As such, it shouldn’t surprise us to see Graham discussing wealth inequality and why it isn’t the demonic thing many believe.

Wealth inequality is a divisive topic, and one I’m no expert in, so I’ll try to provide a general overview without twisting Graham’s ideas into something they aren’t. You might want to read the essays in full if you’re interested in the topic.

By default, we think wealth inequality is inherently bad. 

In Mind the Gap , Graham presents three reasons why we think wealth inequality is inherently bad:

• The Daddy Model of Wealth: We confuse wealth with money and think there is a fixed amount of it. And if there’s a fixed amount, we believe it should be distributed equally. (By now, you should realize that wealth is different from money, and that you can create wealth; there is no “fixed amount” or “fixed pie”; you can increase the pie)
• We think people get rich today like they got rich earlier: In the past, the rich people tended to get rich by stealing (through war or taxes). So some people still believe rich people have gotten rich by stealing, even though today the much better, more reliable, faster and legal way to get rich is by creating wealth, not stealing it.
• We don’t understand leverage: Technology increases the gap between the productive and the unproductive, thus increasing wealth inequality. If a CEO is 100x richer than an employee in the same company, we think it unjust because there’s no way the CEO works 100x more than they do. But because of leverage, the CEO can easily be 100x more productive than an employee, or make decisions that are 100x more valuable. “I have no trouble imagining that one person could be 100 times as productive as another.”  

Wealth inequality can be a sign of good things.

“Variation in wealth can be a sign of variation in productivity. (In a society of one, they're identical.) And that is almost certainly a good thing: if your society has no variation in productivity, it's probably not because everyone is Thomas Edison. It's probably because you have no Thomas Edisons.

In a low-tech society you don't see much variation in productivity. If you have a tribe of nomads collecting sticks for a fire, how much more productive is the best stick gatherer going to be than the worst? A factor of two? Whereas when you hand people a complex tool like a computer, the variation in what they can do with it is enormous.” (From Great Hackers )

“By helping startup founders, you’re helping to increase economic inequality. If economic inequality should be decreased, no one should be helping founders. But that doesn’t sound right.” (From Economic Inequality )

There are many causes of economic inequality. Some of them are bad, like corruption and stealing. But some causes are generally good, like variation in productivity. Some people are vastly better at creating things people want, so it’s unsurprising they are able to make more money than other people.

Remember that startups grow the pie: they get rich by making other people richer. Because they are rich doesn’t mean you must have been screwed over. It’s more like the opposite: the Google founders are rich because they have made life easier and richer for billions of people.

Of course, wealth inequality isn't only due to startups (although startups create the most extreme results). Some people’s salaries are higher than others’, again, because some produce more wealth than others. Salaries are closer to market price than ever before , and get constantly closer, as people are more free to start their own companies, switch companies and work internationally.

Taxing the rich reduces economic inequality, but may not lead to the results you’d hope for. 

If you want to make the poor richer - as is probably the intention when you want to reduce economic inequality - you can either take the money from the rich, or make the poor more productive so they’ll get richer (through education and infrastructure, for example). But if you make people more productive, some people will create 1,000x the results as another, so economic inequality remains. 

So if you want to reduce economic inequality, the only way is to push from the top - to take money from the rich (see Inequality and Risk ). Thus, you reduce the rewards for creating or funding startups and business activity, thus you hinder technological innovation. This doesn’t sound as positive as “reducing economic inequality”. Especially when you consider the many different kinds of inequalities beyond income equality.

The gap between rich and poor is increasing in monetary terms, but probably closing in wealth terms. Today, the average person lives a relatively similar life, materially, to a rich person: both have a fridge, a car, a phone, Netflix… 100 years ago, the rich had a car while the poor didn’t, they had things we now regard as “essentials” while the poor didn’t. Through businesses, essential products are getting cheaper and more accessible to everyone. In many cases, the rich can pay to have a flashier version of something, like a sports car or brand watch, but the basic, affordable version is still good enough.

Today, the difference is appearance and what brand your stuff is; in the past, the difference was either having it or not having it. So yes, the income gap is increasing, but with it, the gap in quality of life is decreasing.

“You need rich people in your society not so much because in spending their money they create jobs, but because of what they have to do to get rich. I'm not talking about the trickle-down effect here. I'm not saying that if you let Henry Ford get rich, he'll hire you as a waiter at his next party. I'm saying that he'll make you a tractor to replace your horse.” (From Mind the Gap ) Trickle-down economics is a bad argument because it misses the point. We need to look at how wealth is created, not how it’s used

Graham’s proposition:

Allow those who create wealth to keep it.

When you’re allowed to keep the wealth you create, people can get rich by creating wealth instead of stealing it. People take bigger risks if they can keep more of the upside when those risks pay off. A startup founder never captures all of the wealth created; most of the wealth is transferred to other people, so we should encourage those who want to get rich, not discourage them.

Based on these ideas, you can probably guess Graham’s opinions on capitalism vs communism (something he discusses in the essays linked in this section, particularly in How to Make Wealth and Mind the Gap ).

Not everything we think is true is true, and not everything we think is false is false

“At every period of history, people have believed things that were just ridiculous, and believed them so strongly that you risked ostracism or even violence by saying otherwise. If our own time were any different, that would be remarkable.” (From Taste for Makers ) 

“And yet at every point in history, there were true things that would get you in terrible trouble to say. Is ours the first where this isn't so? What an amazing coincidence that would be.” (From Orthodox Privilege ) 

Not everything we think is true is true, and not everything we think is false is false.

Graham comes back to this idea repeatedly, particularly in the essays discussing independent-mindedness and conformism (see above). But you can see tones of this idea in his startup essays too; after all, a successful startup has a vision of a future that most other people do not believe in at the time. 

Graham deep-dives into this idea in What You Can't Say , an essay I consider one of his finest - one you must read for yourself. In fact, the whole essay is so intellectually important that I’d do it a disservice by summarizing. Instead, here’s the main takeaway I was left with:

There are things you believe that are incorrect, horribly so. To you, they seem correct without question. Stay open-minded.

Paul Graham on Life

If we accept that writing is thinking (as we addressed earlier), Graham, with over 200 essays and decades of writing, has done a lot of thinking. When he shares life wisdom, you’d be smart to listen.

What You'll Wish You'd Known is sort of Paul Graham’s compilation of life wisdom, targeted at high school students. It’s also one of his most popular essays. While you should read it yourself, here are a few major points that stood out for me:

• It’s okay to not have a plan. In fact, it may be better not to fixate on one plan when you’re young. Optimize for optionality. If you’re unsure, go with the option that gives you more options later down the line. 
• Build something. Work on something hard on your own, doesn’t really matter what it is. You’ll learn so much about yourself in that process. This is a shortcut to finding what you want to work on, which is one of the major questions in life. “If I could go back and redo my twenties, that would be one thing I'd do more of: just try hacking things together. [...] I should have spent less time worrying and more time building. If you're not sure what to do, make something.” (From The Power of the Marginal ) 
• How you succeed in school is in no way representative of how you succeed in life. “One of the most dangerous illusions you get from school is the idea that doing great things requires a lot of discipline. Most subjects are taught in such a boring way that it's only by discipline that you can flog yourself through them.” At school, stuff is forced on you; in real life, it is the stuff you initiate that matters and defines your trajectory.
• “There's no switch inside you that magically flips when you turn a certain age or graduate from some institution. That’s not how you become an adult. You start being an adult when you decide to take responsibility for your life. You can do that at any age. [...] The important thing is to get out there and do stuff. Instead of waiting to be taught, go out and learn.”

Beyond that essay, there are a few bigger themes I want to highlight below.

What You'll Wish You'd Known

Life is Short

The Acceleration of Addictiveness

• How to Lose Time and Money

Lies We Tell Kids

Keep Your Identity Small

Cities and Ambition

The Top of My Todo List

Life is short

“Life is short” is one of those statements everyone kind of agrees with, without giving it too much thought. But Graham has explored the idea a bit deeper.

For starters, a startup itself is a way to appreciate the shortness of life or adapt to it ; instead of a 40-year career, you compress your income-making to a few startup years and thus free up time for activities beyond making a living. The average human lifespan is increasing while the minimum possible time it takes to be set for life is decreasing; startups are one way to maximize the gap.

Whether you agree with the premise that Life is Short , it’s easy to agree that one way to make life seem less short is to minimize anything unimportant. If you do nothing for 5 hours, that 5 hours will feel excruciatingly long. The more we have going on, the shorter life feels. So we should cut all the things we don’t like doing, the stuff that we think life is too short for (Graham calls this, bluntly, “bullshit”).

And if we invert the argument, we realize that we should dedicate more time for the important stuff. If people and relationships are important to you, your calendar should reflect that. When life is short, we must ruthlessly cut the unimportant while making time for the important. Sounds simple and easy to dismiss, but somehow, Graham applies weight to it in Life is Short .

It’s surprisingly easy to waste your life if you’re not careful

Since life is short, it’s easy to let it slip away in a blur if you’re not careful.

One thing you get easily sucked into is “ anti-tests ”. These are tests you can try to excel in, but the way to come on top is to not care about the test at all, to ignore the test. So you could try to be popular in school, but you probably shouldn’t care about popularity; you can try to become important and high-status in life, but you probably shouldn’t care about that. Just because there’s a test doesn’t mean you should try to perform well in it. 

Ignoring tests is especially hard for intelligent, ambitious people, because their ambition provides the motivation and intelligence the means to do well in the test. But try not to get sucked into the anti-tests in life; they are the kind of “bullshit” life is too short for.

Another thing that can corrode your life, if you’re not careful, is addiction. We know to be careful with the standard stuff like alcohol and gambling, but it’s harder to avoid addictions that everyone has because those seem normal to us. In The Acceleration of Addictiveness , Graham makes a division between two normals: statistically normal (that which everyone does) and operationally normal (that which works best). Being addicted to social media and your phone is statistically normal, but not operationally normal. “ Technology tends to separate normal from natural. ”

“ You can probably take it as a rule of thumb from now on that if people don't think you're weird, you're living badly. ” For example, if your approach to consumerism doesn’t seem a bit weird, you probably own too much Stuff .

But being careful about pleasures and self-indulgence and “the bullshit” isn’t enough. We must also be careful about the things we do that feel important and productive. In How to Lose Time and Money , Graham writes: 

“It's hard to spend a fortune without noticing. Someone with ordinary tastes would find it hard to blow through more than a few tens of thousands of dollars without thinking ‘wow, I'm spending a lot of money.’ Whereas if you start trading derivatives, you can lose a million dollars (as much as you want, really) in the blink of an eye.”

Similarly, for a fairly ambitious person, it’s hard to waste your time by watching TV or laying on the sofa - your brain will start thinking “this is a waste of time” sooner or later. But you can easily work 12h a day for 2 years on something that, in retrospect, was a complete waste of your time. 

If you’re not careful about where you invest your time and money, life passes by surprisingly easily. 

You have a lot of unconditioning to do

What’s a lie you were told as a child? Stuff like “if you swallow an apple seed, a tree will grow in your stomach” is easy to identify as a lie. But stuff like “be careful with strangers, they are dangerous”? Less so.

In Lies We Tell Kids , Graham shows that we’ve been lied to as kids, for a variety of reasons (some better than others). Some falsities have flowed into our heads at home, some at school, but the main idea is that we’ve woven lies into our understanding of the world at a young age. And if it’s something we learned as a child, it feels undeniably true as an adult; it takes serious effort to take apart these deep-held beliefs.

As a rule, if you think it’s true because you learned it in school or in your childhood, assume it is not true. It’s better to verify it for yourself, even if it turns out to have been true all along.

If childhood beliefs are a good place to start unconditioning, a good place to continue is whatever you identify as (democrat, minimalist, crypto bull…). This is because we have a terribly hard time thinking clearly about something that’s part of our identity , so you may have taken in opinions one-sidedly. If you identify as x, criticism against x feels like a personal attack because x is a part of your identity, part of you. The bigger your identity, the more you have to process and rethink. 

Another thing to uncondition comes from Cities and Ambition . When most people talk about the essay, they consider the obvious implication: you should go to the city that matches your ambition. So if you want to be in the show biz, go to Hollywood, or if you’re into startups, go to Silicon Valley (or, increasingly, the right corner of the internet). But there’s an inverse consideration, too, and it’s an important one: the places you’ve already lived in have subconsciously influenced your ambition. So, yes, we could match the city we live in to our ambition, but before we do that, we should figure out whether our ambition really is our own or if it’s simply a product of where we have lived in so far.

This idea of unconditioning links back to the earlier point: because you’ve been conditioned a certain way, you’re set on a path that you may not wish to be on, had you consciously made the choice. So unless you do uncondition yourself, it’s easy to waste your life.

You have a lot of unconditioning to do. So better get started.

Paul Graham’s 5 commandments for life

Bronnie Ware, a palliative care nurse, made a list of the biggest regrets of the dying:

• Forgetting your dreams
• Ignoring family
• Suppressing emotions
• Neglecting friends
• Forgetting to be happy with what you have

In The Top of My Todo List , Graham inverted the regrets into his 5 commandments to live by:

• Don’t ignore your dreams
• Don’t work too much
• Say what you think
• Cultivate friendships

Paul Graham’s Best Essays

Paul Graham’s favorites ‍

This is in addition to the three that get the most traffic: https://t.co/zsxRpKm4ew https://t.co/nROmN4eyhO https://t.co/O8hIcjcMd2 I should also have included: https://t.co/CUBGEQ9N7H https://t.co/bAcAN5wROL https://t.co/MVTTJDzyQ2 https://t.co/OKZOGIhi4i — Paul Graham (@paulg) December 20, 2019

My favorites

• What You Can't Say  
• How to Think for Yourself  
• You Weren't Meant to Have a Boss  
• How to Make Wealth  

Final words

This has been nothing but a short introduction to Paul Graham’s ideas. There are so many essays and ideas and topics that weren’t included here, so, who knows, maybe at some point there will be a PG 201. 

Anyhow, I hope this has inspired you to explore the essays yourself and gives you a convenient way to find the essays that interest you. 

If you found this summary useful, please feel free to share around. It took me nearly a year to read all the essays and turn my notes into something useful, so it’d be awesome if many people knew about this.

And if there’s something you’d like to add / edit, reach out: [email protected] / Twitter

Thanks for reading.

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How to Start a Startup: A Summary of Paul Graham’s Essential Advice

Starting a successful startup is no easy feat. It requires dedication, perseverance, adaptability, and a bit of luck. For over two decades, Paul Graham has been providing invaluable advice to founders through his essays on startups. He co-founded Y Combinator, one of the most prestigious startup accelerators globally.

Graham’s wisdom comes from his experience as a successful founder, advisor, and investor. His advice provides practical tips and key mindsets essential for startup success. Here is a summary of his most critical points for aspiring startup founders.

Developing a Startup Idea

Every startup begins with an idea. But how do you come up with an idea worth pursuing? Graham emphasizes starting with problems you face yourself:

“The very best startup ideas tend to have three things in common: they’re something the founders themselves want, that they themselves can build, and that few others realize are worth doing.”

Trying to solve problems faced by real people you understand is much better than chasing hypothetical customer needs or copycat ideas. Build things you wish someone would make for you.

Graham also advocates starting small:

“If you can make something a small number of users love, you’re doing exceptionally well.”

Don’t be discouraged if your initial product is basic. Release it quickly and improve iteratively based on user feedback. Small early successes with real users can grow into something big.

Assembling a Founding Team

For Graham, having co-founders is non-negotiable:

“You need colleagues to brainstorm with, to talk you out of stupid decisions, and to cheer you up when things go wrong.”

Choose co-founders carefully based on complementary skills and shared vision. disputes between founders often kill startups. Vesting schedules can provide an orderly exit if needed.

Moving Fast in Early Days

Speed is critical in the early days. As Graham puts it:

“A startup is a company designed to grow fast.”

He advises focusing on quick growth over profitability initially:

“You make what you measure. If you focus on growing quickly each week, growth is what you’ll get.”

Release a basic v1 fast, recruit users manually, get feedback, and rapidly build v2. Don’t get bogged down trying to launch something perfect.

Relentless Improvement & Learning

“Keep pumping out features. Improve something in some way daily.”

Startups must build momentum through continuous small improvements and learning. Doggedly listen to user feedback and respond. Never stand still.

Budgeting Lean

In the early days, conserve cash zealously. As Graham puts it:

“Spend little. Get ramen profitable as fast as you can.”

Minimize salaries and expenses. Be scrappy and do things manually before you scale. Every dollar should go toward learning and growth.

Focus Intently on Customers

“Understand your users. Make a few users love you rather than lots ambivalent.”

Know your early adopters intimately. Obsess over delighting them. Give them incredible service. Make them raving fans before trying to expand.

Persevering Through Challenges

Startups face many hurdles. Things will go wrong. Grahams’ advice is:

“Don’t get demoralized. Don’t give up. Deals fall through.”

Persistence through difficulties is an entrepreneurial must-have. Stay determined but flexible. Keep your optimism in check to avoid disappointment.

Securing Funding Strategically

Graham cautions against both raising too much and too little funding:

“Take enough to get to the next step, but not so much you get locked into the wrong direction.”

Understand exactly how much runway you need to hit key milestones. When pitching investors, focus on conveying your expertise and traction.

Maintaining Focus & Priorities

Distractions are lethal for early stage startups with limited resources. As Graham warns:

“Avoid distractions, especially those that pay money like consulting.”

Stay obsessively focused on learning and growth. Don’t get enamored with quick revenue opportunities that detract from the core mission.

Key Mindsets for Founders

Some of Graham’s advice goes beyond tactical steps. He emphasizes cultivating an entrepreneurial mindset:

• Iterate rapidly:   “Most successful startups end up doing something different than they originally intended.”  Remain adaptive and willing to pivot.
• Create value:   “If you fix things that seem broken, you’ll build something of value.”  Focus on real user problems, not big ideas.
• Start small:   “Better to dominate a small niche than be marginal in a big one.”  Grow deliberately from a strong initial beachhead.
• Expect challenges:   “Assume the worst about machines and people.”  Mentally prepare for inevitable hurdles.
• Move fast:   “Economically, a startup is a way to work faster.”  Value speed, learning and flexibility over short-term gains.

How to Develop Startup Ideas People Want

Coming up with ideas for startups is challenging. You want to find an idea that is novel yet solves a real problem for people. Graham provides a framework for developing promising startup ideas systematically:

Look to your own experiences

Pay attention to problems and frustrations you face regularly in your daily life. The best ideas often arise from scratching your own itch.

Observe small inefficiencies

Don’t overlook problems that only mildly annoy you. Small frustrations that people have learned to tolerate present opportunities.

Notice gaps in products

Look for missing features, holes in user experiences, or needs not adequately addressed by current solutions.

Leverage your unique knowledge

Your specialized expertise in a domain exposes problems others may not see. Domain knowledge fuels creative ideas.

Talk to people with different experiences

Other people you interact with likely face frustrations you don’t. Discover unmet needs through conversations.

Pay attention to workarounds

When people devise clumsy workarounds, it often signals an underlying problem with current solutions.

Follow up on complaints

Don’t dismiss complaints as mere whining. Frustrations that make people complain out loud are promising starting points.

Zoom in on “hair on fire” problems

The best opportunities involve big pain points that people desperately want solved. Identify the most pressing frustrations.

Fall in love with the problem, not the solution

Ideas morph. Success comes from understanding user problems deeply, not having the perfect solution upfront.

By diligently following this approach, you can discover startup ideas that fulfill Graham’s criteria: addressing problems people care about that you can uniquely solve.

8 Keys to Building Habit-Forming Products

Incredible product design is crucial for startups to delight users. Graham emphasizes making your product compellingly habit-forming. Here are 8 techniques he advises:

Solve a frequent frustration

Choose a problem people encounter routinely. The more regularly the need arises the faster habits form.

Provide immediate value

The first interaction must provide tangible value upfront. Don’t make users wait for “aha” moments.

Keep it simple

Complexity is the enemy of habit formation. Distill your solution down to the absolute essentials.

Build for quick interactions

Habits require repeated small actions, not lengthy engagements. Target micro-moments.

Utilize reminders and prompts

Triggers bring users back frequently. Employ notifications, emails, texts, etc. appropriately.

Create variable rewards

Varying payoffs sustain interest. Provide surprises via personalized content, Easter eggs, etc.

Leverage natural drives

Tap into innately satisfying human drives: achievement, connection, competition, self-expression.

Continuously improve

Small ongoing enhancements delight users and fixes keep them loyal. Never stop iterating.

Building habit-forming products is challenging, but incredibly valuable. Utilize these techniques to hook users and create obsessive fans.

Choosing the Right Startup Funding Strategy

Raising startup funding is nuanced. Graham suggests being strategic about how much money to take and when:

Factor in your risk profile

Conservative founders should minimize early fundraising to maintain control. Aggressive ones can raise more upfront.

Only take what you need to hit milestones

Don’t raise too far ahead of your needs. Investors want to see progress between rounds.

Have a plan to be ramen-profitable fast

Target basic profitability quickly to extend runway. Then raise more once you’ve proven traction.

Build momentum before raising bigger rounds

The better your metrics, the better terms you can negotiate. Wait until you have strong traction.

Keep early rounds small

Raise small amounts initially while you find product-market fit. Startups need flexibility early on.

Only expand after nailing the model

Premature scaling wastes money. Prove repeatability before ramping up aggressive growth.

Maintain control of decision-making

Taking money from investors doesn’t mean letting them run the company. Protect autonomy.

Raising too much too fast can be as dangerous as raising too little. Match your fundraising pace to your progress and milestones.

How to Convince Investors to Back Your Startup

Fundraising is a skill. Graham explains how to craft a compelling pitch:

Demonstrate market opportunity

Show a big problem exists that consumers urgently want solved, that is better than current solutions.

Convey why you can win

Explain why your team and strategy will beat competitors. Lean on domain expertise.

Provide evidence of product appeal

Nothing persuades like traction. Showcase metrics, testimonials, usage data.

Talk specifically about users

Share specific stories of real users describing transformative experiences.

Emphasize exponential growth

Investors love hockey stick growth curves. Outline plans to scale aggressively.

Highlight your purpose

Communicate the “why” behind your startup. Mission and meaning matter.

Skip business model details

Models change. Focus pitches on problem, solution and traction, not monetization.

Demonstrate self-belief

Conviction is contagious. Investors back founders who believe in their startup.

Success ultimately depends on having a startup worth investing in. Refine your model until you can pitch with authentic conviction.

Choosing the Right Startup Metrics to Track

Tracking metrics helps startups learn and improve. Graham advises being thoughtful about what to measure:

User growth rate

This reveals how fast you’re acquiring users and if efforts are working. Compare week-over-week.

Customer lifetime value

Knowing value per customer helps determine sustainable pricing and profitability.

Monitoring churn shows if you’re delighting customers or need improvement.

Virality rate

For growth, analyze how users invite others. Tweak until you find viral fuel.

Engagement by feature

Spot which features drive stickiness and where users lose interest.

Funnel conversion rates

Pinpoint where users drop off in sign up, trials, purchases, etc. Optimize weak points.

Net Promoter Score

This measures user satisfaction and loyalty. High is 40+; low is below zero.

Customer acquisition cost

Calculate cost of acquiring each customer to guide marketing spend.

Carefully tracking metrics gives startups crucial feedback on what’s working, what’s broken, and where to focus energy. But don’t get analysis paralysis. Spend more time improving the product than analyzing.

Key Mindsets All Startup Founders Need

While doing valuable work is essential, mindset also plays a big role in startup success. Here are 5 founder mentalities Graham highlights:

Starting a business is a rollercoaster. Grit enables founders to power through the inevitable brutal periods.

Flexibility

Successful founders stay nimble and adaptable. They allow their ideas and plans to evolve.

Persistence through setbacks, rejections, and short-term disappointments is non-negotiable.

Sisu – This Finnish concept of stoic determination and courage drives founders through dark times.

Delayed gratification

Startups involve sacrifice. Founders must delay rewards for future gain.

Cultivating these attitudes provides stamina when efforts seem fruitless and resilience to rebound from failures. Build these mindset muscles intentionally.

Key Decisions When Structuring Your Startup

Startup legal structure has long-term implications. Graham highlights critical choices:

Corporation vs LLC

Weigh investor preferences, risks, taxes, and paperwork requirements. Many startups pick C-Corp.

State of incorporation

Delaware has startup-friendly laws but can be costlier. Consider home state too.

Vesting schedule

This governs how founder equity vests over time. Typically 4 years with 1 year cliff.

Stock option pool

You’ll need equity for employees. Set aside 10-20%.

Board composition

Decide arrangement of voting vs non-voting directors. Keep founders in control initially.

Share classes

Allows different rights for common shareholders, investors, employees.

Protective provisions

Give investors veto rights on key decisions to ease concerns.

Founder control

Maintain majority voting power when possible, especially early on.

Don’t just default to typical startup legal structures. Make deliberate choices tailored to your situation and goals.

When Does It Make Sense to Pivot or Persevere?

Pivoting requires effectively abandoning your idea to start fresh. Graham offers advice on when to stick it out versus changing direction:

Preserve core vision

Stay committed to the core problem you’re solving, even if solutions shift.

Question assumptions

Continuously test your hypotheses. Be ready to toss wrong assumptions.

Keep evolving based on feedback

Let customer input guide iterations. Don’t pivot impulsively based just on opinions.

Watch for exponential growth

If you see hockey stick adoption, persist. Slow linear growth demands change.

Consider opportunity costs

At some point, further optimization produces diminishing returns. Pivot before excessive sunk costs.

Be unsentimental

Judge ideas dispassionately. Don’t cling to solutions out of attachment.

Focus on trajectory

Isolate week-over-week trends. Pivot if metrics consistently worsen over time.

Change one variable at a time

Small iterative pivots are best. Don’t pivot product, market and business model simultaneously.

There are no fixed rules on when to pivot. Carefully weigh quantitative trends and qualitative learning to decide.

Key Startup Failures Modes to Avoid

Startups face many hazards. Here are 6 common failure modes Graham warns founders about:

Premature scaling

Expanding aggressively before nailing product-market fit will kill startups fast through waste.

Getting distracted

Lack of focus plagues startups. Shiny objects derail progress. Maintain ruthless prioritization.

Not listening to users

Failure to obsessively gather user feedback causes startups to build unwanted products.

Founder disputes

Infighting and lack of alignment corrodes startups from the inside. Ensure you have shared vision.

Running out of runway

Mismanaging cash burn forces startups to shut down or accept bad terms too soon.

Losing momentum

The graveyard spiral of stagnation must be avoided. Always make progress week-to-week.

Avoiding these pitfalls requires discipline, open communication between co-founders, and constantly learning from users. Be vigilant in order to dodge these startup killers.

Key Lessons from Paul Graham on Startups

• Ideas emerge from understanding people’s frequent frustrations
• Build for habit-forming daily use cases
• Match fundraising to reaching key milestones
• Obsess over delighting a small group of users first
• Continuously improve through rapid iteration
• Persist through the turbulent rollercoaster ride
• Maintain intense focus on learning & growth
• Cultivate grit, flexibility, tenacity and determination
• Pivot when necessary but preserve the core vision
• Avoid scaling prematurely or getting distracted

Paul Graham has mentored generations of founders, sharing hard-earned wisdom forged through experience. His advice provides invaluable perspectives for increasing the odds of startup success.

At the core, he emphasizes deeply understanding customer problems, assembling the right team, maintaining focus on learning and growth, and persisting through challenges. By internalizing his perspectives, founders give themselves the best chance at building companies that improve people’s lives.

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Partha Chakraborty

Partha Chakraborty is a venture capitalist turned entrepreneur with 17 years of experience. He has worked across India, China & Singapore. He is the founder of Tactyqal.com, a startup that guides other startup founders to find success. He loves to brainstorm new business ideas, and talk about growth hacking, and venture capital. In his spare time, he mentors young entrepreneurs to build successful startups.

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Where do ideas come from: Much more than you wanted to know

“For me, inspiration comes from a bunch of places: desperation, deadlines… A lot of times ideas will turn up when you’re doing something else. And, most of all, ideas come from confluence — they come from two things flowing together. They come, essentially, from daydreaming. . . . And I suspect that’s something every human being does. Writers tend to train themselves to notice when they’ve had an idea — it’s not that they have any more ideas or get inspired more than anything else; we just notice when it happens a little bit more.” — Neil Gaiman 

How people from all sorts of professions come up with ideas has always fascinated me. We all deal with ideas. Founders need startup ideas. Once you have started a business with an idea, you are in constant need of ideas for growth, management, competition, and so on. Writers need ideas. Footballers and tennis stars need ideas. Politicians need ideas. I can go on. But I’ll not because it does not make sense when the list can potentially run infinitely :). Simply put, the world runs on ideas. 

Moreover, I think where good ideas come from is a question that many people have. We used to organize a community event in the early days of Future Startup called FS Talk. We hosted our first event in 2013. At that event, we asked attendees to submit three questions to our speakers. We received a ton of questions about various aspects of building a company. One widely recommended question was “how to generate ideas”. So it makes sense to spend some time on the question. 

The second aspect of this discussion is the importance of ideas — how much weight we should put on an idea. I believe a lot. Because an idea is the starting node of everything. When the founding node is weak, whatever you build on it will be weaker. It is simple to understand. For instance, if you are starting a war — I mean a literal war and attacking another country, your chance of success, along with many other things, will depend on how sound your strategy is. Many people want to say that Hitler made a serious strategic mistake when he attacked Russia during the second world war while fighting on several other fronts. That’s broadly how important a strategic idea could be. It can cause your downfall. 

Let’s move towards a closer-to-home example. Consider someone you know who started a company that will send humans to mars (you see the connection, right?) and you want to start a company that will deliver dog food in Dhaka. Which one do you think will attract more attention and thus resources? I know I don’t have to tell you. Ideas of course have qualitative value. That’s why, among other things, I guess Tipping points by Malcolm Gladwell became a worldwide bestseller and my poorly written Rethinking Failure didn’t sell more than a few hundred copies. 

To be clear, I don’t take the importance of execution — doing the work well, be it writing a book or building a company, lightly. Rather the opposite. Unless you do it well, no great idea will take you far. But my view is simple: I believe ideas have qualitative value. There are good ideas and not-so-good ideas. There are problems that should get priority over other problems. So it appears to me that we should mindfully choose what problems we want to solve. Similarly, when choosing an idea we should be critical because we always could do better. 

Still, when it comes to my home turf which is the world of tech startups, people remain skeptical of the value of the idea. 

Many people poke the question: do startup ideas matter? I didn’t want to write about the topic but it would bug me and I guess many other readers because it remains a question. So let’s take a look at it first before we move on to the key question of this article which is how to generate more exotic ideas, if I may say so. 

Before that, I want to make something clear. This article will specifically deal with idea generation for entrepreneurial purposes — you want to start a company and are in need of ideas, how you should approach it. This is the core focus of the article. However, I believe the ideas can also be applied to any other discipline. I also plan to borrow from all other disciplines where applicable. This guide is divided into the following parts: 

• Introduction
• Why ideas matter 
• Techniques for generating ideas 
• Paul Graham on generating startup ideas 

Sam Altman on generating startup ideas 

The practice and psychology of creative idea generation, ii. why do startup ideas matter .

“The most common question prospective startup founders ask is how to get ideas for startups. The second most common question is if you have any ideas for their startup. But giving founders an idea almost always doesn’t work. Having ideas is among the most important qualities for a startup founder to have—you will need to generate lots of new ideas in the course of running a startup.YC once tried an experiment of funding seemingly good founders with no ideas. I think every company in this no-idea track failed. It turns out that good founders have lots of ideas about everything, so if you want to be a founder and can’t get an idea for a company, you should probably work on getting good at idea generation first.” —  Sam Altman

Identifying ideas as a less important element in the process of building a successful company has become a fashion of late. We routinely hear cliches like ideas do not matter, execution matters the most. Ideally for an entrepreneur, an idea is one of the biggest assets. A shitty idea remains shitty no matter how great your execution is. Execution is important. Maybe it is a lot more important than having an idea and doing nothing or executing it poorly. But great execution will take you only so far if your idea is not good enough.

Examples of failures due to poor execution are prevalent. Similarly, examples of failures because of a shitty idea are equally prevalent. 

A great business starts with a great idea, not great execution. No one starts a company right away. You start with an idea. You test the water and then you move forward.

When we are talking about an idea, it is not only a mere idea. It is the scalability of the idea, growth potential, market size, defensibility, and more. When you are considering an idea and weighing whether you should go forward or not, you not only think about the product or service, you consider all these things. Here are a couple of points about why we should put serious importance on the idea: 

Great ideas make execution easy —  Great ideas excite people. It can draw lots of early attention and support. When you are working on a difficult problem, it is relatively easy to build a team, attract resources, and stay motivated. For instance, on a recent trip to India, I met a founder who is building a private rocket startup. The moment I heard his idea, I was intrigued. Not so much when I came across ideas about building a regular-sounding startup. We often overlook the importance of perception. But it makes a lot of difference in real life. When people perceive you as superior, it can bring you a lot of advantages. 

Hard to copy  — Monopoly makes a good business. If your idea is easy to replicate, you will face much harder competition. This is why intellectual property rights are such a hot topic. When you have something proprietary in the form of IP, it makes it very difficult for the competitors to compete with you. 

Startups are a long game  — you don’t build a business overnight. It takes time. Many industry insiders suggest it usually takes ten years to build a business. And if you are not passionate about something, you are not going to put ten years of life into it. That’s where the importance of an idea comes in. When you are solving a hard problem, you are likely to see value in it to dedicate years of life to solving it. 

Having a great startup idea is hard. Good ideas are often overlooked or seemed too early a move or sound terrible. Good ideas are unfamiliar and on-obvious. Anything unfamiliar is often too hard for our taste to accept. Hence, we instead take the familiar route and replicate an existing idea from somewhere else. 

When people talk about great execution and the importance of execution, there is a point to it. No great idea is going to bring you success unless you put it to work better than everyone else. 

But the importance of execution does not negate the importance of an idea. The importance of the problem you are working on is still important. 

It is objectively true that there are problems in the world that are far more important and urgent than other problems. So execution begins after you have chosen the problem you want to solve. Once you have chosen the right problem, then only a great execution will generate an outsized result.

How to generate ideas

“The way to get startup ideas is not to try to think of startup ideas. It's to look for problems, preferably problems you have yourself. The very best startup ideas tend to have three things in common: they're something the founders themselves want, that they themselves can build, and that few others realize are worth doing. Microsoft, Apple, Yahoo, Google, and Facebook all began this way.” —  Paul Graham 

Where good ideas come from is a common question everywhere, be it in business or art. The right answer is you. Make what you need. Write the book that you want to read. Start the company that you want to buy from. That’s the silver bullet.

The common theme that runs across the board is to look for problems. Not solutions. The best kind of problems is the ones you have yourself.

You are your best customer. This is the truth for both individuals as well as for companies. Some of the best innovations in human history came forth into the world because the creator wanted them badly enough that they dedicated their lives to bring them to life.

There are several reasons why starting with you is the best idea. Often ideas need to be validated. But validation is not easy. Yes, there are models for validating your idea. That you have to go out and meet customers and get their thoughts and feedback and so on.

But the easiest way is if you yourself are using the product or service and if you see value in it. It is a proxy for other people who are like you and have the same pain points as you do.

You will eventually have to go out and meet real users but this initial validation is strong enough to get you to the next step. The important question to ask at this stage is whether you could do it at scale.

The second reason, when you think of starting a company and then trying to come up with an idea to build a business, the best you could do is to start with some assumptions. Assumptions that are not essentially tested or proven. You might develop a logic for a product using some hypothesis but that could be a false positive and people could behave very differently in reality than what you might think. Compared to that if you are building a solution for yourself, you at least have one ready customer. 

People look for hot trends and shortcuts when it comes to finding startup ideas. Consequently, most people end up starting vitamin companies rather than painkiller companies. Vitamin is convenient, and painkillers are necessary.

Instead of looking at the hot trends and what everyone is running after, you should look at things that are underrated, broken, or missing and that you could help improve with your product or services. 

The law of attraction says instead of trying to acquire wealth or anything for that matter, one should try to become the person who attracts wealth or whatever that you’re trying to achieve.

Paul Graham says it well, “finding startup ideas is a subtle business, and that's why most people who try fail so miserably. It doesn't work well simply to try to think of startup ideas. If you do that, you get bad ones that sound dangerously plausible. The best approach is more indirect: if you have the right sort of background, good startup ideas will seem obvious to you. But even then, not immediately. It takes time to come across situations where you notice something missing.”

You can work on developing habits and abilities that would enable you to identify broken systems, and missing things.

You can maintain a problem notebook where you take notes of issues you come across, develop a deliberate observation skill, meet tons of people, and most importantly be interested and curious.

It may sound simple and non-specific, but it usually works.

James Young Wood’s on art and science of producing Ideas

In his brilliant work,  A Technique For Producing Ideas  James Young Wood gives a realistic prescription for generating ideas. Written in 1939, the book remains one of the best materials on the subject. James — an ad man by profession — designs a five-step process for producing creative ideas with a clear sense of applicability and effectiveness.

In the first chapter of the book, James describes the production of ideas as a structured process similar to that of the production of anything else that follows a standardized procedure. He wrote:

“The production of ideas is as definite a process as the production of Fords; that the production of ideas, too, runs on an assembly line; that in this production the mind follows an operative technique which can be learned and controlled; and that its effective use is just as much a matter of practice in the technique as is the effective use of any tool.”

James then goes on to teach us how this process of production of ideas works. Comparing the production of ideas with art, James proposes a formula for training our minds capable of getting ideas.

“In learning any art the important things to learn are, first, Principles; and second, Method. This is true of the art of producing ideas. So with the art of producing ideas. What is most valuable to know is not where to look for a particular idea, but how to train the mind in the method by which ideas are produced; and how to the principles which are the source of all ideas.”

Then in a Chapter called ‘Combining Old Element’ he describes the most important aspect of producing ideas and proposes the now popular idea of combinatorial creativity that claims creativity is a remix and a multidisciplinary discipline. In order to create something new, we have to understand connections among things. Anything new sits on the old.

“The second important principle involved is that the capacity to bring old elements into new combinations, depends largely on the ability to see relationships. To some minds each fact is a separate bit of knowledge, to others it is a link in a chain of knowledge. It has relationships and similarities. It is not so much a fact as an illustration of a general law applying to a whole series of facts. To a mind which is quick to see relationships several ideas will occur, fruitful for advertising, about this use of words as symbols.”

In the book, James prescribes a five-step idea-generation technique that can be followed and put to work effectively. Let's take a look: 

• Gathering raw materials

James wrote about building a large amount of mental treasure of information collected from diverse sources and subjects. The objective is to enable yourself to find connections among seemingly unrelated information and things. The hypothesis is simple and practical, when you have knowledge and understanding of multiple disciplines, it will be easy for you to see connections between these distant fields of work and knowledge. This is probably why many successful entrepreneurs and writers alike put undue importance on curiosity and a sense of wonder. An individual who is interested in different things can easily gather more raw materials and eventually can see more connections. James writes: 

“It is something like the process which was recommended to De Maupassant as the way to learn to write. “Go out into the streets of Paris” he was told by an older writer, "and pick out a cab driver. He will look to you very much like every other cab driver. But study him until you can describe him so that he is seen in your description to be an individual, different from every other cab driver in the world.” Every really good creative person in advertising whom I have ever known has always had two noticeable characteristics. First, there was no subject under the sun in which he could not easily get interested-from, say, Egyptian burial customs to Modern Art. Every facet of life had fascination for him. Second, he was an extensive browser in all sorts of fields of information.”

The idea can also be put in the context of our current debate of generalist vs specialist. Generalists are people who explore diverse fields and branches of knowledge. By virtue of that, they can see how diverse ideas connect with each other. When you have an understanding of different disciplines, you can make connections between them relatively easily. 

This is probably why many of the geniuses and famous scientists and writers and artists from the middle age were polymaths. For instance, Muslim Middle-age Muslim school Ibn Sina, who is known as Abiesinna in the west, was known as a scholar of a diverse set of disciplines although we primarily know him for his contribution to medicine. 

• The mental digestive process

Gathering ideas is the beginning. James suggests we take the help of our subconscious mind in processing information and producing ideas. James wrote after gathering raw materials one must digest those materials in order to transform them into useable elements.

“What you do is to take the different bits of material which you have gathered and feel them, as it were, with the tentacles of the mind. You bring two facts together and see how they fit. What you are seeking now is the relationship, a synthesis where everything will come together in a neat combination, like a jig-saw puzzle. As you go through this part of the process two things will happen. First, little tentative or partial ideas will come to you. Put these down on paper. Never mind how crazy or incomplete they seem: get them down. The second thing that will happen is that, by and by, you will get very tired of trying to fit your puzzle together. Let me beg of you not to get tired too soon. The mind, too, has a second wind. Go after at least this second layer of mental energy in this process.” 

In my opinion, idea generation is a highly intuitive process. You can’t force it. You can build a system where you delve into a contemplative stage to generate ideas but you can’t force ideas to come to you. Often the process is automatic and happens by itself. This is probably the reason many people claim that they get their best ideas when in the shower or taking a walk. 

• Do something else

Genius lies in the ability to be able to not try that hard. Instead, get yourself involved in something else. Have fun. Take a walk. But don’t think about ideas. Thinking constantly about the problem or the subject matter blocks the path of the idea. 

James prescribes, “stop thinking for a while. Let your mind work in its own way. Let the magic happen inside when you are busy with other things. Better, let the magic happen in its own way and don’t interrupt it with external efforts. When you are done with the above three steps perfectly, then the next step will happen without a doubt.”

This is akin to what they call We Wei in Chinese — try not to try. When we exert our mind too hard, it shuts down. It is the same with idea generation. You can’t try it in a too active manner. It is a delicate process and you have to treat it as such. 

• The eureka moment

“It will come to you when you are least expecting it - while shaving, or bathing or most often when you are half awake, in the morning. It may wake you in the middle of the night. This is the way ideas come: after you have stopped straining for them, and have passed through a period of rest and relaxation from the search.”

• The final shaping and development of this idea to practical usefulness

In this section, James’s prescription is similar to what we call idea validation. You need to take your idea out to test in the real world. James writes: 

“In this stage, you have to take your little idea out into the world of reality. And when you do you usually find that it is not quite the marvelous child it seemed when you first gave birth to it. It requires a deal of patient working over to make most ideas fit the exact conditions, or the practical exigencies, under which they must work. And here is where many good ideas are lost.” 

This appears a lot similar to what founders face when it comes to finding product/market fit. Many founders have a hard time taking market feedback and making the necessary changes. 

James wrote instead of becoming a passionate protector of our idea, we should let it go into the world where it actually needs to work and see whether it works or not. In the process, we will get feedback that will ultimately make the idea better. 

“Do not make the mistake of holding your idea close to your chest at this stage. Submit it to the criticism of the judicious. When you do, a surprising thing will happen. You will find that a good idea has, as it were, self-expanding qualities. It stimulates those who see it to add to it. Thus possibilities in it which you have overlooked will come to light.” 

Paul Graham on getting startup ideas 

One of my favorite Paul Graham essays is on generating startup ideas. The essay titled How to get startup ideas illustrates the key to getting high-quality startup ideas in a very PG way. The essay has several important ideas. I’ll try to summarize them here. You can read the entire essay  here . In the introduction, PG writes: 

“The way to get startup ideas is not to try to think of startup ideas. It's to look for problems, preferably problems you have yourself.”  

I’ve used this idea in my own essay about idea generation and it generally works. It is much easier to solve for yourself than solve for others. You can then use yourself as a proxy for a lot of other people who probably have the same problem as you. While it may appear that solving for yourself may narrow your market, it is unlikely to be the truth all the time. There could be a ton of people who have the same needs. 

PG also offers a framework to judge startup ideas.  He writes: 

“The very best startup ideas tend to have three things in common: they're something the founders themselves want, that they themselves can build, and that few others realize are worth doing. Microsoft, Apple, Yahoo, Google, and Facebook all began this way.” 

The essay has other fascinating ideas but the rest of the essay can be called an expansion of these ideas. For instance, in the essay PG talks about ideas that people want so badly that they will be happy to use badly made products rather than not having a solution for it. Then there are products that are good to have but people would rarely go out of their way to use them. 

“When a startup launches, there have to be at least some users who really need what they're making — not just people who could see themselves using it one day, but who want it urgently. Usually this initial group of users is small, for the simple reason that if there were something that large numbers of people urgently needed and that could be built with the amount of effort a startup usually puts into a version one, it would probably already exist. Which means you have to compromise on one dimension: you can either build something a large number of people want a small amount, or something a small number of people want a large amount. Choose the latter. Not all ideas of that type are good startup ideas, but nearly all good startup ideas are of that type.” 

PG calls this ‘well’. We can deduce this idea to what the founders themselves want to have. If as a founder you create a product that you want a lot, it is likely that many other people might also want it a lot. If the problem you are solving is somewhat mildly necessary to you, it will likely be the same with other people. Many people call this painkiller vs vitamin. Although the analogy is not entirely accurate, it serves the purpose. Good startup ideas are necessary like painkillers and unlike vitamins which are usually good to have but not always necessary. 

The next important idea is non-obvious and difficult problems. There are many non-obvious problems around us. Some of these are non-obvious because we have become used to them and don’t consider them solvable problems. The problems are hiding in plain sight but we fail to see them. Sometimes the second trait of these challenges is that they are somewhat difficult to solve because of external challenges such as regulatory barriers and so on. As a result, many people don’t approach it. PG says this is an important insight into whether you should pursue an idea. 

Become the person who comes up with interesting ideas.  Paul Graham writes: 

“How do you tell whether there's a path out of an idea? How do you tell whether something is the germ of a giant company, or just a niche product? Often you can't. The founders of Airbnb didn't realize at first how big a market they were tapping. Initially they had a much narrower idea. They were going to let hosts rent out space on their floors during conventions. They didn't foresee the expansion of this idea; it forced itself upon them gradually. All they knew at first is that they were onto something. That's probably as much as Bill Gates or Mark Zuckerberg knew at first.”

This is something I’ve written about before. It is akin to what people call the law of attraction. You first become the person who gets rich. The same applies to idea generation. Many of the traits we discussed earlier such as being a generalist or polymath go well with this idea. You become someone who has a good grasp of a diverse field that eventually helps you identify gaps and potential improvements and connections. 

Former YC President and now CEO of OpenAI Sam Altman published an essay on idea generation about two years ago. I think it is one of the good essays on the subject available online. A lot of what Sam proposes in the essay, we’ve already discussed such as looking into the future, looking for major shifts in your world, and so on. But the essay also offers several unique ideas. One such idea is your environment and the people you spend time with. This I think is an important idea. Sam writes: 

“It’s important to be in the right kind of environment, and around the right kind of people. You want to be around people who have a good feel for the future, will entertain improbable plans, are optimistic, are smart in a creative way, and have a very high idea flux. These sorts of people tend to think without the constraints most people have, not have a lot of filters, and not care too much what other people think.”

I think we always don’t attribute enough importance to our environment. The people we spend time with. The content we consume and so on. But all these things are super important in how we view the world and the problems we see. I recently attended a residential unconference program where I had an opportunity to meet a bunch of ambitious people. The ideas we discussed and the topic of general conversation were almost always weird and fundamentally different from what I usually get exposed to. I was in an entirely different world for a few days. No topic was too silly or too ambitious or too new. Everyone was generally open to new ideas. Sam explains this well: 

“The best ideas are fragile; most people don’t even start talking about them at all because they sound silly. Perhaps most of all, you want to be around people who don’t make you feel stupid for mentioning a bad idea, and who certainly never feel stupid for doing so themselves.

Stay away from people who are world-weary and belittle your ambitions. Unfortunately, this is most of the world. But they hold on to the past, and you want to live in the future.” 

Spending time with people who are ambitious and open to ideas also alludes to the idea of becoming the person who gets ideas. We become the person we are through association. Our peer groups often shape our worldview and thus our life. To that end, although it might sound farfetched, it is critical that we find our group and design our environment in a manner that supports our ambition. 

You can read the full essay  here . 

“There is no such thing as a new idea. It is impossible. We simply take a lot of old ideas and put them into a sort of mental kaleidoscope. We give them a turn and they make new and curious combinations.”

—Mark Twain

There is a certain amount of mysticism in where ideas come from. Famous composer Rick Rubin calls it “source” and that he is a mere medium. Others call it medium. Many famous writers and entrepreneurs are well-known for their quirky habits. For instance, Victor Hugo is well-known for his habit of writing (almost) naked. When the deadline for a book approaches, Hugo would ask his servant to lock all his clothes except a gray shawl so that he could not leave the house. There are examples of writers who would go to a hotel room and shut them down until they are done with writing. 

A common pattern emerges when we study the literature on idea generation. Let’s try to put together a list of what works: 

• Environment — If you want to start a web3 startup, spend time with people who are into web3. The same applies to every other area of your work. I think it is useful to create an environment catered to your work. This involves many things from your workstation design to your information consumption habits such as content and books you read to people you spend time with and so on. 
• Community — Related to that, try to be part of a community that pursues a common passion. Coffee shops, computer clubs, literary societies, and nerd clubs have played an outsized role in shaping the history of innovation throughout history more than anything else. 
• Meditation — In the learning community, they have these two moods of learning: active mood and diffuse mood. The active mood is essentially when you are actively trying to solve a math problem but can’t. The diffuse mood is rather a meditative state where one enters a sort of flow state and deals with the problem as such. You are not too self-conscious. You are not overthinking. You are simply being. You can call it a meditative state as well. I believe it is the best state where we can better access the subconscious part of the mind. And when we are in that state, ideas come to us. But simply meditating may not be useful. You need to give your mind some specific work such as solving a particular problem and get to your meditative state with that thought in your mind. 
• Read — Reading is useful for many purposes. It is more so when your business is dealing with ideas. We discussed multiple times the importance of having ideas from diverse fields which you can call polymaths or generalists. Whatever it is, reading widely is useful when your job is to find connections and come up with ideas. 
• Seek connection — Creativity is a remix. There is a famous documentary series by Kirby Ferguson called Everything is Remix where he depicts how many of the mainstream innovations of today are the results of combinatorial creativity. So see how you can put two distant ideas together and create a third one. It is what Austin Kleon calls Stealing like an artist. 
• You have the problem — we discussed this multiple times. It is an extremely good proxy but most people are not self-aware and are good observers. So they miss a lot of these opportunities. 
• You can build it — Paul Graham and Sam Altman both emphasize this trait of your idea. You should work on an idea that you understand and preferably can build.
• Underrated and non-obvious — these are the best ideas. Many of these problems can exist for a long time. Since people disregard them as problems, they remain unresolved. 
• Be open and flexible — This is one of the most important traits of people who come up with a lot of interesting ideas. They are curious, interested, and open to weird phenomena. 
• Don’t try to start a startup — When you are trying to come up with a startup idea, you are already under pressure and are more likely to look for shortcuts. You will not think originally. You’ll doubt many novel ideas. You’ll seek conformity and try to think about the feasibility of an idea before considering it. So don’t try to come up with a startup idea. Approach from a general problem-solving or project perspective. 
• Vitamins — try to avoid good solutions. 
• Personal habits: Examine your own problems. Maintain a notebook and make good use of it. Be an apt observer of your environment. Meet people. Have interesting conversations. Be interested and curious. 
• Difficult and boring — Look for boring and difficult problems. Most people avoid these kinds of challenges. 
• Broken and missing — Look for what is missing or what is broken. 
• Problem — Find a problem that bothers you the most, find a community that is also bothered by that problem, and go and solve it.
• Be interested
• Write it down — Jot down everything that comes to your mind. Carry a notebook everywhere and make good use of it. Every famous writer and entrepreneur did the same. 
• Look for changes. The world is changing all the time. Change makes old systems, approaches, and technologies obsolete and creates space for new ones. See what is changing around you, take note, and make use of it.
• Imitate. However, be a good one at it. For instance, you can replicate one system/service of a sector to a completely different sector. It has been done many times before and it can be done now too.
• Alternatives that work better: Think replacement: good system over bad one, good service over bad, speedy technology over sluggish one, beautiful interface over sloppy one.
• Live in the future and build what’s missing 

Idea generation is something we have to do all the time. For founders, it is more so. It is not only about coming up with a startup idea, it is also about running your company. While running a company, you are in need of ideas all the time. It is the same for the rest of us as well. Even if you are not an entrepreneur or a writer, you need ideas all the time. To improve your life. For a presentation at work. To come up with a creative gift idea for your wife or husband. To come up with a clever idea for your upcoming advertising campaign at work. 

Idea generation is a meta-skill that we all need almost all the time. The problem is that we never see it as such. We rarely take it as a possibility that we can learn how to be effective at generating ideas. Part of the reason is that it is a skill that is hard to define and measure. Also, it is a thinking job and thinking is not enjoyable. It is a non-doing job. It is hard. 

But if we can develop the discipline to learn idea generation as a skill and make it a habit, it can transform not only our entrepreneurial life, it can transform every aspect of our life. We can do everything better because we’ll be thinking better. We’ll be able to improve every aspect of our work and life because we’ll be always coming up with new ideas and approaches and trying things out. 

As a starting point, I think we can start with taking some thinking time daily and making good use of notebooks and diaries. 

We can start by reflecting on our days and taking notes of our observations. We can make meditating on our environment and challenges a regular habit, write down our thoughts and ideas about how to address them, and try to experiment with some of these ideas. 

Once we make it a habit in one area of our life, we can gradually expand it into other parts of our work and life. It will not be easy to develop such a habit because we live in such an always-doing-oriented world. But if we start small, and keep pushing gradually, it can become a transformational experience for us. 

Further reading

There are excellent resources on idea generation on the internet. There are also a good number of excellent books on the topic. I list down a few that I’ve enjoyed: 

• Where Good Ideas Come From: The Natural History of Innovation by  Steven Johnson  
• A Technique for Producing Ideas by  James Wood Young
• Brain Pickings, which is now The Marginalian has many excellent pieces on idea generation. I loved this one from 2011 titled  Networked Knowledge and Combinatorial Creativity.  
• Good  article on Zapier. 
• Jonah Lehrer’s excellent Imagine: How Creativity Works is an excellent read on this subject. 
• Steal Like an Artist by Austin Kleon
• Everything is Remix by Kirby Ferguson (Documentary series) 

Cover Photo by Mika Baumeister on Unsplash

Originally published on 1 November 2022. Updated on 8 May 2023.

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Startup Jobs Today Mean Networking With Tomorrow's Industry Leaders, Says Paul Graham: 'In Ten Years They'll Be Running Everything, Even If The Startup Tanks'

Paul Graham , the renowned entrepreneur and co-founder of Y Combinator , has voiced his opinion on why it’s more beneficial to work for a startup than a large corporation, even if the startup doesn’t succeed.

What Happened : Graham recently shared his thoughts on the matter on X. He believes that the connections made while working at a startup can lead to future success, even if the startup fails. “In ten years they’ll be running everything,” Graham wrote, referring to startup employees.

He acknowledged that working for big companies might be perceived as “safer,” but the potential for future success through startup connections is worth the risk. Graham’s advice has sparked a debate, particularly regarding the tradeoffs between high salaries at big tech companies and potentially lucrative stock options at startups.

Despite the potential for mental health issues and a lack of work-life balance at startups, Graham’s advice has resonated with many. Users on X, where Graham often shares career advice, have expressed their support for his views, according to a Business Insider report.

See Also: Steve Jobs Turned Around Apple’s Fortunes 27 Years Ago, Not By Making Mac Better Than Windows, But By Using This Technique Nike Is Known For

Why It Matters : Graham’s advice comes at a time when the tech industry is experiencing significant changes. His stance on the benefits of working for a startup aligns with the shifting attitudes toward work and career paths. This advice also complements recent industry insights, such as Amazon CEO Andy Jassy ‘s identification of the most crucial skill for success, indicating a growing emphasis on entrepreneurial thinking and adaptability in the workplace.

Additionally, Graham’s advice may resonate with recent graduates, as Steve Jobs ‘ ex-intern shared an investment tip with new graduates, emphasizing the value of taking risks and pursuing unconventional paths.

This advice also aligns with Elon Musk ‘s recent reflections on the craftsmanship and dedication required for success, highlighting the importance of perseverance and adaptability in the tech industry.

Read Next: More Classified Documents Reportedly Recovered From Trump’s Mar-A-Lago Bedroom — Judge Expresses Disbelief: ‘No Excuse Is Provided’

Image Via Shutterstock

This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote

© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

This article Startup Jobs Today Mean Networking With Tomorrow's Industry Leaders, Says Paul Graham: 'In Ten Years They'll Be Running Everything, Even If The Startup Tanks' originally appeared on Benzinga.com .

Y Combinator founder Paul Graham thinks stock market investors are missing out on the AI boom

• In a recent tweet, Graham said he believes all the good AI companies to invest in are still private.
• This, he said, leaves few options for those public market investors wanting to invest in AI. 
• But some claim those wanting to invest in AI can buy stocks of companies like Nvidia or Microsoft.

Paul Graham says public market investors are missing out on a potential way to get in on the AI boom, since all the good companies to invest in are still private. 

The famed venture capitalist, entrepreneur and cofounder of startup accelerator Y Combinator tweeted that those who invest in the public markets – which includes anyone who can access a stock trading account on Robinhood or Charles Schwab – have few options if they want to invest in an AI company. 

Graham argues that AI is the "first big wave of technology" since startups started going public later, which results in "a unique problem."

—Paul Graham (@paulg) June 2, 2023

Since many AI startups are still relatively new – most have been founded within the past five years or so –  they rely mainly on private funding from investors like venture capitalists or private-equity firms to fund their operations and help them grow over time. The everyday retail investor probably doesn't have the kind of cash or access to invest in these companies directly. 

And the typical pathway to the public stock market can take several years and most AI companies haven't achieved the type of scale and revenue necessary to make the transition to that market. It's also not a great time for a company to go public . The current volatile state of the IPO market makes it less appealing, even for the biggest and most successful private companies, like payments giant Stripe or grocery delivery startup Instacart, to go public. 

This is the unique problem that Graham references and he believes there are only two ways to satisfy the public demand for AI companies: an already public company will "claim" they are now an AI company by buying an AI startup or AI startups will hit the public markets much quicker than expected. 

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Neither scenario, according to Graham, may produce a good investment since those companies choosing the first route are playing to public market opinion, while those settling for the second could probably find a private investor willing to give them the kind of capital they're looking for.

But some disagree with Graham's assessment, arguing that a public stock market investor could buy into companies like Nvidia, Microsoft, Alphabet or Meta, and get the kind of AI investing exposure they seek. 

AI-related stocks have soared on the public markets this year, but new research from Vanda Research shows that institutional investors are driving the upswing . Retail investors, however, "remain on the sidelines" the research firm said in its note.

Nvidia, the public company originally known for producing computer chips that power things like graphics for computer games, now also produces chips that power generative AI, where users can create text and images with simple prompts. It's the technology that underpins applications like ChatGPT, Google's Bard and others. Wall Street recently took notice and helped catapult the company's worth briefly to $1 trillion , joining other big tech giants like Amazon, Apple, Microsoft and Alphabet in that club. 

And Microsoft has plans to pump $10 billion into AI startup OpenAI, the makers of ChatGPT and DALL-E, and is integrating the company's technology into many of its tools. While Google has an AI chatbot of its own called Bard. And, these big tech companies have venture arms of their own that invest in AI startups. For instance, Google recently led a $100 million round in generative AI startup, Runway, Insider reported. 

Yet, private investing in AI startup innovations may be where the biggest potential for a huge windfall, as Graham alludes to. Since OpenAI released ChatGPT to the masses last fall, investors have been keenly interested in AI, and specifically, generative AI. 

In the first quarter alone this year, generative AI startups raked in about $1.7 billion in VC funding , according to PitchBook data, and that doesn't even account for an additional $10.7 billion worth of deals that were announced but haven't closed. 

Three years ago during the same quarter, data shows the funding was just $250 million.  

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