September 30, 2005
Paul graham classic
I love reading Paul Graham's essays. I don't always agree with them, but I enjoy reading them. And this one is no exception.
Here are some unordered thoughts on this essay:
1. Zod is mentioned! Seeing our CTO mentioned always makes me chuckle.
2. I disagree that big companies will be very successful by continuing to acquire little companies. Sure, it makes sense to do the acquisition for the reasons Paul points out (fuse hiring and product development, lower risk of hiring dumb people, etc). However, I think Paul ignores what happens *after* the acquisition. Take Paul as an example... his company, ViaWeb, was bought by Yahoo (and became Yahoo Shopping I think). Soon afterwards, Paul left in disgust, anger, and general frustration. This is a *very* common trend in acquisitions. I don't claim to know why, but I think a major factor is that big companies simply operate radically differently than little startups. In the startup, somebody has an idea. A few days later the idea is made manifest. A few weeks later the realized idea is either becoming more successful or it's trashed. And the cycle repeats itself. In a big company, someone can have an idea. If that idea conflicts with the general norms, its far harder to get traction. If that idea is risky, it will take weeks of discussion, analysis, trending, risk/reward ratio calculation, and other glorious displays of PowerPoint prowess to get the idea to the development approval. Once you've got approval, it still might not happen for weeks or months. After all, in a big company, lots of people have ideas. So your idea waits in line with all the other ideas like a slow teller window in a bank. Sometimes this is actually good - your idea can often benefit from other ideas nearby. Somtimes it just stinks and you lose the drive to see the idea to fruition.
My point is that big companies operate on a very different plane than startups. So the "big company will acquire startups to make progress" is only useful for a limited amount of time. Since Paul means big *tech* companies, we should consider carefully how mature these companies are. How many acquisitions has Coca-Cola done recently? Or GE? These are true big companies that have survived the tsunamis of the entire twentieth century. That doesn't mean that they have the one and only answer on how to be successful. But, we (the big companies of the tech world) should damn well consider what a crappy job we do at integrating acquired companies. I am not sure that "acquire startups at an earlier stage" plan would really benefit large tech companies in the long run.
But if we did start doing that, I think our lunch time conversations would be far more interesting.
I definitely have more thoughts on Paul's essay, but it's late and it's friday nite. so i'll write those some other time.
"big companies like docile conformists" ... so true.
Posted by: rick at October 4, 2005 09:05 PMHey Dave, I completely agree with your point. I also agree with your distinction tech companies and large established conglomerates. I would say that tech companies have more at stake integrating people, which in some other cases - Coke, GE - the brands and markets are what is acquired.
That said, allow me to point out that Coke, and particularly GE are constantly acquiring companies. Just in the last year or so, GE has acquired the massive companies Vivendi Universal (a big media and somewhat tech company), Dillard's, and in 2005 the airline manufacturer Bombardier.
Coke snaps up beverage and bottling/distribution companies regularly: Snapple, Odwalla, and most of the 400 other brands in their portfolio.
(info from wikipedia)
Anyways, I agree that we do poorly and that we should do better. Thanks for pointing to the essay - it was spot on in too many ways.
Posted by: nate koechley at October 4, 2005 11:55 PM