Paul Graham: High Tech Society

    Original - The High-Res Society , December 2008

    High-tech society
    (thanks to fantom for translating)

    For almost the entire history of mankind, the success of society has been determined by its ability to create large organizations subject to discipline. The winners were those who relied on cost reduction due to production growth, which means that the largest organizations were the most successful.

    Today everything has changed a lot, and it’s hard for us to believe that only a few decades ago the largest organizations sought to be on the wave of progress. In 1960, an ambitious college graduate wanted to work in the huge, sparkling offices of Ford, or General Electric, or NASA. Small business meant small. Small in 1960 did not mean a cool startup. It meant Uncle Sid's shoe store.

    When I grew up in the 1970s, the idea of ​​a "career ladder" was still alive. The standard life plan was to enter a good college, after which you could get an invitation to some organization and then climb the career ladder. The more ambitious differed only in that they hoped to climb this ladder faster. [1]

    But at the end of the 20th century, something has changed. It turned out that cost reduction due to production growth was not the only force in industry. Especially in technology, the speed advantage that could be obtained from small organizations began to exceed the size advantage.

    The future was not what we expected in the 1970s. We were thinking about domed cities and flying cars, but that didn't happen. Fortunately, we have overalls, skills, abilities and specialties. Everything looks like that instead of being in the hands of several giant, branched organizations, the economy of the future will present a flexible network of small independent units.

    Of course, large organizations have not gone anywhere. Most likely, such famous, successful organizations as the Roman Army, the British East India Company suffered from conventions and intrigues, like modern companies of the same size. But they competed with opponents who could not change the rules on the fly, using new technologies. Today, the rule “big and disciplined organizations win” should be supplemented: “in games where the rules change slowly.” No one knew about it until the changes gained enough speed.

    Large organizations lose out because now they are not getting the best. Ambitious college graduates today do not want to work for a large company. They want to work for a fast-growing startup. And if they are truly ambitious, then start your own. [2]

    This does not mean that large companies will disappear. When they say that startups will succeed, it is understood that large companies will exist because a successful startup either becomes a large company itself or is acquired by a large company. [3] But large organizations, apparently, will never again play the leading role that they had until the last quarter of the 20th century.

    Unexpectedly, the trend that has been observed for so long has stopped. How often does it happen that a rule that has worked for thousands of years is reversed?

    The millennium run under the slogan “more is better” has left us with a bunch of traditions that are outdated today, but very deeply rooted. This means that a person striving for success can review them. It is very important to understand exactly which traditions to accept and which to reject.

    The proliferation of small organizations has begun in the world of startups.

    There have always been isolated cases, in particular in the USA, when an ambitious person started his own business and a career ladder grew under him; instead of starting from the bottom and climbing up for years. However, until recently, it was an atypical path that only amateurs followed. It is no coincidence that the great industrialists of the 19th century were poorly educated. While their companies grew to enormous size, they themselves remained mechanics or shopkeepers. It was a social stage that a college graduate would never have occupied if he could have avoided it. Before the advent of startups and, in particular, Internet startups, it was very unusual for educated people to start their own business.

    The eight people who left the Shockley Semiconductor and founded the Fairchild Semiconductor, a fresh startup in Silicon Valley, didn't even try to set up the company at first. They were looking for a company that would hire them as a group. Then one of the parents of the guys introduced them to the owner of a small investment bank, who offered to finance them if they start their own business. And they started. However, the idea of ​​starting a business was alien to them, they were forced to do it. [4]

    I will confidently assume that almost every Stanford or Berkeley graduate who knows how to program has at least considered the idea of ​​starting a startup. This is also the case at the universities of the East Coast and Great Britain. This picture shows the direction in which the world is moving.

    Of course, Internet startups are only a fraction of the global economy. Can the tendency observed by their example be so powerful?

    That is exactly what I think. There is no reason to believe that there are any growth restrictions in this area. Like science, wealth grows recursively (1). Steam power was a tiny part of the British economy when Watt began to work on it. But his invention spread until it captured the entire economy.

    The same thing can happen with the Internet. If online startups offer the best opportunities for ambitious people, then many ambitious people will take care of them, and this small part of the economy will grow recursively.

    Even if projects related to the Internet make up a tenth of the economy, they will set the tone. The most dynamic part of the economy always sets the tone for everything: from salaries to dress codes. Not only because it is prestigious, but also because the principles that underlie the most dynamic part of the economy work.

    The near future trend that is worth betting on is the network of small autonomous groups whose effectiveness is individual. And a society that creates fewer obstacles will benefit.

    Just like during the industrial revolution, some societies will be more effective. Originating in England, during the lifetime of one generation, the industrial revolution spread throughout Europe and North America. But it did not spread further. This new way of life could only take root where there was adequate soil. An energetic middle class was needed.

    A similar social component was needed for the transformation that began in Silicon Valley in the 1960s. Two new technologies were born here: the production of integrated circuits and the creation of a new type of company, rapidly growing thanks to the introduction of new technologies.

    The production of integrated circuits quickly spread to other countries. But startup technology is not. Fifty years later, startups are widespread in Silicon Valley, found in some places in the United States, and completely alien to the rest of the world.

    One reason - perhaps the main reason - is that startups have not spread like the industrial revolution, in their social destructiveness. Having made many changes, the industrial revolution did not affect the principle of “more is better”. On the contrary, she continued it. New industrial companies have adapted to the traditions of large military or civilian organizations, and it worked great. The "industry captains" gave orders to the "armies of workers", and everyone knew what was expected of them.

    Startups go against the foundations of society. It is difficult for them to flourish in societies where hierarchy and stability are in price, just as it was difficult for industrialization to take root in societies where the trading class did not have power. But by the time the industrial revolution began, there were a number of countries that went through this stage. But it seems that in today's situation they are not.

    (still fresh - Paul Graham: “Why Y Combinator?” )

    [1] From this model, the fact that in order to earn more, you had to become a leader. This rule is also maintained in startups.

    [2] There are many reasons why American car companies are worse than Japanese, but in at least one they are superior to car manufacturers in the Land of the Rising Sun: American experts have more choices.

    [3] It is possible that someday companies will be able to grow into larger ones in terms of income rather than the number of employees, but so far we have not gone far in this direction.

    [4] Lecuyer, Christoph “Birth of the Silicon Valley”, MIT Press, 2006. (Lecuyer, Christophe, Making Silicon Valley, MIT Press, 2006.)

    (1) Recursion in the general sense, the inclusion of a whole entity by itself. That is, steam power was an insignificant part of the economy, and then expanded. And steam energy has become the backbone of the economy. (approx. per.)

    Thanks to Trevor Blackwell, Paul Buchheit, Jessica Livingston, and Robert Morris for reading drafts of this.

    Another 107+ articles by Paul Graham on Habré.
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