Reflections on Paul Graham’s Essays

I’ve been a reader of Paul Graham’s essays since around sophomore year of college. Back then it was tremendously infrequent (and lacking depth), but this past year, it has been quite the opposite. Every now and then I’ll take to reading a couple of essays or a batch in one setting. I’ve also listened to podcasts dissecting them, which I’ve found insightful as well. I know the essays garner large recognition in several entrepreneur or investor circles, so I’m cognizant this post may lack a certain novelty relative to others, but similar to the exercise accompanying the Letters from Jeff piece, I found it helpful to reflect on a batch I read this past weekend, drawing out some insights and putting them into a loosely connected piece housed under the theme of being a great founder.

The craft that I currently dedicate myself to manifests that theme as a critical identification skill, so of course the topic is selfishly of importance. However, beyond that, I’ve always had a thirst for understanding how the best people tick, so it was nice to put pen to paper on this batch of essays. Of course, all the kudos goes to Paul Graham here.

What goes wrong

A great starting point for this reflection is to focus on the via negativa, i.e., learning greatness by understanding what not to do. As I think about certain projects that failed in my field, or the failures at the center of various articles and books, I resonate with Graham’s rationale in ‘The 18 Mistakes That Kill Startups’. To draw some out:

• Marginal niche — Graham and YC see a lot of startups that target a small, obscure niche in the hope of avoiding competition. Yet, (1) if you make something really good, you will end up having competitors, and (2) safe and small ideas can’t really amount to massive outcomes. Holding the competition piece aside, I do see (2) pop up with some frequency in the industry. I won’t mention any specific ideas as I don’t want it to seem that I am calling out certain projects, however, the general mold tends to involve one or more of the following: (1) going after a small TAM, whether serving a sector that is small and struggling itself, pursuing a use case for people numbering in the hundreds, or working on a business problem that is on the list of many businesses, but it is way down there in terms of criticality, (2) something that is easily a future feature of another larger project in the space, or (3) a derivative or N + 1 as it pertains to something else out there (which is another ‘reason’ Graham lists in the essay). Now, I personally don’t see concerns about competition as the universal reason for doing this (at least anecdotally). A lot of the time it is just a lack of the founders drilling down on what exactly they are going after and connecting the dots to the opportunity. Sometimes one can also see a lack of being really thoughtful, where asking questions to draw this out makes the founder(s) realize the ‘marginal niche’ issue on the spot.
• Derivative idea — I touched on this one a couple of sentences above, so it doesn’t need a detailed explanation. N + 1 or extremely close derivative ideas are just hard to pair with a venture scale / large outcome. Now, does that mean every startup has to have a completely new idea? No, a great company could be built by counter-positioning to another one already out there, taking the competitor’s lunch money, or expanding the TAM in a way no one understood before. But if the degree of the derivative and the quality of the difference is very low, then it becomes hard for that startup to thrive.
• Slowness in launching + launching too early — I found it a little bit ironic that Graham had both of these in there and listed them back-to-back, but I agree with their inclusion. In some industries, where brand and trust are critical (think asset custody for example), a large error can cost the company its brand and set it very far back, potentially even rendering it dead if there are extremely capable competitors operating as well. Launching too early and having that error because of a rushed process is a danger. Yet, as Graham states — and I definitely agree — “launching too slowly has probably killed a hundred times more startups than launching too fast”. The need to make every single thing perfect before launch can be a killer (although I do find the potential Jobs / Apple counter example interesting here). There is definitely some sort of Pareto principle at play where a small % of the product accounts for most of the utility and consumer surplus on the user side. Great founders are able to deliver that small %, launch, and then version up with incremental improvements where needed. Failing to move quickly, especially in a competitive environment, can kill a company. It also delays several critical feedback mechanisms (which could have informed the founder to pivot faster, change the product, add features, etc.) and increases runway risk (i.e., consumes more months of runway pre-product).
• Having no specific user in mind — Graham says it perfectly, “You can’t build things users like without understanding them”. I have come across several bewildering conversations with entrepreneurs that got to some idea and conducted either no customer discovery or very shallow customer discovery. There are also the cases where post launch, the effort applied to engaging with users, understanding them with as much detail as possible, and scouting out new user groups is not that high. Knowing the customers one is building for is critical; PMF is at the foundation of business success.
• Not wanting to get one’s hands dirty — it can be easy to just focus on the code and avoid the salesmanship side. It can be easy to want someone to acquire the technology rather than build a whole business around it. It can be easy to outsource getting hands dirty to consultants, large teams, or another party. Very successful founders get their hands very dirty, especially in the early years of the company, building it up brick by brick. Fascinating historical examples to study further include figures such as Sam Walton, Jeff Bezos, and Samuel Zemurray.

I also found “The Hardest Lessons for Startups to Learn” pertinent here. I’ll proceed to draw out three takeaways from that essay:

• Keep pumping out features — this is tied to the launching early component above. Graham argues that it is better to launch early and keep iterating from there. The lesson Graham gives around features pertains to that latter part — after releasing the v1, great founders will continue to iterate and do so with a commitment to improving the user experience / value prop / amount of consumer surplus generated. Part of the beauty in the model Graham describes is that it gives founders so many opportunities to take in feedback and improve. This also ties into the idea of continuous iteration — evolve or die is a tough, but good concept to live by.
• Make users happy — this lesson circles back to the discussion of knowing the customer. Once you really know them, the goal is to make them happy. Per Jeff Bezos, the customer is above everything else. Making something that a user really likes is critical as this then opens the avenues to monetizing and building a real business. Of course, this is way harder than it seems. It is also even harder to then tie in making users happy with defensibility, so you can sustainably serve them, but that is a topic for another time.
• Commitment is a self-fulfilling prophecy — the word commitment really hits home. I’ll get to ‘relentlessly resourceful’ in a bit, but just the word itself speaks a lot. Having a deep commitment to and determination in what one is building is paramount. Startups are full of disasters, challenges, friction, metaphorical fires to put out, and all sorts of other hazards. Having the deep, relentless drive to keep going is a trait shared by all amazing founders. Jobs is a phenomenal example here (this really shines through in the biographies written about him). In a harsh way, for the best founders the startup is their life… a very deep commitment indeed. To take this further, Graham ties the commitment component into what he calls a self-fulfilling prophecy. If one is determined to stick around, people pay more attention and come to terms with one. This applies to key industry thought leaders, sector participants, investment firms, future hires, future acquirers, and more. And to bring up one of Graham’s more well-known analogies:

“You have to be the right kind of determined, though. I carefully chose the word determined rather than stubborn, because stubbornness is a disastrous quality in a startup. You have to be determined, but flexible, like a running back. A successful running back doesn’t just put his head down and try to run through people. He improvises: if someone appears in front of him, he runs around them; if someone tries to grab him, he spins out of their grip; he’ll even run in the wrong direction briefly if that will help. The one thing he’ll never do is stand still.”

What to look for

The last point forms a nice transition to reflecting on great founders in the positive sense. To kick this off, I’ll go straight to one of the more obvious titles, “What We Look for in Founders”:

• Determination — Graham and YC (at the time the essay was written) figure this to be the most important quality in great founders. I am cognizant that it was just discussed above, however, there are some other points to add / ones that need further emphasis. Being ultra-intelligent is more on the mythical side as a critical determinant. Being able to be deeply determined, ‘relentless’ that is, allows the founder to get through the sea of obstacles, sources of friction, and opponents that exist in the early stages of company building. Great founder stories confirm this — Steve Job’s reality distortion field, Bill Gates’ work schedule, Elon Musk and Tesla being on the brink of death… determination must be next level.
• Flexibility — Graham’s running back example is applicable here. Great founders (as well as investors) are able to craft a blend of deep determination / conviction that powers their ability to bring a vision to life with flexibility in perspective and path charting which allows them to take in data / feedback and course correct to a more optimal approach. It is important to emphasize the previous sentence — I have witnessed several occasions of confirmation bias, ignorance / limiting of customer discovery, lack of feedback collection, and inability to process feedback. Great founders are able to establish processes (internal to them or formal for the team) to counter the aforementioned perils. Flexibility is critical at each phase of the company’s evolution: (1) idea generation, (2) feature additions, (3) new market entry, (4) company reinvention (a la Intel or Netflix) and so on.

Perhaps an interesting way of blending the two points above would be the following: be obstinate in the right places / situations.

The prior piece can be combined nicely with “Startups in 13 Sentences”, an essay Graham ended up writing when prompted by a reporter asking him what he would say if he could only say 10 things to a startup. Some worth highlighting are:

• “Better to make a few users love you than a lot ambivalent” — one could tie this into a lot of interesting frameworks and tips related to finding PMF and company evolution. It is much better to truly fulfill the demands of a smaller addressable market (initially… caution with regards to one of the points brought up in the first section of this post) than to partially fulfill the demands of a much larger one. Peter Thiel’s ‘start small and dominate, then expand the addressable market’ point is applicable here. So are several stories of great products and companies serving loving fringe groups of society and then expanding into general society over time (Apple is a great one). A great startup’s core users love the company / product and hopefully are as close to not being able to live without it as possible. Great founders really figure this piece out and understand the exact value prop of the product. From there, TAM and product expansion can follow.
• “Spend little” (and I’d add, “wisely”) — this one may be a bit controversial among founders, especially given the excess of available capital in recent years. Overall, I generally find it very applicable and especially now given the current economic state in startup land (+ its general location on the risk spectrum). Being very disciplined and tactical with resource allocation is critical to surviving and thriving. And in the tough times, one should remember that one can only thrive if one survives. According to Graham, most startups fail because they run out of money. By basic logic, great founders don’t run out of money — they have a grasp on capital allocation.
• “Avoid distractions” — being focused is another critical requirement. The sheer number of obstacles and competitors out there command very precise, determined, and focused execution. If one is trying to go after a flurry of different things at once, odds are very in favor of accomplishing no venture scale success in any of them. Intertwined with points above, great founders harness focus on the company / product being insanely good in certain ways and they then pursue evolution from there. Side projects, new product explorations, other commitments (i.e., being on multiple boards or an active angel investor) all detract from building the very best product in category X or very best company in sector Y.
• “Don’t give up” — this one is self-explanatory, but still deserves a mention. In so many cases in life, ‘just’ making it through gets one to victory itself. Survival mirrors success — keep pushing, keep moving, keep growing, and success is nurtured.

Conclusion

Reading over this piece again, I am fascinated with the depth behind a lot of the very simple phrases or terms discussed. Just thinking about ‘relentlessly resourceful’ or the running back analogy leads me down a rabbit hole of thoughts, stories, and connections to other points Graham makes in his writing (for those interested, he dives a bit deeper into ‘relentlessly resourceful’ here).

Overall, it has been a pleasure to go through Graham’s writing and expand on it further with connected thoughts and experiences. Hopefully to any readers that are founders or future founders, it has some thought-provoking value. And, as said at the start, all the kudos goes to Graham for that. I look forward to diving further into his writing and similar pieces authored by others.

Disclosure: This blog series is strictly personal/ educational and is not investment advice nor a solicitation to buy or sell any assets. It does not represent any views from where the author is working — all views, opinions, and arguments are the author’s. Please always do your own research.