Why is Chris Yeh Still in the Valley

William Grosso @ February 24, 2007

Chris Yeh has now posted his second defense of economic inequality. In many ways, his defenses of economic inequality remind me of the Randians out there, most of whom reason well on a micro-level and all of whom are incapable of rethinking their basic assumptions.

(update: this wasn’t fair to Chris. I wasn’t meaning to call him a Randian, just to say that this particular post, with its combination of well-argued logic and completely false base assumption, reminded me of Randians).

To be fair, Chris does actually state the basic hole in his thinking when he claims:

The problem here is that the key impact that wealth has on startups is the motivation that potential wealth provides, not the capability that actual wealth provides.

That’s completely unconvincing to me. And, I suspect, to Chris.

Why Chris Shouldn’t Believe His Argument:

Later in the same article, Chris writes:

If startups didn’t offer the prospect of incredible wealth, as a responsible family man, I’d have to take a job as a consultant (and make $500K+ per year) or on Wall Street (and make $1MM+ per year). It would be economic suicide to be an entrepreneur. As it is, it’s still a pretty shaky decision, but one I’m willing to live with!

To which I respond with: Symphoniq? Incredible wealth? Chris has been there 5 years now. Does Chris really think that when (which is really if) Symphoniq finally cashes out, he’s going to recoup the $5 million he could have made on Wall Street?

Of course, there’s a hole in my observation. Chris probably no longer believes he will recoup the opportunity cost of working at Symphoniq. But that’s hindsight. Silicon Valley is an enormous roulette wheel and, when Chris started at Symphoniq, he probably believed that the expected value of his years at Symphoniq was significantly higher than the expected value of going to Wall Street (significantly higher because, after all, Chris is an MBA and therefore will want his rate of return to be adjusted for his risk as well).

But here’s the thing: Chris is still in the valley. He’s been here long enough, and he’s more than smart enough to realize that success in the valley is 1% talent, 2% hard work, 3% who you know, 4% persistence beyond all definitions of rationality, and 90% sheer luck.

But he’s staying here anyway. He’s part of our infrastructure, he’s part of our ecosystem, and he’s put down roots. Even though, now, he realizes that he’s mostly making bad bets and that if he were economically rational, he would flee the valley for more fertile pastures.

Saying This More Bluntly:

Entrepreneurs start companies dreaming of building the next Google and becoming a billionaire. They don’t create breakthrough companies because of a desire for a comfortable salary.

is pure moonshine (the second sentence is true. But the first is false, and the conjunction of the two is amazingly false).

What’s more, Chris knows this. Think about his examples:

Steve Jobs and Steve Wozniak didn’t need a lot of money to start Apple. Sergey Brin and Larry Page were poor grad students when they started Google. Ditto for Jerry Yang and Dave Filo of Yahoo.

Is Chris’s claim really that Brin and Page started working on what would become Google with the intent of making a billion dollars? That Wozniak (who by the way had a job at HP when he started tinkering around with what become Apple) is motivated by money?

Why Chris Stays Here:

He did this. It’s a wicked cool deal, an interesting idea, a small bit of out of the box thinking. And it might dramatically alter the outcome for Symphoniq (though, not, I repeat, not enough to recoup Chris’s opportunity cost).

Chris isn’t here because of his greed. He’s here because he wants to do interesting things.

I’m speculating, of course. I don’t have a deep pipeline into Chris’s subconscious after all. But, like Chris, I could make a lot more money elsewhere, or at non-startups in the valley. And, like Chris, when I’m pressed at cocktail parties I’ll talk about the potential value of my options and their life-altering nature.

And, I suspect, like Chris I stay because I find the work interesting.

How This Applies to The Inequality Argument:

Suppose someone came up to you and offered you a deal.

• Deal 1. “I’ll guarantee your income. As long as you work at startups and are building interesting things, I’ll make sure you’re in the top 1% of income earners nationwide. But, in exchange, I get all your stock options.”
• Deal 2. Same as deal 1, but for half of your stock options?
• Deal 3. “Go do something deeply interesting. I’ll handle the daycare for your kid and make sure that, if your new company fails, I’ll make sure you still have three square meals a day and good dental coverage.”

Would you take any of these deals?

This isn’t purely hypothetical. I know people who’ve done variants on deal 2 (There’s already a crude market in employee stock options here in the Valley).

The question Chris and his anonymous friend are arguing over is whether a lot of talented people (people who could found landscape altering companies) would find any of these deals interesting.

I think the answer is absolutely.

But then again, I’m an engineer. What do I know about people?

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