Be Good

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| April 2008(This essay is derived from a talk at the 2008 Startup School.)About a month after we started Y Combinator we came up with the
phrase that became our motto: Make something people want. We've
learned a lot since then, but if I were choosing now that's still
the one I'd pick.Another thing we tell founders is not to worry too much about the
business model, at least at first. Not because making money is
unimportant, but because it's so much easier than building something
great.A couple weeks ago I realized that if you put those two ideas
together, you get something surprising. Make something people want.
Don't worry too much about making money. What you've got is a
description of a charity.When you get an unexpected result like this, it could either be a
bug or a new discovery. Either businesses aren't supposed to be
like charities, and we've proven by reductio ad absurdum that one
or both of the principles we began with is false. Or we have a new
idea.I suspect it's the latter, because as soon as this thought occurred
to me, a whole bunch of other things fell into place.ExamplesFor example, Craigslist. It's not a charity, but they run it like
one. And they're astoundingly successful. When you scan down the
looks like a misprint. Their revenues aren't as high as they could
be, but most startups would be happy to trade places with them.In Patrick O'Brian's novels, his captains always try to get upwind
of their opponents. If you're upwind, you decide when and if to
engage the other ship. Craigslist is effectively upwind of enormous
revenues. They'd face some challenges if they wanted to make more,
but not the sort you face when you're tacking upwind, trying to
force a crappy product on ambivalent users by spending ten times
as much on sales as on development. [1]I'm not saying startups should aim to end up like Craigslist.
They're a product of unusual circumstances. But they're a good
model for the early phases.Google looked a lot like a charity in the beginning. They didn't
have ads for over a year. At year 1, Google was indistinguishable
from a nonprofit. If a nonprofit or government organization had
started a project to index the web, Google at year 1 is the limit
of what they'd have produced.Back when I was working on spam filters I thought it would be a
good idea to have a web-based email service with good spam filtering.
I wasn't thinking of it as a company. I just wanted to keep people
from getting spammed. But as I thought more about this project, I
realized it would probably have to be a company. It would cost
something to run, and it would be a pain to fund with grants and
donations.That was a surprising realization. Companies often claim to be
benevolent, but it was surprising to realize there were purely
benevolent projects that had to be embodied as companies to work.I didn't want to start another company, so I didn't do it. But if
someone had, they'd probably be quite rich now. There was a window
of about two years when spam was increasing rapidly but all the big
email services had terrible filters. If someone had launched a
new, spam-free mail service, users would have flocked to it.Notice the pattern here? From either direction we get to the same
spot. If you start from successful startups, you find they often
behaved like nonprofits. And if you start from ideas for nonprofits,
you find they'd often make good startups.PowerHow wide is this territory? Would all good nonprofits be good
companies? Possibly not. What makes Google so valuable is that
their users have money. If you make people with money love you,
you can probably get some of it. But could you also base a successful
startup on behaving like a nonprofit to people who don't have money?
Could you, for example, grow a successful startup out of curing an
unfashionable but deadly disease like malaria?I'm not sure, but I suspect that if you pushed this idea, you'd be
surprised how far it would go. For example, people who apply to Y
Combinator don't generally have much money, and yet we can profit
by helping them, because with our help they could make money. Maybe
the situation is similar with malaria. Maybe an organization that
helped lift its weight off a country could benefit from the resulting
growth.I'm not proposing this is a serious idea. I don't know anything
about malaria. But I've been kicking ideas around long enough to
know when I come across a powerful one.One way to guess how far an idea extends is to ask yourself at what
point you'd bet against it. The thought of betting against benevolence
is alarming in the same way as saying that something is technically
impossible. You're just asking to be made a fool of, because these
are such powerful forces. [2]For example, initially I thought maybe this principle only applied
to Internet startups. Obviously it worked for Google, but what
about Microsoft? Surely Microsoft isn't benevolent? But when I
think back to the beginning, they were. Compared to IBM they were
like Robin Hood. When IBM introduced the PC, they thought they
were going to make money selling hardware at high prices. But by
gaining control of the PC standard, Microsoft opened up the market
to any manufacturer. Hardware prices plummeted, and lots of people
got to have computers who couldn't otherwise have afforded them.
It's the sort of thing you'd expect Google to do.Microsoft isn't so benevolent now. Now when one thinks of what
Microsoft does to users, all the verbs that come to mind begin with
F. [3] And yet it doesn't seem to pay.
Their stock price has been flat for years. Back when they were
Robin Hood, their stock price rose like Google's. Could there be
a connection?You can see how there would be. When you're small, you can't bully
customers, so you have to charm them. Whereas when you're big you
can maltreat them at will, and you tend to, because it's easier
than satisfying them. You grow big by being nice, but you can stay
big by being mean.You get away with it till the underlying conditions change, and
then all your victims escape. So "Don't be evil" may be the most
valuable thing Paul Buchheit made for Google, because it may turn
out to be an elixir of corporate youth. I'm sure they find it
constraining, but think how valuable it will be if it saves them
from lapsing into the fatal laziness that afflicted Microsoft and
IBM.The curious thing is, this elixir is freely available to any other
company. Anyone can adopt "Don't be evil." The catch is that
people will hold you to it. So I don't think you're going to see
record labels or tobacco companies using this discovery.MoraleThere's a lot of external evidence that benevolence works. But how
does it work? One advantage of investing in a large number of
startups is that you get a lot of data about how they work. From
what we've seen, being good seems to help startups in three ways:
it improves their morale, it makes other people want to help them,
and above all, it helps them be decisive.Morale is tremendously important to a startup—so important
that morale alone is almost enough to determine success. Startups
are often described as emotional roller-coasters. One minute you're
going to take over the world, and the next you're doomed. The
problem with feeling you're doomed is not just that it makes you
unhappy, but that it makes you stop working. So the downhills
of the roller-coaster are more of a self fulfilling prophecy than
the uphills. If feeling you're going to succeed makes you work
harder, that probably improves your chances of succeeding, but if
feeling you're going to fail makes you stop working, that practically
guarantees you'll fail.Here's where benevolence comes in. If you feel you're really helping
people, you'll keep working even when it seems like your startup
is doomed. Most of us have some amount of natural benevolence.

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