This episode of the My First Million podcast features a conversation with Garry Tan, the CEO of Y Combinator, who discusses the unique philosophy and success stories behind the startup accelerator. Tan shares insights into how YC identifies and nurtures high-potential founders, the importance of “doing things that don’t scale,” and the evolution of the startup ecosystem.
Topics: Y Combinator, Startups, Entrepreneurship, Venture Capital, Business Strategy, Tech Industry
The Philosophy of Y Combinator [00:00]
Shaan Puri: 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.
Sam Parr: Sam, have you seen? I feel like there’s a new meme that got birthed, and I think Garry is involved with it now, which is the “learn to cook, loser.” Have you seen this, Sam?
Sam Parr: What is that? What is that?
Shaan Puri: Garry, can you explain this one?
Garry Tan: I posted it. 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, loser.” And then all the builders, like I’m just adding another layer, 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.”
Shaan Puri: 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.
Sam Parr: Maybe I’m reading too much into it.
Garry Tan: It’s the more succinct version of “make something people want.”
Shaan Puri: Yeah, it’s the punched-up version. “Learn to cook, loser.”
Defining Success at YC [01:25]
Sam Parr: Is, 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?
Garry Tan: I think so. I think he really did.
Shaan Puri: What’s, what’s your version of that?
Garry Tan: 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, applying 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.
The “Spoon Bending” Story [06:11]
Garry Tan: 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 Posterous, and we, my co-founder and I had like a falling out, 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, why, 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. This is 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. And 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. I 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.”
Shaan Puri: Good for you.
Garry Tan: 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 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, I mean, PG would show up in like shorts and Birkenstocks all, you know, all day. I think he, he, uh, wore khaki pants to my wedding, so my mother, my, uh, 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.”
Shaan Puri: That’s hilarious.
Garry Tan: 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 be wary 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, 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?
Shaan Puri: Well, it’s the same thing as what you said about the framing thing. You, 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, 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, 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.
Garry Tan: I will say that I think, um, it’s possible for people to do, uh, insane business now with like two pizza teams. Like, I think that we, you know, probably in your community or maybe you guys yourselves will end up making these like 100 million to like billion dollar a year businesses that are totally empowered by large language models that like do not need more than 20 people working at them. I think that this is literally the most exciting news that, you know, we’re pretty sure is going to happen the next few years, especially right now. And like that is the one thing that these giant companies that have like thousands of people, like it is completely like corporate America is completely unprepared for this moment. Like they’re just going to get run over by a thousand startups that are way more agile that, you know, aren’t completely drowning in convention. They can just do the right thing for the customer. And the cost basis will come down a ton. You know, the, the trickiest thing is like, I’m not sure if it’s inflationary or deflationary. Like what’s going to happen here, right? Like prices in theory should come down, things should get a lot more, uh, competitive. I mean, on the flip side, like the hope is that all of our, you know, products and services get, um, a lot better, cheaper, faster, real fast. I mean, this is the moment. Like literally we talk to people who are, engine managers and like CTOs and like even engineering teams. I, you know, I think that it’s almost generational. Like we get, it’s like in the water for us right now because we spend all of our time with like 22, 25, 28 year olds who are like the me from, you know, 15 years ago. Like we’re just helping the next generation right now. And they were like born on the internet. They were born with large language models, you know, um, and then there’s sort of, uh, you know, frankly, I’m 43, like my generation of C-levels, like I don’t, like, 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.