Why start-ups rarely change the world
I’m sure nobody wants to hear this and I’ll be viciously attacked for suggesting it, but despite the constant refrain from entrepreneurs that they’re trying to change the world, startups rarely do anything significantly world-changing. It’s not really their fault, changing the world almost always requires massive amounts of money, groundbreaking technology, and a lot of time — three things most startups don’t have.
Really big paradigm shifting developments are so costly and require such a long term outlook that they essentially have to be disconnected from the profit requirement. As such, the only people who can afford to do this kind of work are the research labs of big companies (think Bell Labs in the old days and Google today) and the government. Even startups that raise massive VC rounds don’t have resources anywhere close to what Google or the government can provide.
For those of you sharpening your anti-government pitchforks, where do you think the Internet came from? The government funded this experiment for decades without any expectation of profit and gave it to private industry for the rest of us to make money with it. Without those years of government development, we wouldn’t even have the internet. Everything we’ve done since then, from Amazon to underwear delivery, stands on the shoulders of profitless government funded research. Creating the Internet was the fundamental development that changed the world, not mailing crap in a box.
Some of you are probably thinking, “but Google was a startup once and they’re changing the world.” Yes, but when Google was a startup, all they did was make a better search algorithm. I’m not dismissing that as inconsequential, but it’s not a foundational world-changing technology on the same scale as the creation of the Internet itself.
Furthermore, I would argue that some of the projects Google is working on today, as a large company with near limitless resources, are far more important than the work they did during their startup phase. Google’s self-driving car has the potential to eliminate traffic, reshape our cities, and bring mobility to the blind and elderly. No startup has the resources to fund the development of a self-driving car over the course of 10 or 20 years, but Google can, because they can afford to be disconnected from profits for a long period of time. When the self-driving car ultimately becomes a reality, it will have a much greater impact on our lives than anything Google did in their startup days.
What about Elon Musk? Isn’t he changing the world? Yes, but I think everyone can agree Elon is a rare exception, and even still, SpaceX and Tesla both received massive government financing. Additionally, in the case of SpaceX, the foundational work was done by NASA in the 60s, 70s, and 80s. NASA did the research that changed the world, Elon is only making it cheaper and more efficient. I don’t mean to belittle Elon’s work, I’m a big fan, but let’s give credit where credit is due. Elon didn’t invent space travel. The world-changing research was done by the government decades ago in an environment disconnected from the profit requirement. Unless every VC on Sand Hill Road pooled their money into one giant Hail Mary investment, no startup could ever afford to engage in an undertaking as massive as the Space Race.
As a group, startups can contribute small incremental changes that together add up to a big difference in the way we live our everyday lives, but their work is rarely foundational. Even with generous venture funding, their relatively limited access to resources, along with their near term profitability requirements, just don’t allow them to pursue truly grand ambitions. Only people who can afford to think and spend on the timescale of decades with little or no concern for ROI have the resources to create world changing, paradigm shifting new technology. And the only people who have those kinds of resources are Larry, Sergey, and the government.