Our World of Solipsistic Startups

“Make something for yourself,” the founder and CEO of Evernote, Phil Libin, exclaimed in a crowded auditorium at Harvard Business School’s annual entrepreneurship conference. If you are the ideal customer for your own startup, he reasoned, you are much better equipped to approximate market fit, evaluate quality standards, and make the best possible product. As I glanced through the list of companies that recruit on campus and the stack of cases I read in my tech and entrepreneurship classes, I noticed that many of them, including several founded by HBS alumni, seemed to naturally follow his advice. If you need to borrow clothing, get make-up advice, find a song for your current mood, get your nails done, find an Ivy League graduate to date, share photos of your dinner, make yourself look better in all your photos – worry not, there’s an app for that. Many startups have succeeded to identify these “pain points” and profited handsomely from the endless supply of capital chasing outsized returns, under the philosophy that we are our best customers.

The world’s best and brightest seem intent on creating products and services for consumption by the founder and his or her class of people. How have we ended up in this world of solipsistic startups? A year ago, as I started thinking about where I wanted to work after graduation, I asked myself a simple question: which products have fundamentally improved my life over the last few years? For me, it was the smartphone I carry around everywhere, the software on it that has made it so much easier for me to consume information, and my camera since I’m an amateur photographer. Tech has dramatically improved my life, but after a while, I realized that I was asking the wrong question. The future shouldn’t be about me. When I look at the new wave of startups emerging everyday, I noticed they all seem to be helping a small percentage of people share, message, and buy things more easily. None of them seem to be radically ambitious in how it uses technology to help people in a meaningful way. By adhering to the philosophy that we have to be our own customers to succeed, and yielding to the natural self-centric gravitational pull of focusing on our own problems, we’ve lost sight of the true value of technology. We’ve overestimated the power of technology to solve our problems in the short term, and we’ve underestimated the power of technology to be a transformative force in the long term.

There is no question that talent has been migrating from Wall Street to Silicon Valley, but the same problems that led to the financial collapse of 2008 are evident in today’s exodus. When I took my first job on Wall Street, there seemed to be an endless supply of brilliant mathematicians, athletes, politicians, and economists from the ranks of Yale, Wharton, Harvard and every other elite institution, all converging in a single industry, working inhumane hours to make capital multiply. Curiously, the same structural incentives govern the startup scene today: highbrowed VCs, top accelerators, prestigious MBA programs, and of course the student who has no idea what to do with his or her life – are all complicit in this new game. More money is getting pumped into the system, this time landing in the coffers of solipsistic app creators rather than those of traditional wealth managers. As a result, over 80 private companies have raised money at $1B+ valuations in the last few years.[1] As famed investor Bill Gurley points out, overcapitalizing this crop of immature private companies can have the affect of eroding their operating discipline, further exacerbating the tenuous bubble in valuation and risk.

So what’s the solution? Not everyone can claim Elon Musk’s philosophy of using profits from early product generations to subsidize more revolutionary, mass-market products in future generations, but we all have to start somewhere. Identifying a problem worth solving is a step in the right direction. Venture needs to shift from funding companies that provide features and widgets back towards funding truly transformational ideas.

Some ideas affect large numbers of people but don’t get much attention at Davos or on political campaign trails. Growing up, I’ve noticed that opportunities are so randomly distributed starting at birth, and these variables generate such large discrepancies in people’s quality of life later on. Every time I walk around the streets of San Francisco, I’m taken aback by the sheer number of homeless people there relative to many other cities. I don’t think there’s enough empathy or conviction that this problem can be solved. When I read about Palantir’s philanthropy engineering efforts to help homeless veterans in SF find housing through an algorithm that efficiently matches veterans with housing providers and more importantly, cuts through bureaucratic hurdles that make housing so difficult to place, I was encouraged to discover that things can be changed.[2] I hope these capabilities can be expanded beyond veterans to help the other groups in need.

These kinds of problems are hairy, unglamorous, and offer no immediate economic value. Admittedly there are many things beyond our control – the entrenched financial systems and their appetite for risk and reward. But we can control what we choose to do with our precious day-to-day. We have to believe that we can solve real, hard problems with technology; we must.


[1] Investors Beware: Today’s $100M+ Late-stage Private Rounds Are Very Different from an IPO | Above the Crowd

[2] Palantir Philanthropy Engineering. 2014 Annual Report

By: Louisa Xu


3 Comments

  1. Britt Danneman

    I think you've hit the nail on the head identifying this issue – but I'd pose the question of exactly how to change incentives to get people to tackle the hard issues. Founders and investors are both often motivated by economics, fame, and inherently solipsistic drivers. Issues like homelessness and healthcare are some of the biggest issues of our generation, but they are inherently unattractive for the average startup founder to tackle. They take a long time, political coordination, and significant capital. It's easier to see the quick success of a dating app or an e-commerce company vs. the incredibly difficult problem of homelessness. I'd argue that Phil Libin, Larry Page, Bill Gates, and other like them who have had successful exits are the best forms of patient capital to fund entrepreneurs that have the skills to make headway on this issue. I very much agree that we as a society need to encourage entrepreneurs to work on more important issues, but I am concerned that without the economic and ethical leadership of people like Libin we will miss the mark.

  2. I'm heartened by the few solipsistic startups that are positioned to have significant social impact. According to its founders, Uber was created after one of them grew tired of being stranded on the streets of San Francisco at night. He fantasized about being picked up in a Mercedes S Class limo. Now Uber has grown to the point that it is more affordable than taxis, and almost certainly has saved at least one life from drunk driving. We can imagine a near future when UberPool + Driverless cars reduces the number of cars on the road, cuts traffic and pollution, and dramatically reduces the number of lives lost in car accidents.

    That said, like you I'm disappointed by the number of smart people and smart money pouring into frivolous startups like Alfred and Harry's. I'm interested in learning how your thinking on this issue has affected where you hope to be after graduation and how or whether this affects your attitude towards Clever Layover.

  3. Tausif Ahmed

    While I do believe in the transformational power of technology and it's potential to elegantly solve really hard social problems, I wouldn't be disheartened by the overwhelming rise of solipsistic, comparatively frivolous startups. There are a number of technology startups that are trying to solve incredibly hard problems in a variety of sectors and geographies.

    For example, CriticaLink (http://criticalink.org/) is a startup that is aiming to revolutionize the emergency medical response systems by applying the ride-sharing model used by Uber and Lyft to help people in accidents get help from nearby volunteers who are trained to be first-responders. Range Networks (http://www.rangenetworks.com/) is a startup that is trying to bring cell phone and internet access to remote villages in emerging economies that have historically been considered economically unviable for mobile network infrastructure by using its software-defined multi-protocol IP wireless platform. Even in finance, startups like SoFi (https://www.sofi.com/) are enabling graduates to pay down their crippling student debt in a far more manageable manner.

    I do agree that there aren't nearly enough tech startups that seem to have a social impact-oriented mission and it is pretty sad that a company like Yo would be able to raise a $1.5 million round (http://www.businessinsider.com/yo-raises-15-million-at-a-5-10-million-valuation-2014-7) when there's so much more that can be done with that amount of money but I believe that it comes down to us to be the change we want to see in the world and continue to build things we truly believe in.