It is an exciting time to be an entrepreneur in America. It seems like everyday Imeet a new person or reconnect with an old friend who is bucking the gravity of aconformist career path for the liberation of a freelance lifestyle. One friend I’ve played ina few bands with just sold one of hissongsto Toyota Motors for a web commercial.Another is starting a New York themed wine bar in Buenos Aires. One friend is starting aspa-inspiredhearing aide retail store. Another friend combined art and motion detectionalgorithms to create aninteractive displayat a children’s hospital in New Jersey. Not to mention the other Y-Combinator companies. The Y-Combinator teams arecreating businesses around revolutionary perspectives on old businesses and youthfulinsight into future markets. As I’ve mentioned before, this is one smart group of people.As each Y-Combinator funded team officially releases, we will dedicate a blog post totheir ideas, business plan, and the people bringing the two together.After recognizing that more and more of my friends are skirting the corporate lifestyle, Istarted to think about the motivations and circumstances that have led them on this lesstraveled path. I can think of four.1.
Two standard deviations above the mean
A common perspective among young entrepreneurs is that we are undervalued bymainstream industry. We are dollar-cost averaged down. Our contribution to thecompany’s success is averaged together with coworkers balancing a wife, two kids and amortgage.At this age, working for someone else does not make sense. Our effort is two standarddeviations above the mean. The average employee wants to work eight hours a day; weare happy to work 15. The average employee takes a one-hour lunch; we eat at our desk for 15 minutes, readingReddit. Large companies expect average effort. Why work thereuntil you want to give average effort?2.
Where is the incentive?
There is another reason that motivated college graduates skirt mainstream industry.When working for large companies, they are not vested in the success of the company. Nowhere was this more evident for me than at NASA. If I create an image processingalgorithm that reduces the computational demand of a particular Mars rover by a factor of two, I do not see any boost to my career path.You can guess what pay grade someone is in simply by knowing the number of yearsthey have been working. Why go above and beyond?Maybe if NASA could find a way to incentivize and attract young smart employees theUnited States could put matter into space for less than$10,000 per pound.Given China’snewly announced space ambitions, hopefully the competition will drive our governmentto establish effective incentive systems.
Freedom to innovate
Starting your own company is liberating. We are in charge of our own destiny. No bigcompany’s compensation package can compete with that motivator.Our greatest motivation is the freedom to innovate. We don’t have the burden of legacycode. We don’t have the overhead of a physical plant. Decisions in our company don’tclimb a bureaucratic ladder.We were originally calling our first product Xobni Statistics. It sounds boring inretrospect. One night I told Adam and Drew that I liked Google Analytic’s user interface.Drew commented, “I like the interface and the name.” Adam and I looked at each other and within five seconds our company’s first product becameXobni Analytics. Thechange would never have been as smooth, or even possible in a big company. They wouldhave held a couple of meetings as the suggestion got passed up the chain of command.And even then, one of the middle managers might have killed it, because someone in themarketing department said they had already printed the brochure.4.
America’s acceptance of failure.
Nowhere in the world does there exist a fertile entrepreneurial environment like thatof America. Our friend Paul Graham wrote a popular article about whySilicon Valley isin America.Along a similar line of thought, Guy Kawasaki wrote a blog postwhich compared theAmerican entrepreneurial environment to that of Japan. What struck me most was thecultural stigma surrounding failure in Japan. Failing once can taint your name and dimyour future career options. I am glad that America does not treat failure this way.One of the greatest failures of my college career was coming up 2% short of victoryin the undergraduate student government vice-presidential elections. At Penn State, aschool of over 40,000 students, this is a prestigious position: face time with university policy makers, interactions with state government officials, full tuition stipend, and theresponsibility of a hefty student activities fund. Had I grown up in Japan, I might nothave risked repeated failure for fear of tainting my future prospects.I mark the failed campaign as one of my greatest learning experiences. I learned howto speak in front of large audiences, form a terse argument, garner publicity, manage alarge team, and it was my introduction to guerilla marketing. Our society’s acceptance of failure encourages people to take risks and learn from their mistakes.It will be interesting to see how all these friends fare over the next few years. Somewill stumble and retreat to the consistency of corporate America. Others will succeed andgrow their companies to the size of a company none of us would want to work for. Thenwe can quit and start new companies again.