Y Combinator CEO Shares How They Pick Winners, Advice For Founders + Lessons From Paul Graham | Garry Tan Interview

I don't think people are prepared or even aware of what's about to happen right now. And it's like super, super good news for anyone who's running a business. I feel like I could rule the world. I know I could be what I want to. I put my all in it like no days off. On the road, let's travel.

Never— Sam, have you seen, I feel like there's a new meme that got birthed and I think Gary's involved with it now, which is the learn to cook loser. Have you seen this, Sam?

What is that? What is that?

Gary, can you explain this one? I don't even know like what it was a reply to, but It seems to be going viral. So it's a good meme.

I think somebody, Paul Graham was talking about cooking. He was like giving his kid advice and he's like, you know, when you have a girlfriend or something like that, like, you know, they love to come home to the smell of like a meal being cooked. And then someone immediately, you know, random Twitter troll is like, why are you raising like a feminine man? Like, you know, he should be masculine. He doesn't need to learn to cook. And then I think Paul's reply was, learn to cook, comma, loser. And then all the builders like Amjad and others, basically like tech people were like, you know, this is actually good. General advice, like learn to cook as a high agency way of living. I think it's like the compressed idea of, you know, build things, actually make things, actually go do things in the world that, you know, are of value. Maybe I'm reading too much into it.

It's the more succinct version of make something people want.

Yeah, it's the punched up version. Learn to cook, loser.

Is Paul Graham like the definition of success? Basically built like one of the greatest companies of all time, YC. And then it started working well and then just bails to Europe where he's living in a, I don't actually know if this is true, but it appears he's living in the woods, writing and being with his family. And I'm like, is this guy, did he just, did he just pull the ultimate move and it worked out perfectly?

I think so. I think he really did.

What's, what's your version of that?

I mean, more or less like YC as a concept is like kind of a miracle. It's, you know, there are very, very few, um, places in the world where anything like YC ever happens. And then I just feel like I need to be like the watcher on the wall. It's like, okay, let's, uh, this thing is working. And then it's working for relatively mysterious reasons that are almost too obvious. I mean, it's at once a mystery and it's obvious. YC itself is like pretty earnest. Like it's just make something people want, apply in this thing. We'll try to go through and sincerely find the things we think could be really, really big. And then we just give you a bunch of money and throw you in a room with all the other people who are, you know, sort of the top 1% of people trying to do that thing. And then somehow some magic happens where, you know, 5 to 10% of those companies become worth a billion dollars or more. And, um, you know, YC takes some equity, but not that much, you know, like 7% specifically for people who often wouldn't have access to that capital or that network, like by default, anywhere, anywhere else. I mean, so it's kind of cool. It's just, uh, you know, 1 1 3 in a really unusual way. Um, it sort of resembles a college in some ways, you know, only instead of people paying tuition, like we pay them.

You know, when I think of good brands, a lot of people will just think of like, like funny or cool things. But when you think of like what BlackRock or Goldman, like some of these names, they're kind of like Harvard or Harvard. They're like, they're a little ominous and like a little scary, but they're institutions. Do you ever purposely think, how do we become an institution? Or is this just all because of, you just said, let's have high standards. Like, was it on purpose or did it just happen because you had good values? How does that happen?

I mean, I think a lot of it comes back to, you know, earlier we were talking about Paul Graham and, um, the guy's just a very unusual original thinker and very just clear communicator. And then I think the thing I learned from him in particular is that clear communication and, you know, just using basic logic, being able to explain, you know, sort of, you know, A to B to C, and then you zoom out and there's a really big idea in there. That's, you know, in essence what a really good pitch is. Um, you know, I think that that's where it came from. Like Paul was just very, you know, both frankly Paul and Jessica Livingston, his wife and co-founder, the two of them basically created this thing that feels different, didn't feel like another investor, felt very welcoming. I mean, this sort of, uh, viral tweet I think PG has about Jessica is like, you know, Jessica once. Cut a founder's fingernails before he went on stage at demo day or something, just because it's, it's like sort of, you know, at once very exacting, you know, we have very high standards, but then it's at, at once also very, um, sort of like almost family or like homey, just, um, welcoming and, you know, sort of that mix of both very earnest and very formidable, like those two things combined. Created, I don't know, something that seems to create magic.

Isn't it wild, by the way? Like, just think about this. So one of my companies, I recently taken through like an M&A process and I talked to bankers and bankers. So we, we, you go first and interview bankers. You're like, why should I go with you? Why should I give you 4% of this transaction for 6 months of work here at the very end? And they're all about their differentiated process, how they do more, more, more, how they have the smartest people in the room and all the things they brag about. About what makes them successful. On paper, makes sense, but it's kind of the Midwit meme because if you look at YC, it's like, yeah, we, um, we invest in people before they even have an idea. A lot of the time they have no traction.

Often they have to change ideas.

We don't negotiate every deal. We just 7% for every single company. Uh, same deal. That's it. The application.

Yeah.

It's like a one-page form you fill out online. The, oh, the interview. Yeah. We talked to you for 10 minutes and we just give you a thumbs up, thumbs down from there. Uh, like all of the things YC does.

Is it really only 10 minutes?

Yeah, it's 10 minutes.

Oh my God.

It's a 10-minute interview. Yeah.

It's, uh, if YC was a st— a company, because I think it's been around like 18 years, you said. In the last 18 years, you know, YC's got to be up there in like the top 10 Silicon Valley companies, things that got created that created so much value. Um, do you think about it that way, or is there—

do you have a good lens? That's what I try and, uh, get people to understand. Like, this isn't just, you know, working at a company. This is, uh, you know, I think we did the math on, um, how much money per employee YC in theory should drive. And, uh, I think we're something like $20-ish million per year per employee in terms of like, you know, sort of market cap value created in the world. And that's just the carry, like that's our take, like, you know, in terms of value created for our limited partners and, you know, sort of overall in, in sort of I think it's like close to $100 million per year per employee. So it's pretty wild.

Who are the LPs even? Is it like these pension fund types?

Oh yeah.

Just like a VC fund or is it—

You've read, I think I read something, you've read 6,000 YC applications. So you've seen more of this than anybody else. You're the admissions officer. You've been in a lot of these, uh, interviews. You've then seen the companies grow. What do the extreme winners look like early on and do they look any different than the average company?

I mean, honestly, they're very similar. Like my two craziest wins, one was Brian Armstrong at Coinbase and he was a solo software engineer working at, you know, anti-fraud Airbnb. And, you know, he had never started a company before. He, you know, a lot of the things we worked on with him very early were like, sort of the basics that, you know, it's sort of hard to believe now, uh, on the other side of him having built Coinbase, it's kind of hard to believe that, you know, there was a time when Brian Armstrong didn't know how to, you know, do a product launch or, um, you know, even raise a single dime from investors. So I think it's basically been that same profile, like highly technical people who are just like sort of smart and earnest. And that's about it. Like, that's sort of mainly who we like to fund. Um, and then it's, I think, unusually really, really important today in 2024. I mean, large language models have basically opened everything up. I mean, almost anything that a knowledge worker can do, you know, anyone with 130 IQ or below, pretty sure that with Workflow and evals, you could write software now that could do what that You know, basically almost any knowledge worker could do, and you could do it perfectly with like no management headaches. It's, I think, like a really profound moment for all entrepreneurs, period.

Yeah, I think me and Sam have both had, uh, learn to code on our to-do list for like 12 years. Bought the, bought the, uh, you know, Python the Hard Way course on Udemy, did all that shit. I think we, we now we get to skip the learn to. It's just code now. You don't have to do the learn to part.

It's like you don't need to actually write it. I mean, it helps to be able to write a little bit yourself, but yeah, I mean, the wild thing from here is with like the new developments in O1 and CodeGen, I actually think it'll be more important that you're able to speak to virtual developers and like instruct them on exactly what you want and all the different use cases. And like, we're right at that moment where it's going from like, you really have to code it all yourself to You can just sort of talk to this pretty smart entity that will, you know, do it mostly for you. Like it's not even about no-code anymore.

I was doing that the other day where I was talking to ChatGPT where I was like explaining like, here's the problems my business is having. Can you help me? Like, can you just like be a therapist with me and help me like come up with interesting solutions? And the answers were shockingly good, by the way. It was like, it was like pretty good at just like brainstorming with me and just being like a sparring partner. Is there a, you know, like I know that YC, a lot of it comes down to making people what people want and things like this. And to me, that's a, that's like a bit of an art where you're, you're more of an artist than a scientist. But is there a world where you could take your 6,000 applications and a bunch of other data that you have and kind of spreadsheet your way to like the likelihood that we build a company that, and I think there's magic to create these like multi-deca unicorns, whatever, but is there a way where you could like use your data and spreadsheet your way to like, well, here's the interesting opportunity. This is going to get to some type of traction and wealth creation with a high rate of certainty.

Conceivable. I, you know, some of it is like, we think someone might do something like that and it might totally work actually. And then the trickiest thing is like, how do you actually get really smart people to come and do that thing? And, you know, I mean, capital as a service has been an, I, I think like Chamath talked about that and I thought it was very interesting.

It sounds conceivable. Uh, I mean, I think they experimented with this when he was still working on Social Capital where instead of, uh, having a 10-minute interview and you know how it works at YC is we actually have 14 equal group partners, including myself. So we actually, you know, hand-read these applications and you know, you're not talking to an AI when you do the 10-minute interview, it's literally just talking with us. And then once we fund you, we're just working with people day to day, you know, for those 10, 12 weeks and then onwards into the future of the company. Like we own, you know, 7% of the company or like a big seed investor. So we need to sort of be around and it's very like high touch and You get like an individual person. And then I think like the capital as a service idea, like, is really just, you know, connect your metrics, connect your Stripe account, your bank account, your QuickBooks. You know, I mean, it's actually pretty doable today. Like, it's conceivable that someone should connect all those things up and then an LLM can just, you know, rank whether something's real or not, do the diligence. And then if you like hit a certain bar, like, boom, like, here's money in your bank account. Sam, did you ever see that when they did that for for growth stage companies.

I think they called it the 8 Ball. It was like you, you connect all your data and then it'll, it'll not just tell you, they like, they could just take your raw data and they could put it into a format where they needed to analyze it. But then secondly, they benchmarked you. So they're like, oh wow, they have best in class retention for this category or they're below average. So don't invest.

Right. But I thought the results were like interesting, but not like, like, yeah, where it was like, this is interesting. But do you remember when, um, ChatGPT started getting popular? I think Sean, 2 years ago and there was a guy on Twitter. Who had a really funny, like, name. It was like Greenpoint or something like that. And he told ChatGPT, like, make me a content website that can rank high on search and it can monetize on ads. And I think within like 3 months, he got it to like $20,000 in monthly revenue. Do you remember that story?

Oh yeah.

Like the normal way now is I prompt AI and I want AI to be an agent. What he did was the opposite. He's like, you tell me what to do. I'll be your human agent. You, but you have the good ideas. You prompt me. And I thought that was like.

I bet it would work extra well now with, uh, O-1, like the new reasoning model.

Gary, can I ask you a question? You, um, today you probably think about like, you know, the future and billion-dollar ideas, but when you were 14, I read that you kind of had your own hustle there. You were cold calling companies in the Yellow Pages trying to get work, and you, you made enough money to kind of actually like help your family out, like move from an apartment to a house. Can you tell that story? I've never heard that before.

Yeah, of course. Um, I mean, let's see. I mean, my parents, we grew up You know, sometimes food insecure. My dad was a foreman in a machine shop and my mom was a home health aide and certified nursing assistant at convalescent homes. She worked two jobs and me and my brother lived in, you know, apartments in Fremont in the Bay Area, sort of in the shadow of Silicon Valley. And I guess one of the weirder things is like my dad's actually an engineer, but he just didn't have the EQ to really hold onto jobs. And he also struggled with alcoholism. So we just, he was always losing his job and so we were always just like never had money around. And the thing was like he really did invest in computers. Like we had our first computer was a, uh, you know, IBM PC XT. So, you know, we were sort of reality poor, but you know, rich in access to computers, which was like really, really powerful for me. And, um, I just realized Oh yeah, like I'm 14, but I, you know, know how to make webpages and I started winning some awards for like web design as a kid in junior high. I started an underground newspaper with my, um, uh, junior high friends and, uh, we learned how to make a website for that underground newspaper and we got, and we called it an online zine. And, uh, the funniest thing was like we had, you know, thousands of people would find it off of Usenet newsgroups and things and we'd write Articles that, you know, uh, I don't think people knew that we were 14. Like, when, uh, when you're on the internet, one thing we learned is like nobody knows that you're a dog, I guess. I don't know. Like, people would just write letters to the editor like we were like a legitimate publication, and I just got sort of really addicted to that.

Like, like an early Vice.com.

What is that, uh, what's that phone script?

Oh God.

Yeah, first you have to deepen your voice, right? You can't be 14 on the call.

That's right. And it's like, oh, I'm, I'm a web— I'm an award-winning web designer and, you know, but I'm 14.

So did you say that?

Yeah, I think so. I mean, um, it's funny. I mean, I remember my first boss, he was, this was sort of his like side hustle.

So by the way, is award-winning designer in your LinkedIn now?

No, I don't know if it is.

I just added it.

That's a miss.

We'll add it back.

Yeah. That's a miss.

It's funny. I mean, I remember it was like this company called InfoLane. It was, you know, they had a one, like basically I think it had a conference room and you know, sort of an engineer den and a lot, and like a little reception desk. And that was the whole office. And, um, I think it was one really technical, like sort of neckbeard Unix guy. And then, uh, the funny thing was the CEO was also a bank, a regional bank manager, I think, at Fremont Bank. And so, you know, the tech guy had walked into the local Fremont Bank and, you know, the internet was happening and this bank manager was like, I'm gonna give, I'm gonna invest myself, like I'm gonna invest my own money. And he became like the co-founder on this, you know, web design firm in, uh, 1993, '94. So it was pretty wild to, to think about. I mean, that's just how you started business and that was what business was like. You didn't go on the internet and apply on a form or something. You literally walked into a bank and banks were supposed to loan you money to start companies, which, you know, I think to some extent still happens, but You know, it's just funny to think like, uh, how that's evolved since.

And at some point, did you just make enough where you were like, mom, dad, here, like I can help? Or what happened?

Yeah, I mean, we— I always lived in apartments growing up and I had a little brother who was 8 years younger and, you know, I wanted us to live in— I wanted the American dream. And so, um, you know, I still remember like, uh, helping cook the turkey at Thanksgiving and, you know, the new house that that, you know, our family bought. And, you know, I helped my parents with the down payment, and my parents still live in that home in Fremont. So I'm helping them remodel it right now.

That's amazing. By the way, I looked up your old blog. I think back in 2001, you wrote the following, which I think is pretty accurate. You said, you know, blogs are all over the place. This is back in 2001, so over 20 years ago. Pretty soon we'll all just be writing a blog. We won't really talk to friends, have to catch up anymore. Human interaction will just boil down to clicking on someone's name on your favorite website, and that'll be it. No more tedious 'how do you do' over an iced matcha frappuccino at some pretentious cafe. Just read my blog if you want to know what's up. Oh my God, you basically predicted social media. It wasn't exactly blogging, but that's Instagram stories, that's Facebook, that's, that's the news feed.

Exactly.

Uh, I think you nailed it for better and for worse.

That's funny, man. I wish, um, the one thing I wish I could do is like go back in time and tell myself, don't sell, uh, your time. Like don't work for a consulting firm or like, you know, get paid $10 an hour. Like go make products.

But did you, did you ever do that? I thought you were pretty young when you first started getting involved with YC.

Oh, uh, I was 27, so I was much later, honestly.

I mean, you look very young in the photos.

You actually didn't need to come from the future because I think I've heard a story that you were working somewhere, Microsoft or something like that. Oh yeah. And Peter Thiel was like, Peter Thiel was like, hey, quit your job. In fact, I'll pay you your whole salary to quit your job and come co-found this new company, this little company we got called Palantir.

Yeah. It's like a $95 billion market cap company today.

And you turned them down. Could you, uh, I mean, what the hell were you thinking? Could you just embarrass yourself here?

Well, and there was a bu— and there was a bunch of them too, so that got divvied up a bunch.

Yeah, it's wild.

How much was Peter Thiel worth, do you think, at that conversation? Because like, let's say you made $80,000, that, that's like a big deal, right? To be out to dinner with someone, be like, I'll give you 80 grand right now just to quit.

Yeah, totally. To get a co-founder or co-founding engineer, like, I, I, I— some of it is like, I could see myself doing that today. I mean, I think Peter was probably worth like at least a couple hundred or at least $100 million. At that moment.

More than enough to, to be able to, to say something like outlandish like that.

Yeah. I mean, I think it's a fair trade today. Like I would definitely trade like my, you know, my gold Rolex for a first co-founding engineer of a company that I think could be worth $100 billion in the future. That is a fair trade.

Did he make a compelling pitch like about the company or was he just like, I don't know, this is just like a bet. Like, was he, did he see the future in that, that sense of like what it became?

Yeah, absolutely. I mean, I think the thing I really learned from that moment, I mean, I was 22. I didn't know how the world worked at all. I mean, we had dinner at his French restaurant Frison. I think that's one of the things you do when you, you know, make it to Centimillionaires. You do something stupid like open a restaurant. And I mean, the restaurant was terrible. Like, the soup was really bad.

And I mean, he lost like millions of dollars on that restaurant, right?

And Peter knew that because he somehow, the CIA, NSA, whatever, when PayPal was running, they're like, uh, you guys want to have a conversation? Or like, you know, how does like a, like a Silicon Valley kind of, uh, outcast get a CIA tip?

that's simple, but that's still really hard to like—

oh yeah, well, it was smacking me in the face and I, I didn't see it.

You had an L6 promotion waiting on you, right?

At Microsoft? Yeah, I was trying to make it to level 60. Yeah. Level 60 is like hardly L6, it's like level 3 or something. It's brutal.

And by the way, Palantir, uh, I've got friends that are there and I've learned a little bit about it reading, like it did not, Peter Thiel, I think it's easy for me to say Peter Thiel back then seemed like an obvious winner. But the Palantir idea didn't, like, it seemed, it seemed like it didn't work for like 2 years or something like that. Like it was definitely, it seemed like it had this normal startup trajectory where it's like, it's not working. Maybe it's working. It's definitely not working. All right. Now it actually has legs, you know, the YC Trafisaro thing. Like it seemed like it had those normal normal, like, issues except for, like, maybe 5 years.

Yeah, it took many, many years before it started driving revenue and, you know, became real. Um, yeah, the trickiest thing, like, YC companies always come to me and ask, like, what could I learn from the Palantir experience? And I'm like, are you— is your name Peter Thiel? And are you willing to put, you know, tens of millions of dollars of your own money into it before and sort of wait and be incredibly patient and Ignore all the signs that you're, you know, weren't getting revenue and not, you know, actually working for so long to the point that, you know, suddenly it started absolutely working and working like 10 times better than you thought it would. Like, that's just not a thing that people are really capable of doing on certainly their first million dollars or their first, you know, Palantir is sort of like the, the most amazing version of like the second or third startup that people do. Like your first startup, you gotta just gut it out sometimes. It's like, how do you like get to your first million dollars, right?

Well, that is the name of the podcast. Indeed. And so I'm curious, what's your advice or take on that? Like, how did you do it? How did you think about it? And knowing what you know now, how would you go make your first million?

Yeah, I mean, what's funny is in the end, like, Palantir ended up being huge, but it took it didn't really IPO until many, many years later. It's like, I mean, I designed the logo in 2000. I joined as employee number 10. We would do these ridiculous things like go to Stanford and give out pizza. And then we were like 10 people, 15 people working there, but the pizza box would have our Palantir logo that I designed and like, join the next Google. And people would like eat the pizza and they'd like give us dirty looks. Like, how dare you? Like, it's like, what the heck is wrong with you guys? And then, um, let's see. My first win, I mean, the Palantir shares did turn out to be something, but it did not seem like it was going to for a really long time. I think my first actual million dollars was selling a few million dollars worth of Twitter stock at IPO. And so it was actually really late, like 20— I mean, for me, I started working in tech like when I was 14, so like 1996, '95. And then, I mean, I think it, yeah, it literally took like 18 years of like working as an engineer and not having money and having like $50,000 credit card debt coming outta college. And I think that might've even been one of the reasons why I didn't quit to join Palantir. I was like, it, it felt, you know, in 2004 I still had like $30,000, $40,000 in credit card debt and like maybe $50,000 in student loans. And I just like, I was like, well, like $70,000 is a lot, but you know, how am I gonna actually, you know, I don't know if this job will even exist in 6 or 9 months. And like, I could be a lifer at Microsoft. And of course, in retrospect, it's like being a lifer at Microsoft would be sort of like a life of torture at some level. So yeah, my first million was actually Twitter stock. Uh, so I started a company in 2008 called Posterous. It was a blog platform.

I used to use it. I love Posterous.

And what did they eventually sell for, like $300, $400 million?

I think like it's a multiple choice test. You just circled A and B. Yeah. Can't be wrong that way.

But I don't know, this is all, you know, 20/20 hindsight. I mean, we use, I use these stories all the time to try to help founders get on the right path to real enterprise value all the time now. All right. So, you know, it's not just make something people want and raise a Series A and B and like look like a successful startup. Startup. It's actually make something people want, and that's the end in itself. And if you do that, like, you're gonna make money, and, you know, hopefully you can compound that and like, you know, create real enterprise value for yourself. And that's sort of the game.

We wanna ask you a bunch of questions about different stories, 'cause you probably have a lot of stories, but what's interesting about that story is, um, you You left Palantir. Palantir is a very— I don't know if it felt it that way then, but now it's a very serious company where like they prevent terrorist attacks at times. So like it's a very serious product. Uh, what you were working on after that, you could like, someone could be like, well, that's just like a blogging platform or that's just this, like, that's, that's quote less serious. Did you ever, like, I mean, I guess I'm self-projecting because I feel this way sometimes where I'm like, I'm doing something that's not serious. But you kind of have done both, and you've done— now you're back to a relatively serious thing. It's a— YC's a multi-billion dollar company. Um, how do you balance like, like working on something that seems fun and cool versus like a serious big thing?

So wait, are you telling all YC founders to go and build an audience online?

Oh, if you're doing consumer, you ha— you basically have to, right? But sometimes even if you're dev tools, like you guys—

but yeah, wouldn't you say the same thing if you're a B2B Like, isn't it even more valuable because you need a smaller, more targeted audience?

Oh yeah, that'd be great. It's harder to target.

That's it. That's a pretty interesting thing. You didn't say this, I'm putting words in your mouth, but if you are saying—

oh yeah, yeah, we have Mark Pincus coming to speak at our, uh, mini conference later today, and, you know, we're going to talk about it. It's like, how do you actually get incremental customers? And distribution really matters for consumer businesses, but that's also why You know, we've had a dearth in really breakout consumer businesses for 10 years. Um, you know, I, I think that this will change. I mean, with AI, AI does change things. I don't think it's broken the distribution advantage. You know, I think that the big tech companies have a total stranglehold on the incremental user and you have to pay them still. Uh, I mean, it's just purely market dynamic, right? Like, you know, we're selling Widget X or Game X or Dating site X or whatever it is, but you know, our, you know, buddy from college or, you know, or someone from halfway around the world in Eastern Europe can like take what we've done and like do the exact same thing or go to our supplier in China and like get the same dropshipping relationship. And so at that point, like the second price auction means like, well, I want that customer. No, I want that customer. No, I want that customer. Guess what? It's an auction. Like every incremental dollar that is gross margin Google or Facebook will just extract because it's a perfect marketplace. And that's just the world we live in right now. And then, you know, I think that the purest form of alpha that exists still is saying interesting, valuable things that, you know, and the YouTube algorithm and the X algorithm and, you know, to a less extent, like Instagram. I mean, I think TikTok is actually pretty wild. Like they're just giving away distribution over there. Especially for brand new creators. Um, I think Meta is probably really dropping the ball on how they're thinking about creators. They just like, I don't know what's going on over there. Seems like they only wanna satisfy the people who are already big, which, you know, is not that helpful for people who are trying to do new things. Um, but yeah, that's, that's sort of the regime we live in. Um, you know, for B2B, what we see at YC is that You know, probably 70 or 80% of companies are B2B and, uh, our most well-attended mini conference every batch is actually the sales mini conference. Um, you know, uh, Pete Kazanjee, uh, Founder Sales, like that book, we give a copy of that to like literally every founder. A lot of it is about a mindset shift. Like most people have never been rejected 95 out of 100 times. Like it's just so like soul crushing to get no that many times in your life, but It's also, you know, for 80, 90% of businesses today, you better get good.

If your website conversion rate's 5%, you're doing phenomenal. You go out and knock on 100 doors and get 95 nos, you feel like you're the biggest failure in the world.

And it's the same comparison. And you shouldn't because you got 5, you got 5 enterprise contracts paying you $10,000 to $100,000 a year. Like you're the biggest winner in the world. Like that's how this stuff works.

We gotta ask you about some of the people that you've been able to meet. I'll tell you what I want, and I hope that you give it to us. I don't know if you will or you won't, but like, so me and Sam kind of are in what I'll call like the way that most people live their life, which is you wake up every day, you got your project, your business. It doesn't matter if you're doing, you know, $10,000 a month or $100,000 or $10 million a month. Doesn't really matter. You wake up every day and then we all look for kind of like this entertainment inspiration thing and we get a lot of it Twitter, from podcasts. And one of the best things is when you hear about the way that some of the people you admire operate, or the way that they handle things, or the way that they dealt with a situation, or something about their personality. And of course, it's sort of a caricature. It's not a perfect picture and whatever. They're not perfect people, but it is badass to hear those stories. And we hear them about Elon. But you run in a really amazing circle where Paul Graham, Sam Altman, like all of the YC network are people you've been around. You've been around them before they were, you know, big and, and, and since. I would love if you could tell us a couple of like either personality traits or stories that stand out for some of the people. So I'm curious, it's a long-winded way of saying, can you tell me some cool stories about some of these characters that you've run into? Yeah, absolutely.

The funniest story I remember from working with, uh, Paul Graham in the office, I mean, he gave me my first shot as an investor and as an advisor to startups. I was burnt out from Imposterous. We, my co-founder and I had like a falling out and And, um, he wanted to become Google Groups and I was like, dude, I don't even think that Google wants to be running Google Groups. Like what? We should just charge money. But, um, yeah, Paul, like I think really did, like Paul and Jessica basically like did all the admissions, worked with all the companies. It was like 2011, you know, even the whole YC campus was not a campus. It was like a warehouse with some carpet. And some like custom, like very cheap, I mean, it was just tables and benches. The benches were so rickety that like if you sat on one side, like, and the other person on the other side, like, you know, stood up, like you'd fall over. Like there's just like a bunch of funny things about YC early. It was like this tiny thing. Um, and to paint a picture, like people still, when I said I was going to go work at YC, uh, as a designer in residence, my friends in venture or startups would say, oh, that's nice. It sounded like I was going to volunteer at like a high school camp or something. It was like a high school basketball camp or something. It was like, oh, that's, oh, that's nice. That's so, you know, I hope you enjoy that. Like you're doing community service. Good for you.

Good for you.

Exactly. And, um, you know, Dropbox had happened as a, you know, and it had become a billion dollar company, but, uh, Airbnb. I think was just about to become a billion-dollar company. And, uh, you know, I, I, I think this is lost to the sands of time, but I remember Sarah Lacy had created a, had written a book called like One Year Lucky, Two Year Good. So that, you know, 2011 I think was the one year lucky, two year good moment for YC where people realized, oh, this isn't like some fringe thing. It's actually starting to churn out like basically the most dominant startups that exist. It's like a very concentrated form of Silicon Valley. And, uh, about that time, um, yeah, we had, there was literally one person who did all the books, all the finances, all the audits, all the CFO stuff. And, uh, she needed a copy machine, so she got one of those like, uh, sort of waist-height copy machines that, um, you know, looked corporate and it had like these little stickers on it. And then I remember Paul Graham came in, he's like, what is this? Why is this here? And it was like sort of this totem of, um, corporateness. He's like, I remember seeing these at Yahoo and I hated them. Like, he started like scraping off the sticker that had like the phone number of the little company that, uh, would maintain the, the copy machine. And, uh, I guess it just jumps out at me as like this very interesting quirk of Paul that was like absolutely right. And, you know, I sort of stay up at night thinking about like, how do I make sure that YC never feels corporate? PG, PG would show up in like shorts and Birkenstocks all, you know, all day. I think he, he wore khaki pants to my wedding. So my mother, my, my sister-in-law was like, excuse me, sir, this is a private wedding. And I'm like, no, no, no, that's my boss. Um, so I mean, there's this, I think what I learned from Paul was that Um, I think there is an insidious nature to like formality and, um, corporateness and just like having to wear a suit or the convention, right? Like, I think there's incredible value in being very, very unconventional. Whenever there is prestige and/or convention, you should be wary of that thing because You know, there's got to be some other weird soul-sucking things that are associated with that, that, you know, no one by default would sort of choose to have, you know, a dress code. Or like, what, you know, what are some other examples of this? Like, you know, basically you should beware of about your own formality and, um, try to fight against it. It's just like try to be super matter-of-fact. Um, and I think that that's That's one of the things that just makes companies bad. I wonder, like, as people who run your own businesses, do you ever think about that? Like, you go into a meeting and you just think, like, was that a meeting that if I were not me running this place, like, would I want to be in that meeting?

Well, it's the same thing as what you said about the framing thing. You behave like you think you're supposed to behave versus what, uh, kind of makes sense. Um, you start playing business a little bit. It's sort of like You know, when you start a company, a lot of people play business by getting like a business card before they get a customer. And then you kind of snap out of it. You're like, no dude, I got to make the damn thing. And you start making the damn thing and you start getting some customers and then you kind of go back to playing business again. Yeah. Um, which, which is definitely part of the Silicon Valley thing, you know, like OKRs, measuring things quarterly. Like there is a bunch of like lameness that I myself fall victim to and you have to like pull yourself out of that trap. But, but some of it is like useful, I guess, if you're Airbnb, you, You have to, if you have 6,000 employees, you, you do slow down, but it's hard to know what's truth versus what, like, or what you should do versus what you have to do type of thing.

That's so exciting.

What companies, um, are you super excited about that we should watch out for, we should go check out? Because you live in the future, you're, you're further in the future than we are.

Was it obvious when Sam Altman left, uh, YC to do this?

I wish I was smart enough to predict that this was what was going to happen.

Did you think that he was going to be the man like he is now? Like, you know, Paul, Paul Graham has that essay where he's like, here's 5 people I'd bet on, and one of them The fifth one was like a 25-year-old Sam Altman, and the other three were like, you know, uh, Bill Gates and Steve Jobs. And then he said this kid. So did you, were you like, whatever Sam does is gonna be a generational company? Or were you like, eh, might be, it could be mildly successful.

I mean, I think it could be. I bet in full transparency, like I'm gonna be super honest. I was like, man, I don't, I don't quite get it. You know, I, he, uh, when he was sitting in my, my shoes as president of YC, uh, he'd come back and I remember sitting in the group partner room and he'd say like, well, this is what Elon was talking about and this is what Larry was talking about. And you know, they were all talking about AI and they were, you know, sort of talking about these sci-fi scenarios. Um, and I'm like, man, I saw Terminator 2 too, but that was a movie. Okay. And, uh, I think that I'm changing my tune at this point. Like it, it, You know, I wish that it was smart enough to be, you know, actually totally a believer. You know, I'm a believer now. Um, do I believe that we're going to end up in like a doomsday scenario? Like, I still don't really believe that there's that much agency in these things, which is super weird.

Yeah, but your judgment now is questionable, you know? First Palantir, now OpenAI. You know, thank God that you've like already made so many other successful investments that I know that Gary's got good judgment and like can predict the future a little bit because, uh— I'll come around eventually.

You know, like I'm just a year off.

Yeah.

Yeah. He was Palantir employee 10 after he said no to the co-founder. Well, he ended up there. Right.

So, I mean, now we're, you know, we are full believers in large language models, but I, you know, I think the thing that's a little bit lost to the sands of time is that, you know, what Sam was absolutely right about was jumping on this thing that the smartest people in the world were already talking about like 8, 9 years ago. And then he built it, you know, he invested the money. He, um, you know, brought together the people. It was no small task to bring together the smartest AI researchers in the world. And then not only that, it was like semi-miracle. You know, you could ask, why didn't Meta do this before? Why didn't Google do this before? Why didn't Microsoft Research do this before? Like, all of those people had virtually limitless access to resources. And, um, to weave this back together, I think there is something really terrible and limiting about, like, giant organizations that are not capable of evolving and making smart decisions. I mean, that's what big tech is like. They're sort of like big daycares for the most technical smart people in the world. And it's like, here's— here, do you know, play some volleyball, we'll cook you lunch. Like, here, you know, here's— do your laundry at work, you know, like You know, let's totally infantilize the smartest people in the world. And like, that's a waste of time. Like what needed to happen was, um, the ability, you know, uh, one of the things that got explained to me why, uh, it was OpenAI that came up and like invested, you know, millions first and then tens of millions and hundreds of millions into the large language model and, you know, transformers for language. Um, if you were at Google, you needed to work this bureaucracy. It was like highly political, you know. You had hundreds of other researchers, all of whom were all as smart as you, and you had a finite sort of limited set of compute. And, you know, what you would find is that, um, Google would do really breathtakingly amazing work, but then you'd have like 30 different authors You know, and if you'd read the paper, there'd be like these sort of like strange things that seem like it was a little bit tacked on, but that's the only way you could get the compute resources to actually pull off a training run on like the model that you wanted to do. Like you had to do some weird things to accommodate like people who were gonna commit their training resources for their like random little thing. And so it's funny to see that. You know, human progress is more or less a little bit, uh, impeded by the bureaucracy and lack of governance and lack of agency that large organizations just sort of like impose on people. Like you don't have a choice.

Isn't it crazy that it was easier for them to invent and discover Transformers and this large language model breakthrough than it was for them to navigate the bureaucracy to actually like create a product out of this or do anything useful with it? Like, That should tell you kind of everything you need to know.

I mean, the wild thing is like, even within OpenAI, like they did everything right. Like GPT-3 was very impressive. 3.5 was even more. 4 was incredible. But like, they were going to just put it behind an API and like explicitly for many years, OpenAI was supposed to be a, you know, we're a research lab, not a product company. And, uh, you know, it took the relatively Herculean efforts by product people inside OpenAI to even release, um, you know, ChatGPT, which turned out to be the greatest consumer launch of maybe the, in the history of consumer launches, actually.

Hey, you said, um, and I, and I know we gotta wrap it a second, but you said, um, you keep talking about this thing. It's pretty amazing about, uh, talking to the smart people and like, what, what are they, what are they talking about? Uh, you have access to more of those types of people than probably most anyone on earth, what's the conversation right now? Or is it, is it all AI still?

Yeah, I mean, ultimately that's sort of the number one thing that we're pretty excited about. I mean, that, you know, a few people who are really smart can sit in a room and, I mean, make a thing that literally does what humans do all day. You know, I, I would make a pitch that often the best things that could be automated are actually very rote. They're sort of the knowledge worker equivalent of like hand looming a carpet or something. It's like all I do all day is look at an email box, see if someone paid their bill, reconcile that against a ledger in QuickBooks. Like, can you imagine, you know, millions of people, like tens of millions of people on the planet, like that's their 9 to 5, you know, like that, that is not a good use of a very smart human being, uh, generally speaking. And like, those are sort of the things that are most easily replaced by really great prompting, great evals. And frankly, I think, um, you know, there are going to be 20-person software engineering-focused startups that basically turn, um, you know, billions of dollars in payroll into, uh, billions of dollars in software revenue. And Hopefully those people go on to do much smarter and much more interesting jobs than like passing butter all day.

That's amazing, Gary. Uh, if you have one minute, can you tell the spoon bending story? I think this is the, uh, a very powerful story that you have, uh, the spoon bending party. I don't know if you know this.

Oh God, it's hilarious. I mean, uh, I, you know, I've been to Burning Man a few times. I love Burning Man. It's my favorite place to take a break from consensus reality and realize that it's all made up, but you get to make it up. And, uh, you know, there's a lot of like weird fringe stuff, a lot of like '60s, like esoterica, you know, uh, you're just wandering around the desert on a bike with your buddies. And, you know, I think, uh, we randomly walked into a spoon bending party where, uh, they were, you know, it was a huge group of, I think it was almost like a magician at the front, like sort of helping people, you know, the, the shtick was that they were gonna teach you how to, uh, bend a spoon with your mind. I was like, okay, that's cool. Like, let's go check it out. They passed out these spoons, um, and then it was like a magic trick. They said, uh, okay, now bend your spoon with— like, look at your spoon and bend it with your mind. And then in between, they would say like, okay, well, sometimes you need to use your hands and like warm up the spoon to bend it. And then basically, uh, I think What you're supposed to do literally is just bend the spoon with your hands. And that's what, you know, and then what's funny is by the end of it, um, half of the people, like I had, I had a bent spoon cuz I was like, oh yeah, like they said like, oh, I should, you know, sort of warm up the spoon with my hands and bend it with my hands. And then the other half of the room—

just to get it started.

It's just like, dude, Gary, you're the shit, man. You are the best. I love talking to you. You make me feel really great. You give me energy and we're very, very, very thankful that you took the time to do this.

Thank you guys so much for having me. Always great to see you guys and, you know, congrats on all the success and excited to see where you and your community go. I mean, you know, we're, we're all building the future out here.

Well, thank you for saying that.

Take care, Gary.

I feel like I could rule the world. I know I could be what I want to. I put my all in it like no days off. On the road, let's travel, never looking back.