Why Drug Prices Keep Rising Despite Congress's Efforts - <AUTHOR> https://www.bloomberg.com/opinion/articles/2019-04-08/why-drug-prices-keep-rising-despite-congress-s-efforts <comment><USER2> In the US, we have a ban on re-importing cheaper drugs which our companies produce. Congress did that. We do not admit competitive medications from other first world countries without full FDA approval. Congress did that. We do not have visibility into prices due to the structure of our insurance cartel. Congress did that.

I fail to see how congress' efforts would do anything but increase prices.

<comment><USER3> Painting the reimport ban (and the Medicare negotiating with drug companies point below) as a "competition" thing is highly misleading. Other countries distort the market price of drugs in those countries by leveraging their monopsony power ([https://en.wikipedia.org/wiki/Monopsony](https://en.wikipedia.org/wiki/Monopsony)) and imposing outright price controls. Keeping those distortions from affecting the U.S. market doesn't undermine "competition" any more than excluding highly-subsidized Chinese steel undermines "competition."

<comment><USER4> Disagree, it does distort the market because it increases the monopsony power of the overseas purchasers.

With zero frictions between the cross-border trade in prescription drugs, a drug manufacturer would have to set a uniform worldwide price for their drugs. Otherwise if they sold to France cheaper than they sold to the US, then US consumers would simply import the drugs from French vendors instead of paying the US list price.

<comment><USER5> And that's perfectly fine - we allow that for all sorts of other products. Will it cause the cost of healthcare in France to go up? Probably, but I don't see how that's a problem for the US.

</comment></comment></comment></comment><comment><USER6> I was disappointed by this sentiment by the author

>And really, one can't blame the drug companies. These are profit-making companies. We can't expect drug companies to behave differently.

The notion that corporations should only work for the maximization of shareholder value is relatively modern, and leads to companies doing societally destructive things like this all the time, yet the author takes it as an inviolate truth. I would suggest that this is also part of the problem, and an area to look to fix it.

<comment><USER7> Companies are going to, and should, maximize for _something_. The most natural thing for that to be is profit.

The biggest problems are: we don't properly regulate monopolies, and price signals are broken because we don't properly price in negative & positive spillovers.

As a society, we are MUCH better off having healthy and educated citizens. And as of recently, funding in these areas is being viewed as a cost center, rather than an economic multiplier. At the same time, we're destroying the environment with carbon and subsidizing fossil fuels.

Capitalism only works when price signals work. And price signals won't work without competition, and they'll be inaccurate without spillovers taxed accordingly.

<comment><USER8> That's only because the government removed the _requirement_ of corporations to have a social benefit in their charter of incorporation.

If we reinstate this it would make that "something" be identified and other than just money.

<comment><USER9> This is news to me. I thought we created these monsters with their mandates to make only money from the beginning.

I'd like to see Social Purpose Corporations become the default but sadly it's non-obvious how to go about creating one. Stripe's Atlas defaults to the monster. Can we get an anti-Atlas that makes it easy to bootstrap ethical corps?

</comment></comment></comment></comment><comment><USER10> There is one bright spot on the pharma horizon and that is the industry's discovery and pipeline crisis. There has been a marked slowdown in the discovery of novel drugs over the past decade, a trend that has remained resilient even in the face of enormous R&D spending. Whether you think big pharma spends too much on marketing in comparison to R&D doesn't dampen the importance of the sheer volume of dollars being spent. The pipeline for many pharma giants is practically dry and only getting drier with each passing year. Many have tried to offload the risks involved in massive R&D efforts by letting small companies develop the drug and then obtaining their IP through mergers and acquisitions but even then, the pace of discovery for novel drugs has still slowed meaning the number of M&A opportunities are also shrinking.

Maybe the pharma giants simply played themselves, greedily focusing on exorbitant short term profits and naively assuming R&D would always deliver something at their existing levels of funding while ignoring the long term effects this would have on their business model. Maybe we've simply reached "peak pharma", running out of easy discoveries that are best treated by applying a chemical and entering a world where biotech and immunotherapy will drive the future of healthcare. Either way, the patent cliff looms and we are rapidly approaching the threshold where enough profitable drugs go generic that the industry can no longer afford to buy out, bribe, and cheat their way to maintain their position.

<comment><USER11> they have a plan for this: reformulating old drugs for new indications. if drug X was originally made for condition Y but there is some inkling which suggests it could work for condition Z, they can commission a new round of trials and eventually remarket X for Z. thus the crusty and middlingly profitable X gets a new lease on life, treating Z with modest efficacy. they do this at a very high rate at present.

they can also rehabilitate their older drugs by making facile new combinations in which drugs A and B which treat condition Z are combined into the same pill which is now rebranded as drug C. this technique is beneficial because if A and B were first-line treatments before, C is guaranteed to be a first-line treatment with a minimal amount of time in the wild.

then there's the old side effect shuffle in which older drugs with acceptable but unpleasant side effects are reformulated or otherwise tweaked to offer marginally better patient experiences, most frequently in a single small patient demographic. marginal improvements win the market if the drug's target demographic is already suffering a lot from their condition or their treatments.

in conclusion, the pharmas can create the appearance of innovation and modest new revenues nearly indefinitely even when their pipelines are in actuality quite sparse and breakthrough innovation is absent. this ability to churn old stuff buys them time to create new stuff to put into the pipeline using more complex therapeutics like immunotherapies, etc.

<comment><USER10> >the pharmas can create the appearance of innovation and modest new revenues nearly indefinitely even when their pipelines are in actuality quite sparse and breakthrough innovation is absent. this ability to churn old stuff buys them time to create new stuff to put into the pipeline using more complex therapeutics like immunotherapies, etc.

I agree with everything you said in that post but I think we disagree on the inevitability of the pipelines running dry. The mere fact that such strategies have become common industry practice points toward a structural decline in novel drug discovery. While such strategies buy time for new blockbuster drugs to be discovered, they simply are not being uncovered at a rate commiserate with the expectations of the existing pharma business model. What you are describing are what I consider to be patches on the hull of a sinking ship. When today's big pharma business model relies on $X profits and all the profitable drugs are going off patent and being replaced by tweaks and new indications, eventually $X becomes $X-25%+. Once that happens, all these enormously expensive shenanigans are no longer affordable.

Of course, this all comes at the cost of some potential drugs discoveries that could have been made if the business model was kept honest but that's the future we're left dealing with.

</comment></comment></comment><comment><USER12> The hospitals are getting kickbacks for offering more expensive drugs. This is fraud, plain and simple. It should prosecuted to the fullest extent of the law: they really need to start going after these hospitals and doctors that are colluding with the drug companies.

"The PBMs negotiate discounts from drug companies and then help determine patient access to drugs. In theory, that is supposed to encourage PBMs to drive prices down on the drugs. But drug companies have very cleverly turned the system on its head. Before they give a discount to the PBMs, they raise the price each year. It is like a department store raising prices before a sale so that the sale price looks more appealing. Then the PBM can claim to have negotiated a great deal, and will pocket the rebates. In return, the drug companies want the PBM to make sure their competitors are disadvantaged."

And once again, the patent system is being abused to no end. The patent office, swimming in money, just rubber stamps the same old patents over and over again: "78 percent of the drugs associated with new patents are not new drugs. They are existing ones. Instead of innovation, we are seeing secondary protections piled onto old drugs over and over again. They make minor medical modifications by adjusting the dosage or the delivery system." Someone seriously needs to sue the patent system for the enormous amount of financial damage they've caused to this country.

<comment><USER13> > _The hospitals are getting kickbacks for offering more expensive drugs. This > is fraud, plain and simple. It should prosecuted to the fullest extent of > the law_

100x this. Much of the breakdown of trust in our society is due to existing laws and crimes being enforced extremely unevenly. Simple crimes committed by lower class individuals are prosecuted relentlessly, even when they are ultimately victimless or otherwise overly harsh. Meanwhile huge scale crimes committed en masse by companies are rarely pursued, and in the rare cases they are it basically results in civil slap-on-the-wrist fine that comes out of one quarter's profits.

Law in general only works when it proactively _deters_ bad behavior. Corporate counsel should be pointing out that such setups fit the shape of fraud, and advising the CEO/board that they'll personally be facing down prison terms. But rather than discouraging they enable - advising how to complexify the scheme to prefortify future defenses. The deviance has been so normalized that wider society just shrugs it off as them maximizing shareholder value.

I have no idea how this can actually be remedied. The screws of demanding justice keep being turned up based on a desire to punish those who escape, yet those with the resources continue to insulate themselves just fine. We're effectively headed towards anarcho-capitalism for those at the top, and totalitarianism for those at the bottom.

</comment></comment><comment><USER14> I'm not really sure there is much in the way of "efforts".

The drug companies now control and manipulate the market. One law here or there won't fix it.

I think the larger question is if congress wants to effectively break the market and if the politicians want to take on the task of rewriting a lot of law / taking on the drug companies.

<comment><USER15> Serious question, if laws won't fix it, how does India do it? From my very limited understanding India doesn't have these high costs?

<comment><USER16> They manufacture their own drugs piggy-backing off American R&D and then sell them for much much smaller margins.

America's lucrative drug market funds research which allows the rest of the world to benefit at no cost to them.

Edit: seem to be getting downvoted because people think I'm saying drug companies do this out of benevolence. Not my intention. I'm saying that wrenching maximum dollars out of America but having little ability to capture returns elsewhere is a mechanism by which new drugs are created and later manufactured as foreign generics

<comment><USER17> > America's lucrative drug market funds research

That's a nice and heartwarming story. But I don't believe it for a second. When those companies want to fund research, they raise money from third parties. Or get it from the government in the form of grants.

No, all that money goes to someone's pocket, and mostly stays there.

<comment><USER18> They do spend some of their patient revenue on R&D, but they spend more on consumer and physician marketing.

<comment><USER19> Should they not? Ignoring money, if you have a product which has been shown to improve lives or increase lifespan, shouldn't you aim to make it as available as possible? In general, pharmaceuticals have to prove some benefit over the current standard of care to convince payers (insurance companies) to pay for the drug.

Disclaimer: I work in big pharma, though in discovery research, nowhere near pricing and business decisions. Of course, in my position, it would be great if all pharma invested more in R&D

<comment><USER18> I'm not objecting to all marketing spending, but I do think it's out of line with the benefit. I would prefer to see prescription marketing be much more low-touch that it is today.

<comment><USER19> Me too. I had a manager once suggest that you could set up a consortium of pharma companies based around a disease. So, for example, every company that has a drug targeted at psoriasis would buy in, then the consortium would be tasked with raising awareness that psoriasis is a treatable condition, so go talk to your doctor. Of course it has some flaws (what about companies that are first into an indication), but it might be a step better than what we have today.

<comment><USER18> Interesting. Very much like the milk boards and other agricultural councils that promote specific largely-fungible products.

</comment></comment></comment></comment></comment></comment></comment></comment></comment><comment><USER20> An excellent, detailed discussion of this is in "Overcharged: Why Americans Pay Too Much For Health Care". Drug prices are only one aspect of the problem. The root is that government involvement focuses on the demand side and proactively reduces the supply.

[https://www.cato.org/overcharged](https://www.cato.org/overcharged)

<comment><USER21> The root problem is that it is in the interests of everyone, from the doctor, to the pill manufacturer, to the hospital, to the insurer, to bilk patients for everything they are worth.

The insurer makes a profit as a % of money spent on healthcare, the doctor needs to pay the million-dollar student loan (his education cost a million dollars because the student loan underwriters know his patients will pay), the hospital makes a profit as revenues - expenses - it's not like patient can price-shop.

Pointing fingers at the supply of doctors ignores the other five elephants in the room.

Markets simply don't work when the person who has to pay can't price shop. Please, come to your senses, and either make healthcare an actual free market, or, more sensibly, single-payer.

</comment></comment><comment><USER22> Likely because they lack an understand of macroeconomics and keep treating the symptoms instead of the causes like "Drug prices are too high, lets make price caps!"

</comment><comment><USER23> Efforts? I think they have a different meaning of effort than anyone else :/

<comment><USER24> The headline is odd - not one mention of Congress in the entire article.

<comment><USER14> Bloomberg articles do that a lot. Many feel like "this is a good title" and then they sort of fill content that may or may not fit underneath it.

<comment><USER25> [https://www.businessinsider.com/bloomberg-reporters- compensa...](https://www.businessinsider.com/bloomberg-reporters- compensation-2013-12)

> Bloomberg News has an unusual practice of paying some of its reporters > explicitly for publishing "market-moving" stories.

So, yeah.

<comment><USER14> That makes sense.

You get some Bloomberg stuff that just seems like really low effort spam / blog stuff.

</comment></comment></comment></comment></comment><comment><USER26> As long as the FDA exists as the arbiter of what can and cannot be sold and the US government defends the intellectual "property" of these businesses, it is unlikely that drug prices will drop in a meaningful way.

</comment><comment><USER27> Because:

> RF: It is the way the system operates now. And really, one can't blame the > drug companies. These are profit-making companies. We can't expect drug > companies to behave differently. Imagine if a CEO went to his board and > said, "I have decided to lower prices and reduce our profits. It's the right > thing to do." That CEO would be fired.

<comment><USER28> Of course it wouldn't happen that way. Instead, what if the maker of a drug or medical device found that they were the only ones making it because patents had long ago expired on it and it wasn't the new hotness. They could say: shit, let's increase the price 10x, and if someone else ramps up production, then we can lower our price again, but in the meantime we've obtained piles of cash.

But there is a PR price to be paid when the public finds out that the company is gouging people who have eczema or whatever the drug treats. Some companies obviously do decide to go that route and either are hoping nobody notices, or are willing to pay the PR price. Others obviously are willing to accept a certain return on their boring drug and leave well enough alone.

</comment></comment><comment><USER29> Too bad the guy who Trump put in charge of lowering drug prices died recently: [https://www.cleveland.com/metro/2018/11/ohios_daniel_best_wh...](https://www.cleveland.com/metro/2018/11/ohios_daniel_best_who_led_hhs.html)

</comment><comment><USER30> The answer to OPs question is simple: because they have gold-plated Cadillac of a health plan themselves. They aren't much affected by the Obamacare cost increases either, unlike the rest of us peons. So we get "let them eat cake" type healthcare legislation.

</comment><comment><USER31> I really want to see trials with these $200+/week drugs where the control group gets catered meals managed by a personal nutritionist, weekly massages, physical trainers, yoga or free housekeeping or whatever. Trouble is you can't patent the result of such a trial, and it would probably often end badly for the people pushing the drugs. It seems like our whole medical funding model in this country is fundamentally broken.

<comment><USER32> I'm pretty sure "catered meals managed by a personal nutritionist, weekly massages, physical trainers, yoga or free housekeeping" isn't going to matter much when you're dying of cancer.

<comment><USER31> That's more a value judgement though isn't it? And I think it totally could matter in some ways. Chemo sounds like hell. It's easy to imagine 1-year survival rates for most cancers are highest with no intervention, and 5-year survival rates are highest with chemo. But 1-year survival rates with any of the things I mentioned might be higher than no intervention whatsoever.

And 5-year survival rates with cancer are pretty bleak regardless so it's not hard to imagine simply helping people de-stress might be the best intervention depending on how you value a slightly better chance of full remission vs. keeping people comfortable.

</comment></comment></comment><comment><USER3> I'm sure the book is better, but the soundbite on what's called evergreening is very misleading:

> RF: Yes, 78 percent of the drugs associated with new patents are not new > drugs. They are existing ones. Instead of innovation, we are seeing > secondary protections piled onto old drugs over and over again. They make > minor medical modifications by adjusting the dosage or the delivery system.

The patent system does not allow you to "extend" the protection of an existing invention by making minor changes. Once a product is released into the marketplace, _the product itself_ becomes prior art. You can make improvements to the product, and patent those changes, but the original product is now in the public domain.

So evergreening can't work as a unilateral action from the drug company. It also has to be the case that doctors must be unwilling to prescribe a generic that doesn't have those improvements. And here is where the article buries a lot of complexity in a hand-waving dismissal:

> Here's the most important point: When a drug company makes a secondary > change to a drug, the R&D investment is minimal compared with what's > required for the drug's initial development. _Also, the change may mean > little from a therapeutic standpoint._

As a threshold matter, no scientist or engineer (note the author is neither, she is a lawyer) would say that incremental improvements don't count as "innovation." And incremental improvement, though cheaper than building a brand-new drug, is not cheap, just like developing each new iteration of iPhone is not cheap. So what's really doing all the work here is the assertion that a "change may mean little from a therapeutic standpoint."

If the change doesn't actually result in a therapeutic benefit, then doctors shouldn't prescribe the new drug over the generic. For various reasons, doctors have little incentive to do that. The main thing is that neither the doctor nor the patient are paying for the drug. When you're not paying, you have no incentive to prescribe the "older model."

Insulin is a good example of this. The first biosynthetic insulin was released in 1982. It is long out of patent. If you wanted to release that exact same product today, you could. But the newer iterations are at least a little bit better, and who wants to give their kid with Type-1 diabetes anything but the latest and greatest version?

<comment><USER33> what seems to happen is the drug is trivially tweaked or a new delivery system is created, they get a new patent, then dump marketing & lobby dollars to secure the revenue stream.

The new patent on Ketamine for depression is an example.

Ketamine is already used to treat depression and it's a cheap generic drug.

The nasal spray being touted is many times more expensive and is really just a marketing play.

<comment><USER3> There are lots of marketing plays on existing, well-established technology. That's like half the things Silicon Valley develops. So what?

With regard to the Ketamine example, what the drug company is selling is a nasal spray (versus the traditional method of using an IV), and freedom from the stigma of taking a "party drug": [https://www.theverge.com/2019/3/11/18260297/esketamine- fda-a...](https://www.theverge.com/2019/3/11/18260297/esketamine-fda-approval- depression-ketamine-clinic-science-health).

<comment><USER10> I would consider a change from ingestion via IV to insufflation is a pretty major development and all around improvement on the existing drug and.method of administration. If someone managed to create an ingestable pill or nasal spray for insulin they'd win a Nobel prize. While the scale and importance of that discovery is greater, the fact that such a switch in delivery method is that significant leads me to believe this controversy surrounding a nasal spray is more outrage porn than actual reality.

<comment><USER34> > If someone managed to create an ingestable pill or nasal spray for insulin > they'd win a Nobel prize.

We already had inhalable insulin in 2006 (Exubera) and again in 2014 (Afrezza), both of these medications were withdrawn from the market for lack of sales. And yet people still get upset when Pharma spends money on marketing...

</comment></comment></comment></comment></comment><comment><USER35> "Government intervention in market produces opposite of intended effect. Experts baffled."

Economists not surprised.</comment>


Apple CEO on $100 Bill - <AUTHOR> http://obamapacman.com/2010/08/in-steve-jobs-we-trust-dollar-redesign-project-apple-ceo-100-bill

<comment><USER2> In that case, you'll also need a bill for Bill Gates, rms, Steve Wozniak, Linus Torvalds...</comment>


How I Crashed and Burned in Y Combinator - <AUTHOR> https://medium.com/backchannel/how-i-f-ed-up-in-ycombinator-35a19e7ace68?hn=1 <comment><USER2> Hey everyone! Author here.

First off, thanks for reading! To be honest, I really didn't expect to get this much attention. This is a story that I've wanted to share with friends and family for a long time, and was thoroughly surprised when it was picked up by Backchannel (and then posted here).

Regarding some of the points made here, I (mostly) agree. Getting into YC or raising money is not success. Changing your idea completely isn't really a "pivot" (but I don't know if the industry has as concise of a term for throwing everything out and starting over). In my mind, the real failure was squandering the opportunity of YC, an opportunity I know many people would kill to have. Clearly we should have stuck it out with our idea, but we were 21 years old, stressed out, and foolish.

I also want to note (in case anyone was wondering) that my experience hasn't diminished my opinion of YC at all. PG's advice was spot on, and YC remains an amazing program for founders. We simply didn't make the best use of our time in it.

Hopefully reading about my experience is helpful in some way. If not, sorry about that. Give it a downvote and send it on its merry way.

<comment><USER3> Cool story, great read! I'm surprised how negative some of the comments here on HN were. They're probably just envious about how _they 're_ not getting that sweet, sweet investor money!

<comment><USER4> Most probably aren't just envious. However, those who wrote negative comments weren't afraid to announce seemingly definitive conclusions without enough data to justify their assurance. Keep in mind that the author and his cofounder were interviewed by YC partners and all of the cofounders. While their selection system has flaws, most probably agree that it's one of the best that exists right now. Perhaps they saw strengths in the author's founding team that the author himself had not perceived.

Based on the author's age, I assume he considers this the greatest failure in his life. He wrote this shortly after exiting an educational system that indoctrinates students to believe that success occurs without failures. So his perspective may have been from a point of low self-worth making it difficult to see his own strengths that will help him recover and succeed moving forward.

Thank you for writing about your experience Charlie. I hope the traveling has been beneficial, and I wish you the best of luck in your future endeavors.

<comment><USER3> For some of the negative comments, the data actively contradicts their conclusion. Many here seem to think that only an idiot would "invest in a 21 year old with a half-baked business plan." The people posting that have probably made less from whatever they're doing, than PG/YC have from their 21 year old founders.

<comment><USER5> "The people posting that have probably made less from whatever they're doing, than PG/YC have from their 21 year old founders."

So it's all about money then, right? Well if you want to take that to the logical extreme then you would take advice from, say, Larry Ellison or Carl Icahn (over PG) because they have much more money than PG does (at this point in time at least). My point is you have to be very careful about putting people up on a pedestal (which is what happens at HN so often) and thinking that their advice ranks over someone who, by the standards of this community appears to be "less successful".

</comment></comment></comment></comment></comment><comment><USER6> This post really misunderstands what both success and failure are.

Getting into YC or raising money isn't success. And trying an idea out for a few months before giving up on it isn't failure.

Building a success startup takes a long long time. Years. Lots of years. Maybe the idea is bad, but giving up on it after a couple of months really proves nothing. All it has proven is that the founders are the type of people that are readily willing to bail out at any moment, and that is a quality that doesn't lead to startup success. The "nightmare" described in this post is a joke compared to the depths some highly successful startups have gone through. _Techcrunch wrote a bad story about me?_ Really? Try having to decide whether to lay off people to make payroll or having spent years on an idea only to still be not sure if it is working on not.

<comment><USER7> Having been in an accelerator before, I definitely related to their sense of dread that they might mess up this opportunity and never be successful again because of it. Watching peers strike it big must have been super hard.

I quickly realized after that most "success" is exaggerated in the media, etc. and true success takes a lot longer than we expect. Raising $1M isn't success. Hell, raising $5-30M in today's climate isn't success. "Success" is such a vague concept that it's best to just focus on being happy and building cool shit and growing it year after year. It takes time.

<comment><USER8> >>"Success" is such a vague concept

Actually its not in terms of business.

Success = Profit + Long term sustainability in doing so.

<comment><USER9> Actually it's not that either.

Success in a business context means a positive rate of return on the resources invested. Or to refine one step further, a return that is positive and superior to the next best alternative for the deployment of said resources at a given level of risk.

<comment><USER8> So Profit.

<comment><USER10> ROI /= Profit.

See Amazon (or as noted below, Instagram).

However I also think that is a problem for many people who want to startup. They don't usually think about how they'll show a profit and manage to run their business within that profit. Investor money gets them started and an exit by selling an unprofitable yet growing business to a larger company is the goal.

</comment></comment></comment></comment></comment></comment><comment><USER11> Am I missing something here? You can get $$$ and top quality advice for an _idea_ and then just turn around and say "bored now - let's do something else"?

And then, so it seems, when that idea runs out you just say "uhhh... let's do _this_ instead!"

So, what are the YC people investing in? Two guys who seem pretty smart?

I appreciate that you might need to pivot from "a social network for dogs" to "a social network for pets" or even "a dog training forum" \- but this just seems like they were given investment for one idea, then immediately dropped it to do something else.

Or, like I say, have I missed something vital?

<comment><USER12> I had similar questions based on this: "In college I had started an ed-tech company, ClassOwl, that raised nearly a million in seed funding. My two cofounders and I attended StartX, an incubator affiliated with Stanford, but ultimately decided to finish our degrees instead of pursuing the startup dream."

Am I understanding that right? Twice in two years this guy took other people's money for something and then quit?

I know we are in another bubble, but this really worries me. What, as an industry, are we doing if recent graduates see their basket of choices as "a) go to grad school, b) work at a big tech company, or c) attend a prestigious startup accelerator"?

On the one hand, I love entrepreneurs, and think that anybody who feels the calling should be supported in doing it. But on the other, I really feel like it is a calling, like being an artist or a religious missionary. People who are the kind of people who will be happy taking one of life's default choices should probably just go do that. If people are becoming entrepreneurs because they see it as another convenient, high-status, high-reward option, then I think we're doing something pretty wrong.

And kudos to Charlie Guo for being honest like this. It's sure not easy, but it's very valuable to the rest of us.

<comment><USER13> Unless there's some kind of actual contract (leave before X years and you have to return Y% of the funding), I don't think that should be very surprising. People start on something (even a funded something) and then change to other things all the time, if their interests change or another opportunity arises.

For example, a portion of the people who win $30k/year National Science Foundation graduate research fellowships take a year or two of the funding, and then decide a PhD isn't for them. Some of those people, after taking $30k or $60k in PhD fellowship funding, leave grad school to start a company instead. I don't think it should be that surprising that people might go the other direction as well, taking $30k in Y Combinator funding, trying a startup for a bit, and then deciding to leave the startup and go to grad school instead.

<comment><USER14> A research fellowship is not seed funding, though. YC doesn't "give" people $30k, it _invests_ $30k in their business.

<comment><USER13> It's not identical, but it's not like the NSF "gives" people $30k of the taxpayer's money just as a gift ether. The goal is to invest public money in future researchers. In both cases there's a clear _intent_ that you will use this as seed money to jump-start a project that will achieve the funder's goals (monetary return and positive PR for Y Combinator, production of research & PhDs for the NSF GFRP). But there's no requirement that you continue to do it indefinitely, and no ban on bailing out if you decide it's not for you after spending $30k of the funder's money. I don't see this as any more morally binding in the Y Combinator case than the NSF case.

<comment><USER15> In addition, it's not like leaving a PhD funded by an NSF GRFP leaves zero net positive impact. Funding research leads to papers (hopefully with valuable insights) and to knowledge and training passed down to other researchers. I don't think it's a very good analogy to startup funding in that sense. (Although I suppose one could make the argument that alums of failed companies have hard-earned experience so some of the value is still there, diffused out to wherever they go next.)

<comment><USER13> In the best case I think that's possible, but in the usual case someone who leaves a PhD program after a year does very little research. US-style PhDs don't typically require a master's degree first, so first-year PhD students are doing mainly course work and "figure out what I want to do for my PhD" project-shopping. If you do that for a year and bail, it's pretty common that you wrote zero papers and did very little research. If you leave after two or three years, it's more likely you will leave _some_ kind of research contribution, although it's also pretty common for people who realize they are going to leave to just "pivot" to full-time MSc coursework, so they can leave the program with a master's degree. In that case, the NSF basically funded someone to take MSc courses, which is arguably not useless, but isn't what the NSF intends to fund.

I think with this amount of money it's just a risk of funding people. Putting in strings requiring repayment if the person changes areas, when you're giving someone <$100k, is pretty heavyweight for either the NSF or Y Combinator, so they just try to pre-screen for people they think are going to use the money as intended and stick with it, and accept that some percentage of people will instead use the money to flail around for a year or two and leave. If the percentage gets too high, then I guess reconsider the screening process.

<comment><USER15> Yes, that's true. For full disclosure, I left a PhD after 4 years to work in industry (I was frustrated by some aspects of academia), having spent three years on an NSF fellowship, so I may be biased here :-) I absolutely didn't go into it thinking I would do that, and I try to bring a researchy perspective everywhere I go now. I also think it depends on the school and the field. Where I was, it was common for first-years to get on a project right away and help churn out results. Probably guided closely by older students or advisors, but still doing productive work.

I think you're right re: clawbacks, though. I can't imagine the mental pressure were the scenario to be "you MUST stay in academia or you owe the government $XXXk". I actually know a PhD student on a (non-US) government scholarship who has a clause like that. He calls it his "slave contract".

Getting back to the original topic, I think that for any venture with a high rate of failure (startups or grad school or...), there has to be some room to allow the funded person/people to say "this isn't working" in good faith and pivot or leave. That's totally different from someone taking funding without the intention to use it properly, or just deciding they're bored or whatnot.

</comment></comment></comment></comment></comment></comment></comment></comment><comment><USER16> What a great story. Charlie is very brave for telling this, and it's something that more people need to hear.

Getting into YC is not an achievement. Even if you get in, you're not special. You still have to bust your ass like everyone else trying to build a company. Not getting into YC isn't a big deal either, because you're still not special.

Stories like Charlie's should help others highlight this fact. He said that he felt impostor syndrome. I've felt that too. I don't have a great solution for that, but what it should tell you is that even people who you feel are smarter/better than you really are not. We are all the same, and we all face the same struggles, albeit in different circumstances.

PG's advice to Charlie about focusing on an idea they're passionate about, and an idea that they could see themselves working on for the next 5 years is sound. Don't chase trends. Don't chase money. Chase your passion. When you're really passionate about something, it's infectious to others around you. They want to help you. The success and money will usually follow.

I'm glad that people like Charlie tell these stories, since we seem to focus on the success stories. Those are few and far between. Charlie's story is likely more prevalent than we perceive.

<comment><USER5> "PG's advice to Charlie about focusing on an idea they're passionate about, and an idea that they could see themselves working on for the next 5 years is sound."

Except for one thing. Passion about something is not something that you wake up in the morning, think about a bit, and then go pursue it.

You won't find a single story in legacy business history of someone who started a wildly successful business because they woke up one morning and thought "I want to start a business". It happened the other way they were going about their business and noticed a need or had an inspiration or idea and then decided to pursue making it a business. Only exception is now in the current day and age we have so many people doing so many things with ease of entry some people are able to pull this off it seems.

In the case of YC or other incubators we now have people who are attempting to just "come up with an idea and fill a need" and while some are succeeding it's not the way businesses have started ever before. Generally. And the process of finding something takes time as well and there is much serendipity involved (and that doesn't operate according to a schedule either).

Now it is possible to "think up" a business but that process can take years. In the case of my first business I had the inspiration one day while in college, pursued it out of college and then thought of a better idea which is the one I actually did. The process took time and there was no particular deadline. That idea worked and I sold the company (9 years later).

The 2nd business on the other hand took me 4 years or 5 years to come up with an appropriate "inspiration" as I investigated various possibilities (flying around to trade shows). There was no deadline that I was working under ("demo day"). Just whenever I found something I would do it. And I finally did and it worked out as well.

My point is, I don't think you can say to someone "focus on an idea you are passionate about" and they go off and "think" and come back with "yeah we want to do X we are passionate about it".

<comment><USER17> >You won't find a single story in legacy business history of someone who started a wildly successful business because they woke up one morning and thought "I want to start a business".

I don't know that it's woke up one morning, but the narrative I'd read on Amazon suggests that Bezos did something along those lines. As I recall it, he didn't care what he sold, he just wanted to sell something on the internet and searched for something that made sense to sell that way, settling on books.

Obviously, it's morphed and expanded since then, and I doubt he literally woke up one morning and decided to move to Seattle and start Amazon, but it's not like he was already running a web company and decided to add commerce, nor already selling books and deciding to add an online channel.

</comment></comment></comment><comment><USER18> This is what happens when people want to "do a startup" more than they want to build a business doing X. The passion for the idea/product should come first, with incubators (if deemed necessary) being used as a tool towards achieving that goal.

<comment><USER19> This is something I've been struggling to understand with some of the startups I read about on here. My lack of understanding is probably to do with the fact that I'm not an entrepreneur, nor do I desire to be. What I'm missing, though, is why these people want to simply start a company.

I get wanting to start a company around your idea. In that case, the company isn't the goal but rather the medium for pursuing the goal, which is to push your idea/product. I don't understand wanting to start a company for the sake of having a company.

<comment><USER20> HBO's "Silicon Valley", Arron Sorkin's "Social Network", TechCrunch, The Verge, Hacker News and tweetstorms brought to you by Marc Andreessen glorify the tech-startup entrepreneur. People within our industry have been taught that the best of the best start tech companies. And the best of the best are 20-somethings! It seems so reachable. So everyone thinks this is what they're _supposed_ to do. Anybody who's anybody has launched a startup in San Francisco, right?

</comment></comment></comment><comment><USER21> I don't get it, I have been working with web development for the past 10 years, I never had problems finding a job but I wouldn't know how to do remote consulting while I travel around the work to "take a break", nevertheless the tone set from OP is confusing you don't know if he is humble, spoiled or bragging. It's all mixed up, and like other people noted pivoting is not changing your idea completely, this is starting over.

<comment><USER22> I'm also interested in how he's travelling the world while doing consulting work. Travelling (for leisure) and working don't go well together in my experience, curious how he's pulling it off (so I can try too).

<comment><USER23> I have seen pretty many doing that. However, don't except a work like in a stable, salary-based job, with a little risk. More like shorter freelancer gigs, maybe some small software products/apps/websites which generate some passive income along the side, etc.

Also I wouldn't say that you can travel just to have fun, you also have to get the work done. That means settling for some place longer than you would recreationally. I have met these guys in coworking places, for example.

</comment></comment></comment><comment><USER24> I find this paragraph interesting:

"From the outside, it might have looked like I was crazy to feel this way. I had graduated from Stanford, I had a CS degree, and I knew how to play the startup game. In college I had started an ed-tech company, ClassOwl, that raised nearly a million in seed funding."

Pardon my ignorance, but if a startup is a game, wouldn't knowing how to play be knowing how to win, i.e. an exit? I feel like getting venture capital would be the equivalent of prolonging the game, which is a +0 type of action. Is raising money really "playing?" From what I've read raising money just results in needing to raise more money.

<comment><USER25> I was going to make a similar comment. There is an undercurrent of "raising money = success" in this posting. The whole concept of throwing money at 21-year olds and hoping they find an idea still seems bizarre to me, but obviously it has paid off for the YC guys.

<comment><USER26> "For the first time in my life, I had impostor syndrome: I convinced myself that I did not deserve the success I had achieved."

This particularly struck me as ironic. Maybe he felt like an imposter because the other people had an actual plan and he didn't.

</comment></comment></comment><comment><USER27> The article makes it clear that the YC interview selection process is deeply flawed. Leaving out the idea that they were selected because they told a story about the sound of biting a bottle, surely at the interview stage, if the entrepreneurs do not know what the company is making, or the business looks weak the interviewer should just say no. It's not enough to say "here are two bright people that can pivot". Bright people are everywhere, good business ideas are rare. All this does is cause the stress that the author has gone through as he and his partner have to desperately search for a business idea that may not come. This kind of stress, based on unrealistic expectations, can lead people to kill themselves, and seems to me to be borderline unethical.

Meanwhile there are literally hundreds of other companies and thousands of smart people with great ideas that would gladly take their place _and succeed,_ including many of the readers here.

<comment><USER28> It's probably true that the YC interview process is deeply flawed, but OTOH there is no known better way to select worthy investments yet. Good startup business ideas are not only rare but also impossible to identify a priori. The only way to tell whether a business idea is good or not is to actually try it out in the market and see what happens. (This doesn't mean that any crazy idea is good, but it does mean that some good ideas seem crazy before they are tried.)

If there were any methodology that could identify worthy investments with anything close to high accuracy, there would not be stock markets and there certainly wouldn't be a VC industry.

VC investment works differently from other forms of investment due to the outsize gains on the rare successes. This market requires many comparatively small bets with limited losses and a few low-probability but huge payoffs. Compare this to a Warren Buffet style investment methodology of a few large bets in well-established companies and industries with high probability of moderate payoff. Neither is "right" in an absolute sense; it depends on the investor's risk tolerance and the nature of the opportunities.

The VC business model is to apply some coarse-grained filters to screen out obvious scammers and gross incompetents, then give the remainder of the cohort some money, knowing in advance that 99% will fail completely. The remaining 1% will pay for the losses on the 99% many times over.

Moreover, in YC's case, the amount of money they invest is so small compared to the massive returns on their few successes that they can now afford to take many of these small risks on "two guys who seem smart." Most of them will fail, and they know that going in. It doesn't matter. They're betting that sooner or later, they'll wind up with another AirBnB or Reddit that will pay for many thousands of these small bets.

<comment><USER29> Honestly I think that YC is opting to make fewer risks these days, not more. The days where you can get funding without traction are numbered, and with it go the real crazy idea startups like AirBnb, Stripe, and Twitch.tv.

</comment></comment></comment><comment><USER30> I don't think you should call it a pivot when you are effectively starting over. Pivot literally means one foot planted and moving the other to a new spot.

<comment><USER31> Totally agree, see also: [http://techcrunch.com/2015/01/07/before-you-make- that-pivot/](http://techcrunch.com/2015/01/07/before-you-make-that-pivot/)

</comment></comment><comment><USER32> > I would have to talk to my cohort and confirm that no, we hadn't found an > idea yet and yes, we were still super excited about our "company." I did > little else but eat, code and sleep.

If you don't have an idea what you're doing what are you doing coding?

<comment><USER33> _a prototype is a conversation with yourself_

[1] [http://www.paulgraham.com/head.html](http://www.paulgraham.com/head.html)

</comment></comment><comment><USER25> Please tell me that this Ryan Lawler from TechCrunch is writing in that style to insinuate his utter disdain not only for the FanHero business model, but for the whole "free money for 21-year olds with a half-baked idea" industry. He can't possibly write that way for real, could he?

<comment><USER34> I think he's writing that way on purpose and I share his disdain for "free money for 21-year olds with a half-baked idea"...

</comment></comment><comment><USER35> This post seems to neatly encapsulate a lot of what I feel is wrong with the entire start-up / accelerator scene. I've always felt that capable people with a good idea will succeed 99% of the time anyway - and if that team in particular doesn't succeed, then another group will, and hence no net loss to humanity of the 'idea'.

OTOH, this kind of process seems to rescue half-baked ideas, or throw money at people that can perhaps program but can't actually run a business, or glorifies killing yourself working for hope of a huge payday. Perhaps I'm in the minority, and perhaps it's because I'm old (44) and 'get-off-my-lawny' ... but I am so not down with this kind of approach to making money.

</comment><comment><USER36> Not sure why the author didn't consider a fourth option when graduating from college:

        4) Join the ground floor of a startup *as an early employee*

It would've yielded invaluable experience and a whole lot of personal growth, leaving him in a much better place to run a company years down the road.

At this point, I don't really think he's learned anything at all, and he won't learn much about running a company while he's galavanting around southeast asia humblebragging.

<comment><USER37> I agree with this, but I don't think it even has to be a startup. Big enterprises may also provide good learning environments, possibly even with experienced developers/marketers/whatevers as mentors, as opposed to a startup's possibly few young, inexperienced recent grads, hellbent on revolutionizing The Way You Think About Shoe Storage with their product called Shoely™ or whatever. Big companies also pay consistently.

I don't know though, the guy seems quite dishonest to me, more interested in means rather than ends, yet still claiming that he "never wanted to start a company simply for the sake of starting a company". To me, he never seemed to question whether he even had anything to give in the first place and address this issue first, if needed, but simply expected to run a successful startup fresh out of college.

Not sure I'd call his closing statements to be humblebragging though, it seems to be just a passing thing for him.

</comment></comment><comment><USER38> ..."professional hoop-jumper" ...He means being a kid?

There's a self-importance and arrogance to all of this that really comes through from this type of rhetor. I think the imposter syndrome might not be that much of a syndrome in the case of far too many startup teams sadly.

<comment><USER39> When I read that line - "nearly two decades as a professional hoop-jumper" \- I pictured in my head a guy in his early 40s. Professional means you get paid for your work. Hoop-jumper is a strange way to describe your education.

</comment></comment><comment><USER40> The "impostor syndrome" meme would have us believe that if you feel like an impostor, don't worry -- it's a positive sign that you're actually a modest, shy kind of genius.

But sometimes it just means that you really are out of your depth.

<comment><USER41> Impostor syndrome is also frequently abused by successful people who want a socially acceptable way of denying that much of their success actually was due to luck and timing.

</comment></comment><comment><USER42> When I read about FanHero on techcrunch, I thought it was a good idea despite the article's tone.

Mainly because I watch a lot of alternative content and listen to podcasts, and I want a way to support what I like. It wasn't an original idea but with awesome execution I think it could had worked.

<comment><USER3> I agree! And if you read the comments on the TechCrunch article, many of them agree about the article being badly written.

I get that it's sarcasm, but what was the TechCrunch writer's message supposed to be? That nobody needed this product? That it was badly built? That the author just doesn't like YC kids? Whatever the author was trying to say, there was probably a better way to say it.

</comment></comment><comment><USER43> "I don't want to start another company until I find a problem that I care about. A problem that I eat, sleep and breathe. A problem worth solving."

i agree with you but you shouldn't wait for these ideas to come by out the blue moon, you should be constantly searching, trying/testing, and keep living/experiencing a lot of different things...because there are a lot of problems out there that you DO NOT know they exist, and how would you know you care about these problems if you don't know they exist.

good luck.

</comment><comment><USER44> The author sounds spoiled and entitled to everything in their life up until YC.

</comment><comment><USER45> This seems like a parody of entrepeneurship. Like instead of defying the odds to be an entrepeneur he's defying the odds to avoid getting startup funding as a recent CS grad from Stanford.

The world it full of things that sound appealing. But you may find when you get a chance to do them it isn't your thing. You may enjoy art, admire artists, but not really enjoy or be suited to the work of an artist.

</comment><comment><USER46> Through some very strange twists of fate it seems to me that bot programming and starting a business ended up being "fashionable" things to do. And obviously as all fashionable things there's quite a lot of people that want to ride the hype train.

Statistics tell us that there will always be a certain percentage that are on the train just for the hype.

My 2 cents: getting on the train just for the hype is a clear indicator that you do not have a very good knowledge of yourself. Internal, time-tested, hard-earned kind of knowledge.

</comment><comment><USER47> Does YC ever accept business / growth people or just "tech"? I ask that in seriousness, as my take - in my very limited time as a startup founder & employee - has consistently been that many startups fail due in part to an obvious lack of business sense and skills. I'm regularly surprised by the sheer amount of startups out there, many of which are funded, with coders and designers who have no damn clue how to sell.

"We were a solid team, a designer/developer combo." Is that a solid "build a business" team or just a solid "engineer the product" team?

<comment><USER48> YC is supposed to help with things like that. They teach techies the business side of things and I would imagine they'd say "you need to hire someone to do sales" if that's what they needed. In this case they said from the start something like "we're concerned about your product idea" which was their primary problem. I suppose having someone with sales smarts may have helped them figure it out, since their idea was to help you-tubers sell stuff apparently.

<comment><USER47> I suppose teaching techies business is easier than teaching business folks tech (or maybe quicker?). Still, I continue to be perplexed at the absence of "business" in startups. I'm not convinced that injecting "business" into a startup is an option for a later date.

</comment></comment></comment><comment><USER49> Hey, I have ideas too!

[http://zonas.free.fr/?p=pages&pg=ideas](http://zonas.free.fr/?p=pages&pg=ideas)

<comment><USER48> Those seem like things that you'd like to make. Some might even be interesting to look at, but What problems do they solve? Why would OTHER people want them? Go to each one and write what it does for people rather than what it is.

<comment><USER49> thanks for the suggestion :)

</comment></comment></comment><comment><USER50> Aside from some other great comments here (some of it which really _nail_ it) I'd like to point out that the greatest difficulty of the author seems to be being in charge of things.

Throughout the entire story he is denying control.

Being accepted into Y Combinator? Pure luck. Most critical interview factor? Sound of biting a plastic bottle. It doesn't surprise me a tiny bit that he thought he had impostor syndrome since he probably felt he is getting rewarded for something that is seemingly totally out of his control.

Then all the "pivots". Again feeling that startup success is something that will magically come just by "waiting a bit longer" or "having a slightly better idea" (i.e. being largely out of one's control), of course you re-set the course right away if the odds seem against you. Even if it's just some objections by interviewers who know you for about 10 minutes. Because they surely know better, right? No way to to prove _these_ guys wrong, right? Probably much better to try something different...

The author ends by saying he wants to get back into startups once he's found a suitable problem to work on. That's cool. Even better would be to find a problem he knows he _can_ solve, by being in charge.

</comment><comment><USER51> Did anyone at YC talk with these founders after investing in them? It sounds like they never understood why they were accepted. Getting accepted into YC should be a confirmation signal, not a signal that you should pivot (yes, YC invests in people, but if that was the case in this case then I would've expected a partner to have helped them find a new idea).

</comment><comment><USER52> Am I the only one who thinks it's insane that someone can go from an undergrad CS degree to a failed startup and then directly into (presumably well paid) consulting gigs? I'd be pretty wary of a consultant who's only work experience was starting their own company and failing.

</comment><comment><USER10> I think this is both an indictment of "squirrel" syndrome (the dog from Up), and YC not choosing well in the first place. maybe that's the environment there, but I would guess if you brought in a new team with an idea, gave them money for that idea and then they went and dumped the idea right off and went to something new and shinier, they shouldn't have been funded in the first place?

And with two previously abandoned businesses in his past, someone should have asked about commitment to the idea. Sure you can work on something you don't love, but then its a job not a career or a self focused business, not something worth others investing in without a really clear business plan and exit strategy.

</comment><comment><USER53> Thanks for writing the article. One thing have bothered me for a long time is why tech startups think TechCrunch or any other high-speed news website writing about them is an indication of early success. It may help you get early customers via the write up if your customers are actually those clicking through these clickbaity links. But this probably doesn't apply in all cases. A lot of the times those reading such viral stories more often than not are on the lookout for the next big big idea to copy. So why bother? May be I don't get as it is some sort of a Valley thing.

</comment><comment><USER54> > We researched Bitcoins, smart devices, 3D printing, biometrics, and a host > of other industries.

Is this common? As in people first decide they want to do a "startup thing". Then they fish for idea. Just curious, is this how most startup idea begin?

I kind of thought it was always someone first having a burning and interesting idea that eventually they want to develop and it gets developed as a startup or patent or something like that.

<comment><USER10> Probably more common than you'd think. Brainstorming for new ideas or looking for something that doesn't work as well as you think it should or seems to be "missing" is a valid way of trying to start a business. You may not be passionate about it, but if it can make money, you can be passionate about that.

</comment></comment><comment><USER55> Thanks for sharing this story. I know it was a tough decision to leave the company. If you were in a situation that causes you a lot of stress and unhappiness, there's no shame in leaving.

There are a lot of people being critical here. It's easy to look at the situation from the outside and feel entitled to make comments. I bet if some of the commenters here were in you're situation they'd feel differently.

</comment><comment><USER56> An idea may be worth less than the potential of the founders, but a well thought-out idea reveals a lot about the founders themselves, in my opinion.

</comment><comment><USER57> Developing an idea that you feel comfortable genuinely committing yourself to is _hard_.

Usually it takes six months from coming up with an idea to researching it and getting to the point where I believe in it.

Most of the time, you start with only a vague notion and have to further develop that into something concrete.

No wonder that it didn't turn out well for them doing it under pressure in just a few days time.

</comment><comment><USER58> Now YC gives startups less money, so they can't try to "pivot" after the first failure. Win big or die fast.

Comment below: "Building a success startup takes a long long time. Years. Lots of years." Not in the YC world. That's not the model.

</comment><comment><USER59> So what was FanHero? The website is now redirecting to imhomeapp.com (their latest pivot, I suppose), and the article doesn't explain at all.

</comment><comment><USER60> They seemed like good guys who had no sense of wherewithal. I liked the FanHero idea, it seemed pretty good.

<comment><USER61> Having youtubers hawk goods seems not so different from advertising/endorsements/affiliate links. I think something that might be more useful for people would be low friction engagement of consultation/services/speaking/musical performances etc.

</comment></comment><comment><USER62> I wrote a lengthy blog post in response to this post in hopes that it will help aspiring founders avoid a similar fate if their startup gets accepted into Y Combinator.

[http://mortdeus.blogspot.com/2015/01/y-combinator.html](http://mortdeus.blogspot.com/2015/01/y-combinator.html)

</comment><comment><USER63> Wow. Aspiring Founder here. What a read. Loved this:

"I don't want to start another company until I find a problem that I care about. A problem that I eat, sleep and breathe. A problem worth solving."</comment>


Ask HN: Screenshot Saturday - <AUTHOR>

Exactly 300 days ago we did the first installment of Screenshot Saturday. I think it's time to share some more of our current projects. Please post a screenshot and a few words of explanation about what you have been working on for the past week. <comment><USER2> Lately I've been making a Selenium WebDriver implementation for Java's built- in WebKit.

I spent an absurd amount of time trying to figure out how to let multiple instances of the browser operate concurrently without affecting each other. E.g., if a resource request is in progress, then a second request to the same resource simply uses the output of the first (which is a problem if it's stateful output for the user).

After reading most of the JavaFX and WebKit codebases I realized that isolation is not possible without recompiling a modified WebKit. So then I set about figuring out how to isolate Java code. But most solutions are half- baked, are only academic research projects, or require a special JVM.

However, if you load JavaFX along with native libs into a classloader for each browser instance, then they're effectively isolated. The downside is that objects of the same class have completely different un-castable types if they're from different classloaders.

So then I needed to use reflection to lookup classnames at runtime and resolve them dynamically.

Anyhow, [http://i.imgur.com/ovxVHW9.png](http://i.imgur.com/ovxVHW9.png)

[https://github.com/MachinePublishers/jBrowserDriver](https://github.com/MachinePublishers/jBrowserDriver)

</comment><comment><USER3> Working on analytics app to visualize web server HTTP traffic across hosted web sites to discover "unhealthy" patterns and security attacks:

[http://www.mensk.com/#prettyPhoto/0/](http://www.mensk.com/#prettyPhoto/0/)

Next iteration will include ability to ban IP addresses.</comment>


Trading Program Ran Amok, With No 'Off' Switch - <AUTHOR> http://dealbook.nytimes.com/2012/08/03/trading-program-ran-amok-with-no-off-switch/

<comment><USER2> 'Prediction is difficult, especially with regard to the future'.

It looks like they were using some new algorithm, which should have made them a lot of money, had the market gone up after their massive purchases. In that case, they would have pocketed fat bonuses and would not be on the news.

However, it has not happened, so the crying and the search for a scapegoat is on. It sounds like the case of the banking business as usual: 'heads I win, tails you lose'.

Ultimately, there is a really serious problem with the concept of limited personal liability for companies engaging in speculation. It is an assymetric arrangement, whereby the directors are entitled to the profits but are never personally responsible for the losses. With such rules of the game, it is advantageous to take crazy risks. Expect to see a lot more of this and many more taxpayer funded bailouts.

<comment><USER3> Huh? Knight Capital lost a bunch of money, and will likely go bankrupt. Essentially, Knight's software bug transferred a bunch of money from Knight to everyone else. This poses minimal systematic risk to anyone else, and they will almost certainly get no bailout.

The markets have already recovered. The S&P was down a little bit on thurs and recovered by friday. Knight is down 60%.

<http://www.google.com/finance?q=INDEXSP%3A.INX%2C+NYSE%3AKCG>

This is ultimately a situation of the market being a robust and stable dynamical system.

<comment><USER4> Yes, no risk to others unless you happen to be one of their newly acquired futures broker unit's customers with $411 million in deposits. [http://www.reuters.com/article/2012/08/02/knightcapital- regu...](http://www.reuters.com/article/2012/08/02/knightcapital-regulators- idUSL2E8J26R720120802?type=companyNews)

<comment><USER3> Did you read the article you just linked to? Penson's customers have their money in accounts completely segregated from Knight's electronic trading division.

 _"It isn't like we found out that Knight was stealing money," Sommers [a CFTC commissioner] said._

The CFTC is just watching carefully to make sure it stays that way.

<comment><USER4> Moreover, I would suggest you read Johnson et al's research on mini-flash crashes (<http://arxiv.org/pdf/1202.1448.pdf>) if you hold that the markets are stable dynamical systems.

<comment><USER3> How does this research suggest the market is unstable? According to these authors, the market was (in their view) dangerously perturbed 18,520 times, more than once per day. In spite of that, it remained stable. The flash crash took an afternoon to recover from. Knight took a day.

If you perturb a system over and over and each time it quickly swings back to equilibrium, that's pretty strong evidence it is stable.

</comment></comment></comment></comment></comment></comment><comment><USER5> What I wonder, following this story this week, is how the software quality controls at a place like Knight compare with those for life-critical systems like those in, e.g., aviation.

On one hand, you'd think the QA in finance would be pretty solid, considering that the survival of the company could be at stake (witness Knight). On the other hand, I have a feeling that even there, people just don't take it that seriously.

Would love to hear from anyone with more experience writing software for these industries.

<comment><USER6> Unlike high-frequency trading, aviation is highly regulated. In the United States the FAA specifies pretty detailed development standards for avionics software (e.g., DO-178B: <http://en.wikipedia.org/wiki/DO-178B>). We're unlikely to see similarly strict requirements for financial software anytime soon.

<comment><USER7> Having talked with people who write life-critical code, the regulation isn't really what makes it safe. Safety comes from good engineering.

The regulation just makes it much harder to bring an unsafe product to market, and makes it clearer who to blame when people die.

<comment><USER8> But don't you think the existence of regulation influences the culture?

<comment><USER9> Penalties influence the culture. As we all know, the first lesson in economics is that incentives matter.

Sometimes, the right people aren't being incentivized to do the right thing.

</comment></comment></comment></comment></comment><comment><USER10> They lost $440 million (and amount greater than their market cap), and possibly the company, on what the world knows to be incompetence.

At some point if I couldn't stop it - I'd be tempted to just kill the power to the server rooms, all of them. There just has to be a way to cut your losses.

<comment><USER11> I'd love to know what qualifies you to throw a word like incompetence around here. My best guess is the reason it took 45 minutes to shut it off was due to a judgement call: burn through free cash, or take out all their customers too. Bear in mind some of the largest retail brokerages in the world hang off Knight.

Their primary functions are acting as an order destination and a market-maker, for efficiency's sake an obvious conclusion would be that both functions are combined in the same software (in a market where microseconds matter). So given the choice of taking a cash hit (a potentially short term affair), or a reputation hit (a much longer term and most likely fatal affair), it's entirely possible Knight knowingly made the right decision.

It's worth note that the eventual deficit amounts to somewhere in the region of one year's net income, hardly insurmountable (and how many investment opportunities promise close to 100% return in a single year?).

Listening to the CEO on Bloomberg, it was clear that minimizing damage to customers was their primary goal (he made this point several times in the 5 minute interview), and that he appeared comfortable with the outcome.

<comment><USER12> $440 million is four times their 2011 net income. I doubt the CEO is comfortable with the outcome of being on the brink of bankruptcy. He is trying to arrange a fire sale of the company as we speak.

But I think you are right that they tried to avoid an outage. The incompetence, if any, is that they apparently did not know how much money they were losing and still kept the system going. It wasn't a caclulated risk but rather an incaculable one.

I imagine it's not easy to know how much you're losing at any moment in time. They certainly knew they were building huge positions, but knowing how much they were going to lose on those positions requires an estimate of the price at which the positions can be closed (or a hedge).

What I cannot imagine is that it is common practice to leave this kind of decision to an individual's judgement call. There have to be rules for a situation like this. And there's only one sensible rule for a rogue algo racking up unknowable losses. Kill it and deal with the consequences later. Anything else is negligent.

<comment><USER11> They had >= $300m free cash as of June, that's how I arrived at the $100mish deficit.

</comment></comment></comment></comment><comment><USER13> So, some of the owners were looking for a way out, and magically this thing broke loose and started giving away (basically) free money to undisclosed receipients. In the meantime all the technicians were fast asleep and couldnt kick the machines down or something, while they were losing milions of dollars per minute. This article is a completely honest recap by completely honest people, about completely honest traders/bankers (bankers are not people).

Edit: on a COMPLETELY unrelated note, trading firms/banks are known to actively pursue the extraction of money from their clients with bogus trades/advice [http://www.nytimes.com/2012/03/14/opinion/why-i-am- leaving-g...](http://www.nytimes.com/2012/03/14/opinion/why-i-am-leaving- goldman-sachs.html?pagewanted=all)

</comment><comment><USER14> I would rarely suggest this, but if something is so incredibly broken that you're loosing money at a rate of 800 million dollars per hour, screw the customers.

Turn it off at any cost. If you are forthcoming and transparent, customers will understand.

<comment><USER15> Point is you dont know what the loss is.

1) They bought too much stock (incorrectly)

2) realized WTF, stopped everything

2a) more likely their clients said WTF is wrong first

3) had to sell the stock for the rest of the day.

Its only after they sold everything did the $440MM price tag surface. Hopefully they sold most of their positions to goldman (instead free market) so one of their investors made a boatload of cash.. giving them favorable terms for a line of credit.

<comment><USER16> This is wrong. The algorithm was buying and selling constantly, sometimes losing small amounts of money (usually about $15) each time, sometimes as often as 20-40 times per second for each of about 150 symbols.

</comment></comment></comment><comment><USER17> There seems to be a lot of confusion around market making, brokering, execution algorithms and HFT in this thread.

</comment><comment><USER18> I read the nanex article. Regardless whether it is true or not, the general trend is towards development of more sophisticated load testing programs.

The most benign ones were developed for use in IT systems. E.g. Apache bench. While these can cause disruptions if aimed at production services, this does not necessarily threaten the health of an entire enterprise.

However, the trend is that all software sectors are starting to adopt this particular technique of testing software with not sufficient regard to what happens if it is released into live systems.

For example, we have chaos monkey, from Netflix, which randomly shutdown services in a cloud based system.

What would happen if software which simulated meltdown at a nuclear facility was accidentally bundled into the build system by a tired operator? Or some one does the same with flight software?

The main software running trading platforms would presumably be supervised by another program to ensure that bad algorithms do not lose e company too much money. However there was no such tool for the component that generated the test data.

To me, it sounds like the supervision should be done at a higher level, e.g. A wrapper around existing APIs. All software running against live systems must call into the wrapper.

Secondly, test software should conduct some kind of verification. E.g. Check for evidence that it is testing against a Test system. This might be the presence of a nonexistent company, et c.

I am more than happy to compile any other ideas you may have so that the IT industry is able to build more fail safes into software.

We are starting to see some of these fail safes in practice. E.g. When you try to send out an email to everyone in the organization, email software may warn you if you are sure you want to do that. The problem is we haven't thought enough about these scenarios that we don't adequately address them.

Incidentally, over in Australia, the Commonwealth Bank suffered a major downtime when it's outsourcer HP accidentally pushed out system wide updates instead of doing this to select machines as originally intended.

</comment><comment><USER19> Pure speculation. Maybe there was an off switch, which used to work, but not regularly tested, and silently broken? Wouldn't surprise me.

<comment><USER20> Highly doubt it.

</comment></comment><comment><USER21> This was apparently an infrastructure problem of some sort: [http://www.bloomberg.com/video/tom-joyce-knight-is-open- for-...](http://www.bloomberg.com/video/tom-joyce-knight-is-open-for- business-1ZpjUmh0TlevIFSAZ2UwxA.html)

Infrastructure changes can be notoriously difficult to back out by simply using an "off" switch, particularly if this was some type of a firmware upgrade that impacted all of their production servers. Backing it out at a minimum would require some type of a reboot, which would cause problems with an active trades. It could very well be that they were running an Active- Active environment, they had to go Active-Passive, back out the changes from the passive environment, reboot, and surgically cut over to the passive environment. This could easily take 30 minutes.

</comment><comment><USER22> Doesn't this mean that others made a killing, taking advantage of all the mispriced orders?

<comment><USER23> Most likely. c.f. the recent JPMorgan losses[1].

[1] [http://www.pbs.org/newshour/businessdesk/2012/06/who- benefit...](http://www.pbs.org/newshour/businessdesk/2012/06/who-benefited- from-jp-morgans.html)

</comment></comment><comment><USER23> "Knight is also working with Goldman Sachs to help unwind the trades behind its extensive loss, according to people briefed on the matter.

"Goldman has agreed to buy, at a discount, the shares that the trading firm had accumulated. Such a move would help Knight by taking the portfolio off its hands and freeing up capital."

What does this mean? Why would GS do this? Why would Knight do this? Couldn't they just sell them on the open market at a better price instead?

<comment><USER24> Yes and no. Given the kind of volume Knight purchased during the faulty trades, it could be difficult to offload that many shares on the open market in a timely manner. Maybe those stocks are hot Monday, maybe they're not. Knight needs capital yesterday to keep floating, so they're likely looking to sell everything in one basket.

As for GS's motivation, they're buying at a discount. Due to the time sensitive nature of Knight's predicament, they're probably trading the portfolio to Goldman at a reduced rate. Unlike Knight, Goldman has the cash to sit on it for a while and sell the shares directly out into the open market, even if it takes a few days. Given the discount they bought the shares at, they're likely selling with a decent margin.

<comment><USER23> So GS is primarily the go-to since they're willing to leisurely unload stock they bought at a discount and they've got the cash in hand to do so. Makes sense.

</comment></comment></comment><comment><USER25> Strange article. Lots of text but missing the main thing I was looking for. What kind "erroneus trades"? where did the money go? If you buy stock at the market you did not intend to buy, why not just sell them the next day?

<comment><USER23> Seems like maybe they couldn't hold on to the stock for long enough to unload the enormous volume they were dealing with. It sounded like at one point they were doing AS MUCH VOLUME AS EVERYONE ELSE on the exchange combined.

<http://news.ycombinator.com/item?id=4337750>

<comment><USER26> Since there's 2 parties to every trade doesn't that make 50% the limit?

<comment><USER16> Nope, sometimes they bought stock they sold themselves!

<comment><USER26> If you sell stock to yourself... why even bother to go through the exchange? Why would the exchange even allow such trades?

<comment><USER16> Knight has different programs running. It was handling >10% of all NYSE, so it must have been running a lot of servers. When the berserk algorithm wanted to buy or sell a stock where Knight was the only "market-maker", another Knight server would usually intercept the order after it had been posted on the exchange. Here's one way it might have happened: <http://www.nanex.net/aqck2/3525.html>

</comment></comment></comment></comment></comment></comment><comment><USER27> Why isn't automated high-frequency trading banned already?

Does it not go directly against the spirit and purpose of having a stock market with proper investors?

<comment><USER17> this is issue nothing to do with speculative trading. Knight is a broker. They provide an interface to the market for retail brokers, spread betting outfits and so on. Their algos execute orders placed by their clients. Their new algo had a bug. That's it.

<comment><USER27> I don't know the details of retail brokers vs HFT, but this writeup <http://www.nanex.net/aqck2/3522.html> has a lot of charts showing trades with 25 millisecond intervals.

Just looking at things in a big perspective, the fact that the system is designed for allowing trades at such frequencies makes it seem like markets these days no longer exist for the benefit of the listed companies.

Then again, maybe I don't know wtf I'm talking about :-S I guess I don't understand how real value can be created from such a system.

<comment><USER28> Check out this TED talk about how these algos. are actively changing the surface of the planet:

[http://www.ted.com/talks/kevin_slavin_how_algorithms_shape_o...](http://www.ted.com/talks/kevin_slavin_how_algorithms_shape_our_world.html)

The speaker makes an arguement that no one can understand how these algos. interact and are being studied like natural phenomena.

</comment></comment></comment></comment><comment><USER29> Can someone smarter than me please explain why a system where trades got matched / executed at a granularity of once per second or once per several seconds wouldn't work? What would be the problem with exchanges accumulating and keeping secret buy and sell orders and executing them at a reasonable interval?

</comment><comment><USER30> I wonder if the lack of a kill switch was linked to the power black outs in India - what if they set it going, got cut (power) and then only came back online 45 mins later? Could be that just one link - say a local exchange or power for an FTTP line failed.

</comment><comment><USER31> I don't believe the problem was caused by "bug" - this reminds me of "rouge trader" stories.

It is kinda weird that all problems in Wall Street are caused by "bugs in software" or "rouge traders": while executives are never hold accountable.

</comment><comment><USER32> This is an extreme example of what what can happen when what should be a software company thinks it is some other sort of company. I am sure they thought they were a trading company and software development was the necessary evil required to get things done.

Well 400 million odd dollars in the red later I doubt they still feel that.

I do feel sorry for them and they probably didn't deserve this huge loss. Hopefully valuable lessons can be learned.

</comment><comment><USER33> Can anyone provide some context on this matter? What happened wednesday and where?

<comment><USER34> [http://blogs.wsj.com/marketbeat/2012/08/02/knight-capital- tr...](http://blogs.wsj.com/marketbeat/2012/08/02/knight-capital-trading- error-cost-firm-440-million/)

Basically, they deployed a new HFT algo and it started buying high and selling low. oops!</comment></comment>


California collects, owns and sells infants' DNA samples - <AUTHOR> https://nakedsecurity.sophos.com/2015/11/12/california-collects-owns-and-sells-infants-dna-samples/ <comment><USER2> This has huge privacy-rights implications...I don't have much to add, but this should be upvoted.</comment>


It's been 100 years since we've seen anybody like Elon Musk - <AUTHOR> https://www.businessinsider.com/why-tesla-ceo-elon-musk-is-like-this-an-explainer-2019-6 <comment><USER2> Howard Hughes was quite similar to Elon Musk but he wasn't a automotive executive. He was an aviation-space guy as Elon is.

</comment><comment><USER3> This article is exactly right. There is so much criticism of Musk today because people are evaluating him by the wrong standards. But let's add in he is also a technological genius.</comment>


Reasons to Ditch Your Digital SLR - <AUTHOR> http://www.wired.com/gadgetlab/2010/01/five-reasons-you-should-ditch-your-dslr/

<comment><USER2> Disclaimer: I'm not a real photographer and I don't have any real experience with SLRs, digital or otherwise; I may be completely clueless here.

The concept of a digital SLR has always seemed a bit silly to me. The purpose of an SLR, as I understand it is to show in the viewfinder the same image that will hit the film. The live preview in an electronic viewfinder or LCD screen serves the same purpose, but in theory at least can get closer to the image that will actually be captured. The digital SLR has always seemed like a stepping stone to me; something that would let a film photographer move to digital without having to relearn everything all at once.

What am I missing? I'm sure serious photographers aren't just slow to learn. What's the technological advantage of SLR over EVIL?

<comment><USER3> I have a good SLR, and looking through an electronic viewfinder is so poor in comparison (even on an expensive pro-sumer model) it's hard to describe. Our visual system can cope with such a huge dynamic range that it makes little sense to neuter this ability while shooting.

An SLR is able to capture RAW data, which can be mapped to different jpeg/whatever images, so there's a big disadvantage in looking at a specific instance through the viewfinder.

In common situations the preview and default jpeg output is absolutely fine, but when you get to more challenging lighting you need to trust your eyes at the time, and the awesomeness of RAW later.

<comment><USER2> Your first point makes sense to me, and meshes well with what other posters are saying.

As for RAW, I don't see what that has to do with an SLR viewfinder versus digital live preview. A quick google search suggests that all EVIL type cameras support a RAW format.

<comment><USER4> He's referring to the fact that whenever you display an image on an LCD you're losing an incredible amount of data about the the lighting and color. Data that the CCD actually does collect.

The comment about RAW is saying that your eye, capturing through a mirror viewfinder, is aware of this level of detail. If you view it through the LCD you miss out. This is unimportant if you only use JPG, because that will be neutered similarly to the electronic viewfinder, but if you are shooting RAW then you're looking for something more subtle and need analog control.

<comment><USER3> Thanks, that's a good explanation. I need to work on my wording.

</comment></comment></comment></comment></comment><comment><USER4> Performance and evaluation of the Lumix GF-1, the EVIL pictured in this article.

<http://craigmod.com/journal/gf1-fieldtest/>

It's not aimed as a gadget review but instead a caring review of the camera across one photographer's grand adventure. The photography and review are both excellent.

</comment><comment><USER5> _"... surprisingly terrible article ..."_

And thats from the article comments :)

<comment><USER6> The article's a mess. The basic point is that most DSLRs, except for the true high-end "full frame" models, have sensors that aren't as big as 35mm film was. So the big 35mm SLR lens is partially wasted, focusing light in areas where there is no sensor.

So there's a new class of high-end cameras that take the same smaller sensor size and pair it with interchangeable lenses. That produced the four-thirds system (<http://en.wikipedia.org/wiki/Four_Thirds_system>). Then if you remove the optical viewfinder and mirror, you get the even smaller micro four-thirds system (<http://en.wikipedia.org/wiki/Micro_Four_Thirds_system>).

They're a great system for the "prosumer" or high end amateur photographer. You get essentially the same quality as the lower-end DSLRs with smaller cameras and lenses.

The only downsides are that so far they seem to be more expensive than the low-end DSLRs and I think lots of people just like carrying around a big black camera with their long kit zoom lens on it.

<comment><USER7> > I think lots of people just like carrying around a big black camera with > their long kit zoom lens on it.

You have no idea :) I got my first DSLR back in September of last year, and I've taken it with me to about a dozen holiday dinner meetups and vacation trips to touristy places like the Grand Canyon and Las Vegas since. If I try to use my iPhone or a P&S (as a backup camera), a lot of people end up walking through my picture or can be really rude about giving me a little space to move around and take pictures.

But....when you've got a comparatively huge DSLR (well, my D5000 isn't even huge, but it looks intimidating enough with even the 18-55mm kit lens, let alone my even-bigger-with-hoods 55-200 or 12-24), people around you tend to give you a little space and courtesy to let you take your pictures to your heart's content. I also don't get as many people asking me to take pictures for them, cause they assume big camera must equal pro photographer that should be left alone. Not that I mind doing that for others, but sometimes it's inconvenient.

So I did find it a bit odd the article went out of the way to mention that DSLR's scream "look at me", because that's practically a selling point to a lot of people. :P

<comment><USER3> But if you're trying to photograph people (street photography, events), they're a lot more relaxed seeing a compact camera than an SLR.

<comment><USER7> I guess it depends on the situation. That's never been a problem for me, and some of my best photos were of family and friends over Thanksgiving, especially the kids. They were never tense, they were at most curious if they even paid attention to me and the camera.

Not to mention that all the P&S and cameraphone pictures everyone else took were either incredibly noisy, washed out with major red eye because of the built-in flash, or blurred and unacceptable because of inadequate indoor lighting.

</comment></comment></comment></comment></comment><comment><USER8> "As a new category, the EVIL is still relatively expensive, and you'll pay as much for a body and lens as you would for a prosumer level DSLR."

Fashion vs function, I guess.

<comment><USER9> I don't think it's purely fashion. In some ways the EVIL cameras are more functional. Just by being smaller and lighter they're much easier to carry around with you. As Gretzky said, you miss 100% of the shots you don't take.

</comment></comment><comment><USER10> Ah, I was hoping that the link was about the joy of film photography.

</comment><comment><USER11> Articles like this preclude the idea of style. Different cameras have a different style. I'm quite fond of the hyper-real style that comes with long, low-light exposures with Canon DSLRs. Also, most adapters I've found for using one lens to another tends to lose something to be desired, whether it's the various auto-focusing features built into the lenses, or an f-stop of light, or both.</comment>


Waldoline – line slope learning game (JavaScript) - <AUTHOR> http://bumblepie.net/waldoline/

<comment><AUTHOR> This is a small weekend project built using JavaScript/jQuery and CSS. The game is intended for students, but anyone can play. It's fairly simple and measures your success based on time and wrong answers. I will enhance it with time, but I think this is okay for a MVP version. All suggestions and observations are welcome.

The code can be found on my GitHub: [https://github.com/dinkom/waldoline](https://github.com/dinkom/waldoline)</comment>


A Programming Language, now in HTML (50th anniversary) - <AUTHOR> http://www.jsoftware.com/papers/APL.htm

<comment><USER2> That version is incomplete -- there's a full PDF at the Computer History museum's Software Preservation Group page ([http://www.softwarepreservation.org/projects/apl/book/APROGR...](http://www.softwarepreservation.org/projects/apl/book/APROGRAMMING%20LANGUAGE/view)).

</comment><comment><USER3> I always wondered whether APL is a language worth learning. I would love to hear some opinions about APL or its children (J, K, ...).

<comment><USER4> I used K professionally for a bit. The people who love it _dearly_ love it, and it is exceptionally great for any type of linear algebra or relational database problem. One of the interesting insights I was made aware of: in K, the slowest operation is usually no more than an order of magnitude slower than the fastest. Since all of the operators are 'approximately the same speed' it's much easier to reason about a program's performance. It's also the reason K programmers obsess over the character length of a solution, often the shorter solution _is_ the faster one.

On the downside, I found K to be very polarizing with respect to interoperability. There is a K way to do something and 'the other ways,' and attempting to bridge the gap leads to a lot of headaches. Part of it is that K is so good 'inside' that not as much effort is given to interacting outside of that world. The K programmers I know are aware of this, and I think this is more of a critique on the size of the community rather than its mindset. They're focused on solving actual problems rather than the gardening involved to keep the language friendly.

One nice thing is that K programmers tend to be higher up on the intelligence side of things[1], so if you meet someone who knows it you're probably in for a great conversation.

[1] like look at this crazy shit <http://www.nsl.com/k/ray/ray.k>

</comment></comment><comment><USER5> APL was the first language I learned - I had a very interesting and forward looking Engineering Professor who taught us how to solve complex systems of equations using APL. I loved it, and am sorry that I don't use it anymore.

<comment><USER6> IBM APL2 was the 3rd or so language I learned. At Merrill, I remember workspaces with tens of thousands of LoC, possibly over 100K. Also we used to have "each" contests and obscurified APL contests, where nobody could read anybody else's code

</comment></comment><comment><USER7> I'm interested... what level of mathematics do you need to know to fully understand this text?

<comment><USER8> Just browsing through I'd say an introductory course in linear algebra and one in discrete mathematics should be enough. I'm not an expert on mathematics or APL so take my advice with a grain of salt.</comment></comment>