Then one day, for some odd reason, I had another epiphany.
Instead of building software to load on cheap servers to sell like everyone else, why not build one “mega-server” that we host ourselves and let people rent the functionality over the web?
My former boss told me, “No, that’s stupid, that’s killing the Golden Goose.”
The engineers told me, “No, that’s going to be a pain in the ass to build.” They sent me all sorts of studies from reputable analysts showing that “ASPs” (the buzzword before it was replaced by “SaaS”) was not a profitable business model after all.
I said, “Guys, what’s the alternative? You want to be the low-cost leader for the rest of your lives hustling these shit-boxes?” I pointed to the growing pile of Dell boxes accumulating in our small office.
Arguing vehemently with them for a month, I realized that on-demand software services weren’t profitable because everyone had just tried to take traditional client-server software and host it themselves.
They hadn’t thought to build something that was truly multi-tenant, meaning building software that was solely designed to handle multiple clients and accounts as a service. That would be a critical advantage for us, if we could pull it off, as it was significantly less hardware to purchase and much easier to manage customer accounts.
But Director of Residential Computing Kevin S. Davis ’98 said that the creation of a Harvard facebook was not as far off as Zuckerberg predicted.
“There is a project internally with computer services to create a facebook,” Davis said. “We’ve been in touch with the Undergraduate Council, and this is a very high priority for the College. We have every intention of completing the facebook by the end of the spring semester.”
Davis said that the principle complication with the creation of an official facebook was figuring out how to design an interface so that directory information could not easily be compiled without authorization.
This game was particularly hard to play for us, since Blogger was hosted software (I mean, in the cloud), unlike most of the tools we were competing against. The operational and engineering challenge was that we had to build features that scaled to all our users. And when we wanted to change something, all the users had to accept that change.
At the time, scaling centralized systems was a less-solved problem (even at far smaller numbers). More importantly, though it was easier due to this setup, we weren’t creating network effects. Though (I believe) we had more people publishing with Blogger than anything else, that didn’t make Blogger better. In fact, it made it worse, because it got slow and harder to add features to."
"The late Richard Feynman, a superb physicist, said once as we talked about the laser that the way to tell a great idea is that, when people hear it, they say, 'Gee, I could have thought of that.'"
- Charles Townes, How the Laser Happened
"Most interesting phenomena have multiple causes."
- N. P. Calderwood
Paul Graham @paulg Aug 8
The best way to increase a startup's growth rate is to make the product so good people recommend it to their friends.
I think this is a very, very important point. I agree with him that virality is the best way to increase your growth rate.
Marc Andreessen @pmarca Jun 27
In tech in the early 1990's, it felt like all the good ideas were already taken. Really.
Paul Graham @paulg Sep 10
The spectral signature of a big winner is when people ask "How did I function before x?"
(Jessica just asked it about HelloSign.)
During the RJR Nabisco, Inc. hostile takeover fight in 1987, Buffett was quoted as telling John Gutfreund:[161]
I'll tell you why I like the cigarette business. It costs a penny to make. Sell it for a dollar. It's addictive. And there's fantastic brand loyalty.
—Buffett, quoted in Barbarians at the Gate: The Fall of RJR Nabisco
Speaking at Berkshire Hathaway Inc.'s 1994 annual meeting, Buffett said investments in tobacco are:[162]
fraught with questions that relate to societal attitudes and those of the present administration. I would not like to have a significant percentage of my net worth invested in tobacco businesses. The economy of the business may be fine, but that doesn't mean it has a bright future.
—Buffett, Berkshire Hathaway annual meeting
Aside from remembering to focus on what’s best for the long term, I think the biggest business lesson I learned from poker concerned the most important decision you can make in the game. Although it seems obvious in retrospect, it took me six months before I finally figured it out.
Through reading poker books and practicing by playing, I spent a lot of time learning about the best strategy to play once I was actually sitting down at a table. My big “ah-ha!” moment came when I finally learned that the game started even before I sat down in a seat.
In a poker room at a casino, there are usually many different choices of tables. Each table has different stakes, different players, and different dynamics that change as the players come and go, and as players get excited, upset, or tired.
I learned that the most important decision I could make was which table to sit at. This included knowing when to change tables. I learned from a book that an experienced player can make ten times as much money sitting at a table with nine mediocre players who are tired and have a lot of chips compared with sitting at a table with nine really good players who are focused and don’t have that many chips in front of them. (NW: This is exactly what Zenefits did.)
In business, one of the most important decisions for an entrepreneur or a CEO to make is what business to be in. It doesn’t matter how flawlessly a business is executed if it’s the wrong business or if it’s in too small a market.
Imagine if you were the most efficient manufacturer of seven-fingered gloves. You offer the best selection, the best service, and the best prices for seven-fingered gloves–but if there isn’t a big enough market for what you sell, you won’t get very far.
Or, if you decide to start a business that competes directly against really experienced competitors such as Wal-Mart by playing the same game they play (for example, trying to sell the same goods at lower prices), then chances are that you will go out of business.
In a poker room, I could only choose which table I wanted to sit at. But in business, I realized that I didn’t have to sit at an existing table. I could define my own, or make the one that I was already at even bigger. (Or, just like in a poker room, I could always choose to change tables.)
I realized that, whatever the vision was for any business, there was always a bigger vision that could make the table bigger.