Notes by @abhia90 // newsletter // youtube

Link to Paul Graham article here

Summary:

• "If you want to understand startups, understand growth. Growth drives everything in this world. Growth is why startups usually work on technology — because ideas for fast growing companies are so rare that the best way to find new ones is to discover those recently made viable by change, and technology is the best source of rapid change. Growth is why it's a rational choice economically for so many founders to try starting a startup: growth makes the successful companies so valuable that the expected value is high even though the risk is too."
• "You're committing to search for one of the rare ideas that generates rapid growth. Because these ideas are so valuable, finding one is hard. The startup is the embodiment of your discoveries so far. Starting a startup is thus very much like deciding to be a research scientist: you're not committing to solve any specific problem; you don't know for sure which problems are soluble; but you're committing to try to discover something no one knew before. A startup founder is in effect an economic research scientist. Most don't discover anything that remarkable, but some discover relativity.

What's the only essential thing to be classified as a startup? What's the difference between a startup (Ex: Google) and a service business (ex: barbershop)?

• The only essential thing is growth. Everything else we associate with startups follows from growth. If you want to start one it's important to understand that. Startups are so hard that you can't be pointed off to the side and hope to succeed. You have to know that growth is what you're after. The good news is, if you get growth, everything else tends to fall into place. Which means you can use growth like a compass to make almost every decision you face.
• To grow rapidly, you need to make something you can sell to a big market. That's the difference between Google and a barbershop. A barbershop doesn't scale.

What are the 2 requirements in order for a company to grow really big?

• (A)— Make something lots of people want, and (B)— Reach and serve all those people.
• Ex: Barbershops are doing fine in the (a) department. Almost everyone needs their hair cut. The problem for a barbershop, as for any retail establishment, is (b). A barbershop serves customers in person, and few will travel far for a haircut. And even if they did, the barbershop couldn't accomodate them.
• Most businesses are tightly constrained in (a) or (b). The distinctive feature of successful startups is that they're not.

What's the biggest downside to being a really big company? How about being an ordinary business?

• Downside to being a big startup = More competition— Yes, it might seem that it would always be better to start a startup than an ordinary business. If you're going to start a company, why not start the type with the most potential? The catch is that this is a (fairly) efficient market. The constraints that limit ordinary companies also protect them. That's the tradeoff. If you start a barbershop, you only have to compete with other local barbers. If you start a search engine you have to compete with the whole world.
• Downside to being an ordinary business = difficulty of coming up with new ideas. (ex: if you're a bar/restaurant, your potential is limited by the geographic constraints that