Paul Graham knows startups. In addition to founding one himself, he is investor and coach for dozens more through his VC company Y-combinator.

In this essay, he writes about a pattern he's seen with some of the more successful startups. The ones that make it tend to start off benevolent. They make something people want, often in opposition to older, bigger, less ethical businesses. When we think of such idealism and struggle, Google comes to mind, but Graham reminds us that Microsoft was once this way.

Surely Microsoft isn't benevolent? But when I think back to the beginning, they were. Compared to IBM they were like Robin Hood. When IBM introduced the PC, they thought they were going to make money selling hardware at high prices. But by gaining control of the PC standard, Microsoft opened up the market to any manufacturer. Hardware prices plummeted, and lots of people got to have computers who couldn't otherwise have afforded them. It's the sort of thing you'd expect Google to do.

Microsoft isn't so benevolent now. Now when one thinks of what Microsoft does to users, all the verbs that come to mind begin with F. And yet it doesn't seem to pay. Their stock price has been flat for years. Back when they were Robin Hood, their stock price rose like Google's.

When you're small, you can't bully customers, so you have to charm them. Whereas when you're big you can maltreat them at will, and you tend to, because it's easier than satisfying them. You grow big by being nice, but you can stay big by being mean.

Detail of Winter by Hendrick Avercamp, Rijksmuseum, Amsterdam

You get away with it till the underlying conditions change, and then all your victims escape. So "Don't be evil" may be the most valuable thing Paul Buchheit made for Google, because it may turn out to be an elixir of corporate youth. I'm sure they find it constraining, but think how valuable it will be if it saves them from lapsing into the fatal laziness that afflicted Microsoft and IBM.

The curious thing is, this elixir is freely available to any other company. Anyone can adopt "Don't be evil." The catch is that people will hold you to it. So I don't think you're going to see record labels or tobacco companies using this discovery.

Being good is good strategy

Graham's hypothesis, then, is that by being good and staying good, old companies can flourish like young ones.

According to his essay, being good helps startups in three ways:

1. It improves their morale- If you feel you're really helping people, you'll keep working even when it seems like your startup is doomed. Oftentimes, this is what it takes to succeed. Almost every startup reaches a point where it is near death. Having a real purpose --something more than a paycheck-- can help them survive when they might otherwise fail.
2. It makes other people want to help them- We like to root for the little guy, especially when the little guy is doing something good. That's why we support the local free trade coffee house instead of the Starbucks that just moved in down the block. When people hear that someone bad is trying to stop the little guy from being good, it makes them really want to help them. This applies even when you're not so little anymore. Apple and Linux spring to mind.
3. It helps them be decisive- The business of making things is complicated; too complicated to for one to reasonably sustain a web of ulterior motives and falsehoods. So don't. When faced with a choice, there is only one choice: do the right thing. We've said something similar before, but I like the way Graham puts it. Being good is the only algorithm that scales.

Don't just not be evil

Most explicitly benevolent projects don't hold themselves sufficiently accountable. They act as if having good intentions were enough to guarantee good effects.

So I'm not suggesting you be good in the usual sanctimonious way. I'm suggesting it because it works. It will work not just as a statement of "values," but as a guide to strategy, and even a design spec for software. Don't just not be evil. Be good.

Graham is a polarizing figure, but I think we can get behind what he's saying here. In fact, we've said it before: in the long run, ethical behavior tends to win out.

We’re not chasing after startup money these days, but we love to make things and solve problems. That’s why I’m filing this list of startup ideas from Paul Graham under inspirado. It’s hard for me to look at it and stop the ol’ creative wheels from spinning.

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