Musings / 12.21.2016

Charles Hu

Mining for Tech

On January 24th, 1848, gold was discovered near the Sierra Nevada mountains. In the next year, over 100,000 people from all over the world moved to northern California in search of their fortunes.

 

On January 24th, 1848, gold was discovered near the Sierra Nevada mountains.  In the next year, over 100,000 people from all over the world moved to northern California in search of their fortunes. As I think about this point in America’s history, I can’t help but think about software development in this tech boom. Much like 1849, the tech industry has drawn hundreds of thousands to the San Francisco area from all over the world from human capital to investment capital. In this blog, I feel compelled to share some of the similarities I see between the gold rush and the tech boom from the perspective of a software developer.

When word got out that James Wilson Marshall discovered gold flakes a the foot of the Sierra Nevadas, would be prospectors sold their homes, borrowed money from relatives, took out loans, left their families, and spent their life savings in the hopes of hitting it big.  In a similar way, many entrepreneurs have been inspired by the success of Uber, Instagram, Pinterest, and other successful ventures.  They see the fruits of Mark Zuckerberg and think, “why can’t I be the one who starts the next Facebook, Facebook seems like a simple enough idea”.

If anyone wants to start a Facebook competitor, I would highly recommend against it. Many of the factors that contributed to Facebook’s success can’t be replicated. During the gold rush, many people came to the Sierra Nevada only to realize that they barely had enough to buy a plot of land, let alone tools and supplies. So many gave up their dream before they began.  Before going to your rich aunt Fran to borrow that $200,000 to start your next tech business, I’d recommend doing some serious research. Know what you’re getting into and what it takes to get it done.

I’ve seen a slew of ideas come through our company. Some amazing, some shocking, and some down right laughable. But due to NDA’s, I can’t share any of those stories. Two questions that I get from almost every tech entrepreneur is: if we like their idea and if we think their idea will make it. The simple truth is that we aren’t qualified to give an opinion, that’s not the business we are in, and even those that are in the VC business are wrong most of the time. Asking those questions to a developer is like a miner asking the merchant who’s making his shovel, if the plot of land he purchased will yield a lot of gold. We can give our opinion or input, but the truth is; we don’t know, and no one really does.  We’re simply selling tools for entrepreneurs to use while mining for their fortune.  We can tell you what makes for a sturdy app that won’t break down while you’re mining. We can even make suggestions as to what type of mining picks to use while mining for which type of market. But in the end, we can’t tell anyone if they’ll hit gold or not.

During the height of the gold rush, supplies were expensive due to demand. Imagine seeing one of those would be miners, new to town, buying his tools from a vendor behind an alley for a fraction of the going price. He thinks to himself, “all mining pick are made of metal and wood, what’s the big deal if the joint is made one way or another, or if the handle is finished or not.”  Unfortunately he learns those answers once the pick breaks from a single day’s use, or when their hands are blistered after a half day of mining. At that point, the money has been spent, and they can no longer find the shady merchant to take it back. There is a difference between quality code and sloppy code, and one development platform to the next. Most capable developers charge a similar rate, and it’s always more than what new entrepreneurs think it should be.  Whether or not that rate is inflated is for another blog.  But there is a reason why those are market rates, and why successful businesses pay those rates willingly. I can’t begin describe the sinking feeling in my gut when I have to tell a would be entrepreneur, who’s spent their well earned money, that they paid for software that was poorly made. And it can’t be fixed. That’s not to say you won’t get a well made mining pick from a back alley merchant, but the question is if that risk is worth taking.

This bring us to the question, how much does the craftsmanship of a tool matter.  And the answer is that the tool should serve it’s purpose, as a tool. It’s tempting to spend all your time focusing on getting the shovel crafted with all the best features you would want, but you didn’t travel all that way to buy a shovel. It’s easy to be so focused on the tools and forget about the business. The software is not the business! Get the tool made to suit your purpose, no more, no less. This is where entrepreneurs should listen to a trusted developer. And a good developer isn’t going to want to add unneeded features to your product just to siphon money. If your product is a hit, that’s better long term business for them. Adding bloated features doesn’t make for a good product, or good business.

There’s so much more to prospecting for gold in the tech market than having a desire and getting good tools. Ultimately, it takes timing, strategy, marketing, connections, vision, personal drive, and a lot of hard work. And there’s even more to it. But in the end, if something’s not working out, it’s really easy to blame the tools and the vendor. Maybe if it was easier to use, or if the vendor gave you better advice. In the end, entrepreneurs should realize that they are trying to go against the odds. According to a Business Insider article, 1 out of 10 companies that go through Y-Combinator sell for greater than $40mm. Keep in mind that it’s very hard to get into Y-Combinator. If success was easy, everyone would be a tech tycoon. And keep in mind that a mark of a successful entrepreneurs is persistence. Successful entrepreneurs tend to have more failures than most, but they don’t quit.  And they take ownership of their failures.  I’m not saying that it’s never the vendor’s fault, but it’s more beneficial to be realistic about what you’re trying to do and what the odds are.

As I’ve mentioned before, I’ve seen a lot of ideas during this tech boom.  The truth is, I’ve seen amazing ideas that never get off the runway, and I thought some ideas were ridiculous that ended up becoming billion dollar companies. What makes for a successful idea is so much more than having a good idea or a well made app. And generally, people that know the secret sauce, have already made billions on their ideas, and have written many books on that matter.