Chris Dixon at Startup School 2013

So today I'm going to talk about good ideas that look like bad ideas.

There's a great, my clicker is not working, sorry, technical problems there. Okay, thanks, oops. So there's a great PG blog post where he talks about Peter Thiel came to talk and said basically there's two kinds of ideas: the, sorry, that there are good ideas and there are things that seem like bad ideas. Most startups are in the sweet spot in the middle, which are good ideas that seem like bad ideas.

So today I'm going to basically expound on this idea a little bit. So why good ideas look like bad ideas? The kind of intuition is that good ideas that look like good ideas are already being worked on by, you know, academics, governments, and most of all, kind of large companies.

So for example, I, you know, I want a smartphone that has 10x the battery life and a better screen and more apps and everything else. And Apple and Samsung and everyone else are hard at work on that. So sort of by definition, you know, we investors and entrepreneurs are kind of in the business of the leftovers, or the things that everyone else thinks are bad ideas. But we think our, you know, we discover are actually good ideas.

And I'm gonna give somebody, start with some sort of high-profile historical example. So it's hard to to sort of imagine this now, but back in, I think it was '98, when Google first launched, they were actually very late to the search engine world. At the time, the search was dominated by large portals like Yahoo and Lycos and Excite. And they actually thought of search as kind of a lost leader; their real business was being a portal and putting display ads everywhere.

In fact, if you go back and look at all of the literature at the time, people, the sort of the, you know, the press reports and things like this, everyone was talking about stickiness. Stickiness was kind of the key, and it was like, sort of today would be like morality or whatever, some of the sort of things everyone's trying to have.

You wanted stickiness, maybe people stuck on your website so that you could show them more ads. Google was the opposite of it. It was so incredibly good at finding the right search results that people would immediately leave the website. In fact, there's a famous anecdote where the Google guys were trying to, when they first started off, trying to sell their technology for like a million dollars to one of the large portals.

And the CEO of a large portal tried it out; he's like, "This works too well. The problem is people are gonna leave my site. Can you make it work less well and like actually give me bad results?" It's a true story.

And so the point is that Google came in—I mean, obviously Google had an amazing technology—but in some ways their insight was actually this very contrary business idea of getting people off the website and that no one had any idea how they'd make money.

I know one VC who went to visit the house of the Google founders—they were staying there working at, they were working in the garage—and actually snuck out the back so he wouldn't have to meet somebody who's working on a search engine because it seemed like such an obviously bad idea.

Another good example here is Airbnb, which, you know, we all know now is one of the great successes of our sort of the modern startup era. And of course, came from YC. Airbnb, when it first started off, seemed to most people like this kind of weird niche, you know, kind of hipster activity, something that maybe see them like the mission or, you know, Brooklyn or something like this.

You know, like who's gonna stay on someone else's couch? You know, you know, and lots of great people, investors who've, you know, and sort of industry observers who've been very smart about things all thought this is sort of this weird niche behavior.

And, you know, it's jury still out, but it seems as if it's on its way to being kind of almost a replacement to the hotel industry. eBay is another one, which maybe this crowd is a little bit going back in time. But it's sort of hard to imagine now, but when eBay first came out, the, you know, this the Internet had just started. It just...