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Email ThisPaul Graham has released another great essay today titled simply “Be Good.” The main point of Graham’s essay can be summed up with this excerpt:
If you start from successful startups, you find they often behaved like nonprofits. And if you start from ideas for nonprofits, you find they’d often make good startups.
That statement doesn’t seem too interesting off hand but it truly is. Basically, Graham suggests that if you simply work on an idea that legitimately helps people you could find yourself with a very interesting business over time even if the current encarnation of the “business” looks more like a nonprofit (i.e. helping a lot of people without making any money).
Graham lays out some interesting examples of this type of thinking (Google and Craigslist among them) and he also covers the reasons why he believes being good can help you do well. His reasons are:
Power -Being good helps you gain power in the marketplace since you legitimately care about your customers and stakeholders and they, in turn, want to help you (I saw this first hand at FeedBurner). This is related to the concept of Karma.
Morale - Morale remains high even during the inevitable tough times during the life of a start-up.
Help - Other people want to help you and you’ll be able to recruit the best of the best.
Compass - Having a solid mission oriented around doing good acts as a compass for the company.
I think Graham is right on with this essay. I firmly believe that doing good will help you do well in life (and business) and have seen it to be true in my own life.
That said, you have to genuinely do good. You can’t pretend to do good because people will figure you out and then you’ll be in trouble.
Following this topic a bit further I would like to point out that running what may be a traditional nonprofit business as a for-profit from day one may actually help more people and create sustainable change rather than simply providing a bandaid.
Case and point for that line of thinking is microfinance. What does microfinance do? It helps the poor pull themselves out of poverty by giving them loans to start small businesses. Off hand you could say that microfinance institutions should be not-for-profit but in fact most of them (if not all) are for-profit banks.
Being that these entities are for-profits they continually find efficiencies to improve their businesses which in turn allow them to help more people. It seems to me that more “nonprofit” ideas should run themselves as for-profit ventures to increase their sustainability.
Graham has this to say about the topic:
The idea of starting a company with benevolent aims is currently undervalued, because the kind of people who currently make that their explicit goal don’t usually do a very good job.
I think he has a point there but Graham links the issue to what he calls the trustafarians (trust fund folks) who simply want to attempt to do something good but never follow through. I think there is more to it than that.
I believe these folks in nonprofits may not be doing a good job because the organizations, being not-for-profit businesses, have no incentive to lower burn rates, be more efficient, etc. They also can’t afford to pay their employees as well as their for-profit counterparts which means that the top minds don’t go work at non-profits (not true in all cases of course).
Imagine if the nonprofits ran themselves as a for-profit businesses. Then they could afford to hire better people and would be more concerned with conserving cash and helping more and more people through their own growth and increased efficiency (assuming they ran the business well of course).
The bottom line is that you can do very well by doing good so follow your idea through even though it may not seem like a business right now. If you are truly solving a pain the business part of the business will most likely follow.
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