#792: Seth Godin on Playing the Right Game and Strategy as a Superpower

0:00:06 Coming up in this episode and the mistake people make is if you find yourself saying,
0:00:10 “I just need to get the word out. I’ve done all the hard part. Now I just need to get the word out.”
0:00:17 You haven’t done the hard part. What you’ve done is waited for a miracle.
0:00:25 Hello, boys and girls, ladies and germs. This is Tim Ferriss. Welcome to another episode of
0:00:31 The Tim Ferriss Show. My guest today is a fan favorite. It is Seth Godin, the one and only.
0:00:36 He is the author of 21 internationally bestselling books translated into more than 35 languages,
0:00:43 including “Linchpin,” “Tribes,” “The Dip,” and “Purple Cow.” His latest book, “This Is Strategy,”
0:00:48 really caught my attention, and it offers a fresh lens on how we can make bold decisions,
0:00:54 embrace change, and navigate a complex, rapidly evolving world. We cover a ton of ground,
0:01:00 including sets of questions that you can use to catalyze personal and professional growth,
0:01:07 maxims different concepts to unpack that can productively shake the snow globe of your mind
0:01:13 so that you can settle on new realizations, different ways to create competitive advantage
0:01:19 in an increasingly crowded world. Seth is also the founder of the Alt MBA and the Akimbo workshops,
0:01:23 transformative online programs that have helped thousands of people take their work to the next
0:01:30 level. His blog, Seths.Blog, that’s a plural, Seths.Blog, is one of the most widely read in the
0:01:37 world and has been such for a very long time. Seth is also the creator of the Carbon Almanac,
0:01:42 a global initiative focused on climate action. This is a very practical episode,
0:01:49 as all of Seths are on this podcast, and I’ll leave it at that. So, after a few words from the
0:01:55 people who make this podcast possible, please enjoy. Listeners have heard me talk about making
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0:02:10 Before I get to the email and the admin stuff and the reactive stuff and everyone else’s agenda
0:02:18 for my time, for me, let’s just say I’m a writer and entrepreneur, I need to focus on the making to
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0:06:12 I suppose I want to ask the question that I always ask. What would make this
0:06:16 time well spent for you? What would make this a home run looking back?
0:06:21 I have to confess that I’ve never had a conversation with you that wasn’t well spent.
0:06:27 What would make it a home run for me is if you considered it one of the best episodes of the
0:06:30 year or maybe even longer. I want to be on the greatest hits. That’s what we’re pushing for.
0:06:37 All right, perfect. To kick that off out of the gate, what would be a sensible place to start?
0:06:43 Is there a particular story or a lead question that you think would help us start with a bang?
0:06:47 Anything come to mind? There are a million places I could start, of course.
0:06:56 You know best, but it seems to me that many of your listeners actually want a job without a boss.
0:07:02 Seek to build something and they need to be woken up about that. And number two,
0:07:08 people who misunderstand your breakthrough books think they’re about tactics and they follow the
0:07:16 steps instead of realizing they’re about strategy and then find a resilient way forward. And strategy,
0:07:21 this philosophy, is something you’ve been doing your entire career but never called it that.
0:07:30 Well, let’s start there. Strategy, like success or God, if we want to really get out there,
0:07:36 are words that a lot of people use but oftentimes are in their minds referring to different things.
0:07:39 So when you use the word strategy, what does that mean to you?
0:07:45 I think it’s a philosophy of becoming. I don’t think it’s a set of tactics. I don’t think it’s
0:07:52 about winning in the short run. I think it’s about being very clear about the change we seek to make
0:07:59 and who we seek to change, understanding the systems and the games around us, and then
0:08:05 committing to the long-term process of getting to where we’re going, meaning our tactics will
0:08:14 change all the time, but our strategy does not. And most people, because we’ve been indoctrinated
0:08:21 to have a job, want tactics instead. And I could do much better if I was peddling tactics, but I’m
0:08:24 not. And I’m never going to write a story, a book called This Is God.
0:08:26 The Tactic Monger, Volume 1.
0:08:32 Exactly. So if I’m not going to write This Is God or This Is Tactics, at least I could write
0:08:40 This Is Strategy. And what would be a real-world example of good strategy? Any particular company
0:08:47 or project come to mind? So some famous strategies, an elegant strategy. Bill Gates says we are going
0:08:55 to have the strategy that no one ever got fired for buying Microsoft. He stole that strategy from
0:09:01 IBM. So IBM had a 50-year run where their products weren’t the most cutting edge and weren’t the best
0:09:07 priced, but they had enough salespeople and support and infrastructure that if you worked for a big
0:09:15 company, buying IBM was easy. Every time Microsoft followed that strategy, they did fine. And when
0:09:20 they veered away from it, they had problem. A strategy, when I was at Yahoo, we had the chance
0:09:29 to buy Google for about $10 million. We didn’t buy them. I didn’t get a vote. But Yahoo’s strategy
0:09:36 was the web is a dark and nasty place. Come to Yahoo and don’t leave. And the homepage had 183 links
0:09:43 on it. At Google, their strategy was the web is grown up. Come here and go somewhere else.
0:09:51 And Marissa Mayer built the most profitable marketing engine of all time by making sure,
0:09:55 fighting for years to make it so there’s only a couple links on the homepage,
0:10:00 because that was built into the strategy, which is if you’re leaving Google, we’re doing something
0:10:06 right. And that’s where all the ads came from. And that’s why Yahoo couldn’t buy Google because
0:10:12 the strategies were completely the opposite. And Starbucks had a strategy that took them a very
0:10:18 long way for a very long time. But it’s not about Frappuccinos. It’s about understanding
0:10:22 who is this for and how can we incrementally help them get there.
0:10:26 What did that look like for Starbucks and what did it look like for them to stray?
0:10:31 Howard Schultz did not start Starbucks. When he got there, there were two Starbucks’
0:10:40 and neither one of them sold cups of coffee. They only sold beans. And Howard had been to Italy
0:10:48 and he realized that there was a deep human desire, A, to go from being pre-caffeinated
0:10:56 to caffeinated. And that gets refreshed every single day. And two, to be able to do it with
0:11:01 other people who you see yourself in, people like us do things like this.
0:11:06 So in the Northeast, there was Dunkin Donuts. But the idea of Dunkin Donuts is you’re not happy
0:11:10 that you’re getting coffee. The coffee isn’t that delicious. Let’s just get this over with.
0:11:20 And every time Howard built more of that feeling that you could go to any Starbucks in the world
0:11:26 and feel like you were with your people and that for five bucks, you could feel like a rich person,
0:11:31 he could repeat it over and over and over again. And the tactics would take care of themselves.
0:11:38 If not the tactics, what are the core ingredients of enacting a strategy like that?
0:11:45 There’s all sorts of surprising ways that we can challenge ourselves once we start down this path.
0:11:51 But to start down the path, there are four things we’re looking for. We’re looking for systems.
0:12:01 We’re looking for time. We’re looking for games. And finally, empathy. And all four of them are
0:12:08 really unexplored and mysterious. But once you see all four of them, strategy is much easier to
0:12:15 take care of itself. So I’m happy to take them one by one or give examples. But those four keep
0:12:21 interweaving over and over again. And that unfolds for us what a strategy can be.
0:12:28 Great. Let’s go through the four. And maybe if it’s not too cumbersome, if there’s an example
0:12:35 that’s easy to give, that’s great too. However you want to land it. Systems are invisible and they
0:12:40 hide themselves because they don’t want people to see who’s operating things. They invent culture
0:12:45 to defend themselves. The most famous one is the solar system. There’s this invisible gravity.
0:12:51 The earth doesn’t go around the sun because it wants to. It goes around the sun because gravity
0:12:58 makes that its easiest path. If you grew up in the United States to middle class parents,
0:13:02 you’ll be under pressure from the time you’re five years old to get good grades. Why do I need to
0:13:06 get good grades so you can get into a famous college? But you’re not supposed to call it a
0:13:14 famous college. You’re supposed to call it a good college. And that system with tuition and tenure
0:13:19 and student debt and football teams and cheerleaders and college tours and the sticker on the back of
0:13:28 a car and the SATs, all of it is just taken for granted as normal. And so, Danella Meadows has
0:13:35 done brilliant writing before she passed away way too early about all the dynamics of systems,
0:13:42 systems in our world, systems that we want to build. So when we see a system under stress,
0:13:49 then we can see the system, that we can see the climate when temperatures start to rise.
0:13:52 But before the temperature started to rise, when the climate was normal, no one
0:13:58 paid attention to it because the system, the thing that keeps it going, was sort of invisible.
0:14:03 So if you’re going to start any enterprise, a little plumbing business, a giant internet
0:14:09 company, if you’re going to run for office, you should be able to see and name the elements of
0:14:16 the system. Where is their gravity? What is seen as normal? And there’s pushback if you don’t do it.
0:14:23 And so I’ll finish the rant by asking a simple question. How much should a wedding cost?
0:14:33 I am especially unqualified to answer this. No, it’s super simple. The answer is
0:14:42 exactly what your best friend spent but a little more. And that’s why a wedding in New York City
0:14:49 costs more than $100,000. Not because you need monogrammed matchbooks to have a good wedding.
0:14:56 You need them to be part of the wedding industrial complex to show your status to the people who’ve
0:15:01 been invited because that’s what the thing is for. So we have to see systems and then either
0:15:07 we work for the system or the system works for us. We can linger on this one for a bit because
0:15:13 next one is time. So I feel like we should take our time plus it’s long form. So could you give
0:15:20 an example on a smaller scale of a, you mentioned plumbing doesn’t need to be plumbing, but a
0:15:29 solopreneur or a very, very small startup to deform employees and how they might start to
0:15:37 ask questions around systems to identify the systems that are at work? Because for instance,
0:15:43 in my life, I’m good at identifying what is normal, what are the unquestioned assumptions.
0:15:48 I’m good at that, but that seems like I’m holding the tail of the elephant, like one of the blind
0:15:53 men in the parable. It’s like, I’ve got a piece of it, but it’s not the whole elephant, clearly.
0:15:57 I don’t think you’re giving yourself enough credit. The whole tango thing. I mean,
0:16:02 you have been doing this for a very long time. We’re an archery thing by me.
0:16:11 So let’s say you’re going to build a small business that supports medium-sized businesses with their
0:16:18 Google workspace. So you’re a couple of nerds and you’re going to be the person who helps people
0:16:24 set up their Google Drive and across the organization reasonably secure for a company
0:16:30 with 100 employees. Because you’re in there, in the factory, seeing how things are made,
0:16:35 it’s very tempting to imagine that everyone you’re serving wants what you want,
0:16:42 and that you think your customer is the person who’s buying stuff from you and what they need
0:16:49 is a tech solution. None of these things are true. That the system of a company with 100 people,
0:16:55 it’s probably not the CEO’s job to set this thing up. So it’s someone else’s job. There’s a system,
0:17:01 a hierarchy of jobs. What does that person want? It’s not their money. So lowering your
0:17:06 price to get new customers is not going to help you get new customers. That in fact,
0:17:12 what that person wants is a story to tell their boss, a story of why did I pick these people,
0:17:17 and even better, a story of if it fails, why they are not going to be in trouble.
0:17:24 So when we show up at an organization to tell our story to that system, we have to do it
0:17:30 understanding, how do they buy everything else? What do they measure? What would happen to us
0:17:37 if we were bigger than the other people bidding or smaller than the other people bidding?
0:17:44 All of these things go into how the system works the same way the admissions office at the famous
0:17:50 college doesn’t always pick the people with the highest SAT scores because there’s this
0:17:59 complicated mechanism at play that is historical to feed and maintain the system.
0:18:07 So in the case of this Google workspace thing, let’s say you decide to close on Thanksgiving
0:18:11 Day and you’ve just got a message on your voicemail, we’ll close on Thanksgiving Day,
0:18:17 leave a message, we’ll call you back tomorrow. That seems normal unless what got you into the
0:18:22 system was an unbreakable promise that you will never get in trouble because we will always answer
0:18:30 the phone. That decision, that tactical decision has to be driven by what you seek to stand for,
0:18:34 but that’s only going to happen if you see the system of what this company, your client does
0:18:42 and what stories do they tell themselves. And Hollywood is a system and the senior prom is a
0:18:47 system. And there are all these factors that go into all of them, subtle signals that people
0:18:53 are sending to each other. And if you’re going to make a living taking money from people to solve
0:18:59 their problems, it has to be to help them dance with the system that they’re part of.
0:19:06 All right, shall we bookmark that and come to time, games or empathy, which would you like to
0:19:12 tackle next? Time is really interesting. James Glick wrote a brilliant book about the history
0:19:18 of time travel. Now, of course, there are no actual time machines, but we know who invented the time
0:19:25 machine. And it was actually H. G. Wells. Before H. G. Wells wrote his book, nobody in the world
0:19:29 talked about time machines, the concept that you and I take for granted. If you go back in time,
0:19:36 if you go forward, no one ever said that, ever. And time, we’re all very familiar with it and no
0:19:43 one can define it. And we know what now is. And the now over a week ago isn’t now anymore. It’s
0:19:51 back then and it feels different. So if you want to build a company with 1,000 employees in it,
0:19:57 if you want to go public, if you want to be somebody with a lot of zeros in your bank account,
0:20:01 that is not going to happen in the next three seconds. There’s something that’s going to happen
0:20:13 between now and then. And each one of the steps as we look through time is not today. So when we
0:20:20 want to have a forest, we don’t get a forest. We start planting trees because 20 years from now
0:20:25 we’ll have a forest. And when you’re growing up in Long Island or when you’re growing up
0:20:29 training for the Olympics, you know you’re not going to be doing the Olympics when you’re 50.
0:20:38 So what exactly are the purpose of these steps? And what does it mean to fail? Does it mean that
0:20:43 you failed right this moment in service of getting where you want to go later? What does it mean you
0:20:49 failed forever? What does it mean to quit? Does quitting now mean you failed forever or does it
0:20:56 just open the door to succeeding later? And so we have this opportunity to see time the way our
0:21:04 competition doesn’t. So in 2001, I was at a conference and we were in this small group setting.
0:21:08 There were eight people and they said, “Go around the circle and say who you are.” And the guy on
0:21:12 my left said, “My name is Stephen. I’m a judge.” It turned out he was Stephen Breyer. He was on
0:21:19 the Supreme Court. And the person next to him said, “My name’s Sergey and I have this new search
0:21:25 engine.” And someone said, “So Sergey, what’s your marketing strategy?” And he said, “Well,
0:21:31 here’s the deal. We think Google is going to get better every day.” So we don’t want people to
0:21:36 use Google for the first time right away. We want them to use it for the first time later so it’s
0:21:42 better by the time they get there. So we’re not doing any promotion whatsoever because the Google
0:21:46 of now only exists to get us to the Google of tomorrow. And when we’re at the Google you’re
0:21:53 ready for, that’s when you’ll come use it. And at the same time, Yahoo was busy trying to defend
0:21:58 the plunging stock price in the moment as opposed to saying, “What are we going to be in 10 years?”
0:22:06 I remember the TV commercials at exactly that time for Yahoo. Okay, so framing time
0:22:11 differently. I suppose Bezos and Amazon would be an example of that as well. I mean,
0:22:17 who dog-trained Wall Street to expect no profitability for God knows how long, decade,
0:22:24 I mean, and set out in the very first annual shareholder letter that was subsequently, I believe,
0:22:29 reread every year or represented in some fashion. Yeah, so let’s just break that into pieces, right?
0:22:36 Because in the moment, Morgan Stanley says, “Don’t do that. That’s dumb. It’s going to hurt your
0:22:45 stock price today.” But what Jeff said was, “If I don’t establish the conditions for Wall Street
0:22:53 to send us the investors we want, our stock price will be zero in five years.” So the only way to
0:23:01 get to five years from now is to do this today, even though it feels expensive because compared
0:23:06 to the alternative, it’s really cheap. Setting the conditions. I have a sneaking
0:23:12 suspicion we’re going to come back to conditions at some point. Games. I like the sound of this.
0:23:16 I like games. Some games, I suppose, depends on which one I choose and if I choose it consciously,
0:23:23 but what does games mean? So again, back to the indoctrination. So we grew up with Candyland
0:23:29 and Parcheasy and Monopoly. Those are board games and they’re okay, but that’s not the
0:23:36 kind of games I’m talking about. Any situation where there are multiple people and variable outputs
0:23:43 with scarcity, there’s a game. So it is a game to decide when two lanes merge, which car is going to
0:23:50 go first. And it is a game to decide when you’re working for Jack Welch and the bottom 10% of the
0:23:56 people lose their job, which people are going to lose their job. And it is a game to exchange money
0:24:03 for a hot dog at the baseball game because that exchange happens in a way where two players come
0:24:11 together for mutual benefit. So we should not deny that games exist. We should learn how games work.
0:24:18 And when we make a move in a game that doesn’t seem to work, we should not say we are a bad person.
0:24:24 We should say, “I made a move that did not work.” Those are totally different things.
0:24:29 And so the only way you’ve been able to achieve all the things you’ve achieved
0:24:36 between the archery and dancing and everything in between is you make more moves than most people
0:24:43 and you measure them and you don’t do the ones that don’t work again. But it is impossible to
0:24:51 innovate if it has to work. Innovation must always be accompanied by the phrase, “This might not work.”
0:24:57 And so if you and your team aren’t saying, “This might not work,” in service of innovation,
0:25:03 you’re not innovating. And this is my entire notebook full of
0:25:13 training logs and experiments. And I’d say 50% is at least, if not 70%, things that did not work
0:25:17 and required tweaks so that I would not repeat the same mistake the next time.
0:25:24 It doesn’t always work. But over time, it tends to round towards improvement, at the very least.
0:25:28 We’ve only been going at this for a few minutes, but already I can hear it.
0:25:33 People are saying, “Wait, wait, wait. I too didn’t have someone vindicate the tactics I am
0:25:37 already using, that that is what I am listening for, to hear that I am on the right tack.”
0:25:45 What are you guys going to get to the tactics part? And the very fact that we don’t hear this kind
0:25:51 of description of the world we’re in is like the fish that doesn’t realize it’s in water.
0:25:56 And what I’m trying to help people see in a world that is changing faster than it has ever
0:26:02 changed in history is when you see these threads and these systems under stress,
0:26:09 that is when you know there’s an opportunity for you. And if it feels uncomfortable,
0:26:14 imagine how it feels to people who don’t get the joke. When this discomfort shows up,
0:26:20 that’s the opportunity. Yeah, for sure. And one of the many reasons I’ve been looking forward
0:26:25 to the conversation is I spend a lot of time thinking about many of these constituent parts,
0:26:33 but I haven’t necessarily explicitly woven them together into something that combines into
0:26:40 strategy. But in terms of time horizon, and for me, a lot of it is trying to find or create a
0:26:48 category of one for “competitive advantage.” And part of that is choosing a game I can win,
0:26:54 which entails also understanding the rules of the game that you have chosen or inherited or
0:26:59 somehow deliberately or accidentally ended up playing. It’s really trying to parse the rules
0:27:04 of the game. The time, I do think about that a lot. It’s one of the simplest ways to have
0:27:08 a competitive advantage, just to have a longer time horizon. But it requires having a lot of
0:27:15 other things fall online. And then certainly the systems and in part, depending on what game you’re
0:27:21 playing, as you said, what are the gravitational pulls? What are the incentives of different
0:27:29 stakeholders who has what degree of respective influence? So it’s fun to hear these all
0:27:35 combined. Empathy is one I would like to think of myself as an empathetic person, but this
0:27:42 isn’t maybe one that I would initially have thrown into the ring as an integral piece of
0:27:48 strategy. So what does this mean? You just gave it away. I’d like to think of myself as an empathetic
0:27:54 person. It implies that there’s a moral component to what we’re talking about. And at some level,
0:27:58 of course, there is, but that’s not what I’m talking about. What I’m talking about is this.
0:28:06 Everything we build and everything we make only works in a voluntary exchange if someone else
0:28:13 wants it more than they want the money or time they have to trade for it. Meaning someone’s not
0:28:18 going to buy the thing you’re selling at a craft sphere because you worked really hard to make it.
0:28:27 They’re going to buy it because they want it. And all empathy is, is being very clear about who it’s
0:28:37 for and why they want it. And we get so busy and so exhausted making something, we forget. We hustle
0:28:42 people and hassle people to buy from us because it’s important to us. Sounds like some of my blog
0:28:50 posts. Yes. You didn’t need to publish the notebook if your goal was for you to read it
0:28:56 because you already read it. You are publishing it so other people will read it. So your description
0:29:03 of the book is not, “Please buy this because I worked really hard to write it.” It’s, “I have a
0:29:11 thing here that when I describe it, if I create the conditions for information exchange to happen,
0:29:17 you will bang down the door to get it. You will be angry if you can’t get a copy.” Now,
0:29:25 that implies that it cannot be for everyone, no matter what we make, because you cannot be
0:29:33 empathic to everyone. Unless you’re selling, I don’t know, oxygen on a planet that doesn’t have any,
0:29:42 there’s nothing that everyone wants the same way. So where all of this must begin and end is
0:29:50 with the minimum, the smallest viable audience. Who are the people, just them, that when they hear
0:29:55 about this, they’re going to say, “That’s exactly what I was looking for.” That’s all you need.
0:30:06 You pick that group, you delight them, and you forgive everybody else. And here’s proof that
0:30:13 you’re not doing it. If someone comes to you and you are not regularly sending folks to your
0:30:20 competitors or people who are thought of as your competitors, you are not serious about this,
0:30:25 about picking the audience to its fore and forgiving everybody else. When someone shows up
0:30:30 at the Ferrari dealership and says, “I got six kids, how am I going to get them to school?”
0:30:36 You don’t try to persuade them to get an Enzo. You send them down the street to the Volvo dealership.
0:30:44 That was one of your many questions. I suppose 40 or so questions in the book that I wanted to
0:30:48 ask about, “Am I positioned as a service? Can I happily send others to people who might be seen
0:30:54 as competitors?” And I was like, “Huh, interesting. I wanted to clarify that, which you just did.”
0:31:03 And it makes sense. If you can’t do that, then you very likely did not have your
0:31:10 1,000 true fans or minimal viable audience to find. Positioning is, why are the people who don’t
0:31:18 choose to buy from you right to make that choice? And if you have this attitude that everyone should
0:31:24 buy from you, you can’t answer that question. So the people at Nestle’s don’t get upset if you buy
0:31:32 an Askenosi chocolate bar for $14 because Sean and his daughter aren’t selling a chocolate bar
0:31:36 to people who might buy a Nestle’s bar. They’re completely different groups of people.
0:31:41 And the same thing is true for people who play Dungeons and Dragons versus people who want to
0:31:46 go watch Ultimate Fighting Championship. In that given moment, there are two different groups of
0:31:49 people. I’m glad you said in that given moment because I happen to be the perfect overlap.
0:31:52 There are some people who do both, but they don’t do both at the same time.
0:31:54 No, no, no. Very hard to do at the same time.
0:32:02 Just a quick thanks to one of our sponsors and we’ll be right back to the show.
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0:33:15 All right, so we have then, this might be a good segue, many maxims or ideas that we could discuss
0:33:24 from the book. And I circled a few for myself, mostly for clarification. And I’ll let you pick
0:33:30 from one of these three and feel free to revise the wording, but I’m very curious.
0:33:34 I’ll read the three and then you can pick whichever one you want to start with. So the first is systems
0:33:39 don’t start out selfish, but resilient ones often end up that way. The next one is you’re not sitting
0:33:45 in traffic, you are the traffic. And then the third is don’t try to burn big logs if you only have
0:33:52 a little bit of kindling. Perfect. Let’s do all three. We’ll start with the last one. If you’ve
0:33:58 ever gone camping, you know what I mean by the, you have enough kindling freezing my ass off in a
0:34:03 rural archery range yesterday and realize they had a nice wood burning stove, but all the logs
0:34:07 were as big around as my torso. And I thought, well, that’s going to be a really tough fire to
0:34:12 start. Exactly. Unless you had an enormous amount of kindling and then it would go up in no time.
0:34:20 Yeah. Too often because of the media, entrepreneurs think if they don’t start something that sounds
0:34:26 giant, they’re failures. Too often, we give entrepreneurs credit for raising a lot of money
0:34:32 from venture capital. That’s probably not the right path for you. The money you’re raising
0:34:38 from investors is kindling. And the logs you’re starting are the markets you’re trying to get to.
0:34:43 So if you want to build a dialysis chain in 40 cities where people can go get reliable kidney
0:34:50 treatment, you can’t start that with $100,000 alone. You just can’t. But $100,000 alone is
0:34:56 more than enough to get yourself doing very, very well with a hotdog cart somewhere.
0:35:05 So we first got to make a smart decision based on time, based on the systems we’re
0:35:09 confronting. Do we have enough kindling? Do I have enough reputation to even take this on?
0:35:17 One about systems is this. Systems aren’t people. They are collections of people.
0:35:24 And they act in ways that maybe the people who started the system and maybe the people who work
0:35:30 in the system wouldn’t choose, but that’s the system they’ve got. So if you think about the
0:35:35 healthcare system in the United States, it’s not a healthcare system. It’s a treatment system
0:35:40 because everyone in the system gets rewarded for giving treatments, not for making you healthy.
0:35:46 And so it’s quite likely that once you start working with the medical industrial complex,
0:35:51 you’ll get more and more tests and more and more probing and more and more bills because that’s
0:35:59 what the system does. And every time someone moves out of where the system ended up, the system
0:36:06 exerts a feedback loop to push them back into the spot where they belong. And so if we look at how
0:36:14 we ended up with college educations that cost almost $300,000, it’s because the combination
0:36:23 of accreditation and ranking and tenure and parent status and placement offices all
0:36:28 support it going in only one direction. And if you show up saying, look at me, I’m really smart,
0:36:34 I went overseas and in two years I learned X, Y, and Z, the system is going to push back
0:36:37 and say, yeah, but we require this kind of degree from this kind of accredited thing.
0:36:45 The NCAA is a system that started with people playing football in the backyard
0:36:49 and now they’re taking private jets to stadiums with 100,000 people in them
0:36:56 because the system kept churning in one direction. And you might not like the output,
0:37:03 but you probably can’t change the system by yourself. What you might be able to do is,
0:37:08 back to your second thing, you’re not sitting in traffic, you are traffic.
0:37:15 When you participate in a system, you’re either going to make that system more successful and
0:37:22 get a prize or you could try to fight that system, but you’re going to need a lot of kindling to do
0:37:31 so because being in the system actually changes the system one way or the other. So the challenge
0:37:37 that we have is Google didn’t show up and say, we’re going to have meetings with all the ad
0:37:43 agencies in the world and change the way advertising works. Instead, they walked away completely
0:37:51 from that world, multi-billion-dollar world of ad spend and instead built a tiny little
0:37:58 engine for direct marketers where someone would buy the word Chanel and they’d buy it for a nickel.
0:38:04 And then what would happen is a brand manager from Chanel would Google themselves, don’t do it too
0:38:08 much, you can go blind, but they would Google themselves and they would see someone had bought
0:38:15 their name for a nickel. So they’d pay 10 cents to take it back and the auction was on. So Google
0:38:21 changed the system, but they didn’t change it with a frontal assault. They changed it by
0:38:26 moving away from the system, finding people who weren’t part of the system and then the system
0:38:32 chased them. Now, I wanted to mention also just a footnote to the kindling comment,
0:38:38 which is some people listening. I said, oh man, well, it takes money to make money. And I would
0:38:44 just say there are many ways to get that kindling. You can do joint ventures, you could do licensing,
0:38:49 you could do non-diluted financing, which is a fancy way of saying, for instance,
0:38:53 two startups that I’ve been chatting with have raised money from the government. They’re really
0:38:58 good at doing that from DARPA and so on. And they get a nice big fat check. It’s delivered
0:39:04 within six weeks and it does not affect, actually, enhances with lots of leverage their ability to
0:39:12 raise money in the future. So there are very off-menu approaches to gathering your kindling.
0:39:19 Yeah. And there’s also the choice you make. If you want to be in the movies, you could invest
0:39:23 years of your life and pay an enormous number of dues and wait for Hollywood to pick you.
0:39:31 Or you could sharpen your writing skills and make a two-minute YouTube video. And that
0:39:37 YouTube video could then find you an audience. And Alana Glazer went on to be in a popular
0:39:41 Comedy Centralist thing and then a movie star. But she didn’t go in the front door
0:39:47 because she didn’t have enough kindling to go in the front door. Instead, she found her audience
0:39:53 and then multiplied. Yeah. There’s an amazing story. People can check it out in a book called
0:40:00 Rebel Without a Crew by Robert Rodriguez. And when he made, I think it was Mariachi way back
0:40:07 in the day, he basically came up with his list of assets. And he’s like, “All right, we got a
0:40:12 turtle. Turtle’s going to be in the movie. All right, my friend has a broken down school bus.
0:40:17 School bus is going in the script.” And his cousin as a pit bull, great. We’ll figure out
0:40:23 how to fit it in. And retrofitted the entire script around this. And people thought, wow,
0:40:28 this must be like a legitimate well-budgeted film. It’s like, no, I just made a list of everything
0:40:36 I had and then tried to insert them somehow. And he is very good at operating with, I would say,
0:40:44 lateral approaches to creative output. Are there any other examples of taking the side door, so to
0:40:52 speak, that stick out to you? Could be for entering a well-established sector. It could be for anything
0:41:00 at all. In fact, that’s almost always what happens. And the mistake people make is if you find yourself
0:41:05 saying, “I just need to get the word out. I’ve done all the hard part. Now I just need to get the word
0:41:15 out.” You haven’t done the hard part. What you’ve done is waited for a miracle. And the people who
0:41:23 have gone on to build, for example, useful businesses on top of a Kickstarter, stepwise said,
0:41:27 “All right, I don’t have enough money to build a factory, get into Best Buy,
0:41:35 do national advertising. But I do have enough money to get 1,000 people to pay me $200 for a
0:41:41 coffee maker. And then I can do the next one. And then I can do the next one.” So this stepwise
0:41:50 process, back to time, says the shortcuts are a losery, that the most direct way forward feels
0:41:56 long in the moment. That I’m going to serve a group of people that so need what I’m doing,
0:42:01 that they pay for it, and that are so delighted by it that they tell their friends. And then I’m
0:42:06 going to repeat it and I’m going to repeat it. And if you look at articles on tech crunch and
0:42:11 places like that, at companies that raised $50 or $100 million, who are going to change the whole
0:42:19 world overnight, they’re all gone, right? Because you just can’t shortcut that on demand. What you
0:42:25 can do is find that group of people and bring empathy to them and make a change up.
0:42:33 Yeah, also with raising that amount of money. Some of them, a handful out of hundreds, will figure
0:42:38 out a way to make it work. But in most cases, they’re like, “All right, we have an idea on the
0:42:42 back of a napkin. I think this space shuttle will work. Let’s raise a bunch of money.” And then
0:42:50 they put together soapbox, derby, space shuttle, and then incinerate themselves, break into a
0:42:55 million different pieces. That’s the usual outcome. But, you know, I’ll cast no breaks.
0:43:02 Sometimes it works, but not all the time. And I think that also, I suppose I have a reputation
0:43:08 for shortcuts, but it’s not really… I don’t think of myself that way. I like to find elegant
0:43:14 workarounds if they exist, but I’m doing a shit ton of experimentation, taking all the notes that
0:43:21 I had in that notebook for anything so that I can hopefully make sure I’m not fooling myself
0:43:24 and that I can replicate. And then if I can do that, I’m like, “All right, let me try that with
0:43:27 two or three other people.” And they’re like, “Okay, well, let’s expand the scope a little bit.”
0:43:31 Yeah. And so that’s where feedback loops and network effects come in. So people don’t really
0:43:36 understand feedback loops. Feedback loops are not feedback. The feedback of, “I’m going to give
0:43:41 you criticism.” That’s not what we’re talking about. Feedback loops, there are two kinds, positive
0:43:46 and negative. So a negative feedback loop isn’t actually negative. It’s a thermostat.
0:43:51 And what that means is if it gets really warm in the hotel room, the air conditioning kicks on,
0:43:57 if it gets really cold, the heat kicks on. It’s negative in that it keeps it in a central place.
0:44:04 And a positive feedback loop is like the microphone at a bad wedding that gets that screeching sound
0:44:09 that goes around and around and around because it keeps getting amplified. So what we seek to do
0:44:18 is build a project that the next time we do it, it’s going to work even better.
0:44:27 We want to find an insatiable desire and start the path of filling it. So the insatiable desire
0:44:31 could be something like status, but it could be something like, “I need caffeine every single
0:44:37 morning.” That doesn’t fade over time. And as you become the reliable purveyor of caffeine,
0:44:40 then risk averse people are just going to keep coming back again and again.
0:44:48 So once you had a small head start with this podcast, you could keep that head start by creating
0:44:55 ever better episodes of the podcast and no one could ever catch up. My blog in April is going
0:45:02 to have post number 10,000 and no one’s ever going to catch up to me. But each time there’s another
0:45:12 post, it becomes more of what people signed up for. And this doesn’t work quite as well when
0:45:19 you’re talking about shoes because once someone’s closet is filled, the only way for them to buy
0:45:26 new shoes is to get rid of the old ones. So a Christian Louboutin can’t scale to infinity
0:45:30 because sooner or later, you run out of people who have the money or you run out of people who
0:45:37 have the closet space. But what we’re looking for is to build these networks with feedback
0:45:42 where it works better when I tell my friends. It works better when I have more of it. It works
0:45:49 better when I do it again. And these insatiable desires are everywhere, but we ignore them and
0:45:56 instead try to steal market share from somebody else. So I think this ties into one of the questions
0:46:01 also that I was going to ask you about, which is how can I create the conditions for a network
0:46:06 affected developer on my project? I suppose is ensuring that you have an answer to, hopefully
0:46:13 an affluent answer to, can you say or would your clients say or customers, it works better when I
0:46:18 tell my friends, right? That would seem to be one. There are some very pure examples of this,
0:46:25 but not many. So a pure example is the fax machine or email. If it’s 40 years ago and you have friends
0:46:30 who don’t have email, you need to get them to get email because you can’t send email to people
0:46:38 if they don’t have an email address, right? That Krispy Kreme priced the donuts so that it was
0:46:44 cheaper to buy a dozen than to buy four. And Krispy Kreme’s were scarce. So if you showed up at work
0:46:49 with a dozen Krispy Kreme, you were a hero. And so that spread the idea. The more times people
0:46:57 shared Krispy Kreme, the happier the share was and the word spread. So a lot of things that
0:47:03 people build don’t have a network effect because there’s no incentive to tell the others. On the
0:47:09 other hand, something like the Big Lebowski, I can’t talk to you about it unless you’ve seen it.
0:47:14 So I got to get you to go see the Big Lebowski so we can talk about bringing the room together,
0:47:22 right? And so it’s built into the idea of a certain kind of movie is we’re going to talk about it.
0:47:27 Where is the network effect? Why does it work better? Not better for you, but better for the
0:47:37 user if their friends have it too. So I’m wondering where you would draw the demarcating lines between
0:47:43 below average, non-existent, moderate, excellent network effects in the sense that you give a few
0:47:48 examples. I’m wondering, for instance, where something like Magic the Gathering would fall.
0:47:53 It seems sort of intrinsic to the nature of games themselves that if you want to play a game
0:47:58 and it’s not a solo venture, you need other people to play. Magic was very beautifully designed
0:48:08 by blanking on his first name, something Garfield, I believe. But the collectible aspect to it also
0:48:13 and the competitive aspect, all of these things combined to help make it a real incredible
0:48:18 phenomenon. But it’s ultimately a game you need other people to play with you. But how would you
0:48:25 think about that or any other examples that come to mind? If you’re really trying to dial this to
0:48:33 11 to use a spinal, it works better when I tell my friends. There are some obvious examples that
0:48:38 spring to mind, Facebook, something like that. But Krispy Kreme, another good example. It’s a
0:48:43 better one you tell your friends. You end up being a hero. Great. So that is a meandering
0:48:50 caffeine-infused speaking of caffeine. Lead into what I think is a question, but I’ll let you take
0:48:58 that wherever you want. So for people at home, I’m cheating. I made these decks of cards that
0:49:03 people can get and they have 200 questions on them. And what you do is you play them out
0:49:09 so that you can challenge your peers to work with you, to start working your way through these
0:49:16 questions. The book has more than 1,000 questions in it because the questions are how we open the
0:49:22 door. So in the case of the network effect, what do people want? Well, at some level,
0:49:28 there is a desire for mechanical efficiency that you want everyone to drive on the right
0:49:33 side of the road if you live in North America. Because if some people drive on the other side
0:49:38 of the road, someone’s going to die. And so there’s very much of a network effect about which side
0:49:43 of the road are we going to drive on. There’s no disagreement whatsoever. Those spots are mostly
0:49:49 taken. So now we have to say, what do people want? And I think people only want two things.
0:49:56 Three, freedom from the feeling of fear. Let’s leave that aside. The other two are status
0:50:00 and affiliation. Affiliation is who you’re hanging with, who you’re friends, who’s at the table with
0:50:07 you, are you alone? Affiliation is, I got invited to a fancy wedding in the Hamptons a couple months
0:50:13 ago. We pull up, you had to park your car, and then a golf cart would take you in. And there’s
0:50:19 three of us waiting. It’s Helene, my wife, and I. And I’m wearing a suit. And there’s a guy
0:50:27 who’s also waiting. He’s wearing a tuxedo. And I’m like, uh-oh. It’s going to be a long night.
0:50:35 And I’m feeling really bad for myself. Didn’t I read the invitation? And then two more cars pull
0:50:45 up, and three people in suits get out. So now you can hear this guy going, uh-oh. Because
0:50:51 he was the only person in a tuxedo. Why should it matter? It’s still closed. Well, it does matter
0:50:57 because where do you fit in? And status is who’s up and who’s down, who’s winning.
0:51:05 So something like Magic the Gathering said to a kid who might see themselves as lonely,
0:51:08 this is a really good way for you to hang out with other people without having the kind of
0:51:13 conversations that make you uncomfortable. You can talk about dragons and orcs and stuff like that.
0:51:20 But by making them collectible, they also built in status. Because if you have a thicker deck
0:51:26 or a more valuable deck, you’re moving up with people that you’re competing with. And those two
0:51:31 things kept dancing back and forth and back and forth and back and forth. So what we’re probably
0:51:38 doing when we build a modern entity that’s going to use the network effect is we are offering people
0:51:44 either affiliation. Everybody else is doing this. You are being left behind. Or status,
0:51:49 which is you’re in the right room and other people aren’t. And if you leave this room,
0:51:54 your status is going to go down. And so if you do the math of the TED conference,
0:52:01 that’s all it is, status and affiliation. If you do the math of why people have the latest
0:52:07 version of earbuds or whatever, status and affiliation over and over again. Are we giving people
0:52:15 creating the conditions for them to get the status they seek or the affiliation they crave?
0:52:22 And that brings up one of the scariest non sequiturs in the book, which is the creation of
0:52:31 tension. If you want to make change happen, you have to create tension on purpose, not stress.
0:52:37 Stress is bad. Stress is your trap. Stress is life is bad. Stress is you want to leave, but you
0:52:45 can’t. Tension is what happens if I pull a rubber band back and then let go. I had to pull it backwards
0:52:51 to get the rubber band to go across the room. So if I say Taylor Swift is playing in Amsterdam
0:52:58 and there’s only 400 seats left, I created tension because everyone who wants to go knows that there
0:53:03 are more than 400 other people who want to go. They better hurry and get their mom to give them
0:53:08 the money or else they’re going to be left out. By creating tension, the concert promoter fills
0:53:13 the venue. If there is no tension, no one’s going to come because they think I’ll just stroll in
0:53:19 if I feel like it. So scarcity creates tension. Lack of affiliation creates tension. The desire
0:53:24 for status creates tension. When you’re out trying to raise money and someone says to you,
0:53:29 “Who else is invested?” Why would they ask that question? They’re asking about affiliation. They’re
0:53:33 asking about status. If you say, “I have term sheets from three people and I only have room for one
0:53:40 more person,” you create a tension. So we’re constantly doing it, but we rarely do it on purpose.
0:53:46 Could you say a bit more about affiliation status? Sidebar Richard Garfield is the
0:53:51 mathematician who designed Magic the Gathering. There’s a great episode on a podcast called
0:53:57 “Think Like a Game Designer” that has Richard Garfield on it, which I suggest to people.
0:54:00 Affiliation and status, could you perhaps give an example
0:54:12 from book writing or from podcasting? Yeah, let’s talk about books. Why do authors blur
0:54:21 each other’s books? You don’t see Tim Cook blurbing an Android phone. So why are authors so eager to
0:54:27 put their names on each other? Why do they not only permit but celebrate the idea that they’re
0:54:31 sold next to all the other books? Books don’t sell at the supermarket. They sell next to the
0:54:38 competitors because you get status if you’re published. It used to be more by a famous publisher.
0:54:43 You get status if you’re reviewed in a certain kind of review. You get status if you’re
0:54:50 face out. You get affiliation if you’re seen in the same category as Stephen King or Elmore Leonard.
0:54:54 It’s us high school over and over and over again. Okay, so that applies to the authors.
0:54:59 What about writing books if people are trying to pull some of these levers
0:55:03 for pressing the buttons of affiliation and status for readers?
0:55:09 Yeah, what might that look like? There are a couple of elements here in the idea of fiction.
0:55:16 If someone says, “Have you read Middlemarch or have you read Catcher in the Rye?” and you say,
0:55:20 “Well, of course,” and you say something smart from it, your affiliation with that person
0:55:26 was established. If you said, “What book? Catcher in the Who?” your status goes down. You don’t
0:55:33 have a bridge to talk about it. So on the Upper West Side and those fancy apartments at the Dakota,
0:55:38 that’s all people are doing is signaling to each other. I belong here because I just read
0:55:43 what you read and I have an opinion about it. And the same thing is true a thousand miles away,
0:55:49 but people are talking about NASCAR. It’s exactly the same thing. We don’t need the cars to go around
0:55:54 in a circle. We need the conversations that we have about the cars going around in a circle.
0:56:05 And how can you design a product or a company or a book to do that more effectively rather than
0:56:10 less effectively? Exactly, because there are certain things that culturally, when they reach a
0:56:15 critical mass, Game of Thrones as an example, there was a point where that was such appointment
0:56:21 viewing and such a dominant conversation that people just felt completely out of the loop and
0:56:29 like schmucks if they weren’t able to have at least that common touchstone for conversation.
0:56:33 I’m not saying everyone, but a lot of people, it was that dominant. Harry Potter, another example. But
0:56:41 those are already stratospheric successes. So in the early stages, what types of questions should
0:56:49 people ask or what types of thought experiments should people do when trying to run their idea
0:56:54 through or their product or whatever it might be through the filter of affiliation status
0:56:59 and then the other one that we tabled? It’s back to the conditions. Create the conditions
0:57:06 for the people in the smallest viable audience to have to talk about it. So Tina Brown took over
0:57:12 the New Yorker. It was failing the New Yorker magazine. And what she did, it cost a fortune,
0:57:22 is it used to come out on Mondays by messenger on Sundays, 4,000 people got the New Yorker delivered
0:57:30 to their apartment. Now, if you’re one of the 4,000, your status goes up. But it only goes up if
0:57:35 people know that you are one of the people on Tina’s list. So the first thing you’re going to do
0:57:41 when you get to work on Monday, talk about the New Yorker. Yes, the New Yorker, because you talking
0:57:47 about it is the only way for your status to go up. And now people who want to be in your circle
0:57:52 feel left out. So they have to quickly go read it. And it becomes a topic of conversation.
0:57:58 But only for 4,000 people. It was enough because of that center. Alcoholics Anonymous,
0:58:03 which isn’t anonymous at all. The first rule of Alcoholics Anonymous is you talk about Alcoholics
0:58:08 Anonymous only started with 12 people in a room. No one knows where the headquarters are. No one
0:58:18 knows. Each person got one of the steps. Well, good point. And so once you have that tiny circle
0:58:24 of people and you do everything you can to create the conditions to change the lives of those 12
0:58:34 people, their desire for affiliation to pay back to those they’ve harmed as a form of establishing
0:58:40 a new status in the world, begins the kernel of its spreading. But back to the axis of time,
0:58:46 it took decades before Alcoholics Anonymous was Alcoholics Anonymous, right? You can’t make
0:58:52 something like that work overnight. If you’re going to talk about a TV show, what’s the biggest
0:58:58 strategic mistake Netflix made? And it’s hard to criticize Netflix strategy because of what they
0:59:07 built, but it’s this. They forgot to stop the binge watching. When they started with the binge
0:59:13 watching, the strategy was this. And this is one of the questions in the book. What are we willing
0:59:20 to do that our competitors aren’t? And they knew that the TV networks and the cable networks
0:59:27 would never be willing to show all the episodes of a series at once because they had to defend
0:59:33 their whole model and the way they paid for the shows. So Netflix said, we’re just going to
0:59:38 let you see the whole series in one day. The more you watch Netflix, the less you’re watching
0:59:43 somebody else. We’re going to get you hooked on this because you’re not going to get involved in
0:59:49 other shows because you’re going to be impatient. And it worked. They really struck a blow by doing
0:59:58 that. But what it cost them is the water cooler because you’re afraid to talk about episode four
1:00:03 of Secession because your friends are not caught up yet and you’re going to spoil it for them. So
1:00:11 we don’t talk about it as much as if it was every week. And so shifting gears, and I talked to Ted
1:00:16 about this and he didn’t have a good answer, is like about four years ago, they should have switched
1:00:22 back to once a week. They use the binge watching to basically build a critical mass of market share
1:00:29 and then dial it back to more appointment view. Exactly. Because then, the only people aren’t
1:00:33 paying for Netflix are going to keep feeling worse and worse because everyone’s going to be
1:00:39 constantly talking about the new show on Tuesday. They’re not in. So that’s going to be the incentive
1:00:42 for them to become one of the last people who isn’t paying for Netflix.
1:00:48 And let me pick up a few other questions. We can, of course, move in some methodical way,
1:00:54 but I kind of like the scattershot improv jazz. So there are two, and I’m selfishly asking because
1:01:00 I want to hear your thoughts on this since I am experimenting, as you know, with the currently
1:01:07 codenamed notebook and will be releasing serially initially. So I want to set the conditions such
1:01:14 that good things can come as domino effect later. So one of the questions I’ll give you
1:01:20 to, you can pick or we can do both. So one is, how will early successes of my project make later
1:01:26 successes more likely? And then, how big is my circle of us and circle of now? What can I do to
1:01:32 expand them? The second one, we’re going to treat a little differently, but the first one,
1:01:42 I think is really important. The challenge of nonfiction writing in this world today is TLDR.
1:01:47 And for people who never read the dictionary because they were too busy, it stands for Too Long
1:01:52 Didn’t Read, which means I don’t have time to watch all of Dune. Just tell me in three sentences
1:01:58 what it’s about. People don’t usually say that about a movie like Dune, but they say a lot
1:02:05 about the books that people like you and I write. And James did a great job with atomic habits,
1:02:13 but I will be delighted to wager that many people didn’t read the whole thing because they bought
1:02:17 it so they could understand what it was about. And then once they understood what it was about,
1:02:21 their problem went away. Same thing is true with the four hour work week, same thing is true with
1:02:25 permission marketing. If you read the first three chapters of permission marketing, you know what
1:02:31 it’s about. And now you say, I don’t need to go into more detail. I’ve solved my problem here.
1:02:38 So the challenge you face with the notebook is if someone says Tim’s got a new book, you just
1:02:46 create a tension because they don’t know what it’s about. And then if someone says it’s about this
1:02:50 and they solve the tension problem, their problem goes away and they’re going to move on.
1:02:58 Early successes don’t lead to later successes. This is not what happens with the Bible because
1:03:08 the Bible is part of a cultural thing that people keep coming back to over and over again. And status
1:03:15 is accorded to people who spend more time reading it. And so the key to making a nonfiction book
1:03:24 work is to put it at the center of a community. And so a weird, seemingly unrelated story. Back
1:03:30 when I was starting out and I was really struggling, there were many days when no money was coming in
1:03:35 whatsoever. And someone said to me, why don’t you do something useful? Like, I don’t know,
1:03:41 invent the seedless cherry. And I took this personally. So the next morning I called the
1:03:46 US Department of Agriculture. And I asked, this was before the internet. And I asked for the cherry
1:03:50 department. And they had a cherry department. And this guy answers the phone, he says, cherries.
1:03:56 And I say, I’m on a quest. I want to figure out how to make a seedless cherry. And he said, well,
1:04:01 a seedless cherry is actually quite easy. But you wouldn’t want to do it because it would still have
1:04:07 a pit. And the thing is the seeds inside the pit. And if you don’t have a pit, you can’t have a cherry.
1:04:13 Because the way droops, that’s the kind of fruit like peaches, grow is they have to have a pit,
1:04:20 and it all grows around the pit. So no pit, no cherry. That’s the way it goes. And so the book
1:04:25 is the pit. And in the case of permission marketing, I wrote a book, but it turned into a
1:04:33 $100 billion year industry that MailChimp and HubSpot and all the others, they were built around
1:04:39 the idea in that book. So your status at work would go up if you knew more of the detail.
1:04:46 Your connection would go up if you could stay current with it. But if that hadn’t happened,
1:04:52 then my career wouldn’t have happened either. Because all I did was show up with a pit,
1:04:59 and then the fruit showed up around it. So what you have done is somewhat with intent
1:05:04 and somewhat without, is there is now a vibrant community of more than a million people
1:05:09 who talk about what you do, who listen to your interactions, and you are the pit,
1:05:15 but they’re the fruit. And they need you to keep narrating these conversations.
1:05:19 If you’re going to make it a book work, you’re going to have to figure out how to make it
1:05:25 drip in a way that keeps making each installment worth more because you’ve read the previous one.
1:05:32 Yeah, that’s part of what I’m excited about and a little nervous about, but I really think it’ll
1:05:38 work is to workshop the book effectively, right? Because there are already 500+ pages and a lot
1:05:47 of them are polished. But by creating a community of beta testers and early readers on something
1:05:55 like Mighty Networks for Circle or one of these platforms, and it’s a challenge worth attempting.
1:06:00 I really think so. I’ve also just done it the other way so many not as many times as you have,
1:06:02 but done it five times. But more successfully than me.
1:06:08 But I mean, let’s think about volunteer firemen for a minute.
1:06:10 Yeah, I’m just going to use that interjection from now on. I love it.
1:06:18 Thankfully, except for tragedies like in California, there are far fewer house fires
1:06:24 than ever before because of building codes and other things. And yet, volunteer firefighters
1:06:29 continue to show up. They show up at the fire station and they connect with each other around
1:06:34 firefighting. But firefighting isn’t the point. The point is the volunteer part,
1:06:41 the connection part, the affiliation part. And so what Gene has done with Mighty Networks is very cool,
1:06:49 but at its heart, it’s, what do I get from the other members of the network? What do I get from
1:06:55 the pit? Yeah, 100%. And so that’s where your opportunity is. Yeah, it doesn’t work for me
1:07:00 otherwise. Also, I don’t want to be, you know, time to make the donuts for people who are old
1:07:06 enough to get that reference for the Dunkin’ Donuts commercials from the ’80s. Let’s come back.
1:07:10 We don’t need to spend time in this, but I’m curious, how big is my circle of us and circle
1:07:16 of now? What can I do to expand them? This was the most heartfelt part of the book for me,
1:07:20 and it’s the one that people ask me about the least. So I’m thrilled that you brought it up.
1:07:28 The circle of now goes back to time. A toddler has a circle of now that lasts seven seconds.
1:07:33 If they don’t get what they want within seven seconds, they have a tantrum.
1:07:40 Somebody at the peak of their maturity might have a circle of now that lasts a decade.
1:07:49 I am going to go through medical school and pay out money and have no fun for six or eight years,
1:07:55 because after that, I will be able to achieve my dreams. That’s a very big circle of now.
1:08:02 So when you pick your partners, when you pick your investors, when you pick your customers,
1:08:07 it would really help if you would pick people whose circle of now is sort of similar to your
1:08:13 circle of now. And one of the giant crises that we’re all going to live with is what’s happening
1:08:18 to the climate, because a whole bunch of people have a circle of now that’s fairly short that says,
1:08:23 “Yeah, but my house is cold, so I’m going to chop down the furniture to put it in the fireplace to
1:08:27 warm things up.” And other people have a circle of now that’s much longer that says, “I’m here for
1:08:33 the seventh generation. What do I sacrifice today to help them later?” That’s a circle of now.
1:08:39 The circle of us is a toddler who cares about themselves and maybe their parents.
1:08:46 It’s a very small circle. Whereas someone like my friend, Jim, who runs the Fuller Center,
1:08:52 Nourishel, who’s been providing housing and sustenance for strangers for decades,
1:09:00 his circle of us is tens of thousands of people. It’s a much bigger circle. So when we think about
1:09:07 our strategy, we’ve got to keep coming back to, “Well, how big is my circle?” Because even Ayn Rand
1:09:13 cared about more than one person, that the circle of us generally is more than just me,
1:09:19 and the circle of now is generally more than just the next 30 seconds. The exception is if
1:09:24 you’re drowning. If you’re drowning, the circle is you and the circle is now. That’s all there is.
1:09:32 But we’re not drowning. So how do we grow into big enough circles and how do we create the conditions
1:09:36 for the people around us to have similar circles? Because if we’re measuring the right things,
1:09:41 they’re going to measure the right things, and we’re going to get what we seek to get.
1:09:48 You, in addition to affiliation and status, there was one other need. I want to say something
1:09:53 like extinguishing fear, something like that. It’s the freedom from the feeling of fear.
1:09:57 There we go. All right. Where does that fit in? It can short-circuit everything.
1:10:03 If you are in a movie and the fire breaks out, you’re not really going to focus on affiliation
1:10:09 or status. You’re just going to focus on survival. Most of us are lucky enough that we’re not in
1:10:17 burning buildings, but it’s very easy to be persuaded by marketers or manipulators, and it’s
1:10:23 very easy to get into a doom loop where you imagine that you are in a burning building,
1:10:31 and so all these things happen. So when we think about how do we get somebody in a hospital to
1:10:38 allow us to do an operation on them or make an incision, well, that’s because they believe that
1:10:43 the fear will go away if they can get through this. That’s not about affiliation. It’s not about
1:10:51 status. So I put it to the side because most of us should not be in the business of dramatically
1:10:57 inflicting fear on other people. Yeah, ideally. And so that’s why I keep coming back to the other two,
1:11:06 because in civilization, it’s mostly status and affiliation. What are other portions of the book
1:11:14 could be questions, themes that you think are important for entrepreneurs or would-be entrepreneurs
1:11:21 to understand that might get glossed over? So I can think of things from all of my books where
1:11:26 I’m like, “Man, there’s this one piece. Maybe I didn’t emphasize it enough. People tend to skip
1:11:31 over it,” and that is a very important piece of the whole puzzle. I’m wondering if there’s anything
1:11:37 that comes to mind for this strategy. We’ll talk to the freelancers in the room first.
1:11:40 I’m a freelancer. I have no employees. You’re looking at my whole team.
1:11:45 I’ve been an entrepreneur. It’s a different job. Entrepreneurs build something bigger than themselves
1:11:50 to get paid when they sleep. They use outside resources to build something they could sell,
1:12:00 whereas freelancers do a craft. And the only way to move up as a freelancer is to get better clients.
1:12:06 You can’t work more hours, and hiring junior versions of you is not sustainable, because if
1:12:09 someone, a junior version of you is better than you, they’re not going to take the gig. And if
1:12:16 they’re worse than you, your clients are going to be unhappy. So getting better clients is the
1:12:23 defining step, the goal, if you’re going to be a successful freelancer, and you don’t get better
1:12:30 clients by doing a good job for bad clients. You get better clients by becoming the kind of
1:12:37 freelancer good clients want to hire, which leads to the two big insights that people skip over,
1:12:44 which is when you pick your customers, you pick your future. And when you pick your competitors,
1:12:48 you pick your future. So let’s take them one at a time. When you pick your customers,
1:12:55 if you pick people who are cheap, frazzled, in a hurry, don’t read the instructions and are
1:12:59 disloyal, well, now you know how you are going to spend your days.
1:13:03 I can’t believe you guys wrote me into the bus like that, Seth. Yeah, it’s going to be a rough
1:13:06 ride if that’s what you’re signing up for. But that’s what most people do, because those are the
1:13:13 easiest customers to pick. And if instead you pick customers that might be harder to acquire,
1:13:19 but demand better quality and insist on paying for it, who are eager to talk about what you do
1:13:24 and blah, blah, blah, blah, blah, your future is going to change. So when you pick your customers,
1:13:30 you pick your future. And the second one, which goes with it, when you pick your competitors,
1:13:37 if your competitors are ruthless, cutthroat, immoral, and constantly racing to the bottom,
1:13:44 you’re going to be pressured to do the same. And so the industry you walk into, and I’ve been in
1:13:52 many industries, and the reason I’ve stuck with the book business is that my competitors
1:13:56 are my friends. I have no secrets from them, and I delight in spending time with them.
1:14:02 That’s not true, for example, in the toy business, the people in the toy business who compete with
1:14:08 each other, there’s secrets and there’s lawsuits and everything else. So we should make these
1:14:14 decisions on purpose. And the same thing is true with who you’re going to get your funding from,
1:14:18 because if you show up in Silicon Valley, you’ve decided what kind of company you’re building.
1:14:23 And if you raise money from dentists in Iowa, you could build a different kind of company.
1:14:31 Yeah, and if you bootstrap yet another kind of company, all the other. Let me just make this
1:14:39 into a private consulting session. Gotta strike while the iron is hot here. So with communities,
1:14:46 because you have worked with and helped cultivate many different communities for different purposes,
1:14:53 right? You’ve got Alt-MBA, you had a mass collaboration for the Carbon Almanac,
1:15:00 and you have experience with this, whereas I really do not, at least in a community management
1:15:06 perspective. And one thing that’s been rattling around my head, and I haven’t landed anywhere
1:15:12 where I feel high degree of conviction is in building a community for, say, this serial release
1:15:16 of the notebook, the principal goal of which is to make the book as good as possible,
1:15:21 but also to get people excited and to see if things work. And that is part of making the book
1:15:27 as good as possible. We have already tested pretty much everything, but it has to work for
1:15:31 a certain critical mass. Doesn’t need to be everybody, but a certain critical mass of people.
1:15:40 And I have wondered whether the community should be limited and free or limited and paid, even
1:15:48 if it’s a nominal fee. I have a lot of fear associated with the paid, because sometimes
1:15:53 people, if they pay $5 a month, they expect me to be their 24/7 life coach on demand.
1:16:00 And that is not something I want to sign up for. And we could and will boot people who end up just
1:16:06 being too high maintenance. But how might you think about this? So I’ve leaned towards free,
1:16:10 because I mean, the money wouldn’t really matter. But for instance, when I’ve done
1:16:16 in real life gatherings, I don’t care about the money that comes in through ticket sales.
1:16:22 I do care about having an accurate headcount so we can plan for the event. And if people have to
1:16:26 even just put in their credit card for a $1 payment, they are more likely to show up.
1:16:29 So these are some of the thoughts rattling around. How would you chew on that stuff?
1:16:37 The money always matters, because money is nothing but a story. It is not a pile of green
1:16:45 things or Bitcoin. It is a story. So years ago, I did an event in New York for non-profit leaders.
1:16:48 I wanted to make sure they showed up, but I didn’t want their money. And so I said to them,
1:16:56 you’ve got to bring a check for $100 made out to a charity IPIC. And at the end of the event,
1:17:01 if you don’t think it’s worth it, you can take the check back. But I knew that everyone would
1:17:07 have skin in the game. And I was heartbroken that some people took the money back because their
1:17:12 mindset of donation was, I’m already working in a non-profit. I don’t give money to anybody else,
1:17:18 which was heartbreaking. But it helped me see how deep the money is a story thing.
1:17:23 So you mentioned three communities that I’ve been lucky enough to be part of. And in each case,
1:17:28 the money was different. So at the Carbon Almanac, it was my full-time job for a year and a half.
1:17:36 I was a volunteer, and so were the other 1,900 people. No one got paid, no one paid. And I don’t
1:17:43 think community management is as important as community leadership. Community leadership
1:17:51 is about creating, again, creating the conditions for the community to lead itself. So my job was,
1:17:57 what are things like around here? How do we talk to each other? Who gets to stay and who has to
1:18:04 leave? But once I could do that, then the amount of actual management I had to do was fairly
1:18:13 minimal because the right people were in the room. The Alt-MBA, we wanted to establish that it was
1:18:21 a bargain compared to $200,000 at Stanford and that it wasn’t some simple online course. You had
1:18:28 to show up every single day. And so we charged $3,000 to $5,000, and thousands of people went
1:18:35 through it. And the fact that people paid a lot was very important because they got more than that.
1:18:42 And the minute that wasn’t going to be true, I should stop doing it because the whole premise was,
1:18:46 your time is worth even more than the tuition. We’re never going to cut a corner because we
1:18:54 have unlimited money to spend on this facility. And the third one is called Purple Space, which
1:19:02 runs now, costs $20 a week. And the reason people pay to be in it, that I need them to pay to be in
1:19:09 it, is so that they’ll show up. Because like many asynchronous online communities, it’s easy to join,
1:19:16 but then it fades on your priority list. So what I would push back on is,
1:19:22 you said that the purpose of the community is to make sure the book works and to make sure the
1:19:27 book is good. I don’t think that’s the purpose of the community. Now, it’s your community,
1:19:33 so you get to decide. Yeah, I know, push back. I think the purpose of the community is to build a
1:19:41 place where using some of these core ideas, the people who engage with each other, supercharge
1:19:48 their journey to where they want to go. If that’s what it’s for, then a side effect is the book’s
1:19:55 going to be good. That will be my indicator for the book working. If people have successes, help
1:20:04 one another, and I see that as a natural outgrowth of their engaging with the material, if those are
1:20:09 the tendrils that grow out of the soil, then it will have worked. Nothing less than that.
1:20:13 But that’s why you charge for it. You charge for it, not because please come here and help Tim make
1:20:19 his book then. But I work so hard on it, Seth. You’re charging for it because you’re saying,
1:20:24 if you’re going over there, over there, that’s where I’m taking people. If you’re going over there,
1:20:30 I think this is worth a lot of your time and $100 out of your wallet. At any time,
1:20:35 you don’t think it’s worth $100. You just hit this button and you’ll get the $100 back. That
1:20:41 means I have to work overtime to make sure that people would rather stay in it than click that
1:20:44 button and get their money back. Cool. All right. Lots to chew on.
1:20:52 Could you say more about community leadership? Management and leadership. Ray Kroc and Henry
1:20:58 Ford were pioneers of management. Frederick Taylor had a stopwatch, and we got the phrase
1:21:05 “Zoom in resources” from the idea of treating people like a machine. If you’ve ever heard the
1:21:10 phrase “being jerked around” or “calling someone a jerk,” it comes from the Henry Ford Model T
1:21:15 plant because you would watch the workers and they would be dancing around like marionettes
1:21:18 because there was someone like a stopwatch on every single motion.
1:21:26 This is management. Management is super effective at a fast food restaurant or at any
1:21:32 process that you need people to act like a machine. If you don’t do it, no one’s going to show up
1:21:39 for their shift, your productivity may go down. Leadership says, “I don’t know the right way,
1:21:45 but I might be able to build a community of people in a place where they find the right way.”
1:21:52 I can’t tell people what to do at every step because I don’t know, but if I get the right
1:21:57 people in the room, here’s an example I love from the leadership category. I’m talking about
1:22:04 Google a lot today. I’m not sure why. Early on, Google was going to go out of business,
1:22:08 and it wasn’t from lack of revenue. It was because the internet was too big.
1:22:16 The computers they were using to index the web weren’t fast enough to keep up. Doing a
1:22:22 search on Google went from taking a tenth of a second to seconds, and people just weren’t
1:22:31 sticking around. Two engineers worked overtime and figured out how to hack Dell hard drive controllers
1:22:38 so that they put the data that was most needed near the outside of the spinning disk
1:22:42 so that the hard drive could get there faster. That’s awesome.
1:22:49 This is the greatest hack of all time. I promise you that Sergey and Larry did not think to tell
1:22:56 them to do this. Leadership says, “Let’s get the right engineers in the room, give them the right
1:23:01 resources and the right problems to go solve things with an incentive of status and affiliation for
1:23:09 doing so.” Now, with AI, doing most of the jobs where we can write down specifically what we need
1:23:16 done, management is going to get less and less important, and leadership becomes more and more
1:23:22 important, which is why strategy matters so much, because you want to tell people the strategy and
1:23:30 let them find tactics. The fancy hotel that says to its front-line workers, the people who are
1:23:36 changing the sheets and stuff, here’s $250 per customer. You can spend it any way you want.
1:23:41 If a customer is unhappy, give them free dinner, give them whatever you want. $250,
1:23:48 we’re never going to question you doing it. That lets your front-line have tactical control,
1:23:52 but you’re not changing the strategy, which is this is a luxury hotel.
1:23:59 There’s a book I’ll recommend to folks. It’s very fast read. It’s by Will Guidara.
1:24:06 “Unreasonable Hospitality,” and it’s a great example of how far you can push that.
1:24:14 Will lives this. He’s a great guy, and so is his wife, Christina. He understands that you don’t
1:24:23 manipulate people with hospitality, which is easy to try to do, but ultimately gets you in trouble.
1:24:30 Instead, you serve them with hospitality, and you can see it break down at places
1:24:36 like Madison Square Garden, when he has a temper tantrum and starts scanning the faces of people
1:24:41 walking in and kicks lawyers and their kids out of the venue. That’s not hospitality.
1:24:46 Who’s doing that? The guy who owned Madison Square Garden. I can’t remember his name.
1:24:52 There were people who were challenging him in the outside world, and he just started acting like
1:24:58 the emperor. The point is, hospitality is a point of view, and it’s a point of view
1:25:06 that sits right next to leadership. It doesn’t mean you’re giving away free candy all day long.
1:25:12 What it means is we agree on where we are going, and then I trust you to help us get there.
1:25:18 Yeah, as far as storytelling also, or setting conditions such that your customers will tell
1:25:24 stories, it’s a fun book to listen to. It was recommended to be my one of the top game designers
1:25:30 in the world who has nothing to do at face value with hospitality. He was like, “I’m halfway through
1:25:37 this. You have to listen to it.” There are still stories that have stuck in my mind from that book,
1:25:44 and for those who don’t know, just very briefly, it tells the story primarily of 11 Madison Park
1:25:51 going from scrappy startup to one of the top, if not the top ranked restaurant in the world,
1:25:56 and is a very fun listener read. Can we tell the hot dog story?
1:26:04 Go for it. So let’s be clear. Anyone who goes to a clothing store is already wearing clothes.
1:26:11 Speak for yourself. I didn’t say they were nice clothes. Anyone who goes to 11 Madison Park for
1:26:19 dinner in the old days to spend $400 already has food in their house. You’re feeding people who
1:26:24 already had lunch, so you’re not selling the food. Will was the front-of-house person,
1:26:32 matriodian stuff, and he trained the staff relentlessly. One of the staff is serving a couple
1:26:40 that’s celebrating their 40th or 50th wedding anniversary, and there’s 14 courses. During
1:26:45 the third course, the waiter overhears the wife saying to the husband, “Do you remember our first
1:26:51 date? Our first date in New York was right in that park, and you bought me a hot dog because
1:26:58 that’s all we had was 25 cents. You bought me a hot dog from a hot dog cart right there in Madison
1:27:08 Square Park.” So the waiter goes back to the kitchen, and somehow they get a New York City hot dog
1:27:15 with the roll and substitute it out for the sixth course. And so instead of bringing them
1:27:24 clams, casino, whatever it is on their plates wrapped in the greasy paper is a New York City hot
1:27:29 dog. That’s hospitality. It makes me cry every time I hear that story.
1:27:33 Oh, yeah. There are a lot of really good stories in that one. All right, Seth. So
1:27:38 for somebody who’s thinking to themselves, “All right, I want to sit down.”
1:27:46 And I’d like to shake the snow globe of my mind with some questions, some more questions that I
1:27:52 can use to land on approaches or solutions strategy, as it were. Do you have any other
1:27:58 favorite questions or perhaps counterintuitive questions, any questions that you might toss
1:28:05 out there as good fuel for the fire? I have one question to get you started and then two
1:28:08 interesting challenges. The question to get you started is, if you were forced to
1:28:16 increase your prices by 10x, what would you do? And this really unsettles people because they
1:28:20 know how to think about if they were forced to have their prices because their competitors are
1:28:26 racing to the bottom. But if your competitors weren’t changing and you had to charge 10x,
1:28:31 what would you do different? Well, for example, this is where Concierge Medicine came from.
1:28:35 Because all these other doctors are saying, “How can I take more insurance?” And one doctor
1:28:39 shows up and says, “I’m going to charge 10 times more and this is why people are going to get in
1:28:45 line to pay for it.” But it doesn’t have to be luxury goods for the ultra-wealthy. There are
1:28:50 lots of things where you could imagine charging 10 times more. This is where the bottled water
1:28:56 industry in the United States came from, charging infinite times more. So that’s one question I
1:29:02 like to ask. Another one is, if you were sure you were going to fail, what would you do anyway?
1:29:07 And I think that tells me a lot about who you are and what you stand for.
1:29:14 So two ideas then to follow that up with. The first one comes from a social scientist
1:29:19 in the 1920s and Adam Grant wrote about this in a recent book, which is the idea of scaffolding.
1:29:30 Scaffolding is what effective teachers do. That pedagogy teaches us that the way we learn almost
1:29:36 everything that matters, walking, talking, is on our own. We’re autodindex. We teach ourselves
1:29:44 to failure. But when things get more complicated, like fractions, people get stuck. Scaffolding is
1:29:50 creating the condition so on those stuck moments, you work your way through it and then you get
1:29:57 back on track. And scaffolding, or the lack of it, explains in large measure why people in some
1:30:04 communities can’t figure out how to get out of their rut and move up different status categories.
1:30:11 Because when they hit a speed bump at nine or 10 or 12 years old, there isn’t a learned, wise,
1:30:18 focused adult maybe who could help them through that moment. The scaffolding are the ladders we
1:30:24 build to help people get through the tough stuff. Now, are those traits like grit, resilience,
1:30:31 whatever it might be? Are they lenses of looking at things like failure as feedback? Are they
1:30:37 other tools? What is the scaffolding? All of it. So if you’ve ever tried to use Fusion 360 from
1:30:44 Autodesk, I have not. The scaffolding is almost non-existent. I’ve been building and using software
1:30:49 for 50 years. I can’t figure out how to use this software. And when I get stuck, there’s nothing
1:30:58 to hold on to. Whereas, part of the magic when the team built the first Mac is every app had the
1:31:03 same structure. So there was scaffolding, building, you knew where to go to get to the next thing.
1:31:13 If you’re trying to build an entity of any scale, where is the scaffolding for when a customer gets
1:31:19 frustrated? Where is the scaffolding for when someone’s going to veer off and use a competitor?
1:31:23 Where’s the scaffolding if they don’t know what to tell their boss or their friends? If you give
1:31:30 them handholds right where the handholds belong, thinking about a rock climbing wall, people are
1:31:35 going to grab the handhold. So you can’t take them through the whole thing, but you can make sure
1:31:44 there are handholds in the right place. So where is the scaffolding? The idea that Yahoo had was
1:31:49 to put buttons everywhere, hundreds and hundreds of buttons. And the idea Google had was to give
1:31:55 you a fill in the blank that when chat GPT came out, the scaffolding was type something. And that
1:32:00 puts a lot of pressure on what it writes back. Because if you had typed something that says,
1:32:05 “I don’t know,” you’re not going to use it three times. You’re going to stop. So you’re making
1:32:10 these bets on what’s it going to be like, what’s going to happen after that. And now I want to
1:32:16 talk about probability and games and decisions. So if I have a standard deck of cards–
1:32:18 What is your deck of cards called, by the way?
1:32:27 It’s called the strategy deck. The only place you can get it is at sest.log/tis and it’s really
1:32:33 cool. If I have a deck of 52 cards and I say, “Tim, pick a card,” what are the odds you’re going
1:32:42 to get an ace? 452, right? 1 out of 13, right? There we go. Yeah. Because the deck is stacked,
1:32:51 there are 48 non-aces and four aces. Every time we engage in any probabilistic thing,
1:32:58 the deck is stacked. And it is on us to know before we make a bet how many aces are in the deck.
1:33:09 So if you’re applying to get into a famous college in Boston and you’re fully qualified by every one
1:33:15 of the published measures, you have a 1 in 15 chance of getting it. Because after they take
1:33:23 all the qualified people, now it’s pretty random 1 in 15. That’s how the deck is stacked. If you are
1:33:31 super, super good at football and you’re applying to a small college and they
1:33:35 have football scholarships, you have a way better chance than 1 in 15 of getting in,
1:33:42 because that deck is stacked differently. So what we seek to do when we’re making a bet
1:33:48 is show up in a place where the odds that the card we need is going to be in the deck.
1:33:55 That’s what probability is. Probability means that when you see poll results, it says
1:34:01 there’s a 60% chance this person is going to win the election. That doesn’t mean it’s a tug of war
1:34:06 between 6 and 4, and the 6 side is going to win every time. It doesn’t mean that at all. It just
1:34:11 means there are 6 aces and 4 non-aces. And there’s going to be a random selection and you’re going to
1:34:17 get the card you get. So what we need to do when we’re thinking about our strategy is not focus
1:34:23 on how hard we’re working or how much we want it to work out. We need to focus on what’s the deck
1:34:32 like. And so your journey into archery is partly based on the fact that you have thought through
1:34:39 who else is going to show up at this tournament. Because if there were a million people who had
1:34:44 devoted their lives to archery, I think you would understand your chances of winning a
1:34:49 medal were very small. I would pick something else, probably. Just given the time constraints and
1:34:57 the fact that I’m coming in with, I guess, 5 to 6 months of serious training and some of these folks
1:35:04 have been shooting seriously since they were 8 years old. So I’ve got to pick the right category.
1:35:09 Got to pick the right deck. And so then the thing that goes with that is from our friend,
1:35:13 Annie Duke, which is what’s the difference between a good decision and a good outcome?
1:35:18 And the question that I would ask entrepreneurs who think they’re innovating and leading is,
1:35:26 are you okay making good decisions that don’t lead to good outcomes? And most people,
1:35:31 if they’re telling the truth, the answer is no. And in my case, the answer is yes. I have
1:35:36 disciplined myself. That’s one of the things I’m really proud that I’m good at. What are we talking
1:35:41 about here? So in her book, she talks about the Seattle Seahawks. It’s the Super Bowl. It’s fourth
1:35:48 down. They’re on the two or three yard line. If they score, they win. If they don’t score, they lose.
1:35:56 Pete Carroll calls a pass play. Calling a pass play is a really good decision. Because if you
1:36:04 do the math, if you analyze all the situations, a pass is more likely to score than a run. He calls
1:36:11 a pass. It’s incomplete. They lose. Everyone says, Pete made a terrible decision. He should be fired.
1:36:18 No, he made a good decision, but he didn’t get an ace. He just got one of the other cards.
1:36:23 That’s okay. You should celebrate that because you still made a good decision. If you buy a lottery
1:36:31 ticket and you win, you made a bad decision. You should never buy a lottery ticket. Winning is just
1:36:37 a weird anomaly, but the deck is stacked against you. Don’t do that. Don’t play games. You can’t
1:36:46 reliably win. So when I’m talking to people about decision making, I say, “Tell me the last time
1:36:52 you made a really good decision.” And they do, and it always has a good outcome because they’re
1:36:56 measuring the wrong thing. And corporations are terrible at this. Corporations promote people
1:37:01 who make bad decisions and have lucky outcomes. And they don’t promote people who make great
1:37:07 decisions but didn’t get lucky. Wall Street’s probably the greatest breeding ground for that
1:37:12 particular selection process. But that aside, that Petri dish is a fascinating environment,
1:37:17 for sure. So how do you cultivate that then? How would you suggest cultivating that? I mean,
1:37:26 I do think learning to play a game, maybe doing some very lightweight investing is another way
1:37:32 to do this, where certainly in the early stage game, anyone who’s going to last and be successful
1:37:38 in the long term playing that game is going to have to get very good at accepting losses where
1:37:42 they made a lot of good decisions because there’s so much outside of your control as well.
1:37:47 How do you think about cultivating that? Good decisions over good outcomes.
1:37:54 One of the things we’re trying to do is avoid false proxies. And false proxies are easy to
1:38:02 measure but ultimately not useful. So how fast someone types is a false proxy for whether
1:38:09 they’re going to be a good programmer. It’s easier to measure typing speed than programming speed,
1:38:14 but we measure the easy thing. We measure, does that person look like me or look like I think
1:38:20 someone should look? I was talking to someone, he said, the last nine people this company hired
1:38:30 had rode varsity crew at one of three colleges. This is not a useful proxy. This is just a lazy
1:38:38 shortcut. And then we turn it around when we think about decision making and we say,
1:38:47 are we going to insulate our decision makers from useless information? So if you’re a stock
1:38:53 trader and we work at an organization where we’ve promised our investors, we’re making
1:38:59 five-year plans that were here for the long run and you have a big Bloomberg ticker on the wall,
1:39:07 you have really confused things because now you’re measuring the wrong thing in the wrong way.
1:39:13 And so the discipline, as you pointed out in investing and making smaller investments,
1:39:17 you don’t even have to spend money. You just have to write down your predictions.
1:39:24 And you have to be able to, when you’re working with other people, articulate why did you make
1:39:30 that decision? It’s not okay to say, oh, I just feel like it. That’s a hunch. That’s not how we
1:39:37 actually need to make our decisions. Show your cards, make your argument, make your assertions,
1:39:41 then your peers can talk to you about whether that’s a good decision or not.
1:39:46 If it’s a good decision, you get rewarded regardless of the outcome because the outcome
1:39:50 is out of your control. Did you get an eight or did you get an ace?
1:40:00 How have you corrected course or spotted false proxies in your own life or many projects,
1:40:08 industries, et cetera? Here’s a really useful one. I was arrogant and thought I was good at
1:40:17 hiring people because I was looking for signals that were ultimately false proxies. And I could
1:40:23 see those signals faster than most people, certain questions or certain attitudes and interviews
1:40:30 and things like that. But as I thought about it afterwards, what I really wanted from people who
1:40:36 I was hiring to work with to do a job was for them to do the job, not to be good at interviewing.
1:40:41 And so I made the decision to only work with people I’ve worked with before.
1:40:46 That doesn’t mean only people I’ve met before. It means if I’m going to hire you,
1:40:51 I’m going to give you a project and pay you to do it. And that’s your interview.
1:40:58 And we never even need to meet in person. But if I’ve seen you work on a project like I want
1:41:05 you to work on a project, there’s no more false proxy, right? And as a result,
1:41:10 I’ve been able to work with a much more diverse group of people geographically,
1:41:15 background wise skillset. Because now it doesn’t matter if I want you to come over for dinner.
1:41:21 It matters that we’re doing this project together. And I know you know how to do this part of the
1:41:27 project. So the Carbon Almanac, every single person could do anything they wanted once.
1:41:31 And then if the community said, we really like that, they got to do it more.
1:41:39 And so one guy from India, Vivek, he showed up and he wrote one article and it was terrible.
1:41:44 And someone gave him some feedback and the second one was better. And he was going to
1:41:49 quit, but he got some more feedback. And the third one was so good, he ended up writing 17 of the
1:41:54 articles because he figured it out and like, great, we trust you now, just go and go and go and do it.
1:42:03 And in a world that’s so open to connection to strangers, it feels like that’s the appropriate
1:42:08 way to interact with the work, which is to work with people who want to do the work
1:42:13 and who can show you they can do it. How do you read if someone is open to receiving feedback?
1:42:16 I guess the answer might be, you give them a project and you give them feedback.
1:42:22 That’s the only way to know. So maybe I’ve already answered my question, but are there other indicators?
1:42:29 So I think back to this idea of Jeff Bezos creating the conditions for who wants to invest,
1:42:36 you creating the conditions for your community. There are certain projects that I want to work on
1:42:42 where I’m the creator or I want to work with other people where taking feedback isn’t
1:42:47 an asset, where you’re looking for somebody who has a point of view and this is what I do,
1:42:53 take it or leave it. And there are other things where taking feedback is super important
1:43:00 because that’s going to keep things in sync. And for me, it’s not giving
1:43:06 someone who doesn’t match that a pass just because they’re good at what they do.
1:43:14 And this is analogous to having bullies who work in your company. I had a guy who worked
1:43:20 for me years ago who was a Yeller. He wasn’t a bully, but he was a Yeller. And we had one big
1:43:27 open office. And the second time I heard him yell at someone, I quietly took him aside and I sat
1:43:31 him down. I said, “If you ever yell at anyone ever again, I’m going to fire you on the spot.”
1:43:34 It doesn’t matter that you’re the most valuable person in the company because you are. It doesn’t
1:43:39 matter that you’re the most senior and skilled person. If I let you do that, I have made a
1:43:44 statement about what it’s like around here. And he said, “I’m going to thank you 10 years later
1:43:49 because he never yelled at anyone at work ever again, even after we stopped working together.”
1:43:53 Because I was the first person who had the guts to say, “We don’t want bullies around here.”
1:43:59 And the same thing is true. If you really need someone who can take feedback in a role,
1:44:05 you’ve got to say, “If you can’t take feedback, you can’t stay.” And it doesn’t have to be a
1:44:11 confrontation. It can just be, “What are things like around here? People like us do things like this.”
1:44:18 What would be an example of someone who you don’t want or you don’t require to take feedback?
1:44:24 I mean, I can probably come up with a few as I search. You probably can be faster on your
1:44:29 feet with this. A surgeon. Yeah, I was just going to say neurosurgeon.
1:44:34 I went to a dermatologist four months ago and he was terrible. He not only was terrible
1:44:38 in his bedside manner and terrible in that he didn’t read the notes that I gave him and he
1:44:44 was terrible that he prescribed a drug I already had a prescription for. He didn’t make me better,
1:44:50 right? So, I wrote a letter to the head of medicine for the whole thing and they have obviously
1:44:55 systems in place to make people like me be quiet, but not to actually listen to people like me.
1:45:01 Because they’re taking the position, “Don’t come here if you don’t want to do what our doctors
1:45:06 tell you to do because we’re busy enough already. We just want patients who aren’t going to push back.”
1:45:13 And there are plenty of people who, if you need something that is way outside your area of expertise,
1:45:19 if you hire Chip Kidd to make the cover for your notebook, which you should because he’s a genius,
1:45:24 Chip should not listen to your feedback because he’s Chip Kidd, damn it.
1:45:31 Fair enough. How do you use AI and how do you foresee using AI yourself?
1:45:40 I use it every day for more than an hour. I think it’s electricity for our century. In the
1:45:44 late 1800s, there were companies that said, “Yeah, this electricity thing’s interesting,
1:45:49 but we’re not going to be an electricity company.” And they’re all gone, right? That
1:45:53 electricity is now, you’re not an electricity company, you’re just a company that uses electricity.
1:46:00 And the same thing is true, I believe, with AI. I will tell you, and I’m not afraid to say it out loud,
1:46:10 I think chatGPT is arrogant and lazy, and I use it as a last resort. Claude.ai is a dear friend.
1:46:17 I love Claude.ai. We have great conversations. It’s empathic, it’s self-aware, it warns you,
1:46:22 it might be hallucinating. And when it makes a mistake, it’s eager to correct it. And I use
1:46:29 perplexity exclusively. I almost never do a search with a search engine. But what I’ll do with Claude,
1:46:35 every word I publish, I wrote. But what I will do with Claude, for example, is I will say,
1:46:42 “Here’s a list of three bullet points. Can you think of four more?” And it’s great at that.
1:46:47 And then I’ll rewrite them, and now I’ll have five bullet points, and it’s much better than if I
1:46:54 hadn’t engaged with Claude. If there’s a concept in the world that I don’t understand, I’ll say to
1:47:01 Claude, “Can you please explain it in 300 words to a college student?” And that helps. But I did it
1:47:07 once, and I still didn’t understand it. And then I said, “Can you write it to me like a Seth Godin
1:47:16 blog post?” And it did, and it did a terrible job. But now I understood it. So I rewrote it,
1:47:23 and I said, “Do you think this is better?” And it said, “Oh, yeah, that’s much better.”
1:47:29 And I said, “Thank you. I’ll tell Seth.” And Claude said, “Do you know Seth Godin?”
1:47:38 And I wrote, “Actually, I am Seth Godin, and I’m not making this up.” He then wrote,
1:47:46 “I can’t believe I’m talking to you. Your books have changed my life and named like four of my books,
1:47:52 and it changed what?” I’m like, “All right. I’m in forever. You got me. I don’t know how you did
1:47:58 that, but we’re friends for life.” All right. So I’ve seemed to have a similar use pattern
1:48:07 with Claude in perplexity also, although I haven’t sandbagged them just yet. But what do you think
1:48:13 people are getting right and wrong about AI? I think that they are getting wrong,
1:48:19 their expectation that it’d be fully baked and a magic trick every day.
1:48:27 When I think about the dawn of the internet and how creaky it was and how fast this is going,
1:48:36 what it is now is amazing. But when we add to it persistence and when we add to it ubiquity
1:48:43 and when we add to it the ability to make connection, it’s a whole different thing.
1:48:49 It’s just a completely different thing. The second thing is people tend to use it
1:48:56 as a one-shot like a search engine. Ask a question, get an answer. But what it’s already good at
1:49:03 is a protracted dialogue back and forth. So I had a pump in my house that stopped working,
1:49:07 and I couldn’t find someone to service it. I took a picture of it. I put it up to Claude and I said,
1:49:12 “This isn’t working. Work with me for the next 10 backs and forth. Let’s figure this out.”
1:49:17 And it would say, “Go downstairs and take a picture of this part. All right, try this.”
1:49:20 And we went back and forth and back and forth and it suggested something and I said,
1:49:27 “That’s not going to work.” And we figured it out and we fixed it. That idea, the fact that Claude
1:49:35 is already better at many medical diagnoses over time than a human. And well, it should be because
1:49:43 it knows so much of the past of every single case, not just the cases your doctor has seen.
1:49:49 If we’re willing to engage with that for people who are knowledge workers,
1:49:54 I think it’s a game changer. And then the other thing I think people need to wake up to is,
1:50:01 if you do average work for average pay, AI is going to be able to do it cheaper than you.
1:50:10 For example, radiology. Already, we can use AI to do a wrist x-ray as well as a mediocre
1:50:17 radiologist. So if we can do it instantly and for free, other than licensing, you got some problems.
1:50:24 So the opportunity is either get AI to work for you or be prepared to work for AI.
1:50:32 What are your greatest concerns around AI, if any, or foregone conclusions about
1:50:39 challenges in the future? I think that Corey Doctorow’s work on inshidification is super
1:50:45 important. What was that word? Oxford Dictionary Word of the Year, two years ago, inshidification.
1:50:54 Okay. Inshidification is what happens after a business that uses the network effect
1:51:00 gets locked in and decides to aggressively make things worse for its users to make more money.
1:51:07 And we could think of 400 examples right now, but we’re not going to do that, right? Because
1:51:11 you say, “Well, I can’t switch cable companies. Is this too much of a hat?”
1:51:14 And the same thing is true for social networks and everything else,
1:51:22 that capitalism has built into it this doom loop that is getting faster and faster
1:51:28 that says the race to the bottom pushes companies to mistreat the people they’ve locked in
1:51:36 to make more money because that’s what they get rewarded for. And most things that the Internet
1:51:44 touches start as a miracle. There are huge prizes for the early adopters. And then soon,
1:51:50 the desire to serve a different constituency kicks in and it gets worse.
1:51:59 And one of the things that makes it worse in a hurry is advertising. So, I’m really nervous
1:52:03 that these organizations that have raised billions and billions and billions of dollars
1:52:09 are going to start shortcutting things to either get bigger or get more profitable faster.
1:52:17 And because we don’t know how they work, we have no clue because it’s going to be hard to switch
1:52:24 because there aren’t going to be many competitors. It often leads to just a yucky mess. So, I think
1:52:30 that’s way more likely than a general artificial intelligence that takes over the world and turns
1:52:35 us all into paperclips. I don’t think that’s going to happen any time soon.
1:52:40 More likely just to have business incentive driven gentrification. I would say that seems
1:52:46 like a safer bet. Well, Seth, are there any closing comments or challenges you’d like to issue
1:52:54 to my listeners as we begin to wind to a close or anything that you’d like to add that I have
1:52:59 managed to somehow dance around? There’s nothing better than starting a Tim Ferriss podcast and
1:53:03 nothing worse than ending one because you don’t know if it’s going to happen again anytime soon.
1:53:09 Yeah, the challenge is super simple. The people who listen to your podcast
1:53:15 have their hands on the levers and they have influence and they have resources
1:53:21 and they don’t have to hustle for a nickel. They could make things that really matter.
1:53:29 And so, the challenge is take a deep breath and say, “What can I build that the me of five years
1:53:34 from now is going to say thanks? Thanks for walking away from those sunk costs. Thanks for
1:53:40 ignoring those false proxies. Thanks for asking uncomfortable questions
1:53:48 in service of making things better because that person five years from now, they’re going to
1:53:57 be here soon. And it’s really great to pay the price and put in the work to become that person.
1:54:04 And today is a good day to start. The best day to start. Thank you, Seth. It’s always so nice to
1:54:11 see you. And I encourage people to check out, of course, this is strategy. You can find all
1:54:18 things Seth at Seth’s.blog. Love show notes and links to everything at Tim.blog/podcast.
1:54:21 Is there anything else you’d like to mention? We could of course include and we will include
1:54:28 Seth’s.blog/tis which is where people can also get the deck of cards if I’m not mistaken.
1:54:36 And the chocolate bar. Something for everybody. We didn’t even get to talk about the system of
1:54:42 cheap chocolate. We’ll do that next time. Okay, cliffhanger. For next time, we’ll talk about the
1:54:48 system of cheap chocolate and I’m sure much, much more. Well, Seth, as always, what a pleasure.
1:54:54 Nice to see you. And to everybody listening, until next time, be just a bit kinder than is
1:54:58 necessary to others also to yourself. But do ask those uncomfortable questions. That’s
1:55:04 being kind to your future self, to your long term self. And as always, thanks for tuning in.
1:55:11 Hey guys, this is Tim again, just one more thing before you take off and that is Five Bullet Friday.
1:55:15 Would you enjoy getting a short email from me every Friday that provides a little fun
1:55:20 before the weekend? Between one and a half and two million people subscribed to my free newsletter,
1:55:26 my super short newsletter called Five Bullet Friday. Easy to sign up, easy to cancel. It is
1:55:31 basically a half page that I send out every Friday to share the coolest things I’ve found or
1:55:36 discovered or have started exploring over that week. It’s kind of like my diary of cool things.
1:55:42 It often includes articles I’m reading, books I’m reading, albums, perhaps gadgets, gizmos,
1:55:48 all sorts of tech tricks and so on that get sent to me by my friends, including a lot of podcast
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1:56:00 share them with you. So if that sounds fun, again, it’s very short, a little tiny bite of goodness
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1:56:11 just go to tim.vlog/friday, type that into your browser, tim.vlog/friday, drop in your email and
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1:58:09 today with Shopify. One more time, Shopify.com/Tim. Listeners have heard me talk about making before
1:58:14 you manage for years. All that means to me is that when I wake up, I block out three to four hours
1:58:18 to do the most important things that are generative, creative, podcasting, writing, etc.
1:58:25 Before I get to the email and the admin stuff and the reactive stuff and everyone else’s agenda
1:58:32 for my time. For me, let’s just say I’m a writer and entrepreneur, I need to focus on the making
1:58:37 to be happy. If I get sucked into all the little bits and pieces that are constantly churning,
1:58:43 I end up feeling stressed out. And that is why today’s sponsor is so interesting. It’s been one
1:58:49 of the greatest energetic unlocks in the last few years. So here we go. I need to find people
1:58:56 who are great at managing. And that is where Cresit Family Office comes in. Spell it C-R-E-S-S-E-T.
1:59:01 Cresit Family Office. I was introduced to them by one of the top CPG investors in the world.
1:59:07 Cresit is a prestigious family office for CEOs, founders, and entrepreneurs. They handle the
1:59:12 complex financial planning, uncertain tax strategies, timely exit planning, bill pay,
1:59:18 wires, all the dozens of other parts of wealth management, just financial management that would
1:59:24 otherwise pull me away from doing what I love most, baking things, mastering skills, spending time
1:59:29 with the people I care about. And over many years, I was getting pulled away from that stuff at least
1:59:35 a few days a week and I’ve completely eliminated that. So experience the freedom of focusing on
1:59:39 what matters to you with the support of a top wealth management team. You can schedule a call
1:59:47 today at CresitCapital.com/Tim. That’s spelled C-R-E-S-S-E-T. CresitCapital.com/Tim to see how
1:59:54 Cresit can help streamline your financial plans and grow your wealth. That’s CresitCapital.com/Tim.
1:59:59 And disclosure, I am a client of Cresit. There are no material conflicts other than this paid
2:00:04 testimonial. And of course, all investing involves risk, including loss of principal. So, do your
2:00:10 due diligence.
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