Don't be a mercenary, be an owner, and capture the value you create

In an essay last year in Forbes, Venkatesh Rao talked briefly about Alexander Holley, one of the steel-making pioneers who worked closely with steel magnate Andrew Carnegie -- not as a peer, but in today's parlance, a rent-a-CTO.

He was the greatest steel-plant designer of his time; the uber-10x-hacker of steel-making. When Andrew Carnegie turned his attention to steel, and raised $700,000 to build the pioneering Edgar Thompson plant, Holley stepped up immediately to handle the technical end. Charles Morris describes the event in The Tycoons:

Holley was engaged almost immediately; he had made the first contact himself as soon as heard of the new plant. His offer — $5000 for the drawings and $2500 a year for construction supervision — was one that could not be refused.

It is critical to note two things about Holley’s role. First, he negotiated a significant (for the time) but low-risk remuneration package (amounting to about 1% of the capital raised, but as cash rather than equity). Second, he made sure he wasn’t tied to Carnegie via risk-capital, and offered his services as a highly paid mercenary, within a time-bound model. He was what we would call a rent-a-CTO today.

That was then, this is now. In today's terms (Late 1800's USD adjusted for inflation to today), that's just about $125K up front, and $62,500 per year. That's even lower than what most software engineers make today. 

If you're working at a big company, one way to measure how much value you should be worth to your company is if you divide the annual revenue of your organization and divide it by the number of employees there are. Here's a recent graph of revenue per employee via Mashable:

That's $1.3M per employee in revenue per year. And if you're working on the product or engineering side, you've got to know you're pulling more than your share of that value creation. 

Clearly, if you can do it on your own, and take risk like Carnegie and not like Holley, you'll actually be able to reap the benefits of the skills you have. And that is why people start companies themselves. If you've got what it takes, don't be a mercenary, be an owner. 

It's not about passion, it's about desire to [cook / code / create / build]

It’s not about passion. Passion is something that we tend to overemphasize, that we certainly place too much importance on. Passion ebbs and flows. To me, it’s about desire. If you have constant, unwavering desire to be a cook, then you’ll be a great cook. If it’s only about passion, sometimes you’ll be good and sometimes you won’t. You’ve got to come in every day with a strong desire. With passion, if you see the first asparagus of the springtime and you become passionate about it, so much the better, but three weeks later, when you’ve seen that asparagus every day now, passions have subsided. What’s going to make you treat the asparagus the same? It’s the desire.

THOMAS KELLER  //  creator of the French Laundry  via fastcodesign.com

Unwavering desire is the key to being great. Passion comes and goes, but unrelenting desire will endure. I've developed a Pavlovian response when startup founders begin a conversation "passion." Because usually that first sentence goes: "We're not sure if this startup is our passion." Sometimes they're working on something unpromising, in which case you wouldn't fault them much for deciding to move on. But sometimes it's not... sometimes they have traction, evidence people want it, are willing to pay for it, and then they just walk away from that which thousands of their peers dream of. Just because it's not their passion. 

There are no rules and hard absolutes when it comes to what startup founders should do, but I've seen more people quit because it got hard with this excuse of "lost passion" than I care to admit. Do something you're willing to do forever, for the rest of your life. Then you won't be chasing the next passion high, but creating, cooking, doing what you want to do because it is your desire.

How to win while being generous: Givers can avoid burnout by shunning free-riders and give-nothing-back takers

Organizational psychologist Adam Grant has a new book Give and Take: A Revolutionary Approach to Success. NY Times Magazine made it the cover story for March. I think this is a pretty useful model for thinking about the human beings around us:  

Grant’s book, incorporating several decades of social-science research on reciprocity, divides the world into three categories: givers, matchers and takers. Givers give without expectation of immediate gain; they never seem too busy to help, share credit actively and mentor generously. Matchers go through life with a master chit list in mind, giving when they can see how they will get something of equal value back and to people who they think can help them. And takers seek to come out ahead in every exchange; they manage up and are defensive about their turf. Most people surveyed fall into the matcher category — but givers, Grant says, are overrepresented at both ends of the spectrum of success: they are the doormats who go nowhere or burn out, and they are the stars whose giving motivates them or distinguishes them as leaders. Much of Grant’s book sets out to establish the difference between the givers who are exploited and those who end up as models of achievement. The most successful givers, Grant explains, are those who rate high in concern for others but also in self-interest. And they are strategic in their giving — they give to other givers and matchers, so that their work has the maximum desired effect; they are cautious about giving to takers; they give in ways that reinforce their social ties; and they consolidate their giving into chunks, so that the impact is intense enough to be gratifying. 

I blogged recently about lessons I learned in my first 2^5 years and I think these classifications of giver, matcher and taker fit with the third lesson well. Giving is a winning strategy in a world in which human beings are mirrors. But to avoid free-riderhood and to just plain protect yourself, you've got to identify takers and other zero-sum-thinkers and gracefully jettison their influence from your life.

Hackers can be business guys, and other lessons from an interview with Paul Graham during the first YC batch in 2005

Spent most of this evening reading YC applications. We ask applicants to record themselves for about a minute with their cofounders just so we can get a sense for who they are in person. We fire up that video the second we start reading an application, usually. In the YouTube post-roll of suggested video, I found this gem -- a 20 minute interview with PG in 2005. 

"I believe, and Y Combinator is kind of an experiment to test this, that programmers can become business types. I think that business is kind of like chess in the sense that the hard part is not knowing the rules about how the pieces move. The hard part is actually being able to look ahead and make strategies. The hard part about playing chess is being smart. Business is like that. There's a few rules of business and that hackers are capable of learning them, most hackers. Once they learn them, they'll be as good at it as business guys. Hackers can be business guys."

--Paul Graham, Unedited Interview from 2005 during YC's first Summer Founders Program.