= 27d567bc2d48d9f40e9ccc20ea370b15)
Lumifer comments on Open Thread, Apr. 27 - May 3, 2015 - Less Wrong Discussion
You are viewing a comment permalink. View the original post to see all comments and the full post content.
= 783df68a0f980790206b9ea87794c5b6)
Loading…= b715d02e85f7b3b4ae65ca3d3e450868)
Subscribe to RSS Feed
Powered by Reddit
= f037147d6e6c911a85753b9abdedda8d)
You are viewing a comment permalink. View the original post to see all comments and the full post content.
Comments (352)
Disclaimer: this thought is "foxy", in the sense that I don't assert it's definitively true, but I still think it could be a useful lens for viewing the world.
Startups Don't Create New Technology
Contra gurus like Paul Graham and Peter Thiel, successful tech startup companies do not actually create new technology. Good tech startups do one of two things: 1) invent a new technology-dependent business model, or 2) repackage and polish existing technology in such a way as to bring it above the threshold for widespread use.
Consider a couple of recent successful tech startups: Facebook, Twitter, Uber, AirBNB, and Dropbox. None of these can be said to have innovated deeply new technology. Instead, they realized that they could create a new business model based entirely on available technology.
Uber is a particularly illustrative example. The company depends enormously on several powerful new recent technologies: smart phones, GPS, and mapping software. However, Uber itself did not innovate any of those. If one of those technologies hadn't been available, Uber probably would not have been successful. Uber certainly could not have created any of those technologies as part of its business plan.
I'm not suggesting here, of course, that tech companies in general do not create new technology. The point is that startups don't create technology. Instead, deeply new technology is primarily developed by large, established companies. The basic pattern for technology creation is:
The history of Amazon illustrates this pattern very well. Amazon started by creating a new business model using currently available web technology. It depended on a huge array of technology that was developed by others - web browsers, web servers, databases, the internet, personal computers - but it did not develop any of that technology itself and would not have been successful if it had had tried to do so (imagine trying to innovate the web browser so you could sell books online).
While Amazon did not create new technology in its startup phase, it certainly has created deeply new technology now that it is in its mature phase. The clearest example of deeply new technology created by Amazon is cloud computing (some people might also point to eBooks). Cloud computing could never have been innovated by a startup company - the resources required in terms of finance, talent, and corporate resilience are far too great. While cloud computing could never have been innovated by a startup, it is now becoming a foundational technology for the new generation of startups.
So the lifecycle of entrepreneurial technology development suggests a kind of virtuous circle. A company becomes profitable by building a new technology-dependent business model or repackaging technology developed by others. Then it grows, and when it reaches a certain point, it becomes able to create new technology that feeds the next generation of startups.
I am not sure I'm willing to agree with that.
First, absolutely everyone depends on technologies invented by others and it's turtles all the way down -- a start-up depends on personal computers which depend microprocessors which depend on transistors... etc.
Second, Google and Apple would probably be the canonical examples of startups which actually created new technology. Not coincidentally they belong to the biggest and richest companies in the world. I think Facebook also created new technology, albeit intangible, and also joined that club.
Third, look beyond bits. Biotech startups, for example, attempt to create technology much more often that the code-driven ventures.
I see Google and Apple as marginal examples - they don't exactly fit into my schema, but they don't exactly break my schema either. Apple's success depended on two key insights contributed by the two founders. Jobs saw that a market for personal computers could exist, and Wozniak saw a way to repackage existing computer technology cheaply and usably enough for the customers in that market. Google did build a better search engine, but they also saw a new way to make money with search, and it's not clear which insight was more important.
You are now arguing that a start-up must have business sense to succeed -- which is entirely true, but not related to your original claim that start-ups don't create new technology.
If Google's business model were more important than its technology, that wouldn't cause its technology to cease to exist. Your original claim was that startups don't create technology, which is a very, very different claim than people who want to become rich should pursue business models, rather than technology.
But, actually, I don't think that Google's business model was more important to its earning power than its technology. Many people have copied its business model, but they don't have the scale of being the most popular website, so they don't make as much money. Part of that is that other companies have copied its basic search technology, but the first-mover advantage has turned Google's early technology into an enduring brand advantage.
Also, my guess is that Google had better technology 10 years ago for running scalable infrastructure than Microsoft has today. While that may have contributed to their bottom line, I'm not sure it contributed much to their popularity.