• Paul Graham, Thursday, August 12, 2010 1:28 PM

Paul Graham -- onetime Yahoo employee and the founder of tech incubator Y Combinator -- wants to know: "What happened to Yahoo?" Specifically, he's referring to the portal's decline over the past decade. His theory? Too much money to invest in half-baked ideas, and the absence of a thriving hacker culture. By the time Graham joined the company in 1998, "The company felt prematurely old," he said. "Most technology companies eventually get taken over by suits and middle managers. At Yahoo it felt as if they'd deliberately accelerated this process. They didn't want to be a bunch of hackers. They wanted to be suits. A media company should be run by suits."

Also, Yahoo came to view itself as a media company, rather than a technology company. Why? "One reason was the way they made money: by selling ads. In 1995 it was hard to imagine a technology company making money that way. Technology companies made money by selling their software to users. Media companies sold ads. So they must be a media company." Another big factor, according Graham, was the fear of Microsoft. "If anyone at Yahoo considered the idea that they should be a technology company, the next thought would have been that Microsoft would crush them." As a result, Yahoo didn't take programming seriously enough, and failed to employ talented programmers.

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