startups & big corp: underestimating the compounding returns of intelligence. max levchin, stephen cohen, peter thiel lecture
let me preface this by saying I love Google — I had two awesome years there, my sister and some of my best friends are there, and I hesitate to post this lest anyone think it’s a bash to Google. It’s not — replace Google in the below excerpt with any large tech corporation, and it’s meant to be a comparison of a startup vs large corporation. There are advantages and disadvantages to each — I think this is an interesting articulation of the advantages of the former:
Max Levchin: Engineers are very cynical people. They’re trained to be. And they can afford to be, given the large number of companies that are trying to recruit them in Silicon Valley right now. Since engineers think any new idea is dumb, they will tend to think that your new idea is dumb. They get paid a lot at Google doing some pretty cool stuff. Why stop indexing the world to go do your dumb thing?
So the way to compete against the giants is not with money. Google will outbid you. They have oil derrick that spits out $30bn in search revenue every year. To win, you need to tell a story about cogs. At Google, you’re a cog. Whereas with me, you’re an instrumental piece of this great thing that we’ll build together. Articulate the vision. Don’t even try to pay well. Meet people’s cash flow needs. Pay them so they can cover their rent and go out every once in awhile. It’s not about cash. It’s about breaking through the wall of cynicism. It’s about making 1% of this new thing way more exciting than a couple hundred grand and a cubicle at Google.
Stephen Cohen: We tend to massively underestimate the compounding returns of intelligence. As humans, we need to solve big problems. If you graduate Stanford at 22 and Google recruits you, you’ll work a 9-to-5. It’s probably more like an 11-to-3 in terms of hard work. They’ll pay well. It’s relaxing. But what they are actually doing is paying you to accept a much lower intellectual growth rate. When you recognize that intelligence is compounding, the cost of that missing long-term compounding is enormous. They’re not giving you the best opportunity of your life. Then a scary thing can happen: You might realize one day that you’ve lost your competitive edge. You won’t be the best anymore. You won’t be able to fall in love with new stuff. Things are cushy where you are. You get complacent and stall. So, run your prospective engineering hires through that narrative. Then show them the alternative: working at your startup.
from Peter Thiel’s lecture notes by blake masters — full lecture here