Sam, thanks for joining us.
This is something, this is like a lot bigger than the earlier startup schools.
Yeah, I mean startups are a lot bigger now than they have ever been. So sure.
I mean they're bigger than they've ever been because of the vision that you had for AGI which is nigh. I think this is going to be the best time in the world to do a startup and it's gonna be quite amazing to see.
So I wanted to start with a time and place which is you were in the very first batch of Y Combinator in 2005 with a location sharing company called Looped. What do you remember about that and what was your best PG Paul Graham story?
I think if it were possible to get as far from this moment as I can imagine, it was, you know, startups are not cool at all. We were like hiding out in this little building in Cambridge. PG was making us dinner. And you know what took three months to build at the time that each company built over the whole YC startup could now be done in like seven minutes by a coding agent. And it was only I mean only 20 years ago. And I think the difference in what's possible for a startup now, what a startup can take on, you know, I think you could either be sad and be like oh man like a Codex prompt is a whole startup or you could be like I can go start the world's most ambitious crazy company I can have like experts in every field working together I can do these very hard technological things that were just impossible and it's going to be amazing but at the time it felt nothing like that and it was very difficult to get anything to.
I think Paul Graham is probably the most important force in startups of the last few decades and without question. Yes. No question. And my kind of Paul Graham memory is we would all every week come I think it was on Tuesdays and he would like cook he himself would cook us dinner and we would all walk in feeling like very hopeless and very dejected and we would there were eight companies and then we would all go home at the end of it and he had convinced like each of us that our startups were about to like take over the world and we're going to be like the next Google or whatever Facebook maybe at the time. And that ability to sort of like create optimism and momentum and belief out of nothing was like a real PG special. And in the early days when YC seemed like a terrible idea and startups seemed like a bad idea and certainly startups that were like young technical founders with no business people seemed like a terrible idea, PG just sort of like willed it into existence.
But it also takes someone who actually I mean you're sort of famously par excellence an agentic person like even before we thought about agents period. I mean you just I remember Paul wrote I mean it's making the rounds on X today even that Paul wrote in the early in the late 2000s that you would be you were one of the top five entrepreneurs he'd ever met.
That's very nice of me to say. I think like many 20-year-olds, I had like a lot of energy and a lot of ambition, but it was sort of very not directed and I wasn't sure what to do. Paul had this thing he used to say of like the job of being a good startup investor is a teacher, but it's a kind of teacher we don't usually use. Like we usually think of teacher as someone who like gives a lecture and you can't help someone that much by like giving a lecture about a startup. There's another kind of teacher which is like a flight instructor. The person who like sits next to you saying like do this, don't do this, that worked, this is, you know, you missed that thing or you're making these mistakes and I'm just going to talk to you about this one and that very like hands-on kind of you know, here's where to like direct this sort of like brownie in motion energy. That was very important to me.
Yeah. I guess later you came on to become president of YC and you sort of brought exactly the same energy to a great many YC founders over the years. Did you have anything like did anything jump out at you from that time around you know taking this raw energy of someone really really smart and maybe a little undirected and then driving them more towards agency.
Yeah. So first of all I love startups. I think not everyone they're not like for everyone but I think startups are the coolest thing in all of business. I think startups are really like the main thing that keeps the economy from becoming stagnant. I think companies do just like drift towards suckiness and startups will continue to be important forever. In fact, if we are right that AI is going to be such a big change, startups will be much more important to making sure that the power of this technology gets widely distributed throughout the economy and society and is not just concentrated in a few companies or models. So I think startups are this like unbelievably cool, fun, extremely painful and difficult but wonderful thing.
And I think a big part of the job of running YC is you are kind of the unofficial flag bearer for the startup movement. You know like there's lots of startups. There's lots of ways to do a startup. You obviously don't need to do YC but it has always been a huge help to companies and a very powerful force. And so starting with PG and then all of us like you know we have to like make YC successful but I think we really have to like fight for why startups are important and why people should consider startups and help put like relatively more power in the hands of founders and encourage more people to start them. And that's actually worked really well. I think thinking back to the early days of YC there's like very little leverage in being a founder relative to an investor and that shift you know I think that's even been good for the investors. I think it's just been like much better for the whole startup ecosystem.
So mostly what I tried to do at YC was just push for more startups and encourage people to think about startups and figure out what we could do to help founders and help make startups and the startup ecosystem as good as possible. Definitely part of that was pushing people towards more ambition and bigger swings. But it feels like the minor leagues relative to now. I mean, I think you were one of the people who really brought hard tech to YC in a really grand way. And then one of the things we're seeing at YC now is that number was, you know, maybe five or 10% for many years and then now we're getting to 15 20 25%. I would argue on the back of how much easier it is to use agents and cost coming down.
I think like ambitious startups are always awesome and hard tech startups are appealing to a lot of people but they're hard or they've been hard. They still will be hard. But what you can do now to go take on a really ambitious project like in the same way that you can make the startup that took us 3 months of non-stop work in 17 seconds with three months of work and a lot of agents you can do unbelievable things. So I think we will see a golden age of startups where people are like you know what I'm going to do things that would have been completely impossible for a startup to even like dream at a year ago in sort of like the YC time frame.
I mean that's actually a really big reframe. I mean there are probably people even in this room who might be worried that well intelligence on tap means that you know they might be looking at a Looped or my startup Posterous and they're like well I can't start that company anymore but guys that was like a long time ago actually.
Man there's this whole meme going around which is like you know you have to join a frontier lab or you're going to be a member of the permanent underclass because it's so dumb. Because there's going to be like, you know, startups are over and there's like no economic value. That's not true. I mean, if that were true, the world is like totally f***ed and it's a very bad place. But I would bet that the average startups created today will be like I bet there's some future trillionaire sitting in this room and I would bet that the startups created today will be much more valuable, much more impactful than startups of the past. And I kind of think people see that a little bit more now. I mean, there was this period where like is AI just going to break the whole economy and I think people are like mostly over the sort of shock response of that. But there was like yeah definitely a time I would you know come every YC batch and I'll be interested to see how the kind of like level of anxiety versus ambition was trending and it feel like it went through this like big trough where people are like you know it's over it's models are just going to eat everything to now it's back towards like let's go do it.
What are some practical things here? I mean hard tech for instance I was hearing you know at one of the breaks someone was asking like should I go get my PhD? How important are credentials? You know, how would you answer that? Especially people who want to do these harder tech things.
Well, as a general observation first, I think startups tend to win when the sort of like technology landscape is moving very quickly. When costs are coming down when cycle times are short and all of those things are happening right now. So if you look at when there have been like the great clusters of startups in the past, you know, there was the internet boom in whatever that was like 98 99 when new things became possible. There was another version of a mini version of people building on top of basically like Facebook apps. There was then another big version when the iPhone app store launched. But the great startups tend to cluster when the ecosystem shifts and incumbents lose a lot of their advantage. And then also when you have this like cost and cycle time change. This moment feels very big for those things.
It also has this other thing that you were talking about which is a lot of the traditional things that were hard to get expertise, you know the ability to go like hire excellent people that could do specific things you needed. That's really shifted and in the last few months I have seen a lot of people who just kind of grew up using AI the last few years who are like I can kind of automate an entire startup of agents and four of us four people and you know all this compute and I think we're going to see much more of that. Clearly like taste and agency and understanding of kind of like the physics of business like where you can build up a valuable business how to think about like a good network effect or sort of a good moat looks like versus a fake one. But I would bet that this generally will cut against many years of experience in favor of people who have a lot of fluency with the tools.
I guess I want to get into the beginning of OpenAI and that it actually started as YC research looking at this idea. I mean, kind of a crazy idea that, you know, you and a ragtag crew decided we're going to dedicate our lives to this creation of AGI, but at you know, today it sounds fatal complete, right? But that really wasn't how it felt when you started.
It's really hard because it now it like is the only thing people want to talk about. It's really hard to remember what it was like. It's even hard for me to remember this without like finding notes from the time 10 years ago when everyone was like, not only are they wrong about saying they think it might be possible to build AGI, but they're going to they're single-handedly going to cause another AI winter. It's they're wrong and irresponsible and bad. And maybe like my highest order or like my highest bit of advice to all of you is find the things that you can develop like reasonable conviction in that people decide like the conventional wisdom is they're just wrong. And be okay with it taking a long time and having people be like very you know, very frustratingly wrong and dismissive.
For years at OpenAI, it felt like we knew the biggest secret in the world. Everybody was calling us an idiot. And we had increasing data points to convince ourselves we weren't delusional. And it was very frustrating. It was extremely frustrating. But looking back it was like an incredible gift because it meant we didn't have this like massive competitors and we had time to do our research and build our stuff and build our company. And I've since noticed that this is the case for like a lot of companies in different ways. They end up doing something that other people that like experts in the field or the industry are convinced is a very bad idea.
And on the other side of this, if you're starting the same startup as everybody else, it's like you get a lot of hype and you can raise a lot of money, but it's sort of like those are much less frequently the big option, the big outcomes. So, if I were you all, I would figure out what the really big brand new thing is that is possible now that wasn't possible a few years ago. In our case, it was no AI had really been working and then the deep learning magic moment happened and the world didn't update enough. The world. This is another great PGism. The world does not understand how to intuit exponentials and so they missed this one. There's got to be new exponentials forming right now. I don't know what they are. But if you can figure those out and if you can develop continuing conviction based on more data, be grateful that the world doesn't understand. They will eventually. This is like a huge superpower.
It sounds like in your journey there were like a few different things that stacked. Maybe the first one was even that AGI was possible to be built and finding other people who believed that thing. You know, it didn't matter that lots of people didn't think it was possible. It mattered that you found really really smart people who did believe that.
Yeah. We used to joke that only 50 people in the world believe that AGI was possible, but it was okay because 45 of them worked at OpenAI. And I think that's kind of true. Like you don't need a ton of people. And in fact saying the heretical thing was probably why those people wanted to like all be together. So again, I think like really figuring out what you believe, being willing to be misunderstood for a long time and bringing together the like crew of misfits that believes it. That's also what YC was like in the early days.
One of the things that people in the room are probably thinking is like, well, I believe this thing, but I haven't found my people yet. Like, is that delusion? You know what? Is that actually maybe even a gate that you would propose people have? It's like, well, you need to find, you know, five people who might believe that or even one like a co-founder, you know, people maybe that's one of the explanations for why we like co-founders at YC so much.
Yeah, I think if you can't find anybody else that shares your belief, you should pay attention to that. And it's also very hard to do a startup on your own and very lonely. But I don't think you need to find a lot of people. And in fact, if everybody believes it, that's also like a bad sign. The question, I don't know if this is still what feels like the limiter on more startups. But five or 10 years ago, what felt like was limiting the number of good startups YC could fund is figuring out how to solve the co-founder matching problem. Like a lot of really talented people, and they just couldn't find their tribe. They couldn't find their people.
You know, it used to be very heretical that YC told people they had to move to San Francisco. And looking back, it was clearly right. I think I don't know if this is still going to be true for the next 10 years. I suspect it will be, but the best thing you could do if you wanted to like find your people to do a startup with was to move to the Bay Area. You just like magic happened. You got a lot of like lucky chances and collisions. I still think that's probably good advice, although I feel like I have less of an intuition for it now.
I also think that I can say this, Gary probably can't. I think the premium on doing YC is bigger now than it's like ever been before. The distance between like YC and second place has expanded. And this is a reminder of the power of network effects. And so finding networks that you can be part of that help you just meet those people like the people that I started OpenAI with, I met like many many years in some cases before starting OpenAI and I kind of like got to know them over the long like a very long career journey and this happens again and again and so the sooner you can put yourself just in a flow where you're going to meet the people that will be your eventual co-founders for startup or the next one or whatever, I think the better. It takes a long time to compound.
I guess I'm keying off what you just said, which is like, you know, some of the people you ended up starting, you know, all these different things with, you didn't necessarily know what that was for or that it would be useful in a, you know, sort of network setting at all. Like you just collected cool, interesting people. I think you do this. I think Peter Thiel does this really really well. What would you say to a room full of people who are just starting out and like figuring out who their people are?
Just like your highest confidence piece of advice here is just like find a way to be like mildly helpful to a lot of people. It's like fun to do. You'll see a lot of interesting stuff. It's like kind of gratifying to be helpful. But you know, even that example you were just talking about, I met Greg Brockman, my co-founder, OpenAI, because I was a very early investor in Stripe when I was like 22 or something, and they were like, this was before they had, you know, like real investors that could really help them. And they said, you know, we're trying to close our first hire. Will you like drive down to Palo Alto tonight and have dinner with this guy to convince him he should like drop out of school and join Stripe, which is Greg Brockman. And then like eight years later, we started a company together. So, and I could like, you know, we could too. We could like spend the rest of this time just telling stories like that that was totally unpredicted but ended up being important in big ways.
So, I have Yeah, it's fun to do and I think you should do it for its own reason or its own sake, but just like helping people a lot really goes a long way in terms of these things coming together later.
I mean, I think that's actually a really important message, you know. So, one of the things, one of the memes right now is I see it on X is live action roleplay. That's like one of the things that people have been saying on X. I mean, I can't tell why they're doing it because it just seems wrong to me. Like, I mean, one of the things that we really love at YC, for instance, is earnestness. And also, words matter. So, you know, this idea that what we're trying to do is a live action roleplay is like kind of deeply offensive to me. Actually, sorry guys, please don't do that.
They say that about YC specifically?
No, there people just attendees in this room have been tweeting that and we'd like them to stop.
What are they claiming? What's the claim?
I think it's just being a little sarcastic about and you know it's sarcasm is sort of the opposite of what I think you and I like. Because it's like we like earnestness who's like we're actually trying to do a thing here.
