Paul Graham: Hiring is Obsolete

jazznjava writes "Paul Graham has a new essay covering what the influences of declining operating costs will have on startup companies, and the undervaluation of undergraduates."

Comments

Outsourcing...

[Virtual Karma]

Outsourcing will definately bring down the average wages. The only way for local graduates to be hired will be to offer their services for lesser pay. This will also translate to lower standard of living. Think about it...

Re:Outsourcing...

[wpiman]

The dollar is likely to fall- and the Rupee gain-- so I think equalibrium will eventually come.

But your point is valid- he doesn't mention outsourcing at all.

Re:Outsourcing...

[mrchaotica]

Well, the point is that we don't want equilibrium. We're the ones with the advantage right now, and we want to keep it.

Re:Outsourcing...

[enjahova]

This "free trade" idea only works if all countries are created equal.

You obviously have no grasp of economics. Free trade works BECAUSE countries are not equal. A country should specialize according to its comparitive advantage.

I think it can be argued that this outsourcing is part of the natural cycle of growth in the computer industry.

Computers started out as custom built machines by scientists of high education. Now they are built by 3rd world countries. Why are you not crying that computer manufacturing should be done in the US? Programming is (arguably) the same way.

This is some of the most basic economics (I have only had one class in international trade). There is no "unfair" competition going on, people need to learn to adapt to a changing economy (this includes me, as I will be going into the CS field when I graduate)

Re:Outsourcing...

[Etherael]

Or let's say that they don't, and you're talking about the meanest form of modern corporate exploitation possible, for argument's sake lets say Nike hiring south east asian sweatshops for garment manufacturing, surely this is a heinous crime which can be unequivocally written off as the purest example of concentrated evil, right?

But what about;

According to a UNICEF study an estimated 5,000 to 7,000 Nepalese children turned to prostitution after the U.S. banned that country's carpet exports in the 1990s. Also, after the Child Labor Deterence Act was introduced in the US as estimated 50,000 children were dimissed from their garment industry jobs in Bangladesh, leaving many to resort to jobs such as "stone-crushing, street hustling, and prostitution," --"all of them more hazardous and exploitatitive than garment production" according to the UNICEF study. [1]

This?

A lot of people seem to be viewing the american job drain from a vacuum, I too am a coder and a sysadmin and I admit in my more primitive moments the same sense of panic and dismay strikes me when I ponder how I can compete with someone willing to do the same work as I am for 40$ per day, but the thing is you're not taking into account the entire equation.

A bunch of jobs go to india, there's less money in the domestic economy to spend on necessities of life, even if this is limited to a degree by government economic controls or other inefficient controls on natural reality, it can still be said to be a significant drain, so what's the result of the drop in demand for higher priced housing and goods? Those prices drop, also, they simply *have* to, if noone is buying them then it makes no sense for the businesses involved to maintain an unrealistic pricing structure and not actually get paid for their goods / services. The end result is a slow equilibrium being imposed upon the entire globalised economy, prices drop in the overpriced areas to match the decreased demand and raise in the underpriced areas to deal with the increased demand.

So what am I getting at? If you want someone to shout at, shout at the people making your life such a ridiculously high cost, your goods and service providers and the government that sucks the lifeblood from both you and them.

Re:Outsourcing...

[skeptic1]

I think you've got it totally wrong here. If American companies don't outsource to reduce costs, they won't be able to compete with their rivals, and this would result in a loss for the entire American economy.

Inefficient companies that don't try to minimize operating costs just won't cut it in our market. They would stagnate and lose their business to more efficient firms. Outsourcing is good for both America and the countries being outsourced to (like India). There's nothing "unfair" about competition. It's good for us all in the long term.

It's scary that you actually think the government should take action in this situation. Most ideas that go something like "the government should ...", are not bound to work. In fact they're more likely to make things worse. The government can't (and shouldn't try to) control the direction of the international market. As for jobs being lost, structural changes have come before in our economic past, and we've always gotten through them all right. The workers who aren't willing to compete and sharpen their skills to survive probably don't deserve the jobs they're losing to begin with.

Our country is at the top position in the world today for a reason. We earned our way there, but can only stay as long as we can keep ourselves there. We must continue to evolve and compete to avoid being outdone by others, who have every right to try their best as well.

The solution is not to waste our time trying to keep others down, but rather to be smart and keep trying to get better and stay ahead of the pack. And this requires innovation, not regulation.

Re:Outsourcing...

[anandsr]

Well the reason I modded it down was that its so demeaning to us Indians. Yes this happens in India.

So who is responsible, do you have any idea. The problem is education. There is not enough of it. Did you fund any non-profit organisation here who was providing education to poor Indians. Who gave you the right to say such hurtful things.

The only reason why you are saying this is because of outsourcing of IT jobs. Because it hurts you. You are losing the advantage you had, of getting a much better salary than the average.

But don't forget that the things you said to not apply to the IT sector. The Software Engineers) are living much better in India than their American counterparts, at least on the things that we care about.

Can you eat outside daily in a decent restaurant without going over budget. Can you afford a Chauffer for your car in budget. Can you get house help who will clean your house, clothes and cook food in Budget. We can and that is what we care about more than the latest electronic gadgets.

I am just 33 and own a house and will be able to pay off the mortgage in a couple years more. And I will say that I am not as successful as my other friends. Can you say something like that.

You talk about safety regulations, what are those that would matter in the IT industry. An american should not talk about the Environment regulations, because they are the worst in the developed nations. They probably produce more emissions than India (except if you consider emissions from Cars).

Yes we work harder than you guys. Because we don't have labour unions, and nobody would protect us if we lost the job. There is no job security. We have to save our old age pension ourselves. There is no social security. So we save as much as possible.

We have been in this job insecure position since the beginning so we take it for granted. You will have to come to terms with it and work hard to be where you are. It is going to be harder on you than on us, because you cost more than us. Even though we live more lavishly (in the lower salary) than you.

Such rants are not going to help you. The only possibility of job security for you is to learn some foreign language (Indian or Chinese) and learn about our culture so that you can be the bridge between our technical people and your consumers.

Who thinks recent grads are undervalued?

[Anonymous Coward]

Besides recent grads, of course.

Hiring someone with no work experience is extremely risky. There's a very good chance you're going to get someone with no clue, or someone who finds out your job isn't really what he wants to do for the next 5 years or so.

Because of that risk, recent grads will not get paid top dollar. Period.

Re:Who thinks recent grads are undervalued?

[Austerity Empowers]

I'm not a recent grad, I think they're undervalued. They're generally the workhorse of any professional establishment (esp. engineering, medicine and law). They're still deluded into thinking hard work alone will move them up, and they work hard. They usually have no families and their friends are all slaving away like they are. They have big college loans. They're pretty canonical "good" employees, they deserve to be paid well. Further, if you want new workhorse types, you need a steady supply from school so wages have to be there or people will major in something else. Sure, they don't know as half as much as they think they know but that's why they're slaving for the man.

Second, not many people want to do the same job for 5 years. Older people may be more inclined to find peace in a lower paying, lower responsibility job owing to having a family or just finding zen. Young people are less likely to do that. But expecting anyone to stay in the same job for 5+ years is not rational. In addition to just wanting to move up and be CEO, professionals MUST change jobs periodically or become obsolete. It may just be going from one project to a different kind of project. It may be a company change or even a career change. But it's dangerous to stay put too long. Finally, we all work for the man to make $$$. Most companies do not give raises sufficient for employees to keep up with market value. 5 years is a good time for employees to go rectify the situation. Some may just be comfortable and not do so, but in my experience about half will.

I don't expect a graduate to have much work experience. Most in field work experience opportunities are unpaid, most college kids don't have a trust fund and must make money. Most do just fine, they may leave you quicker (if opportunities are limited) but I would be concerned if they stayed doing that shit work.

In many ways he is right.

[edtstu]

The basic costs to start a business in today's market is very small. Web storefronts have replaced real storefronts and the cost of 'renting' space is close to nothing now a days. Along with the fact that a bachelor's degree doesn't set you apart by any means the same margin it did a decade ago. More and more people are finding graduate school a necessity for job security.

Re:In many ways he is right.

[TheOriginalRevdoc]

The basic costs to start a business in today's market is very small.

I think this is where Graham gets it very wrong.

Granted, the cost of IT gear is pretty low, and if you administer it yourself, running costs won't be high.

However, finding paying customers is time-consuming and expensive. I've worked for a startup, and they went under because they had a product, but no customers. Marketing ought to be 80% of your starting budget. A few businesses might escape this requirement, if they have a ready-made market, but most won't. Expect to bleed cash for a year or two before turning a profit. (It'll cost a lot more than $10k.)

Coupled to that, if you're out marketing, who's looking after your servers and fixing the bugs in your app?

Specialization.

[rice_burners_suck]

In my opinion, companies shouldn't have to hire anymore. The hiring and firing process creates a lot of overhead costs that most companies should avoid.

We know from the study of basic economics that specialization creates synergies between global organizations and that by leveraging innovative technologies, content providers streamline compelling enterprise solutions. Therefore, there should be one big huge company that always employs everybody in the labor force, and those employees would be rented on an hourly basis to other companies for their use. This would have the following advantages: First, this big huge company would have its payroll system totally dialed in, so that it would happen with minimal overhead. Secondly, everybody would have benefits. Third, you could never get fired. Fourth, when a company decides not to "use" you anymore, the big huge company will automatically place you in a job by the next day. This would maximize the amount of employment throughout the country, reduce the amount corporations are spending on the hiring and firing process, reduce litigation, and give everyone a good, stable job.

I think that's what Graham means when he says that hiring is obsolete.

Paul's recurring theme...

[MarkEst1973]

Have you noticed the essays he's written? They all trend in the direction of this most recent essay. I say he's rather encouraging.

His points over many essays are nearly always the same, but looked at from different angles:

• do hard work (and work hard)
• hang around with smart people
• don't follow trends, blaze your own trail
• start with good ideas
• spend as little as possible
• the internet leverages your investment
• your biggest investment is time
• Tech matters (as do languages and platforms)
• He did it (started a successful company and sold out). All of his essays encourage you to as well.

I cannot understand why anyone on this site does not like what he has to say. He's saying the time has never been better to start a business, keep your costs low and make better technology your advantage, and he's entirely encouraging with his style of presentation.

I, for one, thank Paul Graham for his insight into something I want to do.

Oh, and if you didn't know this nugget of wisdom: Find and listen to someone who has done what you want to do. Don't listen to the masses. Listen to someone's who's done it.

Buying startups: Pro and Con

[G4from128k]

Cisco pursued this strategy of buying small companies with promising technology but in the dotcom days. Effectively, Cisco let others finance the R&D and initial market testing that all start-ups perform. If the start-up failed, it was no skin off Cisco's nose. If the start-up worked and had a product (and company vision) that matched Cisco, then they bought you.

Its a great way to get innovative and market-proven technologies, but it can be a little piece-meal. Not all the great start-up techs are going to fit into your architecture or segment the market in a clean way. Also, due diligence can't uncover every problem when you take the start-up's tech and try to scale it to big-company volumes and service expectations. Finally, buying start-ups is a very public affair compared to a tightly secured internal R&D function -- the minute you buy a startup (with a product on the market), all your competitors know where you are going.

Buying start-ups is a nice tool, but it can't totally replace (only augment) an internal, integrated approach to R&D, product development and architecture development.

Re:A plea to Paul Graham...

[swimmar132]

Why? You don't have to read them.

What Paul Really Does...

[quark101]

It seems to me that while, as several users have pointed out, Paul doesn't really present anything new; what he does do is to point out things that most people don't see. While some people already know in detail what he is talking about, many do not, and he is opening the eyes of these people.

Having read about 2/3 of his articles, I have realized that most of what he talks about, I already, at some level, know. The article helps to see a topic in a new light though. Yes, some of his articles aren't all that great, and are stuff that is generally know, but very few writers are always successful.

It is the same reason that we have books on science or programming or how to use Windows, or any other number of topics. A subset of the population already intimately understands these ideas. However, to the rest of us, it lets us understand and explore the ideas in ways that never would have occurred to us/been possible.

If you really don't like Paul's articles, then don't read them. They only come up every few weeks. It's not like he posts a new one every other day.

Choice quote

[timeOday]

"In fact, if Bill [Gates] had finished college and gone to work for another company as we're suggesting, he might well have gone to work for Apple. And while that would probably have been better for all of us, it wouldn't have been better for him."

Overgeneralization

[Locke2005]

1) He says barriers to entry of startups is low. Wrong. Barriers to entry of web services is low; most other startups still require huge infusions of capital, e.g. anybody that wants to do actual manufacturing or sell actual hardware. Are web based startups different from hardware manufacturing startups? Absolutely.

2) Low barriers to entry also means there is going to be hundreds of other "undergrads" trying to sell the same idea. This means your chances of eventual payback are much smaller!

3) Why should bigger companies buy startups when they can just partner with them or outsource company services to them?

4) Yeah, starting a web based startup doesn't cost significantly more than just being a slacker. But if you haven't noticed, 99% of us can't afford to just set around and be a slacker either! SOMEBODY has got to be paying your food and rent. Apparently Mr. Graham thinks most students graduate with tens of thousands of dollars in the bank and can afford to not have any income for several years. I've got about $130,000 in student loans that say otherwise...

If Paul Graham says it, it must be true

[ftzdomino]

This is just as likely as his previous essay stating that bayesian filtering would end all of our spam problems.

This is so 1998

[Animats]

That sounds like the stuff I was hearing in San Francisco in 1998. Mindshare! Viral marketing! Big companies are too inflexible! Profit doesn't matter! It's the New Economy!

And where are we today? Microsoft is #1 in Internet browsers. IBM is #1 in open source applications. WalMart is #1 in retail. The number of programmers in the US is down 25% since 2000. Almost all the dot-coms are dead.

There are interesting things to be done in software, but the "make money fast by selling stuff on the Internet" ideas have been done.

I liked it

[stoolpigeon]

At first I thought it was all rosy and unrealistic and then he balanced out with the fact that yes, you will probably fail. But taking that chance at that point in your life is an interesting proposition.

As a father of 3 I know I can't afford to do anything too risky. But what if I had done it 14 years ago when I was 22 and had no responsibilities to anyone else. As he points out, there is a lot to gain but not nearly as much to lose.

It seems to me a lot of the criticism in the thread revolves around small points of the article but don't take the entire essay into account. And we know why this is the case.

Re:Dear Paul

[Blackeagle_Falcon]

Why don't you get back to us after you've successfully launched and sold a successful startup? Until then, I'm simply going to disregard all your assurances of how easy it is as just so much bullshit. Or, to quote the old adage, if you're so smart, how come you're not rich already?

Ever heard of Viaweb? It's the startup founded by Robert Tappan Morris and Paul Graham. It was sold to Yahoo! for (according to Wikipedia) $49,000,000. I don't know how much of that actually went Graham, but he got enough of it to form his own VC company (Y Combinator).

He's got the experience to back up what he says.

Re:startups

[GlassHeart]

I think the idea behind the article was that undergraduates should start their own companies instead of seeking a ground level job.

According to the US Small Business Administration, 50% of small businesses fail within the first year, and 95% fail within five years. To start and run a business without ever having held a job is a sure path to disaster for all but the most talented, hardworking, and lucky.

Old people are obsolete

[DuctTape]

Back in the 60s, it was, "Don't trust anyone older than 30."

Now it's, "Don't hire anyone older than 30."

DT

Re:Please

[swb]

I'm sure you've been modded -1 for your post, but I share your sentiment to some degree or other. What I wish is that Slashdot spent more time promoting what non-geeks had to say about technology and less promoting what some select group of "ubergeeks" had to say about non-technology subjects.

It's not that Paul Graham or Linus or ESR or whoever don't necessarily have something interesting to say, and in an interesting way, about subject matter outside their area of expertise (in this case the squishy areas of management and economics), but it's the sycophancy and lack of criticism with which it's presented.

Welcome

[Anonymous Coward]

So, I hear you're starting your own business?

Welcome, welcome.

Welcome to 16 hour days, and your employees earning more than you. Welcome to heartache and racking your brains for something to give you an edge, calling on experience you don't have yet. Welcome to doing boring and tedious tasks that if you fail, can land you in prison, like accounting and keeping receipts. Welcome to trying to protect your ideas from much larger and more powerful companies who will take and exploit them in a heartbeat.

Welcome to getting your first solicitor. Welcome to earning far less than minimum wage for months on end, and lets not forget that you may never get anything back. Welcome to friends and family slowly becoming more distant as you have no time to devote to them, welcome to becoming a fanatical zealot, welcome, oh yes, welcome to compromising most of your ideals just to stay afloat.

Welcome to management - you're the boss now! Welcome to having to see both sides of the story, welcome to slow or non paying customers, welcome to learning how to manipulate your fellow man to achieve your ends, welcome to grey hair and addiction to mild stimulants.

Welcome, welcome, one and all. Do stay a while.

And that light at the end of the tunnel you are striving for? Well I'm not sure what it is, exactly, are you?

disruptive

[LordMyren]

Let your shitty employees go.
Not so hard really. 2/mo salary, fine, cut your losses, and cut your dead weight.

Risks can be mitigated. Basic basic risk investment; you can try 6 employees for two months throughout a years, one of which should prove to be at least 6 times more productive than all the others. In two months at 6x productivity, that employee will already have produced a man-years worth the next guy's work.

I suggest companies take grads who think they're the shit, offer them two months trial at reduced pay and hope pray you can be disruptive and dynamic enough to keep them interested.

Thats the real killer. But I see you see that; "or someone who finds out your job isn't really what he wants to do for the next 5 years." Most people who start startups do it because they'd rather commit sepuko than deal with being forced to continue doing such useless unproductive work on your ass ugly product. Finding smart kids is not hard, keeping us busy is a lot harder to do. Most companies cannot deal with disruptive players.

Myren

It isn't all about money!

[logicnazi]

Admitedly I may be somewhat biased against this guy because of his stupid claims about nerds and web service applications. It is obviously outright false that nerds are not popular in secondary school because they have better things to do than spend time trying to be popular. In both my personal and observed experience nerds often try despartly hard to be popular (in fact they often have a problem of trying too hard and too transparently). Moreover, it just isn't true that other groups with large time comitments and interests outside of school are automatically as unpopular (music people etc..). While I am uncertain about the future of web service applications I expect a better analysis than the same crap which has been used to predict network computers for years.

As for this actual point I agree there is a small grain of truth in it. The advent of computer programming and other large profitable fields of intellectual endeavor makes intelligence hugely more valuable for a company. The productivity difference between someone who is just average and someone who is really fucking brilliant can be very large. So it really does make sense for companies to pay new recruiters big bucks just for being smart and train them on the job. Oracle is already doing this recruiting people from caltech with no programming experience for 80k starting salaries. However, people with those sort of smarts are extremely rare and so this trend does not hold out hope for the vast majority of CS students much less undergrads in general. As a TA at Berkeley it is clear that even here most of the CS students are not of the caliber necessery to launch compelling new products.

Moreover, I think the fundamental flaw in this analysis is the authors assumption that people, even young just out of college types, are interested in maximizing their expected revenue. Sure these people would like to earn more but alot of them just don't find it worthwhile to live for years eating Raman and living in a hovel for the promise of later riches. Happiness and utility are sub-linear in wealth and so great riches later in life don't necessarily compensate for prior poverty. In short many people really would prefer to be comfortably well off for most of their life and have the time and resources to start a family or pursue other interests out of college rather than being poor and working 100 hour weeks for several horrible years for later money. Heck I sure as hell wouldn't want to waste my youth as a workaholic just to end up as one of those rich bachelors at 35.

Also while the author touches on risk he radiclly misunderstands most people's attitudes towards risk. Sure studies have shown that there is some percent of society who are naturally thrill seekers and thrive on risk but many of the rest of us find risk itself (and not just the bad consequences if things go bad) unpleasent. Most people don't like risking alot for the hope of a big reward but would prefer a comfortable sure thing.

Big companies with stable employment and paychecks which don't depend entierly on project success exist for a reason. Most people prefer that sort of comfortable stable life. It isn't all about accumulating the biggest bank account but also about knowing you can provide for a family, have free time and safely plan for the future. It isn't just the economic situation that needs to change to make start-ups as prevalent as the author imagines but human nature itself

Re:Bill Gates at Apple

[michaeldot]

If Gates had never created Microsoft, and never cloned the PC's underpinnings away from IBM, we would probably never have seen the day of ubiquitous, commodity PCs.

It was Compaq that reverse engineered the BIOS to start the clones rolling. All those clones then ultimately ran Microsoft's OS because its aggressive marketing techniques drove out all other competitors.

Result: a 95+% domination of the market, establishing a monoculture where almost everyone uses Windows, Outlook, IE, with the resulting lack of innovation, viruses, and security holes that monocultures bring with it.

Alternate history: If Microsoft hadn't come into being, companies that made alternate OSes (DR-DOS, GemStar, Visio, etc) could have continued and the situation could be like the various Linux distros (Red Hat, SuSE, Gentoo) today, except on a much more marketshare significant scale. Hardware markers would still have flourished, widespread demand for hardware would still have driven PC prices down to commodity levels.

This was actually like the situation before Microsoft came to dominate. Lots of computer makers - Commodore, Atari, Tandy, etc - competing with both hardware and an OS. The big bad Apple was never a monopoly - at its height the Mac had a maximum of 18% marketshare, and even the venerable Apple II no more than 50%. There were always others. IBM may have started the monoculture, but it was Microsoft that embraced and established it.

Why must the US education system be so fucked?

[Inoshiro]

I've never understood why the US view on higher education is that the moment you get into university, your main goal in life becomes the consumption of fermented vegetables and goldfish.

Seriously, this is not the view in Canada, or other countries. There is no inferiority complex for going to a tech school vs. a principles school (IE: University). If you go to a tech school, they teach you how. If you got to a University, they teach you why (you're expected to be able to learn how on your own).

Perhaps if the US legal drinking age were lowered, University wouldn't be seen as such a booze zone (although, frankly, I'm guessing as much underage drinking occurs in the US as in Canada, despite the large legal drinking age gap). Perhaps if the US gov't made public education a priority, we'd also see generally accesible schools for people whose marks qualify them for it. I'd like to see what you could've done in University, instead of resenting people who went.

Of course, you could still go to Canada and pay 1/4th to 1/8th what you'd pay in the US (even after the usual 2-3x doubling of fees that citizens pay!). And you wouldn't have to deal with beer swilling!

On buying startups before they get big (& Goog

[otisg]

The timing of this is quite interesting. In one paragraph Paul Graham says:

"What companies should do is go out and discover startups when they're young, before VCs have puffed them up into something that costs hundreds of millions to acquire."

And what did Google do today? It bought a 2 people company.