SocialBias :: a Digital Abstraction of Michael Parkatti

Wow, I didn’t think one off-hand remark in a blog post would cause such a controversy.  I mention that we’re working 18 hour days and people assume that we’ve been entranced by slave mongers.

Let me clarify.  We’re not working 18 hours of straight productive work.  That’s both ludicrous and naive to assume.  The human body literally cannot do that for an extended period of time and still be able to think clearly.

What that comment was supposed to convey was a sense that while you’re in YC and working on your product, it’s like being at a summer camp.  You may not be playing tag all day, or learning how to tie knots, or drinking apple juice that tastes like eggs — but you certainly are at summer camp for your waking hours.  You can’t help it, you’re freaking there.

That’s what being in a startup is like, it’s a lifestyle.  So in those 18 hours we do things like eating, talking, taking walks, going for drinks, taking breaks, etc.  Everyday I’ll spend two hours reading my RSS feeds.  The guys in my house like to read books while taking a break.  But when you finish those things, you are pumped to get right back to work.  Not because anyone is forcing me, but because I want to.  When you work at a startup, you don’t think of it as work; it becomes a passion.

And yes, we are away from our loved ones, and we don’t have time to go to Splash Mountain… so what?  It was and is our choice.  And it’s just temporary.  I would suggest that most people who work in startups know how to appreciate the things that matter most to them.  I don’t value a commercial entity over the people that I love.  I’m not taking part in this because of some cult-obsession.  If I had to choose between this startup and the things in life that matter most to me, I’ll take the latter option every second of everyday.

It’s just one summer.  After this summer, we’ll continue working on it, but in a much more moderate setting.  Demo Day is a motivator, as it should be.  People have given up a LOT to get here.  Good-paying jobs, material wealth, time with loved ones.  We would be doing ourselves a disservice if we didn’t give ourselves the best shot possible for taking advantage of the opportunity.  We are working harder than we normally would because we have a massive constraint to work around, one that we knew about from the beginning.

People talk in retrospect about their 10 weeks of YC as being the most productive of their lives.  People pursue that productivity in their own ways.  If you don’t have the same sense of drive or urgency, odds are you probably shouldn’t apply.

The post is now up at the Globe & Mail.  Full text below:

I just read The Next Web’s article providing 3 reasons why Google’s Knol will beat Wikipedia, and while I think the author makes some decent points, I’d say there are some decent counter-points.

I don’t think these are necessarily competitive products, but they do represent vastly different avenues of approach and identity, which I think proponents of Knol vastly miscalculate in their plaudits.

1. You Can’t Beat Collective Intelligence

The very reason why Wikipedia works is that there are authoritative pages on a topic, whose contents are continually vetted by a massive community of Wikipedians.  I would suggest that something as objective as the quality of an encyclopedic entry will have a positive correlation with the amount of people that are allowed to produce it.

I do believe that true pieces of artistic genius do need to be created by one or two people (see the ridiculous notion of a crowdsourced novel, for instance).  But writing a Wikipedia entry does not need to have creative elements of character, plot, story arc, etc.  It has to be a fact-based piece of writing.  That’s why Wikis work so well — participants aren’t creating stories together, they are simply combining their stored knowledge-bases.

Now, it will be cool to read an article written by an esteemed expert, I will admit.  But plenty of articles on Wikipedia have been largely created by esteemed experts — whose contributions have subsequently been added to, enhanced, and iterated upon.

2. Overestimating Pay Incentives on the Internet

If being paid to create content was so important, how come for-pay video sites didn’t beat YouTube, or Microsoft’s ridiculous pay-for-search scheme wasn’t received well, or pay-per-post pyramid blogging schemes didn’t really pan out?  How come the ‘community-owned’ meme didn’t really take off with any web startups?

It’s because people value simplicity and authenticity in a consumer web product.  The Wikipedia project is one of the most noble I’ve heard of in the last 10 years, in any discipline.  I’ll admit, I’m a degenerate for Wikipedia — as are millions of other people.  The reason we love it so much is that we feel like we’re part of a lofty human mission when we get involved.  It is something beyond pecuniary human creations like commerce and wealth… it is in fact a basic right to have instant access to the store of accumulated human knowledge.

Knowing that some schmo is getting paid for me accessing his content makes me feel like someone is profiting off of a basic human right.  Yuck.  Double yuck, in fact.

3. Keeping the Knowledge Fresh

I’m not sure if you’ve ever taken the opportunity to see how fast Wikipedia is updated with current events.  The next time somebody famous dies, right when you hear the news try to access their Wikipedia entry, and their date of death will invariably be inputted already.  That’s true with any major news — Wikipedia is updated by an army of devotees to ensure its accuracy.

A page created by some dude is just a snapshot in time, and not a living document.  Have you recently read an article published in the 80s? 90s? 2003?  They sound almost endearingly naive (depending on the author).  Things change so rapidly in our society, that a page created on Knol has almost no chance to compete with its comparable Wikipedia entry.

In reality, I think both Knol and Wikipedia will be able to co-exist and even thrive together.  They will serve slightly different purposes with slightly different approaches.  But to suggest that Knol will defeat Wikipedia under any subjective criteria is simply missing the point.  Wikipedia is created by the people, and stewarded by a non-profit organization.  It’s the internet’s WHO, or IMF… it’s beyond any measure of commercial value.  Let’s just be happy that it exists, and that it will be one of our generation’s finest gifts to future world citizens.

Knol is created out of a commercial interest.  This is one of the few times that dollars will not triumph.

Take a look at these people on the left.  I’m not sure who they are, but they look incredibly serious.  Seriously, take a look at each one of them.

Do you notice anything special about them?

I know, it’s a tough one.  As it turns out, there is something special about them — they’re normal people, doing normal things.

How about an incredibly overbearing statement?  There are very few companies that reach IPO or sell for over $100 Million that haven’t had people like this using and/or buying their products.  I know we can all think of some special cases (Bebo, Club Penguin, maybe Digg?), but on the whole, you need a person who has no heightened exposure to technology and does not belong to a special demographic to both understand and need your product.

Who is this ‘normal’ person you speak of?

Let’s talk about these peeps up there some more.  Think about their day, think about the things that they do, and then think about how your product can trickle into their happy-spheres.

What makes them normal?

• they work 9 - 5 jobs, most likely in an office setting
• they have a computer that their work gave them which is most likely restricted to outside software
• they may have a desktop computer at home that they use to watch YouTube or surf their Facebook profile for a few minutes every night
• they know and like Windows, no matter what the cool Apple ads say (and on the whole, they’re wrong)
• their favourite software applications are Outlook, Excel, Word, and PowerPoint.  Happily enough, this is known as Microsoft Office.  They think these are great pieces of software (and on the whole, they’re right).
• they can’t fathom how internet startups make money (and on the whole, they’re right)
• they don’t post photos online, or share links, or make podcasts, or aggregate content, or contribute to the Linux kernel.  In fact, there is a 98% they’ve never even heard of ‘Web 2.0′.
• they probably sign up to 0-3 different new websites a year, probably after a discussion with a colleague they trust.  These are probably perceived as ways to help their careers somehow (hello LinkedIn) or as part of a wave of late adoption (hello Facebook).
• they don’t own an iPhone.  They abhor Macs.
• to perform any new task in any piece of software is a massive threshold of new ability.  They are likely to use less than 5% of any of the features of a piece of software they actually do use.
• they don’t read TechCrunch.
• they’ve been visiting the same websites everyday since 1997 (CNN.com, nytimes.com)
• the highlight of their week isn’t the gluttony of iPhone blog coverage — it’s probably Friday night when their friends are hosting a dinner party or Sunday when the Bills play football.
• they believe that a wild horde of malcontented hackers are watching their every move in unchartered internet waters.  This is most conspicuously manifested in their distrust of giving their credit card information over a webform.
• they don’t experience signal vs noise problems.  It’s hard to have noise problems when you only have a handful of signals.
• they don’t disdainfully complain about having 500 emails a day to contend with.  They probably have on average 5-15 emails a day that require their personal response.
• oh yeah, and they don’t have a problem with paying for things that offer a tangible value.

As the consumer internet frenzy reaches a nadir, I think we can safely assume that more and more startups are going to start rediscovering and embracing these people.  Their survival may very well depend on it.

But as purveyors of software, it is our duty to include these people in our designs.  We need to make their lives better, as much as we need to make our software better.

Think about these people.  Think about what they want, and why they want it.  Think about how they could incorporate your software into their everyday lives without a drastic learning curve.  Try to picture why they would bring up your product to their friends over dinner.  Try to put yourself in their shoes while designing, and do not give your vicarious-self an opportunity to mess up.  Give them a strict narrative, and an easily digestible identity.

I love it when tech-oriented consumer apps say that their target audience is ‘everyone!!!!!’.  No, actually, your target audience is the 1% of the population who could even begin to perceive what you’re doing to be useful.  And you’re fighting against 1000 other startups for their attention.

Talk about blue oceans — think about the other 99% who are sitting in their normal bubbles and have free time to encroach upon.  They also need life improving services.  Think about trying to cater to a wider iaudience, and It’ll feel like trudging into a huge patch of fresh, unbroken snow.  (For those who don’t know what it feels like to trudge into fresh snow — trust me, it’s pretty sweet).

I would posit that the frontiers of technology will not be forged amongst the 1% of uber-adopters; rather, they will be proven out when the unwashed masses can also derive some utility.  Many do evolve from catering to the 1% to eventually becoming useful by everyone… but most do not.

So think about these ‘normal’ people.  They could very well make or break your product.

Week #6 is up over at the Globe and Mail.  Full text below:

One of Y Combinator’s greatest strengths is the fixed time span of three months that it offers the founding teams. No matter how ambitious your idea is, no matter how much complexity it involves, and now matter how long it would traditionally take to build in ‘real-world’ time, every team operates on the same deadline.

Some teams had the advantage of having fairly complete products before they arrived in Boston, and some teams started with nothing. The reality is that we all have to present our progress to investors in August, and we have to reduce as much risk surrounding our product’s success as we possibly can.

There is no doubt that Mike and I have a fairly large problem to solve. All things being equal, I would rather try to solve a difficult problem than an easy one. We also want to make sure that we’re solving problems with large implications, rather than the problems of a 13-year-old on his parent’s computer.

Our product development phase will extend beyond this summer. In fact, no software product is ever “finished.” All we can do is perpetuate the dual tasks of building and commercializing.

This week we had a fantastic dinner with Bill Warner, founder of Avid Technologies and Wildfire. He talked at length about his experiences with both companies and correlated his original intentions with their eventual successes. He reminded us that the inventions we make are fuelled by our intentions — and to take the time to truly understand our own motivations behind pursuing a new venture.

Listening to him talk, I was struck by how genuine he was. It’s good to continuously re-affirm that you don’t have to be cold-hearted to succeed as an entrepreneur.

We met with Paul Graham again this week, and he gave us some good ideas about how to refine our product. In the 17 days since changing our idea, we’ve built a lot of software and made a lot of tools, but we now need to focus on how these tools come together in a coherent package. The problem we’re working on involves applying a new approach to an old problem. This means that we not only need to make our product useful, it also needs to be extremely intuitive.

A problem with a lot of software out there is that people have a high threshold of adoption. They don’t want to take the time involved to understand what it does, why it’s useful, and why they should care. People live their lives successfully without software. It’s a massive burden of proof to break through their preconceptions, and show them how their lives could be made better or simpler by using software.

We believe that what we’re doing does have potential to improve people’s lives. Essentially, we need to make other people believe the same thing.

Firstly, I hope you all get my title’s reference to the classic Canadian Film FUBAR.

Secondly, I hope you’ve read Jevon’s post How Startups Will Save Venture Capital in Canada on StartupNorth.

Here’s a newsflash — mindset matters.  Too many Canadian startups have had a mindset that they don’t belong in the upper echelon of new ventures.  I’d also hazard a guess that some Canadian VC’s have had a mindset that Canadian entrepreneurs aren’t quite ready for primetime.

Jevon’s call to arms is a good way to start reversing inertia.  Once we break those bonds of sophomoric defeatism, the energy will build on itself.

But we also need to Get Real.  Let’s build products people want, and will pay for.  It’s way too easy for entrepreneurs to make something in isolation, wait for fame and riches, and be dispondant when they get no Venture Capital.  Seriously, nobody cares that you’re making a social network for owners of the ColecoVision 1982 gaming console.

There are smart entrepreneurs in Canada.  I’ve met them.  I talk to them regularly.  What is everyone waiting for: a venture capitalist Santa Christ to rain down term sheets and substantiate ludicrous business models?

So here’s our challenge, Canadian entrepreneurs of the world.

1. Brainstorm products that you could actually sell to someone
2. Talk to people and potential customers about your ideas
3. Decide on one that sounds reasonable
4. Make a prototype and write a quick pitch deck
5. Contact investors who will take you seriously
6. Make it
7. Sell it
8. Sell more
9. IPO
10. Use your riches to invent a new flavour of ice cream for your private consumption

Let’s create things… let’s unleash new ideas… and let’s not be shy about it.  Entrepreneurs: investors WANT to hear your pitches.  They want to know how you’re going to make something sweet.  They are on your side.

Investors: Take a chance on some new faces who have all the hunger and ambition that brought you your success.  After all, it’s the young entrepreneurs that drive the economy over the long term.

This is our civic duty.  New Ventures create wealth, which begets jobs, which beget happiness.  This isn’t rocket science.

Mike and I are founding a technology company to do just that.  And I, for one, would love to be able to do it in Canada.

So … who’s coming with me … ?

Last night our house watched Startup.com, a documentary about the ‘.com’ era internet company govWorks.com and the goldrush of which they were a part of.  I’d seen it before, but not since joining the tech industry myself and witnessing some of the challenges they went through first hand.

The majority of the story centres around the two founders and co-CEO’s of the company, Kaleil Isaza Tuzman and Tom Herman, as they leave their jobs, raise capital, launch their site, and ultimately fail horribly amidst the turmoil of the 2000/2001 meltdown.

First of all, I love cautionary tales like this, especially in the world of irrational exuberance so often observed in entrepreneurship.  I tend to learn more from stories of failure than I do from stories of success.  These were all well-intentioned people working within the constraints they had.  Given the information that they had, they should have succeeded — it’s only in hindsight that we can pick this all apart.

I’d like to outline some of the things that entrepreneurs in this time period of the web can take away from this film’s insights.

The documentary follows the founders from late 1998 until late 2000.  One of the immediate things I was struck by was the completely different world that the .com era represented.  None of the founders had startup experience, or had lead the development of legitimate technology products.  They started their business with a business plan and some product specs.

These were largely business guys.  Just on their ideas alone they were able to raise a Series A round of $18.4 Million from A-list venture capitalists.  I was blown away by that fundraising process.  With a couple of handouts and some smooth talk from an obviously intelligent CEO, they were able to raise all that money.  No product.  No prototype.  No mockups.  Just ideas.

Now it seems like the only people who get that kind of leeway are previously successful founders.  If you’re as green as these guys are, the only way you could get that kind of investment interest is if you’ve got some tangible traction to show off.  A product, revenue, or traffic.  And this usually means that your technology is decently far along — which pretty much means you are a hacker.

Which is pretty much the way it should be.  I’ve been to business school and I’ve also met a lot of pure hackers.  I’m sorry to say, but neither of these skillsets qualifies you to become an entrepreneur on its own.  Business guys should become somewhat technical just to understand how their ideas could be implemented and if they are feasible at all.  Hackers should become somewhat business savvy to understand what the markets wants rather than what you think they want.  Way too many hackers think of business ideas that are hacker-centric… or things that only their friends would think is even remotely cool.  That’s a whole other blog post in itself :).

As I said, they raised $18.4 Million for their Series A round, and $60 Million in total.  On day one they had 8 employees, while at their peak they had 233 people on the payroll.  Hell, they didn’t even launch a product at all until they were a company of 150 people.  Obviously, the observation is that raising that much money and hiring that many people is batshit crazy.

As I was watching their 100 engineers build a website, I couldn’t help but wonder what the hell they were thinking.  Did they actually need that many people to launch a website?  Could 100 people ever get together to build something remotely coherent?  Doing some quick project sizing in my mind, I figured what took them 100 people and 14 months to launch could have taken a reasonably talented developer about 6 weeks to build on his own these days.  Again, I realize they were a product of their time — but think really really hard before you take mass amounts of capital and hire any employees.  Do you need them, seriously?

They also made the mistake of waiting a ridiculous amount of time before launching their product.  How the hell did they have any idea if anyone would like their product or how to make it better if literally no one was using it?  govWorks subcribed to the idea that you only get one chance to launch your product and make a first impression.  Which is obviously a horribly miguided train of thought.  Their competitors managed to launch first and gain a dominant position in the marketplace.  Being too cute with the launch strategy cost them.  Nowadays, the mantra is ‘release early and release often’.  Get it out there, and get feedback.  Otherwise, your website isn’t a website, it’s locally-hosted nuclear waste with a halflife of one funding cycle.

Finally, there seemed to be a lot of personal bickering between the founders and early employees that distracted everyone from the important issue of establishing an actual business.  Old friendships were lost over squabbles about money and equity and control and ‘respect my authority’ type of bullshit.  I realize that was a product of a company in distress — if a company is firing on all cylinders, you don’t tend to hear about that kind of strife because success is the ultimate hissy-fit qualude.  It’s only when companies are bending under the stress of mediocrity that personal relationships tend to undermine the ultimate mission.  And this is exactly when you’ll see people’s true colours — when they are under fire.  You’ll find out who your friends actually are.  These founders figured that out too, but it was much too late to turn the ship around and miss the iceberg.

Overall, it’s a great film, and I recommend it to anyone interested in the startup world.  It’s a great behind the scenes look at the passion you’ll find in a new venture.  It may be from a different era, but its lessons are nonetheless as pertinent today as they were then.

In summary, I give Startup.com 4 legally-incoherent termsheets out of 5.

Yup, another edition of the epic 1000 part series, the Y Combinator Diaries.  Full text below:

Last week I chronicled about how our startup refined our idea to build a new product. Over the last 10 days, we’ve started from scratch and grown confidence in what we’re building again.

In that time-span we’ve been able to create the core product in terms of basic functionality — this includes the functionality that any iteration of our final offering will need. It’s a pretty well-oiled machine of planning, building wireframes, development, final design/interface decisions, and user-flow integration. The focus of YC has allowed us to build something in 10 days that might have taken us a month in a different setting. We essentially have a month before we demo our product in front of investors, which is a major motivation in itself.

The Y Combinator dinners have been fairly helpful over the last few weeks. We had Hutch Fishman come in to talk to us about finance in technology startups. Hutch is an experienced Founding CFO with a lot of different successes on his resume including Sonus Networks and Winphoria. He basically walked us through everything we needed to know about financing, equity, liquidity events, and budgets. I have a business degree on my resume, but he still managed to clarify concepts I always found confusing, such as the reasoning behind issuing both common and preferred stock in a startup.

Last week Jonathan Seelig came to chat with us about his experiences as a Co-Founder of Akamai (which is quietly one of the largest tech success stories of the last 10 years). He’s a venture capitalist now, but his talk was delivered from the perspective of a successful entrepreneur to a roomful of aspiring entrepreneurs. We heard at length about the initial months of Akamai and what they did to achieve their enormous success. He gave us some tips on what to watch out for as we begin looking for investment and business development deals. To say that the room was rapt with attention would be an understatement.

Finally, this week we had a talk with Steve O’Leary, an investment banker with a long history of giving advice on some of the highest profile M&A deals in technology. His talk centred entirely on liquidity events, and mostly on acquisitions. The art of doing a deal is complex and highly nuanced, so he gave us some advice on what to look out for, what signals to expect from acquirers, and how to stay focused during the distractions of success. He took a lot of questions from a roomful of us who obviously like thinking and talking about reaching liquidity.

YC also held its ‘Prototype Day’ session in which every founding team presents what they’ve built in the last month to the other startups. It’s not supposed to be a presentation per se, but simply 5 minutes to show off your developed technology. Mike and I had chosen to switch products only 44 hours beforehand, so instead of demoing the old product we built, we decided just to give a quick pitch on what we were going to build.

I think it went pretty well, if not a bit challenging to describe a product that doesn’t exist yet. I’m not the kind of entrepreneur who likes to spout empty rhetoric about what we’re doing, so it was nice sharing some of the details of our product plan with our fellow founders and get some feedback. Everyone was actually really supportive of our plans to change our idea and seemed excited about the new direction we are taking.

Paul Graham mentioned that he was surprised at the quality of all of our demos and pitches, saying that we were perhaps the most prepared groups he’s seen for the prototype day presentations. I agree — I’m really proud to be a part of this session of founders, as the groups are all very strong. Some groups are further along than others, but everyone is extremely talented and ambitious. It’s fun following as we launch our products one by one.

And it should be our turn in a few weeks to do just that.

Post #4 is up at The Globe & Mail Technology site.  Full text below:

If you read Jessica Livingston’s book about the narratives of past successful startups, Founders at Work, you realize that perhaps the most common underpinning of any entrepreneurial success is perseverance. Expecting the unexpected graduates from a trite cliché into an everyday reality.

What kinds of things can you expect to go wrong? First, this week my computer decided to start crashing on a bi-hourly basis. I wanted to blame the hardware, but after some trouble shooting I realized it was because of the operating system I was perhaps defending beyond a reasonable doubt: Microsoft Vista.

Do you:

• a) send it back to the manufacturer and perhaps lose 3-4 weeks of productivity
• b) listen to the fanboys and finally buy a Mac
• c) wipe your hard drive clean and install a distribution of Linux, the free open-sourced operating system, and make it work?

If you are a cost conscious entrepreneur, the correct answer is c). I lost a couple of days setting it up, but I’m actually quite happy with my installation of Ubuntu, a user-friendly Linux distribution. Once you make the plunge, you realize that there is an open-sourced alternative to any commercially available software.

What’s another thing that can go wrong? You could have your laptop bag stolen from the subway, which is what happened to one of my housemates this week. After spending a day spent hounding it down, he realized that it probably wasn’t going to turn up. One trip to the Apple store and $1299 (U.S.) later, and he’s the proud owner of a MacBook that he didn’t exactly ask for. Imagine every file you’ve ever worked on suddenly disappearing at the exact moment you needed them most. It’s just another thing to deal with.

Probably the most unexpected thing we’ve had to deal with this week is a significant and material change to our product idea. Did I mention that there are only six weeks left to finish it before the three Demo Days in mid-August where we make our pitch to investors?

We were planning on launching what we had built some time this week. After four weeks, the site was almost completely built — it was simply waiting for some final testing before being pushed live.

When we started using our website, a couple of things occurred to us. Firstly, we weren’t in love with what we had built. When you’re not passionate about your product, it’s something that you can’t ignore.

Secondly, our product didn’t have a clear business model. One thing Mike and I agreed on when we started this process was that we didn’t want to create a website entirely dependent on mass amounts of page views and advertising dollars to succeed financially. I think some web entrepreneurs have the golden ticket mentality, where they build something fun and hope the world flocks to their door without having the slightest idea of how to make that product into a sustainable business.

If I have to choose between building a website that could only succeed through a speculative acquisition or building a website that could potentially sustain itself through offering a clear value proposition, I would choose the latter. And that’s exactly what Mike and I have done.

Our previous idea was simply proving an interesting hypothesis. That’s something that one of the early speakers told us to avoid — specifically, working on a research project and not a business. You have to ask yourself:

• 1) what does this website do
• 2) how could that activity make money?

Without a clear answer to number 2, how can you say that you’re building a business and not a research project?

It’s much too easy to delude yourself while answering these questions. The easy answer to provide someone when they ask about your business model is to say that you’re exploring many different future avenues to revenue, including advertising, subscriptions, micro-payments, referral fees, freemium, etc. In reality, you need to plausibly equate one activity on your website into a direct route of accepting money.

Business isn’t a game, and I think some web entrepreneurs treat it that way. Your investors’ money shouldn’t be used to prove your own personal hypotheses — if you don’t have a solid idea about what your product actually does and why it’s valuable, you are setting yourself up for a massive failure.

We realized that one specific aspect of what we were building was more compelling than the whole. Distilling that one thing into an idea seemed to make a lot of sense. It’s given our product more focus, flexibility, and makes it more valuable as a stand-alone piece of software.

This also has the effect of transforming our company’s identity from a consumer website into a productivity web application. Instead of launching our site and hoping for the best, we’re going to launch a product we can sell. The key performance metric instantly changes from traffic to dollars.

In the end, which would you rather have?

There’s been a lot of cross-chatter in the blogosphere these days about the feasability of the ‘free’ internet.  People who deride Web 2.0 frame the debate only in its current lack of reliable paths to profit. People who defend Web 2.0 usually point to its social benefits and innovative zeal.  As with most things in life, the true answer lies somewhere in between.

I read a fantastic article from Fast Company entitled What Should I Do With My Life that pretty closely resembles my viewpoint on what we should strive to accomplish.  I think something that entrepreneurs can forget is that their companies are not only tools for wealth creation, but they are also happiness creation machines.

I think the myth that money begets happiness has been sufficiently debunked for most of us (and if not, you’re probably a huge fan of 80s excess, no?).  In most cases, the process of making money goes through a fairly deep path of sacrifice through one’s personal life and mental stability.

I’m reminded of a quote from Citizen Kane, where Mr. Bernstein says, “Well, it’s no trick to make a lot of money, if what you want to do is make a lot of money”.  I interpret that to mean that the trick in making money isn’t the process of making it, it’s the payment in life sacrifices you have to make to get there.

Stop for a second and think about the happiest people you know.  Why are they happy?  They’re probably either deeply in love with someone, or in love with what they do, or have a true passion that overrides everything else in their life.  They’ve diagnosed that one thing that makes them happy, and they can’t help but give off an aura of satisfaction.

I’d say that it would be pretty flippant to suggest that entrepreneurs derive their happiness from the pursuit of wealth creation.  Not many people I’ve met in this business are obsessed with money.  In fact, you can almost tell the fakes in the crowd simply because they’re the ones talking about exits or liquidity events.

Most entrepreneurs do what they do because they’re pursuing their own happiness creation machines, and they hope their efforts help other people derive some happiness as well.

It’s a slight change in mindset that has massive implications:

1. Either you’re an entrepreneur because you want to make money, and are therefore making sacrifices in happiness to pursue that money, or
2. You’re an entrepreneur because you’re following your true passion, and by the very act of doing it, you’re augmenting your overall happiness.

Most mature corporations have devolved into the former — wealth creation machines.  People involved in them probably aren’t truly passionate about what they’re doing, but they figure that trading time for a steady income is worth it.

Most successful startups are the latter — happiness creation machines.  If you’ve ever walked into a startup office that was firing on all cylinders, you’d understand what I’m talking about.  No matter what aspect of being in a startup appeals to them, the people there have found what makes them truly happy.

And the fact that those people are happy has implications across their entire lives.  They’ll enjoy their social interactions more.  They’ll be more optimistic in life.  And they would be resilient against negative circumstances.

Happiness is possible in a corporate environment too, don’t get me wrong — it’s just that the chances that you’ve happened to find your true passion working for an instutution created many years ago are slimmer.  Startups have no formulas to follow, except those written by the founders.  Their happiness is being manifested in their work in real-time.

Odds are your passion is worth something to somebody.  And if you fail while pursuing your happiness, it’s a lot more easy to swallow than if you fail while unhappy.

Yes, some companies will create more wealth than others, and can therefore pay its founders more.  But is making 40 times what you need to live comfortably really all that different than making 20 times what you need to live comfortably?  Once you’ve found your happiness, all that other stuff is just scenery.