0:00:05 So you went from selling worms to how much money does NFX have under management now?
0:00:07 Close to $1.6 billion, yeah.
0:00:09 Does that blow your mind?
0:00:10 Blows my mind. Blows my mind.
0:00:12 What are the traits of a savage founder?
0:00:17 Speed. School taught you what time looks like, and now you think this is how the world moves.
0:00:20 You’re wrong. Your speed bar is wrong.
0:00:23 So if I’m a founder, what are the most common emotional blockers slowing me down?
0:00:25 The big one is just fear.
0:00:28 We have these mindsets bred into us by the normies.
0:00:32 Why is it that sort of 85%, 90% of all returns in tech have come from the Bay Area?
0:00:35 It’s because the mindsets here are slightly different.
0:00:39 So can you make me smarter as a founder? Because it seems like this is important.
0:00:42 Don’t think of yourself as choosing a job or choosing an industry.
0:00:44 Think of yourself as choosing a network.
0:00:47 What do you think of people who are investing in open AI or the sort of the models?
0:00:49 Is that where the value is going to accrue?
0:00:52 Yeah, I don’t get it. I don’t get it. I think they’re making a big mistake.
0:00:56 What do you think is the juiciest kind of opportunity, whether you’re an entrepreneur or an investor?
0:00:58 There is going to be opportunity.
0:01:18 Can you tell your high school story? Because when I was doing my research, it looks like, James, Harvard, Princeton, Exeter.
0:01:23 You know, like you went to the top high school, the top college, the top business school.
0:01:29 So I just thought you must either come for money or just prestige, alumni, something.
0:01:32 But I guess you were telling me before we started, that’s not the case.
0:01:32 Yeah.
0:01:35 I love the phrase you said, they got me out of the mud.
0:01:35 I love what you said.
0:01:37 Yeah, they plucked me from the mud.
0:01:41 But I grew up on the dirt road in New Hampshire, about a mile from the nearest paved road.
0:01:42 My mom was a music teacher.
0:01:44 My dad, she made about seven bucks an hour.
0:01:46 And my dad was a carpenter.
0:01:49 Sometimes she was a hostess at a nearby restaurant.
0:01:52 And we had 12 cats and two dogs.
0:01:53 We just, we lived in the middle of nowhere.
0:01:57 And I would sell worms to fishermen who would be fishing nearby.
0:01:59 That was my first job when I was sick.
0:02:01 Now, my first job, my first startup was when I was six.
0:02:04 And they would come by and they’d need worms to go fishing.
0:02:12 And so I would dig them out from under the apple trees that were nearby and put them in the empty cat food cans that we had in the house and sell them for 50 cents.
0:02:18 And I would make, you know, six bucks a week during the summer because they would come up the driveway and I would just sell them worms.
0:02:20 And then I went on to do all sorts of other businesses.
0:02:24 But what happened was in sixth grade, I got beat up by a guy named James Cody.
0:02:26 I hope he’s doing well, but he was kind of brutal.
0:02:28 I’m sure he did not have an easy life.
0:02:28 Right.
0:02:30 Because he was making my life hard too.
0:02:37 And as my friend Lance Casey picked me up off the ground, he said, don’t worry, James, we’re going to go to prep school.
0:02:38 And I said, what’s prep school?
0:02:40 And he said, it’s where the smart kids go.
0:02:42 And I said, do they fight there?
0:02:44 And he said, no, they don’t fight there.
0:02:45 And I said, well, then I want to go there.
0:02:47 Because I’m a small guy.
0:02:49 I still weigh 165 pounds.
0:02:53 I mean, as my sons call me, who are all now taller than me, they call me a victim weight.
0:02:55 Dad, you’re still a victim weight.
0:02:57 So anyway, fighting wasn’t my forte.
0:03:01 And so I went home to my dad and I said, you know, I want to go to prep school.
0:03:03 And he’s like, how did you hear about prep school?
0:03:04 And I said, well, Lance told me.
0:03:06 Now, Lance’s dad was like the local surgeon.
0:03:08 And Lance was half Iranian and half Italian.
0:03:11 And, you know, the kids kind of picked on him, too, and whatnot.
0:03:14 So he and I were sort of bonded together.
0:03:16 And that really changed my life.
0:03:18 And so my dad figured out that I needed to take these SSAT tests.
0:03:19 So I took the test.
0:03:21 And then I applied.
0:03:22 And they let me in.
0:03:23 And we didn’t have any money.
0:03:24 So they just paid for it.
0:03:25 So Exeter paid for it.
0:03:29 And so that really set my whole life off in a different direction.
0:03:33 And I, you know, I had, you know, used clothes from Goodwill.
0:03:35 And everybody else had fancy clothes.
0:03:37 And, you know, but and everybody was grinding.
0:03:38 We just grinded.
0:03:42 And so by the end of my junior year, I’d skipped out of the first two and a half years of Princeton
0:03:42 engineering.
0:03:48 So at the end of that, of the high school, they said, you know, you can choose Harvard,
0:03:51 Princeton, or Yale because you’ve achieved all this stuff.
0:03:54 You built a hovercraft that went 35 miles an hour.
0:03:55 You’re clearly an engineer.
0:03:57 You know, pick which one you want to go to.
0:03:59 And I said, what’s the furthest place from here?
0:04:04 So I have been assisted by the whole system all the way along.
0:04:08 And, you know, people talk about beat their chest and say, I’m a self-made man, and it’s
0:04:09 complete bullshit.
0:04:16 Like most of us are a function of a sixth grade friend who put us on a completely different
0:04:16 path.
0:04:17 Right.
0:04:23 And you went from selling worms for 50 cents, making, you know, 50 cents a worm to how much
0:04:25 money does NFX have under management now?
0:04:26 Close to 1.6 billion.
0:04:26 Yeah.
0:04:28 Does that blow your mind?
0:04:29 It blows my mind.
0:04:34 I’ve written here a bunch of kind of like the greatest hits.
0:04:36 So these are some of the big ideas that you’ve shared with me.
0:04:37 Let’s see.
0:04:38 Your life on network effects.
0:04:43 So the NFX.com website is the second most popular VC website in the world.
0:04:45 And Andreessen produces a lot more content.
0:04:46 They’ve got like 600 people.
0:04:48 You know, we have 10 people.
0:04:53 But we’re the second most popular and the most popular blog post was called your life on network
0:04:53 effects.
0:04:55 Can you do the quick explainer?
0:04:57 So for somebody who doesn’t know what network effects is.
0:05:04 A network effect is every new person who uses your product makes the product more valuable
0:05:05 for the other users of the product.
0:05:06 And the great example is Twitter.
0:05:09 The more people who are tweeting, the more valuable Twitter becomes for everyone.
0:05:14 Facebook, Microsoft operating system, more people using Microsoft operating system, the
0:05:18 more it’s more valuable for WordPerfect to build their software on top of Microsoft so
0:05:19 that more people can use it.
0:05:25 And the more people that are using WordPerfect, the more I can share my WordPerfect file with
0:05:25 other people.
0:05:27 So these are all network effects.
0:05:31 So if you look at the top, you know, seven companies in the world in terms of market
0:05:34 cap, five or six of them have network effects at their core.
0:05:36 And that was not true 30 years, 20 years ago.
0:05:43 And so most of the big things that dominate our life, whether it’s Comcast or whatever, these
0:05:44 all have network effects businesses.
0:05:46 And so we’ve studied them.
0:05:47 We invest in them.
0:05:51 We have spent the last 20 years becoming sort of the world’s experts at them.
0:05:53 We’ve identified 17 of them.
0:05:54 They’re mathematical principles.
0:06:00 And in talking these through with Eric and others, he started to get these wide eyes
0:06:02 like, oh, that affects how I’m dating.
0:06:04 Oh, that affects where I should live.
0:06:06 That affects what happened to my dad.
0:06:13 And I was and he was realizing that the analysis of networks and the network topologies and network
0:06:17 dynamics was actually really applicable to how we live our lives.
0:06:18 So give me a simple example.
0:06:20 So where’s besides business?
0:06:23 How does network effects work in my life?
0:06:24 Dating, you know, friends.
0:06:27 The simplest and most relevant is where you choose to live.
0:06:29 So a city is a network.
0:06:30 Right.
0:06:34 And if you choose to live in a city, you are choosing that network.
0:06:39 And so basically what the article says is don’t think of yourself as choosing a job or choosing
0:06:42 an industry or think of yourself as choosing a network.
0:06:43 OK.
0:06:48 My company is a network who I hire into my network, which journalists I get to write
0:06:48 about.
0:06:50 I bond that person into my network.
0:06:51 Right.
0:06:53 Which investors I bond into my network.
0:06:54 Right.
0:06:55 So we think of everything.
0:06:58 Once you start thinking of everything as networks, like the whole world looks a little bit different
0:06:59 to you.
0:07:00 Where should I go to find a spouse?
0:07:02 Well, think about your network.
0:07:05 When you get married, you’re joining her network.
0:07:06 Right.
0:07:07 And she’s joining your network.
0:07:11 You’re going to have to have Christmas and Thanksgiving or whatever with her parents forever.
0:07:12 Right.
0:07:16 And what your life on network effects does is it breaks it down into seven phases of
0:07:22 your life where you are basically choosing a network and it’ll have a really big impact
0:07:24 on how your life plays out.
0:07:25 Let’s pull another card.
0:07:26 See what we got.
0:07:26 OK.
0:07:28 Savage founders.
0:07:28 Yeah.
0:07:34 So, you know, look, I’ve been a founder four times and then the fifth time is starting a
0:07:34 venture firm.
0:07:40 So I have been a founder myself and I’ve invested in, I don’t know, 300 different companies over
0:07:40 the years.
0:07:47 And the thing that keeps coming up is that in order to do something extraordinary, you
0:07:50 have to be relatively savage, which means you have to be very fast.
0:07:54 You have to be very competitive and you tend to have to be pretty aggressive and you just
0:07:56 can never can never stop.
0:07:57 And a lot of people say, oh, they need to be mission driven.
0:08:02 But that’s confusing with that word or they need to have had childhood trauma.
0:08:05 And that’s that may be true for some people, for sure.
0:08:10 But in the end, we use the word savage just because you just go for it every day.
0:08:14 You know, it’s like you wake up every morning and you’re listening to bring me to life and
0:08:17 you’re just, you know, you’re cranking and that sort of thing.
0:08:19 And that’s that’s what we look for in founders.
0:08:20 And that’s who I like to be.
0:08:23 And that’s who I like hanging out with.
0:08:25 And what are the traits of a savage founder?
0:08:31 So I think people would immediately gravitate towards like maybe hardworking or determined,
0:08:32 things like that.
0:08:34 So the number one thing that it rolls up into is speed.
0:08:39 So you could you could lay out 16 characteristics that you’re looking for, but all of those lead
0:08:40 to one thing, which is speed.
0:08:44 And so if we measure speed when we’re meeting with the founders, that’s the main thing that
0:08:45 determines.
0:08:48 And if you look at their speed over the next five, six, seven, eight, ten years when we’re
0:08:53 working with them, that’s the main thing that determines their success is that now to get
0:08:53 to speed.
0:08:56 You typically have to push out people who aren’t fast.
0:09:02 So you end up firing a lot of people who aren’t willing to sacrifice, who don’t enjoy, you
0:09:07 know, type two fun, the fun that you look back on and you suffered, but you look back on it
0:09:08 as if it was fun, right?
0:09:10 Type one fun, fun in the moment.
0:09:10 Yeah.
0:09:12 Type two fun, look back on it.
0:09:12 Is that it?
0:09:12 That’s right.
0:09:15 And type two fun is you’re suffering through the whole thing.
0:09:18 But but at the end, you look back and realize it was fun, like staying up for a hackathon
0:09:20 for three straight days and then winning the hackathon.
0:09:20 Right.
0:09:25 Like, that’s fun, you know, not sleeping very much for 18 months.
0:09:25 Right.
0:09:27 But then it succeeds and you’ve got this giant company.
0:09:28 It’s really cool.
0:09:30 That’s you look back and you’re like, I want to do that again.
0:09:30 Right.
0:09:36 You know, you think about women giving birth, like it’s type two fun, like, you know, and
0:09:38 they look back and like, I would do that again.
0:09:42 So, you know, I think that that’s a that’s a main character, but it rolls up to speed.
0:09:47 So the other thing is that you can’t be afraid of pissing some people off.
0:09:53 Like, and the people who aren’t afraid of it, of just saying what they’re thinking or
0:09:55 having a different view and not pleasing everyone in the room.
0:09:56 Right.
0:09:59 Those people end up doing a lot better because they see the world differently.
0:10:00 They’re not they’re not scared.
0:10:03 We can measure their their personality type.
0:10:06 Actually, if you look at the best personality test in the world, it’s called a five factor
0:10:06 personality test.
0:10:08 McCray and McCosta, 1972, North Carolina.
0:10:09 Right.
0:10:10 This is the best test in the world.
0:10:14 And one of the attributes is agreeableness or disagreeableness.
0:10:15 That’s a scalar.
0:10:18 One of the five scalars that they use is agree.
0:10:23 If you are disagreeable, you end up doing better as an entrepreneur and a founder and as a creator
0:10:27 because you don’t have this need to please everyone all the time.
0:10:30 And it’s simple things like, you know, I remember I went out on a date with a girl when I was a
0:10:35 teenager and she asked three or four times to get ice cream from behind the counter, you know?
0:10:38 And I’m like, at some point, you just got to buy the ice cream, my friend.
0:10:41 And I was getting a little upset because I’m more agreeable and other people were more.
0:10:42 She was just very disagreeable.
0:10:43 Right.
0:10:44 She was great.
0:10:45 It’s just a personality trait.
0:10:49 And so those sorts of things end up showing up in Savage Founders.
0:10:51 I think about that within founders we’ve invested in, too.
0:10:58 It’s like they have these almost rough edges that are and they have things they believe that
0:11:01 they’re going to do and they don’t really care if you think it’s nice.
0:11:02 They don’t really care if you think it’s right.
0:11:04 They believe it’s right.
0:11:05 And that’s kind of all that matters.
0:11:09 And whether they whether 99% of people would agree with them or not doesn’t matter.
0:11:11 And those people might not end up having great friends.
0:11:17 They might not have a normal, peaceful life, but they’re going to potentially do something
0:11:17 extraordinary.
0:11:20 And as a venture investor, we have to look for that.
0:11:24 And in general, I’ve tended to surround myself with people who are both extraordinary and nice
0:11:28 like yourself, but other people don’t don’t really care.
0:11:31 So, you know, like more of a Peter Thiel type or whatever, where he’s just like, I just
0:11:32 want the truth.
0:11:34 I don’t care if I break people’s beaks, you know?
0:11:34 Right.
0:11:36 Who comes to mind?
0:11:36 Savage founder.
0:11:41 Because, you know, I have this theory that you don’t know what a level 12, like on a scale
0:11:43 of one to 10, you don’t even know what 12 looks like.
0:11:44 Then you meet someone, they break your frame.
0:11:48 You said, oh, I thought I was already 10 out of 10 hard work.
0:11:49 And then I met David Goggins.
0:11:49 Yeah.
0:11:51 I was, oh, I don’t know the first thing about this.
0:11:52 I’m a seven.
0:11:52 Yeah.
0:11:53 That’s what a level 12 is.
0:11:57 So who kind of broke your frame as like, wow, that’s the real savage founder.
0:11:58 Yeah.
0:12:01 I mean, a couple of people like, you know, think about the Poshmark CEO, right?
0:12:05 He was so determined.
0:12:07 He was constantly revisiting his flows.
0:12:09 He was constantly rebuilding the product.
0:12:10 He’s constantly changing his mind.
0:12:13 You’re running a very complicated marketplace product.
0:12:16 You have to abandon what you’re doing six months ago and do something brand new.
0:12:17 It’s a very difficult business to run.
0:12:21 And he did it for like 11 years and exited for billions of dollars, right?
0:12:24 I mean, he’s an amazing guy, but he’s also a nice person.
0:12:25 You want to have lunch with him.
0:12:28 So he’s in that boundary layer, which I really appreciate.
0:12:30 A guy like Khan Ghanai, who nobody knows yet.
0:12:36 He’s the CEO of Firefly, which is those videos on top of, you’ve got six different businesses
0:12:37 you’re running inside of that.
0:12:38 It’s a very difficult business to run.
0:12:39 He went through COVID.
0:12:40 He lost 95% of his revenue.
0:12:45 He had to adjust to that because no one was on the street to show ads to.
0:12:47 And so he survived.
0:12:47 They’re now profitable.
0:12:48 Big company.
0:12:50 Everyone’s gotten out of the space.
0:12:51 It’s like, Tim, he’s going to win the space.
0:12:55 People will tell his story later, but yeah, just savage founder.
0:13:00 And you said it all rolls up to speed, but you’ve also said something, which is speed is
0:13:01 not what you think.
0:13:01 Yeah.
0:13:02 What does that mean?
0:13:04 I actually don’t know what you meant by that.
0:13:08 So most people think speed means you’re working 18 hours a day.
0:13:15 It’s not that it’s about an emotional flexibility that allows you to abandon what you were doing
0:13:16 before and do the right thing going forward.
0:13:20 It isn’t speed on your original idea.
0:13:22 It’s speed toward success.
0:13:25 And that isn’t typically what you most ideas don’t work.
0:13:30 You know, I always say I have 83 ideas a week and every three weeks I have a half an idea
0:13:30 that’s good.
0:13:35 I mean, it’s literally that volume of ideas, the difference between what’s a good idea and what
0:13:36 doesn’t work.
0:13:37 And it’s okay that most things don’t work.
0:13:42 And the flexibility to move toward what will work is what speed is.
0:13:44 And it’s mostly your emotional tenor.
0:13:47 And it’s how you manage your network around you.
0:13:51 It’s how you manage your spouse to let him or her know what’s about to come.
0:13:56 It’s how you manage your employees so that they know, look, we’re going to iterate this.
0:13:57 We’re not going to iterate this twice.
0:13:59 We’re going to iterate this 28 times.
0:14:01 You know, that’s where Snap came from.
0:14:02 I think it was their 27th app.
0:14:04 Like, is that true?
0:14:05 Well, what was their story?
0:14:11 I don’t know their story in detail, but I understand that it was many, many attempts before Snap
0:14:11 actually worked.
0:14:15 And if you look at, you know, our gaming company that we did, it was our seventh game that finally
0:14:16 worked.
0:14:21 If you look at my first company, it was our 27th test, which finally got, you know, viral.
0:14:27 You have to prepare everyone around you for all the changes, which ends up producing speed.
0:14:28 So Stan and I have never failed.
0:14:30 We’ve never lost a dime for anyone.
0:14:36 We’ve always made people money for the last 25 years because we had speed toward the goal
0:14:38 of success, not speed toward the original thing we were going to do.
0:14:41 And so we got out of our own way emotionally.
0:14:46 And so I actually have this lecture I give in private about all the emotional barriers you
0:14:49 are putting up in front of you that causes you to go slowly.
0:14:53 And you think it’s fast because school taught you what time looks like.
0:14:57 And then maybe you work for a big company to get a good brand like Google or Microsoft or
0:14:57 whatever.
0:14:59 And now you think this is how the world moves.
0:15:00 You’re wrong.
0:15:02 Your speed bar is wrong.
0:15:02 Right.
0:15:05 And you’ve got to, you’ve got to raise your speed bar.
0:15:06 Hey, quick announcement.
0:15:10 So Sean here, I wanted to tell you that I’m doing a free CEO bootcamp.
0:15:11 Why am I doing this?
0:15:14 I’m doing this because over the last 15 years, I’ve been running my company and I’ve found
0:15:19 a few things, not a lot, but a few things that are incredibly helpful that I kind of wished
0:15:23 I had learned earlier that nobody really seems to teach, but have been incredibly helpful
0:15:25 for me as a CEO.
0:15:27 My business is totally free, no obligations, just doing it for fun.
0:15:31 So if you’re a business owner out there and you want to come to this thing, it’s on April
0:15:32 16th.
0:15:33 The link is in the description below.
0:15:36 And I’m teaching something that I found in a book that I read in the bathroom.
0:15:39 I was in a bathroom once and I read this book called The One Minute Manager.
0:15:44 And as somebody who hates managing people, but wants all the benefits of being a good manager,
0:15:46 this book was incredible for me.
0:15:47 It’s this book called The One Minute Manager.
0:15:49 And I stole this one framework from it.
0:15:51 And I’m going to teach it to you at the event.
0:15:54 And I’m going to do live Q&A with people while I’m there.
0:15:54 It’s going to be a lot of fun.
0:15:55 Totally free.
0:15:56 You should come if you want.
0:15:57 It’s in the description below.
0:15:59 I have a thing on here.
0:16:03 I think it’s called the, or is it the art of unlearning?
0:16:04 Yes.
0:16:05 Is that what you’re talking about?
0:16:10 Like you’re taught things, you learn things, but then as an adult, there’s almost like these,
0:16:11 I don’t know, five, seven things.
0:16:12 I have to unlearn these things.
0:16:13 What are those?
0:16:15 And this is, I mean, there’s so many things.
0:16:16 It’s about speed.
0:16:20 It’s about, you know, the emphasis on human communication relationship versus the actual
0:16:20 product.
0:16:23 Like everyone focuses on how to build this and do it.
0:16:24 No, dude, you’ve got to talk to people.
0:16:25 You’ve got to talk to your customer.
0:16:27 You’ve got to think about that communication.
0:16:31 We have these mindsets that get bred into us by the normies.
0:16:34 And if you want to do something extraordinary, you have to get out of those mindsets.
0:16:38 I mean, why is it that sort of 85, 90% of all returns in tech have come from the Bay Area?
0:16:45 It’s because the mindsets here are slightly different from New York and London and LA and other things.
0:16:51 And as a result, things just happen a lot faster and things happen a lot better.
0:16:51 And we should say that again.
0:16:55 So you’re saying the world of technology, which is open to everybody to compete.
0:16:56 Everybody’s aware of it.
0:17:00 We’ve all got phones and we’re on earth and you’re saying 85% of all of the returns, all
0:17:05 the money that got made comes from this, how many square feet, how many square miles?
0:17:07 It’s like 7 million people.
0:17:08 7 million people in the Bay Area.
0:17:08 Yeah.
0:17:10 And 85% of the returns happen here.
0:17:11 Yeah.
0:17:13 You got to ask yourself why, right?
0:17:16 And what you’re saying is one of the things is there’s a certain mindset, a certain way
0:17:19 of doing things, a certain speed of operating that is different.
0:17:20 Yeah.
0:17:23 And those are all just assumptions and mindsets we make.
0:17:23 Right.
0:17:28 But it’s literally an order of magnitude you can go faster than you think you can.
0:17:33 And once you understand that, once you set your speed bar that way, then life opens up
0:17:33 to you.
0:17:34 And that’s what savage founders do.
0:17:35 They realize it.
0:17:36 Mike Cassidy is the founder.
0:17:38 He was the original speed guy.
0:17:39 I don’t know if he was.
0:17:39 Who’s Mike Cassidy?
0:17:41 Mike Cassidy is a guy who founded Fire.
0:17:45 He founded Direct Hit, one of the first search engines.
0:17:47 He sold it for 500 million after 500 days.
0:17:50 He’s done, I don’t know, four or five businesses.
0:17:50 They’ve all worked.
0:17:52 He ended up at X for a while doing Loon.
0:17:55 And he’s just, he taught me about speed.
0:17:57 He was the one who originally figured it out in the 90s.
0:17:58 What did he tell you?
0:17:59 What did he say?
0:18:04 He’s like, you don’t need to take, you know, three months to raise money and get an office
0:18:04 and all that stuff.
0:18:05 You can do it in four days.
0:18:10 I can raise money in two days and I can get an office in a half a day and I can hire
0:18:14 my team in three days and I can have my product out in two months.
0:18:16 And everyone else was taking two, three, four years.
0:18:16 Right.
0:18:18 He was literally doing it two, three, four months.
0:18:22 Is this a shoot for the stars and you’re laying on the moon situation where, okay, even if he
0:18:26 doesn’t do it in two days, he does it in five, but five is way better than the default five
0:18:26 months.
0:18:27 That could be it.
0:18:27 Yeah.
0:18:28 That could be it.
0:18:30 I have a couple of stories.
0:18:34 Sometimes I hear these stories about, you know, Elon built the Colossus data center in
0:18:36 122 days.
0:18:38 Normally it’s two years for permitting.
0:18:41 And then you hear these stories and it’s like, wow, that’s pace, that’s speed.
0:18:45 But it’s also a little bit like, well, I’m not building Colossus.
0:18:47 So it’s almost distant for me, but I’ll give it like another story.
0:18:48 We have a buddy.
0:18:48 I think he might know him.
0:18:49 Suli Ali.
0:18:51 He, we were advising a company.
0:18:53 The company was like, we really need to raise money.
0:18:54 Desperately need to raise money.
0:18:56 He’s like, okay, we’ll be on the, let’s get on the phone now.
0:18:57 They’re like, okay.
0:18:59 We don’t have it ready yet.
0:19:00 So you just told me you desperately need help.
0:19:01 Let’s go.
0:19:05 So we get on a phone call and we say, just give us what you got for so far for the pitch.
0:19:05 Yeah.
0:19:06 And they give it to us.
0:19:12 And we give them some feedback and they’re like, oh wow, this was really, really useful.
0:19:15 And so Suli goes, great.
0:19:17 How long do you think it’s going to take you to make these changes?
0:19:19 Like, well, we’ll reach back out next week.
0:19:21 And I’m really like, so thankful for your help.
0:19:22 Want to see what happens.
0:19:23 He goes, next week.
0:19:24 I thought this is important.
0:19:25 Like it is important.
0:19:26 He goes, cool.
0:19:28 Like, I think you could probably make, get these changes done or most of them done.
0:19:30 80% of them in the next few hours.
0:19:32 So let’s talk again at 3 p.m.
0:19:33 By lunch.
0:19:33 Yeah, exactly.
0:19:36 So he was like, we met at 11 and he’s like, we’re going to meet again at three.
0:19:36 Yeah.
0:19:41 And I just didn’t even know that was like a norm you could do, especially externally to someone else’s
0:19:43 company be like, why are we not having two meetings today?
0:19:44 Why not?
0:19:45 Why not do two days?
0:19:49 And as soon as I saw that, my own speed bar got raised because I realized like something
0:19:52 that was almost an invisible wall really wasn’t real.
0:19:53 And I could change that.
0:19:56 I could make that, that small difference in my own speed pace.
0:19:57 Right.
0:20:03 So most people think of speed as process or standups or schedules or Kanban board.
0:20:04 That isn’t.
0:20:05 It’s your own emotional mentality.
0:20:06 That’s what speed is.
0:20:09 And you’re saying there’s like this list of emotional blockers.
0:20:13 So if I’m a founder, what are the most common emotional blockers slowing me down from being
0:20:13 higher speed?
0:20:15 The big one is just fear.
0:20:20 You’re fearful of getting it wrong because you were taught all through growing up that
0:20:25 getting the answers right on the test got you love, got you appreciation, got you status,
0:20:27 got you into the right college.
0:20:30 And in the real world, that’s just not the case.
0:20:35 You’re just got to like, like Elon, just blow up the rockets, blow up the rockets, blow up the
0:20:36 rockets, and so the rockets don’t blow up anymore.
0:20:37 Right.
0:20:41 And, and so his, his, his speed bar is what you see.
0:20:41 Right.
0:20:44 And so he has broken through into a completely different realm.
0:20:47 The one that Mike Cassidy has always lived in.
0:20:47 Right.
0:20:49 And there’s just a few of us living in that realm.
0:20:53 And so much is possible once you live in that realm of your mind.
0:20:54 Yeah.
0:20:55 You get, now that you say, you can see it everywhere.
0:20:59 Like Doge, they set a target, which was Doge will wind down in two years or whatever.
0:21:01 He’s like, we don’t need the full term.
0:21:02 Why would I take the full term?
0:21:03 Two years will be done.
0:21:03 We set a date.
0:21:05 That was like the first thing he did was set a date.
0:21:10 And people burn out and people like, oh, I worked there for four years, got my equity
0:21:11 and I’m gone, man.
0:21:12 I never want to do that again.
0:21:12 It was miserable.
0:21:15 Ah, they look back and you know what they talk about at Thanksgiving?
0:21:20 Well, when I was working at Tesla, when I was working at SpaceX, like it’s the most amazing
0:21:20 time of your life.
0:21:23 You talk to people who are in World War II and they’re like, what was the best years of your
0:21:24 life during the war?
0:21:25 We were together.
0:21:26 We were bonded.
0:21:27 We had a mission.
0:21:31 We did the, you know, so this is type two fun and, and going fast as part of that.
0:21:32 You have this diagram.
0:21:33 I thought it was pretty cool.
0:21:33 Yeah.
0:21:35 It’s a technology window.
0:21:37 You have actually two little things here.
0:21:42 So you have this one, which is the technology window curve.
0:21:43 I hadn’t seen this before.
0:21:47 And then you have this kind of historical thing.
0:21:48 It’s like railroads.
0:21:55 The technology window was open for 40 years, cars, 25 years, radio, 24 years.
0:21:57 And so you have, and now AI, eight years so far.
0:21:58 So far.
0:22:00 So can you make me smarter as a founder?
0:22:03 Because it seems like this is important because timing is everything.
0:22:05 Being early is the same thing as being wrong.
0:22:07 Being late is the same thing as being wrong.
0:22:11 So getting the, being, knowing where you are in the window seems important, but I’ve never
0:22:13 really talked about it this much.
0:22:13 Yeah.
0:22:18 So look, I, you know, as I said, I went to Harvard Business School and I lecture at Stanford and
0:22:19 lecture at Berkeley and MIT.
0:22:21 And I’ve never seen anyone teaching this and I’ve never seen anyone teaching this.
0:22:22 And it was really surprising to me.
0:22:31 And basically what you realize is that most big, interesting, world-changing companies are a result of riding a particular technology wave.
0:22:41 So if you think about the railroads, the giant railroads, Southern Pacific Railroad, which transformed America, they leveraged a new technology, which was railroad technology.
0:22:46 Both the steel for the rails and the steam engines and all the stuff that came with that technology.
0:22:50 And that, that window in the United States was open for only 40 years.
0:22:59 If you were, and that was between 1830 and 1870, if you were trying to start a railroad company in 1880, you got your ass kicked.
0:23:00 Right.
0:23:08 And they all wanted to be rich and famous, like the people who had been building it the 40 years earlier, but they couldn’t anymore because the technology window had closed 90%.
0:23:09 It was just closed.
0:23:11 You wouldn’t even think of starting a railroad company today.
0:23:12 Pretty obvious.
0:23:15 But then you look at other technologies like cable.
0:23:18 And that was open between like 1970, 1984.
0:23:24 Only a 14-year window during which all the cable companies that were meaningful were created.
0:23:26 Anybody who tried to do it afterwards got their ass kicked.
0:23:31 Same thing was true in consumer internet once we looked at it.
0:23:36 And, you know, it opened in 1994 because remember, in 93, nobody used software.
0:23:37 Right.
0:23:38 No consumers, no small businesses, no enterprises.
0:23:42 We had some AS400s running around and it was all on-prem software and blah, blah, blah.
0:23:44 But it was very small.
0:23:46 Suddenly, we now have 4 billion people using software.
0:23:49 And that was because of the browser and the internet and TCPIP.
0:24:01 That opens up and between 94 and 2013, it was a fantastic time to start companies in the consumer software space and invest in them from seed or Series A.
0:24:03 In 2014, the window just closed.
0:24:09 You can look at the number of unicorns created from 2014 to today and it’s really small.
0:24:15 It’s like Discord, TikTok, you know, Starlink, ChatGPT.
0:24:17 There’s like 10 of them in the West.
0:24:21 Versus how many, you know, during the previous, let’s say, 10 years, you might have 10x that number.
0:24:22 Yeah, you would have 15 a year.
0:24:22 Right.
0:24:26 And so, what we haven’t been talking about is that the technology window closed.
0:24:29 Like it closes for every technology, you know, window.
0:24:31 If you look at automobiles, same thing.
0:24:44 All the automobile companies that we know of were started between 1898 and 1928, right, until Tesla, when the underlying technology window opened around lithium batteries and electric engines.
0:24:47 And now we have two interesting companies, Tesla and Rivian.
0:24:48 Okay.
0:24:53 So, this opening of the technology and the closing of the technology window is very predictable.
0:24:54 We don’t know how long it’s going to be.
0:24:56 Sometimes 40 years, sometimes it’s eight years.
0:25:02 It’s like with cell phone networks in the United States, which is eight years, but the phases of it are very predictable.
0:25:05 And there’s just six phases in it, and you can see it.
0:25:07 And so, once you see them.
0:25:08 That’s these six phases.
0:25:09 Yeah, once these six phases.
0:25:14 The first phase is just, it’s a hobbyist, is really interested in the technology just because of fun.
0:25:14 Right.
0:25:15 Geeks, basically.
0:25:19 And this is kind of like what the nerds do on the weekend, we’ll all do in 10 years type of thing.
0:25:19 That’s right.
0:25:21 What was a toy before is now a big thing, that kind of idea.
0:25:26 And then there is, the second phase is the status and money phase.
0:25:31 Where suddenly, some geek makes a ton of money and gets status.
0:25:33 And then now everyone’s interested.
0:25:34 Oculus sells to Facebook.
0:25:41 And everybody now can understand it because the abnormal people, the savage people, are probably just hobbyists.
0:25:41 Right.
0:25:43 But normal people are money and status seeking.
0:25:43 Right.
0:25:44 Right?
0:25:46 So, they can understand money and status.
0:25:47 I want that.
0:25:47 How did he get that?
0:25:48 Or how did she get that?
0:25:49 I want that.
0:25:51 So, that’s when the knowledge diffuses.
0:25:54 What’s going on over there with that internet thing?
0:25:55 Broadcasters are like, oh, start talking about it.
0:25:57 Bloggers, start talking about it.
0:26:01 There’s conferences pop up about the AI wave and agents and all this.
0:26:03 We’re diffusing the knowledge now.
0:26:04 More people are getting in on the secret.
0:26:04 That’s right.
0:26:09 And then you get tons of competition flows in.
0:26:10 A lot of investment money comes in.
0:26:11 Teams form.
0:26:13 Everyone can understand the idea because the knowledge is diffused.
0:26:16 And so, five or six people get together and start a company and then they get funded, blah, blah, blah.
0:26:18 And then the incumbents arrive.
0:26:21 The incumbents arrive because they’ve found the network effect.
0:26:22 They had a better management team.
0:26:24 They raised more money and crushed the other people.
0:26:27 Something happened to give them their defensibility.
0:26:27 Right.
0:26:31 And they establish themselves as the incumbents and then they just squeeze down.
0:26:33 And the window closes.
0:26:39 If you want to watch an interesting, beautiful dramatization of what this looks like, watch the movie Tucker with Jeff Bridges.
0:26:43 It’s a story that I think the movie came out in the 90s.
0:26:45 It was about something that happened in 1952.
0:26:48 And it shows you what it’s like to build a car company in 1952.
0:26:48 Okay.
0:26:50 You just get your ass kicked by the incumbents.
0:26:52 The window is shut.
0:26:53 Get your ass kicked.
0:26:53 There’s nothing you can do.
0:26:55 There’s nothing you can do.
0:26:57 And so, we see this pattern over and over again.
0:26:59 And I think it’s very important for us as founders.
0:27:06 So, the window opens due to the technology, underlying technology, and it closes because the winners get network effects.
0:27:16 And their flywheel is spinning so fast that even if you’re hardworking and you’re super smart and you’ve got great design and great engineering, you can’t compete with a network effect once it really kicks in.
0:27:16 That’s right.
0:27:17 And it could be a network effect.
0:27:19 It could be an embeddedness.
0:27:21 It could be a scale.
0:27:22 Or it could be a brand.
0:27:25 Those are the four defensibilities in the digital world that now exist.
0:27:26 So, it’s just one of those.
0:27:27 Quick example of each of the four.
0:27:30 So, like, let’s do a simple brand.
0:27:33 So, a brand network effect would be something like Ford.
0:27:38 People just keep buying their Fords because they’re loyal to Fords, even though, you know, the Toyota trucks might be better.
0:27:43 You have a brand effect around Nike, obviously.
0:27:45 I mean, I feel a certain way when I wear it.
0:27:45 Right.
0:27:47 You know, I project something.
0:27:49 Everybody knows what it means when I wear Nike.
0:27:53 So, there’s sort of a knowledge network effect, but we still call it a brand effect.
0:27:54 It’s quite close to a network effect.
0:27:55 It’s just in the mind.
0:27:58 With, like, all luxury brands, basically, Louis Vuitton, et cetera.
0:28:00 Yeah, those, exactly.
0:28:01 So, those have brand effects.
0:28:05 The network effects are the most powerful because they’re really unstoppable.
0:28:06 I mean, look at Facebook.
0:28:09 I mean, they’re now one and a half trillion or something.
0:28:14 And the more people there, the more valuable those networks are.
0:28:16 Instagram, WhatsApp, and Facebook.
0:28:18 That’s classic network effect.
0:28:19 You’ve got embedding, like Oracle.
0:28:22 They embed that software in your operations.
0:28:25 You’re going to retire before you rip that stuff out, right?
0:28:27 They charge you 25% more next year.
0:28:28 You’re going to pay.
0:28:28 Right.
0:28:30 There’s nothing you can do, right?
0:28:31 It’s just…
0:28:34 We had a startup that was trying to get rid of its birthday alarm.
0:28:36 They’re trying to get rid of Oracle back in the day.
0:28:42 And it took us, like, a year and a half of the worst work that every engineer hated just
0:28:43 to get off our Oracle dependency.
0:28:44 Right.
0:28:45 And how much was it worth in the end?
0:28:46 I don’t know.
0:28:48 So, that’s an embedding.
0:28:50 And then scale would be something like Walmart.
0:28:53 It’s just so many stores, so much buying power.
0:28:55 They can buy cheaper.
0:28:56 They can sell cheaper.
0:28:58 Everyone just goes there because it’s always going to be cheaper there.
0:29:01 Where does Mr. Beast fit in as a content creator, right?
0:29:02 Like, he’s kind of scaled.
0:29:07 Basically, he gets paid the most, so he invests the most, so he has the biggest kind of set
0:29:08 productions.
0:29:10 He can give away the most money, which creates a lot of views.
0:29:11 That’s a scale effect.
0:29:11 That’s a scale.
0:29:12 That’s a scale effect.
0:29:13 And it’s a very weak one.
0:29:14 Yeah.
0:29:15 No, he’s very vulnerable.
0:29:15 Yeah.
0:29:18 Just like BuzzFeed was very vulnerable and wasn’t going to go anywhere.
0:29:19 And why is that?
0:29:20 So, explain more there.
0:29:23 Well, because he’s in what’s called the fresh produce business, which is he has to keep producing
0:29:26 fresh produce and putting it on the shelves, and then it times out.
0:29:29 And he’s not building any network effect.
0:29:30 He’s not building any embeddedness.
0:29:33 It’s just you’re consuming his stuff on YouTube and other channels.
0:29:35 They have the network effect.
0:29:35 Right.
0:29:40 And he’s just, he’s playing blackjack at the blackjack table.
0:29:42 And as I’ve taught my sons, you don’t want to be playing blackjack.
0:29:43 You want to be the house.
0:29:45 And what would you do if you’re a content creator then?
0:29:49 How would you, if you’re Mr. Beast right now, how do you not be the fresh produce business?
0:29:51 You think about how to create a network effect.
0:29:55 You think you go and learn about the 17 network effects and figure out which ones you could
0:29:55 build.
0:29:55 Right.
0:29:57 I would go for.
0:29:59 So, like, he’s got this chocolate brand now, right?
0:30:00 Selling Feastables.
0:30:02 And he literally told me, he said something great.
0:30:04 He goes, he took us to Walmart.
0:30:05 Yeah.
0:30:08 So, he got into Walmart, which is like a hard, once you get this embedding, right?
0:30:09 He’s like, I have shelf space now.
0:30:09 Yeah.
0:30:10 It doesn’t matter if you make another chocolate brand.
0:30:11 I have shelf space.
0:30:11 Yeah.
0:30:14 And he goes, I sell this color of blue.
0:30:17 He’s like, people don’t even, he’s like, I just need to keep showing this color of blue
0:30:21 and I’m going to need to sell this baby blue thing as, you know, that’s, that’s my game.
0:30:25 She sells this dark brown color and I sell this baby blue color.
0:30:25 Yeah.
0:30:26 Yeah.
0:30:26 Yeah.
0:30:29 And, and he might end up building a brand around that chocolate.
0:30:30 Right.
0:30:33 But it’ll take years and it’ll take hundreds of millions of dollars.
0:30:36 And it’s not clear that it’ll happen.
0:30:37 Right.
0:30:42 What’s an example of somebody who you think has been clever about this and done it, whether
0:30:46 they’re a content creator or something else, where maybe most people in their industry would
0:30:52 have done something that’s a bit of a, doesn’t have network effects, but somebody figured out,
0:30:55 somebody who was a little bit smarter or stumbled into something, figured out a way to do it with
0:30:56 network effects.
0:31:00 I can tell you a funny story about where it should have happened and it didn’t, which
0:31:04 was Dana Carvey asked me about what should I do with danacarvey.com.
0:31:07 And I said, what you should do is you should get Robin Williams and one other guy.
0:31:13 And the three of you should create the standup comedy website, like for, for that niche of YouTube.
0:31:14 Right.
0:31:17 And then you guys judge every week who’s the best and have contests and whatnot.
0:31:21 And I said, you create, and each of you own 33% of the company, you raise some venture capital
0:31:24 and then you sell it for a billion to whatever.
0:31:26 And I explained all this to him.
0:31:28 And then at the end of the hour and a half, he said, yeah.
0:31:30 So what do I do with danacarvey.com?
0:31:32 Like he just, he just couldn’t get out of.
0:31:34 I had the same conversation.
0:31:38 I went to, uh, Hasan Minhaj has become a friend and he was on the podcast and he was, he was
0:31:40 asking me afterwards, like, what do you, what would you do?
0:31:40 Yeah.
0:31:44 And I asked him, I said, what, uh, comedians today, they all sell their specials to Netflix
0:31:46 and they’re super happy.
0:31:47 Like we got the bag, right?
0:31:48 $10 million, 20 million.
0:31:51 I don’t know what Netflix plays, but let’s just assume it’s tens of millions of dollars for
0:31:52 Dave Chappelle or whoever.
0:31:56 But it just makes Netflix’s network effects super strong, right?
0:32:00 Like, so they might make 10 million, but Netflix is going to become a multi hundred billion
0:32:01 dollar company in the process.
0:32:06 But comedians could, especially if you get Louis C.K. and Chappelle, you could theoretically
0:32:11 say, if we just put our content here, we own the network where all the comedy content is.
0:32:14 And that’s a much more valuable thing to own than this special.
0:32:16 But it was kind of the same thing.
0:32:19 It was like, yeah, but they’re throwing a big bag at us.
0:32:22 And also, um, yeah, I want my stuff to be seen.
0:32:24 That’s, you know, if I go there, I get distribution.
0:32:27 If I go, if I try to make my own thing, I’m giving up distribution.
0:32:28 I don’t know if it’s worth it.
0:32:28 That’s right.
0:32:31 But somebody, if somebody played that long game, I think that would be very, that’s right.
0:32:33 And that is all network bonding.
0:32:34 And that is all network dynamics.
0:32:36 And that is exactly the game.
0:32:40 And very few people think in that way, like a vampire attack, like Saudi Arabia tried to
0:32:43 suck off some of the PGA guys and create a new golf thing.
0:32:45 And then they ended up merging back or the USFL.
0:32:47 What’s a vampire attack?
0:32:52 A vampire attack is when you go into a network and you try to suck out the blood from what makes
0:32:58 that network work and you, you essentially try to create your own network effect on your
0:33:01 platform by sucking out the energy that had been developed on their platform.
0:33:04 So was it smart what Saudi Arabia did and the live tour?
0:33:05 Was that like, did they execute it well?
0:33:07 Or what’s your takeaway from it?
0:33:08 I didn’t follow it that much.
0:33:12 It looked like it was only a two year effort and then they, they collapsed after two years.
0:33:15 So I don’t know that it was perfectly executed, but it is the right idea.
0:33:15 Right.
0:33:19 It is the right idea because they were being told by the, they’re, you know, they’re trying
0:33:21 to improve their brand, right?
0:33:24 They’re trying to do brand association to improve their brand.
0:33:27 Everyone’s trying to ratchet up the status of their own brand, whether it’s Saudi Arabia
0:33:27 or whoever.
0:33:32 And, uh, they, they were trying to borrow off the PGA and the PGA was putting all these
0:33:37 restrictions on them and they were, they didn’t have a, uh, a free operating field.
0:33:40 You know, they were, it’s like they were on iOS and they were like, well, I don’t want
0:33:41 to pay 30% to you.
0:33:42 Let me do my own thing.
0:33:43 And they tried it.
0:33:44 And then it’s just hard.
0:33:47 There’s an article on, on, on effects.com, which people should read.
0:33:50 I think it’s one of the better articles, but it might not be as read as it should be.
0:33:52 It’s called network bonding theory.
0:33:56 It’s a little bit boring title, but, uh, I wonder why people didn’t, yeah, network bonding
0:33:56 theory.
0:34:02 It’s it’s, and it explains it uses messy as an example, uh, uh, within the social, within
0:34:05 the soccer networks and how much he makes for the whole networks.
0:34:07 So, so what, what’s the story there with messy?
0:34:12 The basic story is that in the, it was funny because this was before he went to, uh, Miami.
0:34:12 Right.
0:34:19 Um, I said, um, you know, PSG offered to give him X much amount of money and some tokens cause
0:34:24 they were doing these like crypto tokens and, uh, they still aren’t paying him enough.
0:34:26 Like everyone was outraged at how much they were paying him.
0:34:32 And I said, they’re still not paying him enough because he moves the licensing for TV rights
0:34:38 and he moves viewership and he, he is going to bring so much more attention to the French
0:34:45 soccer system so that every comp, every, um, game that messy plays around the French system
0:34:49 is going to be watched three or four times more by the world than it would have been last
0:34:49 year.
0:34:50 Right.
0:34:53 And the value to them of that is way more than they’re going to end up paying him.
0:34:54 Right.
0:35:00 And so you look at Tiger Woods, if Tiger Woods plays, the PGA makes one and a half billion
0:35:01 dollars more per year.
0:35:05 And if he’s not playing, it’s like these nodes in these networks.
0:35:08 And so if you could get Tiger to go over here and you could get this and this and that, if
0:35:12 you did the right vampire attack, you could actually create a higher status, better thing.
0:35:12 Right.
0:35:17 But it’s literally about measuring the nodes and measuring their effects and then having
0:35:21 a strategy for the order in which you get them, what you compensate them with.
0:35:21 Right.
0:35:22 You can compensate them with money.
0:35:24 You can compensate them with titles.
0:35:25 You can compensate with status.
0:35:28 You can, whatever they want, figure out how to compensate them.
0:35:31 And that’s what the article walks through is all the different ways you can compensate
0:35:33 people to come to your network.
0:35:35 I have a real world example of this.
0:35:39 When I was at Twitch, Microsoft tried to do a, Microsoft, YouTube, they’re all trying to
0:35:40 do a vampire attack on Twitch.
0:35:44 So Twitch was the number one gaming network for watching people live stream video games.
0:35:46 And the number one streamer was Ninja.
0:35:50 So Microsoft came out and they offered him something, 20, $30 million, come to us.
0:35:53 He might’ve been making 6 million or 7 million a year on Twitch.
0:35:54 Yeah.
0:35:54 I don’t know.
0:35:59 These are hypothetical numbers, but like some, they offered more than he was making by like
0:36:00 a couple, you know, two or three X.
0:36:01 Yeah.
0:36:03 So he leaves and it’s code red inside Twitch.
0:36:09 And there’s the, there’s some people who are like, we, you know, we have to keep the integrity,
0:36:10 you know, we have to keep our community.
0:36:12 We can’t let them just poach our streamers.
0:36:12 We have to fight.
0:36:15 And then there’s the finance people who are like, that doesn’t make any sense.
0:36:16 That’s too much money.
0:36:19 And then there’s people who were like, I think if we lose too many people, at some point, there’s
0:36:21 a critical mass where people will leave Twitch.
0:36:23 How do we solve this problem?
0:36:25 And finance people wanted to use the finance tool.
0:36:29 The community people wanted to make an impassioned, heartfelt argument.
0:36:32 And, you know, there’s other people who are the strategists who were trying to make
0:36:34 an argument about like, hey, there’s some tipping point.
0:36:36 We don’t know where it is, but there was some math.
0:36:39 There was, like you said, there’s like, this is a mathematical principle.
0:36:43 And so one thing, one of the ways that we looked at it was for every viewer, forget the
0:36:46 streamer, for every viewer, how many channels are they bonded to?
0:36:47 You use the word bond.
0:36:47 Yeah.
0:36:52 So it’s like they come every week and they’re watching three channels, four channels, five
0:36:52 channels.
0:36:52 Yeah.
0:36:55 And it turns out if you just take one of those channels out, they’ll just swap to another
0:36:56 channel.
0:36:56 No problem.
0:37:01 But as soon as they lose a certain number of channels in their bonded network, they’ll just
0:37:02 go wherever that is.
0:37:07 And so strategically, if one of those other companies had figured out which network of
0:37:11 streamers to go after, not the ranked list, because they would take Ninja, who’s a Fortnite
0:37:13 streamer, but they wouldn’t take the other Fortnite streamers.
0:37:16 They would take this other guy who plays this other style of content.
0:37:16 Yeah.
0:37:18 And their fans didn’t overlap.
0:37:18 Yeah.
0:37:22 So it was very ineffective, whereas if they had gone and been like, all right, these
0:37:26 15 streamers are all part of, they’re all core to network, all the viewers care about each
0:37:26 other.
0:37:26 Of a subcluster.
0:37:27 Of a cluster.
0:37:27 Of a cluster.
0:37:27 Yeah.
0:37:32 If, and they may not look like they’re the biggest, but there’s a, that would have created
0:37:35 the tipping point, but they didn’t have the data or the know-how.
0:37:35 Beautifully described.
0:37:36 That’s exactly right.
0:37:36 Yeah.
0:37:37 That’s a great story.
0:37:41 That’s, that’s a perfect example of network bonding and how you can do the math on it.
0:37:42 And then you have to think about it, right?
0:37:43 Or you’re going to waste all your money and time.
0:37:43 Right.
0:37:44 Which is what they did.
0:37:45 All right.
0:37:46 Let’s take another one.
0:37:47 So what do we got here?
0:37:49 Language first.
0:37:50 Uh, yeah.
0:37:56 So it turns out that, look, the way I look at it, there are five things in the world that
0:37:57 kind of explain everything.
0:37:59 Okay.
0:38:00 One of them is language.
0:38:01 One of them is networks.
0:38:04 Like if you look at network dynamics, like why do rulers rule?
0:38:05 What’s going on with Trump?
0:38:06 What’s happening with elections?
0:38:08 These are all network dynamics.
0:38:10 And if you study networks, you can really understand all that.
0:38:15 Energy is another one, which is who has the oil?
0:38:17 Who needs the energy to live?
0:38:21 Because our, our bodies are just absorbing energy and expending energy and countries absorb
0:38:22 and expand and households absorb and expand.
0:38:26 You can actually understand the entire world just by studying energy and energy flows.
0:38:28 But one of them is language.
0:38:30 Language and mindsets.
0:38:31 And what do you mean by language?
0:38:32 So what are we talking about?
0:38:32 So language.
0:38:35 So English or more specific than that?
0:38:35 More specific.
0:38:39 So there’s a guy named George Lakoff that people should study.
0:38:42 He’s a semiologist over at Berkeley.
0:38:55 And he was the one who found out that the Republicans in the 70s said, look, we are never going to win another election unless we change the dialogue in this country in the United States.
0:38:58 So they went around and they created a three ring binder and they created language.
0:39:03 They said, when we talk about tax, we’re going to talk about not tax cuts, tax relief.
0:39:07 Because we’re going to use the word relief because we’re going to imply that it’s a disease or a sickness.
0:39:07 Right.
0:39:09 No one’s going to be thinking.
0:39:11 It’s the opposite of stress, relief.
0:39:12 Right.
0:39:12 What do taxes do?
0:39:13 Stress you out.
0:39:14 Right.
0:39:20 And so they went through and for every subject, they developed, they thought about the language they were using.
0:39:25 And then they took, they printed tens of thousands of these three ring binders and they went all around the country and they took every Republican.
0:39:27 They say, use these words.
0:39:31 Everyone use these words and we will turn the situation around.
0:39:36 And that was, that was just like eight years or six years before Reagan got elected.
0:39:36 Wow.
0:39:39 And it was very, very effective.
0:39:43 And George Lakoff is like, hey, Democrats, you guys have to start thinking at this level.
0:39:45 And he’s been screaming this.
0:39:46 He’s just a consultant or who’s this guy?
0:39:53 He’s a professor and then a consultant and he’s got his own institute and, and I think he’s retired now, but you should study.
0:39:56 Everybody should study, whether you’re Republican or Democrat, doesn’t matter.
0:39:58 Like this is the way the world functions.
0:40:00 It functions on language.
0:40:03 And you have to notice that game being played.
0:40:07 Like people were like, oh, we’re going to build a product and then we’ll market it.
0:40:15 I’m like, no, dude, pick the word first and then figure out what the product does behind the word, because the word has a promise to it.
0:40:18 So in Silicon Valley, I feel like you described it.
0:40:21 Well, people think name of your company doesn’t matter.
0:40:22 Just pick one.
0:40:22 It’s fine.
0:40:22 Yeah.
0:40:24 Oh, look, Google, it’s random word.
0:40:25 Don’t worry about it.
0:40:25 Yeah.
0:40:32 So people think names don’t matter and people think marketing and language comes after you build a, we’ll just build a great product.
0:40:36 And then at the, right before it gets out the door, we’ll slap a few labels on it, write a description.
0:40:38 That’ll be enough.
0:40:39 You believe the opposite.
0:40:41 So you believe names really matter.
0:40:41 Yeah.
0:40:42 And that language really matters.
0:40:44 Could you give me why names matter?
0:40:51 Very practically, it lowers your cost of user acquisition and increases your lifetime value to actually give you the business that you want.
0:40:53 So we were building a game.
0:41:01 We knew we wanted to build a particular type of role play of, of strategy game and we had to decide what to call it.
0:41:05 So we tested out names and we, we went onto Facebook.
0:41:15 We spent $2,000 on ads saying wars of Mars, wars of space, wars of Atlantis, wars of the Amazon, wars of Egypt.
0:41:19 And we tried all these different places, like where were we going to have the wars?
0:41:23 And the number one click through blew our mind.
0:41:24 It was Atlantis.
0:41:25 And so.
0:41:26 That’s so funny.
0:41:31 When you just said them, immediately when you said wars of Atlantis, I was like, that, like my, my pick would have been that one too.
0:41:32 Okay, great.
0:41:33 The five you just said.
0:41:33 So that works.
0:41:36 And so, so then we said, okay, we know it’s going to be in Atlantis.
0:41:36 Now, what is it?
0:41:38 Is it going to be Amazons of Atlantis?
0:41:39 Is it going to be realms of Atlantis?
0:41:41 Is it going to be wars of Atlantis?
0:41:42 Is it going to be dragons of Atlantis?
0:41:45 And we went down, we did another 20 of those.
0:41:52 And we spent another $2,000 and the number one click through was, well, the number, number one click through is Amazons of Atlantis, but we knew what people were clicking for.
0:41:56 They were looking to look at, you know, girls, girls, drawings, drawings of girls.
0:41:57 So we discounted that.
0:41:58 And we said, what’s number two?
0:41:59 Number two is dragons.
0:42:01 So we’re like, all right, that’s the game.
0:42:02 Dragons of Atlantis.
0:42:02 Right.
0:42:08 And we knew we would lower our click through rate or our cost of click through by 75%.
0:42:08 Right.
0:42:12 Which would give us a massive advantage over the other gaming companies that were buying ads on Facebook at the time.
0:42:17 And so we then told the game developers, it’s going to be dragons and it’s going to be in Atlantis.
0:42:20 And so then the game rolled from there.
0:42:20 Right.
0:42:23 And then in the end, we were doubling every day.
0:42:27 And in the year two, I think we did 120 million revenue.
0:42:32 I mean, it’s, you know, we merged with Kabam and then the company grew like crazy.
0:42:34 I think we were 55% of the revenue when we merged.
0:42:34 I don’t know.
0:42:35 It was like crazy.
0:42:35 Yeah.
0:42:39 By the way, language is one of the ultimate network effects, right?
0:42:39 Yeah.
0:42:43 Why are people in India and China studying English?
0:42:46 Because English is a more valuable language.
0:42:50 It has a higher market cap because more people speak it, especially in markets that matter.
0:42:53 You know, you can’t go to New York if they don’t speak English.
0:42:58 So I don’t know Mandarin today or, you know, I don’t know Swahili.
0:43:02 But if 95% of the world spoke Swahili, I would have to learn Swahili.
0:43:08 It would be the most important thing I could do in my life is join that network of Swahili because that’s where all the value is.
0:43:09 So well said.
0:43:15 You had said something about language too, where you said, it’s not just about you write language that will describe it to your customers.
0:43:20 First, you figure out the words because you’re describing to yourself what you should be building.
0:43:23 And it basically gives you clarity as a product builder.
0:43:26 Do you have any stories or examples that kind of drive that home?
0:43:33 Yeah, we had a company, I don’t know, two decades ago, we had a product that was allowing you to store your digital photos.
0:43:38 Digital photography was new and we’re like, store your digital photographs here.
0:43:43 And people would come, but not very many people were coming because it wasn’t a multiplayer game.
0:43:45 I store them there, I retrieve them there, single player game.
0:43:51 So I said, okay, guys, we’re just going to change the homepage to say, share your photos.
0:43:55 And I just changed the name, I changed the word on the homepage.
0:44:00 And my team said, but James, our product doesn’t let people share photos.
0:44:02 We’re lying to people.
0:44:03 That makes me really uncomfortable.
0:44:06 And I said, so fix it.
0:44:13 And so three days later, they had figured out how to put in features that allowed you to share your photos.
0:44:17 And within six months, we’d registered 47 million people virally.
0:44:19 47 million.
0:44:21 Yeah, back when there was like 800 million people using the internet.
0:44:25 So it was extremely viral because we changed the word.
0:44:26 Wow.
0:44:29 You also had a lot of virality with Tickle.
0:44:29 Yeah.
0:44:31 Tickle’s an interesting name first.
0:44:34 And then you had a lot of virality there.
0:44:35 Do you have any good Tickle or viral stories?
0:44:36 Yeah.
0:44:46 So I learned about the importance of words in part because the first name I had for the company was Emode, which none of you can know how to spell or know what the hell that is.
0:44:53 And when I changed the name to Tickle, in the middle of it, my board almost wanted to fire me.
0:44:57 The entire engineering team threatened to quit.
0:44:58 They came to me and they said, we’re all leaving.
0:45:02 We don’t want to work for a site that sounds like a porn site because you’re changing this name to Tickle.
0:45:05 And everyone was against it.
0:45:07 And I knew everyone would be.
0:45:13 So the process of deciding on the name, I picked the two most language savvy people I knew in my company.
0:45:14 And it was just the three of us who decided.
0:45:15 And then we announced the change.
0:45:16 We did not let anybody else.
0:45:18 A little bit like the Luka Doncic.
0:45:19 Right.
0:45:20 Trade.
0:45:20 Trade.
0:45:28 It’s just if you want to get something done, you got to kind of keep it close to the chest because, you know, people will be against it and they’ll want to complain and whine and do all the things they do.
0:45:34 So we did it and the traffic went up 30% in a week.
0:45:42 And we had gotten an offer for $45 million as a company when we were called Emode.
0:45:45 And then six months later, we got an offer for $110.
0:45:52 So it literally doubled the value of the company by changing it to a good name that was spellable, memorable, interesting, fun to talk about.
0:45:57 And so I learned, wow, you can double the value of your company by having the right name.
0:46:02 And so that then led me down to watch more and more language and then learn about George Lakoff and all that kind of stuff.
0:46:06 And so we had to use that language ability for our role of our role paths.
0:46:09 We were in the fresh produce business at Tickle.
0:46:11 And we didn’t have a network effect initially.
0:46:15 And so we had to reinvent the growth channels every three months.
0:46:15 Explain what it was.
0:46:16 What was Tickle?
0:46:19 Tickle was a site where you could take self-assessment tests.
0:46:21 So think the first BuzzFeed.
0:46:22 Okay.
0:46:25 So we were the first people to put self-assessment tests on the internet.
0:46:26 Is that a fancy way of saying personality quizzes?
0:46:27 Personality quizzes.
0:46:27 Yeah.
0:46:28 Yeah.
0:46:33 And we had, you know, five PhDs on staff and it was legit.
0:46:35 And you weren’t trying to make something silly.
0:46:38 You actually wanted to make like kind of Myers-Briggs-y type of stuff.
0:46:45 You could actually learn something maybe meaningful about yourself, your character, how you’re wired so that you could make better life decisions.
0:46:45 Yeah.
0:46:47 But that was kind of what you wanted to sell.
0:46:48 It’s not what the market wanted.
0:46:48 Yeah.
0:46:51 What the market wanted was something like, which breed of dog are you?
0:46:53 Or who’s your celebrity match?
0:46:53 Right.
0:46:55 Or which Victoria’s Secret Panty are you?
0:46:56 You know, that kind of thing.
0:46:58 And those tests all did really well and got a lot of traffic.
0:47:03 And so about 80% of the tests taken were silly and 20% were serious.
0:47:05 But how did you even discover the silly ones?
0:47:08 Like, did you one day you were just like, ah, let’s try this at lunch?
0:47:09 Or how did that happen?
0:47:11 What happened was we were off salary.
0:47:12 We were running out of money.
0:47:14 We were almost dead.
0:47:16 I’ve never even heard of off salary.
0:47:17 Is that just like the phase right before death?
0:47:18 Yeah.
0:47:18 Yeah.
0:47:21 Rick Marini was my co-founder.
0:47:23 We were living in Boston at the time.
0:47:26 And we were off salary for six months at that point.
0:47:31 And we said, well, fuck it.
0:47:34 So we get to the fuck it moment, which is always the best moment.
0:47:36 The two most powerful words in the entrepreneur’s dictionary.
0:47:38 You know, you get clarity finally.
0:47:41 That you’re not going to do what you set out to do.
0:47:42 You’re going to do what’s going to work.
0:47:44 And I said, well, fuck it.
0:47:46 Let’s just do something that will get traffic.
0:47:48 Because we got to grow this thing so that we can survive.
0:47:52 And I had a friend who worked in an advertising agency in New York.
0:47:57 And he said, if you want people to remember your ads, put puppies and babies in the ad.
0:47:58 And then we watched the Super Bowl ads.
0:48:00 And sure enough, they all had puppies and babies in them.
0:48:03 And so I said, hey, guys, let’s do a puppy test and a baby test.
0:48:04 And they said, really?
0:48:06 Finally, we can do something fun?
0:48:08 They were so excited.
0:48:08 The team was so excited.
0:48:09 And I said, sure.
0:48:12 And they said, well, if we’re doing those, can we do the, who’s your celebrity match?
0:48:13 I’m like, yeah, fuck it.
0:48:14 Go ahead.
0:48:19 And so we put up the dog test and the baby test and the celebrity match test.
0:48:21 And eight days later, a million people were trying to get on the website.
0:48:22 Wow.
0:48:24 It was just super, what we call novelty viral.
0:48:26 There was no mechanism for it.
0:48:27 There was no A-B testing that we did.
0:48:28 We didn’t manufacture the virality.
0:48:29 It was novelty.
0:48:30 Right.
0:48:30 Novelty.
0:48:32 The person had to tell another friend.
0:48:34 Well, they wanted to show another friend voluntarily.
0:48:35 That’s right.
0:48:38 It was such a cool thing for them that they had to bring it up at lunch.
0:48:41 And you sell this company for $110 million or something like that.
0:48:43 Were you rich before that?
0:48:45 Or that was like your moment to like make it?
0:48:46 I was not rich.
0:48:48 I had a white Toyota Corolla I bought for $10,000.
0:48:53 And my wife and I had two babies and we were living in a rented apartment.
0:48:56 And was the company like really successful?
0:48:58 Did you think it was worth $110 million?
0:49:00 Or you’re like, holy shit, why are they offering me $110 million for this?
0:49:02 No, no, it was definitely worth $110 million.
0:49:06 It was worth more than that because the company that bought us was Monster.
0:49:08 And they needed our viral ability.
0:49:10 They needed our network effects thinking.
0:49:13 They needed all the tests we had for all the…
0:49:16 But as a standalone business, was it kind of going to be worth a lot or no?
0:49:20 No, we would have had to iterate into something else.
0:49:25 We would have had to become more like Facebook.
0:49:28 The problem was we’d started our social network without real names.
0:49:29 Right.
0:49:32 And you told me some story about when you sold.
0:49:36 You’re like, you did something at the last hour or last minute of the sale.
0:49:37 Yeah.
0:49:39 What was that story?
0:49:46 So, we were flying to New York with the four of us to finally pitch the 16-person board of Monster.
0:49:48 They had a $7 billion market cap at the time.
0:49:59 And the night before on the red eye, I actually lowered the projections to be more realistic to what we were going to do.
0:50:01 And it freaked out my team.
0:50:01 Right.
0:50:04 They were like, dude, they’re not going to do this if we lower the projections.
0:50:06 And I’m like, no, we need to be more honest with them.
0:50:07 This is going to be a long-term relationship.
0:50:10 These are good guys.
0:50:14 So, in the end, we meet with the 16-person board.
0:50:16 They decide to do it.
0:50:20 And then we go up to the top floor of the building overlooking Manhattan.
0:50:23 And this guy, Andy McKelvey, amazing guy.
0:50:25 At the time, he was probably 64 or something.
0:50:27 He’s – or maybe 68.
0:50:31 He had acquired 220 companies to build Monster.
0:50:33 Monster, he had bought for $400,000.
0:50:34 Wow.
0:50:38 When he had bought an ad agency in Boston, and they had a side project called the Monster
0:50:39 Board.
0:50:40 He didn’t even know that he had bought it.
0:50:43 He bought an agency, happened to buy Monster.
0:50:45 And that became the $7 billion value.
0:50:45 Wow.
0:50:47 So, he was just – he was just generative.
0:50:48 He’s just an acquisition animal.
0:50:49 Yeah.
0:50:51 Just an East Coast acquisition guy.
0:50:53 He had a lot of character, this guy.
0:50:59 Anyway, he says, so, you know, I offered you, you know, 91.
0:51:03 Would you take – you know, is there any room to negotiate?
0:51:06 And I said, sure, take 10% off.
0:51:07 And he says, interesting.
0:51:08 What do you want?
0:51:12 I said, I want you to pay all of my employees out before you pay me, and I want you to pay
0:51:14 my investors before you pay me.
0:51:16 And he’s like, well, you know, I can’t do that because then the people will leave.
0:51:17 I was like, they won’t leave.
0:51:20 He’s like, but don’t people just stick around for money?
0:51:21 I’m like, no.
0:51:22 That’s not why most people work.
0:51:25 So, you wanted them to get their money first.
0:51:25 Yeah.
0:51:28 And you’re like, mine will kick in a year later or whatever.
0:51:28 Is that what you wanted?
0:51:29 Yeah.
0:51:30 And why’d you do that?
0:51:32 I mean, that’s a crazy move.
0:51:37 Because I felt that was the right thing to do for my employees and for my investors because
0:51:40 they had stuck with me over this crazy five-year ride.
0:51:42 Did you decide that, like, in the moment?
0:51:44 Or had you been thinking, I’m going to do this?
0:51:45 No, I decided that at the moment.
0:51:49 And he said, wow, interesting.
0:51:49 So, what do you want?
0:51:51 I said, I want to pay all my employees.
0:51:54 And he’s like, well, you promise me they’ll stay even if I pay them out?
0:51:55 And I said, yeah.
0:52:02 And he said, okay, well, then in that case, I want you around a long time because I can
0:52:03 see your character.
0:52:03 Right.
0:52:05 I can see that you’re a real leader.
0:52:07 Right.
0:52:08 You’re a mensch.
0:52:08 Yeah.
0:52:14 And he said, okay, I want to put a three-year earn out on this based on revenue.
0:52:14 What about this?
0:52:15 I said, that sounds good.
0:52:20 And in the end, the acquisition price ended up being not 10% less than 91, but it ended up
0:52:23 being 110 because we outperformed.
0:52:23 The company performed, yeah.
0:52:24 Yeah, we outperformed.
0:52:25 Wow.
0:52:26 That’s a great story.
0:52:26 Yeah.
0:52:31 And so, it was, and had I brought, if I had introduced an investment banker into this process, he would
0:52:34 never would have returned my email or walked away.
0:52:35 This is about humans.
0:52:36 It’s about people.
0:52:36 Yeah.
0:52:39 You, I have a picture here.
0:52:43 I actually met you, but before I met you, I met your business partner.
0:52:43 Yeah.
0:52:46 You and Stan.
0:52:46 Stan.
0:52:47 Stan Tednovsky.
0:52:48 Yeah.
0:52:49 He’s amazing too.
0:52:50 Yeah.
0:52:52 And he told me a story.
0:52:54 So, when I, first time I met him, he was at my office.
0:52:57 I remember Michael had this glass table so you could draw.
0:52:57 Michael Birch.
0:52:58 Birch.
0:52:58 Birch, yeah.
0:53:02 He had this glass table where you could like whiteboard on the table itself.
0:53:02 Yeah.
0:53:06 And I had just been writing notes as he was talking and I wrote like business
0:53:10 bromance and I circled it question mark because he told me you guys had been, you’ve been
0:53:13 partners for like, I don’t know, at the time, maybe 15 or 20 years.
0:53:13 Yeah.
0:53:15 And I could just tell it was like, wow.
0:53:20 Like, you know, when you see a couple at dinner and they’ve been married for 30 years, but they’re
0:53:22 like, it’s like they’re on their first date and they’re just having fun.
0:53:24 They’re talking, they’ve got their arm around each other.
0:53:25 It’s like, oh man, that’s what you really want.
0:53:28 You know, when you get married, it’s not the wedding day.
0:53:29 It’s the 20 years later.
0:53:31 What if we’re still at dinner like that?
0:53:34 That’s how he was kind of like talking about y’all’s partnership.
0:53:35 And so I asked him, I said, what’s the key?
0:53:37 Like, how did you make that work?
0:53:39 What’s, what’s been made it, what’s made it work?
0:53:40 He told me a bunch of things.
0:53:41 I want to hear your take on it.
0:53:46 But one story he told me, he goes, when you sold a company at the time, you owned the vast
0:53:47 majority of the company, maybe 90%.
0:53:48 I think you were wealthier.
0:53:50 You’d put more money in before that or something.
0:53:53 I was not wealthy, but he said you, you own, neither of us had any money.
0:53:55 You, you own more of the company.
0:54:00 And at the time of the sale, you, at the last minute, sort of like equalized it in some way.
0:54:04 You gave him like a, you know, got it to more like a 50-50 arrangement.
0:54:04 Yeah.
0:54:09 And I was pretty blown away because you, you really know what someone’s like when the money
0:54:10 hits the table.
0:54:10 Yeah.
0:54:14 And that’s not the story you normally hear of what happened when the money hit the table.
0:54:17 The guy who had, had the leverage gave instead of took.
0:54:18 Yeah.
0:54:20 That was inspiring to me.
0:54:20 I still don’t remember that.
0:54:21 That was like 15 years ago.
0:54:22 I heard that story.
0:54:22 Yeah.
0:54:25 Well, look, Stan’s a special guy.
0:54:27 I mean, I think he said it pretty well.
0:54:29 He said, James turned it into a giving competition.
0:54:35 I think that’s the, that’s the phrase I think that will help people understand the way he and
0:54:36 I look at the world.
0:54:37 Turn your relationship to a giving contest.
0:54:38 That’s what he told me.
0:54:38 Rule number one.
0:54:39 Yeah.
0:54:44 And look, I think that, you know, I’ve read a lot of Greek tragedy.
0:54:47 I learned all the classics because I went to Philip Sexton.
0:54:53 So I got classically trained and you have to have a long arc and looking at what is a good
0:54:55 life and what matters.
0:54:59 And, you know, what matters is in the end is deep friendship.
0:55:06 Like if you work hard, like even if you don’t work, look, my point is the billionaire life is
0:55:08 available to you today.
0:55:12 It’s just in your mind because I know a lot of billionaires.
0:55:18 I’m not one, but I’m nearby and they all wear the same socks you do.
0:55:20 They eat the same steak you do.
0:55:24 They drive cars that are as safe as the car you can drive.
0:55:30 If you can drive a Toyota Camry, they have a hot shower, just like you have a hot shower.
0:55:36 The distance between your life and a billionaire’s life is 99% in your mind.
0:55:40 And so it’s really not about the money.
0:55:42 It’s about the creativity.
0:55:44 It’s about the connection.
0:55:46 It’s about the friendships.
0:55:52 And it’s even harder to make friendships once you have a ton of money because money freaks
0:55:53 people out.
0:55:57 And so just accept where you are.
0:56:01 Like I say, look, you can have a fun, normal life and live like a billionaire.
0:56:07 You can have a fun striver life where you go and try to build something, do roll-ups of,
0:56:09 you know, basement manufacturing, whatever.
0:56:14 And then you can have sort of a global greatness life where you try to be Elon and you try to
0:56:15 be Steve Jobs and all that.
0:56:18 Those are kind of the three ways to go.
0:56:22 Either way, you could live a billionaire life and have a fun life.
0:56:24 And either way, you can make yourself miserable with your own mindset.
0:56:28 And so it’s up, it’s all, it’s 99% in your brain.
0:56:34 So with me and Stan and with Rick Marini, who was also a co-founder at Tickle, it, you know,
0:56:37 and Rick and Stan and I just went to Namibia together.
0:56:38 We’re going to Turkey together.
0:56:42 They’re like, I’m still friends with all these people that I worked with starting in 99.
0:56:45 I’m still friends with people I went to school in fourth grade with.
0:56:46 I mean, that’s it.
0:56:47 That’s life.
0:56:49 You know, and without that, what’s the point?
0:56:53 Without that connectivity, there’s really no point to it.
0:56:54 What are you going to be, higher status than someone?
0:56:56 What are you going to be, richer than someone?
0:57:00 It doesn’t matter past even a basic point.
0:57:01 Right.
0:57:05 And so I never wanted to covet whatever capital I could.
0:57:09 I just want to make sure something cool would happen and that I had enough to keep creating.
0:57:17 And look, I think that 25 years ago, people who were coming to the Bay Area were coming because they were generative.
0:57:19 They were coming because they wanted to create.
0:57:27 And then because so much money was made by 2008, 2013, it’s changed the tenor a little bit here.
0:57:32 And we’re ruining the experiment because people are so money focused.
0:57:35 And I love the My First Million podcast.
0:57:36 I listen to it.
0:57:37 I love you.
0:57:42 And the only thing I would say is the naming indicates that it’s about the money.
0:57:47 And I actually think that people love your podcast because you deep down know it’s not about the money.
0:57:48 Yeah.
0:57:51 Now, we have to talk about money because everyone thinks they want the status and the power.
0:57:52 Show up.
0:57:56 And, you know, TechCrunch will only talk about your product launch as if it’s with a financing.
0:57:56 Right.
0:57:57 Because it’s talking about the money.
0:57:59 It does get the clicks.
0:58:05 And you guys know that it’s not about the money, that it’s about the creativity and the generativeness.
0:58:06 Right.
0:58:10 And the connection with people, the way you connect with each other, the way you connect with me, the way you connect.
0:58:12 I see that in your life.
0:58:17 And so that’s, I think, why people really listen to you is because that’s what we all really want.
0:58:20 And, yeah, there’s money involved, but it doesn’t matter.
0:58:20 Right.
0:58:22 It’s just gas in the tank.
0:58:23 It’s not the tank.
0:58:24 Right, right, right, right.
0:58:25 Yeah.
0:58:26 Somebody said it well.
0:58:29 They go, you know, you’re trying to go on the road trip.
0:58:35 And you want to get in a car, you want your pals inside, and you want to have this kind of adventure you’re going on.
0:58:37 And you need gas, you need fuel to go on the road trip.
0:58:41 But this is not a nationwide tour of gas stations.
0:58:41 Don’t forget that.
0:58:42 Right, right.
0:58:44 That’s a great way to put it.
0:58:44 I love that.
0:58:45 I love that.
0:58:45 Yeah, so, yeah.
0:58:50 So I turned it into a giving competition with Stan, and then he turned it right back into a giving competition with me.
0:58:53 And Rick did as well.
0:58:55 And, yeah, it’s been great.
0:59:02 New York City founders, if you’ve listened to My First Million before, you know I’ve got this company called Hampton.
0:59:05 And Hampton is a community for founders and CEOs.
0:59:10 A lot of the stories and ideas that I get for this podcast, I actually got it from people who I met in Hampton.
0:59:13 We have this big community of 1,000 plus people, and it’s amazing.
0:59:19 But the main part is this eight-person core group that becomes your board of advisors for your life and for your business.
0:59:20 And it’s life-changing.
0:59:27 Now, to the folks in New York City, I’m building an in-real-life core group in New York City.
0:59:38 And so if you meet one of the following criteria, your business either does $3 million in revenue, or you’ve raised $3 million in funding, or you’ve started and sold a company for at least $10 million, then you are eligible to apply.
0:59:41 So go to joinhampton.com and apply.
0:59:44 I’m going to be reviewing all of the applications myself.
0:59:48 So put that you heard about this on MFM so I know to give you a little extra love.
0:59:49 Now, back to the show.
0:59:53 I want to do some more of these.
0:59:54 I want to do one that’s not positive.
0:59:55 I want to do regrets.
0:59:58 You had told me something when I came and hang out with you.
1:00:01 You said you were talking about a mistake you had made.
1:00:05 You go, I had my first success or whatever, and then you go, I kind of isolated myself.
1:00:09 I wanted to do my own lab, partly due to ego and whatever.
1:00:10 And you started doing your own thing.
1:00:14 And you said, like, you drew this diagram on a whiteboard.
1:00:17 And you were like, I was in the core, the white-hot center of the network.
1:00:18 Of Silicon Valley.
1:00:19 Of Silicon Valley.
1:00:21 I knew all the right people, and they like me, and I like them, et cetera.
1:00:24 And then you were like, I kind of went over here to try to build my own empire.
1:00:29 And you’re like, the smart thing would have been to just join Facebook or invest in Uber.
1:00:31 And you gave me a couple of quick examples.
1:00:32 No, that’s right.
1:00:42 You know, in 2006, when I left Tickle after the acquisition, I wanted to just build more stuff.
1:00:47 And I had this great guy, Stan, who I just loved living in his brain.
1:00:47 Right.
1:00:49 And he seemed to love living in my brain.
1:00:53 So we just were happy to get an office and live in each other’s brains and build stuff.
1:00:57 So we created an incubator, and we built 24 different products over the course of three and a half years.
1:00:58 And we had so much fun.
1:01:01 We were just spending my money, my post-tax money.
1:01:05 And we had a blast.
1:01:06 And we were so creative.
1:01:11 Every day, we were doing eight different experiments, you know, on the internet to see what would happen.
1:01:17 And in the end, we came out with three companies from that that ended up working and making people money and raising venture and doing all that stuff.
1:01:24 But we did it in a way where, as my friends told me later, we didn’t know how to be helpful.
1:01:27 We didn’t know, should I send you deals to invest in?
1:01:29 Should I come work with you?
1:01:31 Should I send you people to hire?
1:01:33 Should – what should I do?
1:01:34 Right.
1:01:41 And so our structure of the incubator wasn’t super network-centric.
1:01:44 It was creativity-centric.
1:01:45 It was isolated a little bit.
1:01:46 And that was a mistake.
1:02:00 And had I gone and worked at Facebook and learned more about that ecosystem, or had I gone and become a venture guy or opened up a shingle to say, yeah, I’m doing this, but I also want to be investing on the side.
1:02:03 I want to make 12, 15, 20 investments a year as an angel, and I can be helpful.
1:02:05 And I didn’t do any of those things.
1:02:06 And that was just a mistake.
1:02:15 Now, I just had four kids in 37 months, and my wife and I were moving houses, and, you know, my parents were – my mom got dementia, and, you know, we were busy.
1:02:16 There’s excuses.
1:02:18 But I didn’t have the clarity.
1:02:22 And as a mentor, I would suggest to people, think again about the network.
1:02:23 Go back to my life on network effects.
1:02:30 Think about everything you do as how does this affect the people and the network connectivity that I have or don’t have going forward.
1:02:36 One of the things you said there, you were like – you told me, you go, you got to create your API.
1:02:40 API is – people who don’t know, it’s basically like, you know, you’ll say you make a website.
1:02:48 If you want other developers, other engineers, to be able to, like, make their product compatible with yours, you put out documentation.
1:02:49 You say, hey, here’s what I could do.
1:02:52 If you ask me this question, I can give you this information.
1:02:53 I can give you this data.
1:02:55 You know, Twitter has an API.
1:02:56 Hey, you want to see the tweets?
1:02:57 Here’s the tweets.
1:02:58 You want to see the most trending ones?
1:02:59 Here’s the trending ones.
1:03:00 That’s what I can offer you.
1:03:01 And here’s what I want back.
1:03:03 You know, here’s the things I’m working on.
1:03:05 And maybe I can tap into your API.
1:03:10 And so you were like, you need – it sounds like what you had at the time was just a fuzzy API.
1:03:12 People didn’t know how to plug into you.
1:03:13 They didn’t know where you could help.
1:03:15 They didn’t know how you wanted to be helped.
1:03:17 But you were in a creative mode.
1:03:20 And that stuck with me because I was like, oh, I have the same problem.
1:03:21 I need to make it clear.
1:03:22 What am I trying to do?
1:03:26 Because actually, when you help people, there’s a lot of goodwill that’s built up.
1:03:27 People love to help you back.
1:03:35 But not if they don’t understand what game you even play and what you like to do and what your dreams are and what you’re great at, your superpowers.
1:03:36 It’s all fuzzy.
1:03:40 And I think making that less fuzzy was one of my big takeaways from it.
1:03:40 Yeah, yeah.
1:03:41 That’s a great idea.
1:03:46 And, you know, I think that the Bay Area, more than other cultures, is a non-zero-sum thinking environment.
1:03:47 Right.
1:03:48 It’s one of our key traits.
1:03:54 And that’s furthered by this idea that here’s what I can help you with.
1:03:56 And here’s how you can help me.
1:04:01 And what do you think about people who leave California, leave San Francisco because they don’t want to pay taxes?
1:04:04 I think it’s short-sighted.
1:04:09 Look, anyone can move – it’s very sensitive, very emotionally sensitive to people about their choices, about where they want to live.
1:04:19 And, you know, if you don’t like it here or somehow you feel like everyone’s smarter than you and therefore you feel bad every day because you have low status and whatever, like, go get a therapist.
1:04:22 Don’t, like – don’t move out of the state just because you’re feeling bad all day.
1:04:26 But a lot of people don’t like it for whatever reason.
1:04:29 I can’t imagine why, but they don’t.
1:04:34 And so they’ll leave or they’ll think I can go be a big fish in a smaller pond somewhere else.
1:04:40 But generally, they’re moving because their husband’s mother is nearby and they can help raise the kids.
1:04:44 There’s a network – we call it network gravity that pulls you away from the Bay Area.
1:04:48 And you just have to fight all the network gravity and just go there and be in that ecosystem.
1:04:58 And if I can earn, you know, 20 times more here and pay 13% extra tax versus New Hampshire or Florida, then isn’t that worth it?
1:04:58 Right.
1:05:08 And if I’m not smart enough and good enough to earn 20 times more or even two times more, then, yeah, I should leave.
1:05:11 If I’m, you know, if I’m not good enough to play in the NBA, I shouldn’t be in the NBA.
1:05:11 Right.
1:05:12 But this is the NBA.
1:05:13 Right.
1:05:16 And so a 13% tax on being able to play in the NBA is nothing.
1:05:17 Yeah.
1:05:24 Yeah, I remember you said that because at the time, I think this was like COVID times or something, like tons of people were moving and they were moving not for – not because they didn’t like it.
1:05:29 They’re moving because they were like, oh, why do I – if I can work online anyways, might as well just be somewhere else.
1:05:31 I’ll save 13%.
1:05:33 And I remember you just being like, that’s insane.
1:05:37 Like, if you – if for that reason, because one idea, one investment.
1:05:38 One comment.
1:05:46 One comment, one serendipitous conversation, one brunch you go to – you used to host these brunches – one connection there has paid itself off, you know, many times.
1:05:50 And that definitely reinforced that for me.
1:05:56 One of the things I want to ask you about is you’ve been early to a lot of big things.
1:05:59 You wrote a blog post about Bitcoin before Bitcoin.
1:05:59 Yeah.
1:06:02 You were in social gaming before social gaming really took off.
1:06:02 Yeah.
1:06:05 You were in social networking before Facebook was invented.
1:06:05 Yeah.
1:06:07 So my natural question is, what’s next?
1:06:09 What do you see around the corner?
1:06:10 Yeah, yeah, yeah.
1:06:14 We also got into tech bio in 2016, which is, you know, software-driven biology.
1:06:21 And we also got into AI in 2018, which wasn’t quite as early as kind of a node with OpenAI and Elon, but it was pretty close.
1:06:22 Yeah.
1:06:23 I mean, so what’s next?
1:06:25 A lot of things is next.
1:06:27 This is what’s interesting about the current time.
1:06:32 There is going to be opportunity in robotics that hasn’t existed before.
1:06:34 There is going to be opportunity.
1:06:40 I mean, we’re just seven, eight years into the tech bio thing, and that’s going to go – that window will be open for 30 years.
1:06:44 We’re going to learn so much about DNA and what’s going on there.
1:06:46 And then AI is going to touch everything.
1:06:50 And so I think that AI has created a whole new set of consumer experiences.
1:06:55 I think the window there will be open for three to four years for people – it hasn’t even really started.
1:07:02 I mean, we’re writing a blog post about consumer AI stuff, and it’s hard to find interesting companies.
1:07:07 Like, you’ve got AI Dungeon, and you’ve got, you know, Volley and Character AI.
1:07:12 You’ve got, like, 15 or 20, but you don’t have 50 interesting consumer attempts.
1:07:14 And we’re waiting.
1:07:15 So, consumer is back.
1:07:16 Yep.
1:07:18 Tech bio.
1:07:18 Yep.
1:07:20 Robotics.
1:07:20 Yep.
1:07:21 Those are three.
1:07:21 Yep.
1:07:22 Space continues.
1:07:29 I think the space window is still open for another three to five years, but it’ll start to close here soon because, remember, SpaceX started 20 years ago.
1:07:30 And services.
1:07:33 Services, services, services, services.
1:07:33 What do you mean by services?
1:07:39 Anything that’s a service, like my accounting firm or my tax firm or my –
1:07:40 But now with AI?
1:07:41 But now with AI.
1:07:42 But now with AI.
1:07:53 So, I think that PE firms and startups are going to grab AI and go in to transform all the workings of corporations, but also service firms, banks.
1:07:54 Right.
1:08:00 Everything that’s a service to you as a consumer is going to be transformed by AI.
1:08:03 Faster, cheaper, better, easier in ways we can’t imagine.
1:08:05 Completely rethinking it.
1:08:18 And so, I would encourage people to think through what are services businesses in my area that I could bring AI to and lower the price by 30% and just take market share.
1:08:19 What’s an example?
1:08:27 A good example would be architecture, contracting, building houses, lawn care.
1:08:30 Like, what can you do for my lawn?
1:08:33 So, let’s say there’s a lawn care place, a lawn care business near me.
1:08:33 Yeah.
1:08:34 It’s making a million dollars a year profit.
1:08:35 Guy’s ready to retire.
1:08:35 Yeah.
1:08:38 I think, okay, I could buy that business today.
1:08:38 Yeah.
1:08:39 At a fair price.
1:08:39 Yeah.
1:08:43 But I know that with AI, I’m going to be able to do what?
1:08:46 I’m going to have a robo kind of receptionist.
1:08:47 Yep.
1:08:49 And so, I’m going to get more sales.
1:08:53 And I’m going to go around with a video camera and the video is going to notice what all the plants are.
1:08:59 So, to catalog the entire, I can now produce a beautiful thing for this owner that he never saw or she never saw before.
1:09:00 I’m going to know what every plant is.
1:09:02 I’m going to know what their water amount is.
1:09:10 Like, AI is going to give me x-ray vision for their landscaping and allow me to provide them a service no one’s ever been able to provide before.
1:09:13 And I can schedule stuff more easily.
1:09:16 I can, all the customer service stuff goes to AI.
1:09:19 And I provide a much better service.
1:09:24 So, you can either charge more for the high-end clients because you can do something better or you could charge the same and give them a better service or you could charge less.
1:09:24 Right.
1:09:26 And just take market share.
1:09:28 Right now with AI, there’s like a fog of war.
1:09:29 You have all these companies.
1:09:30 They’re all competing to the death.
1:09:32 Billions and billions of dollars are getting invested.
1:09:35 And it’s unclear who’s going to win.
1:09:36 Where’s the value going to accrue?
1:09:46 And I think from – if anyone is going to have an answer, I would want to hear yours because you think about network effects, which is the thing that kind of creates the long-term defensibility value for these companies.
1:09:50 So, what do you think of people who are investing in open AI or the sort of the models?
1:09:51 Is that where the value is going to accrue?
1:09:52 Yeah, I don’t get it.
1:09:53 I don’t get it.
1:09:54 I think they’re making a big mistake.
1:10:02 And in 2022, when we first started writing about this, we actually came out and said it on our blog post, which is AI is going to be like water.
1:10:08 You’re going to get free unlimited AI processing on your CPU, on your phone within three to four years.
1:10:18 There’s no doubt it’s going to free in the same way that I can use my phone and I don’t have to pay anybody anything to use my phone for hours a day.
1:10:27 So, I don’t understand why everyone’s plowing so much money into this because it’s so clear that you’re going to have open source, whether it’s three months, six months, or nine months behind.
1:10:31 When you’re actually thinking about defensibility, you have to think about 10, 20, 30 years.
1:10:33 So, it doesn’t matter.
1:10:36 The open source is going to end up just taking over.
1:10:39 And you’re going to be able to do it on CPUs.
1:10:47 So, both NVIDIA and all of these giant LLM companies who are spending all this money on training are going to go to zero eventually.
1:10:59 And that’s why NVIDIA is trying to get everyone to use CUDA because that’s their operating system level that locks people into their software, which is more of a Microsoft – it’s an operating – we call it a platform network effect.
1:11:05 They’re trying to force a platform network effect while they have the hardware that everybody wants so that they can be durable long-term.
1:11:06 It’s smart.
1:11:06 I get it.
1:11:08 We’ll see if it works.
1:11:09 And the same thing with OpenAI.
1:11:10 Like, I don’t get it.
1:11:12 Like, I don’t know why everyone’s plowing money into it.
1:11:28 I think it’s crazy because they have to move up to an operating system layer where there’s a platform network effect or they have to move up into the application layer where there are network effects because otherwise, DeepSeq or the 20 DeepSeqs that are coming are going to not cause them to get any revenue.
1:11:29 So, I don’t know what’s going on.
1:11:35 I’m not sure why people don’t see it that way, but I’ve seen it since 22, and everything I’m seeing now teaches me the same thing.
1:11:36 I mean, DeepSeq was obvious.
1:11:43 And look, I don’t know what the percentage is, but let’s say 96% of all the processing in the world is still CPU.
1:11:47 And these models will start working on CPU in the next 24 months.
1:11:49 And then what do you do with the NVIDIA chips?
1:11:50 And why do you need these huge clusters?
1:11:54 So, it’s going to be – I think people are making a lot of bad bets.
1:11:55 There’s going to be a lot of money lost.
1:11:59 And one of the arguments is, oh, but we have the data.
1:12:02 You know, maybe Elon’s – we have the X data feeds.
1:12:03 That’s going to make our model better.
1:12:06 Chamath has come out and said, oh, it’s all about who owns the data.
1:12:08 Yeah, what’s your message to Chamath?
1:12:09 Yeah, I just think that’s wrong.
1:12:10 I just think it’s wrong.
1:12:11 I can synthesize your data.
1:12:12 I can steal the data.
1:12:15 I can cobble together different data sets to approximate the data.
1:12:26 And as we know, if you go to Google and just type in data network effects, like the first article you’re going to get, this explains why data network effects aren’t – they’re asymptoting in terms of their defensibility.
1:12:27 And they’re just not that powerful.
1:12:28 They’re valuable to an extent.
1:12:32 They’re valuable to get to a threshold and to get into a range.
1:12:39 If, you know, if JATGBT sees what I’m typing and then gets incrementally better, the next guy behind me can’t see that it’s incrementally better.
1:12:42 The increment in which it is better is too small to be perceived by the user.
1:12:42 Right.
1:12:46 And so I don’t think that it’s all about the data.
1:12:55 And I think this is a fiction that Google and Microsoft tell Wall Street and their employees for two reasons.
1:12:59 They tell Wall Street because they want Wall Street to think that they’re going to be the winner because they have the data, therefore they win.
1:13:03 And then they tell their employees, why would you want to go be an entrepreneur?
1:13:09 Why would you leave the beautiful confines of this giant company because you know we’re going to win because we have all the data?
1:13:09 Right.
1:13:13 There might be some applications where it’s true.
1:13:15 I’m open to the fact that there could be some.
1:13:18 But there’s very, very few.
1:13:20 And in the end, Microsoft and Google are not going to win because of the data.
1:13:22 They’re going to win because of their scale.
1:13:22 Right.
1:13:24 And they’re going to win because they already have the distribution.
1:13:25 Right.
1:13:29 Customers already got – if I type it in, I’m defaulted to their service.
1:13:31 Because it’s already in my way.
1:13:36 They won the game 20, 30, 40 years ago, and that’s why they get a chance to win the game today.
1:13:38 Not because they have the data.
1:13:39 Because I can get your data, dude.
1:13:42 So buy or sell NVIDIA.
1:13:43 I don’t give advice.
1:13:44 I don’t trade.
1:13:46 So there’s like opinion.
1:13:47 Like you think they’re –
1:13:54 Oh, I mean, opinion is that I would sell NVIDIA compared to long term.
1:13:57 I would still be a Google and a Microsoft buyer because of the distribution.
1:13:57 Right.
1:14:03 Because there’s going to be a tremendous value created for both consumers, small businesses, and enterprises.
1:14:04 And they already have their hooks into them.
1:14:06 And they’re the incumbents.
1:14:06 Right.
1:14:09 And we are in the age of incumbents when it comes to software.
1:14:12 And they are going to win because of the distribution, but not because of the data.
1:14:13 That’s just the fiction.
1:14:16 If you were the CEO of OpenAI, what would you do?
1:14:24 I would try to build an operating layer and get everybody to sign in to my operating layer in the same way that Microsoft has their operating system layer.
1:14:30 And then I would create two or three applications the way Microsoft did in the 90s.
1:14:31 Office or whatever.
1:14:32 Like Office or whatever.
1:14:36 And then I would just go buy up other companies just like Microsoft did.
1:14:37 Just run the Microsoft playbook.
1:14:41 The problem is that Microsoft’s main product was the operating system.
1:14:43 So they had the network effect from day one.
1:14:46 Whereas OpenAI does not have a network effect at all.
1:14:52 The main thing they have right now is distribution and the subscriptions, but the consumers are fickle and SMBs are fickle.
1:14:56 And they’ll move off to something for $10 or $5 or as long as it’s good enough.
1:15:00 And maybe they’ll have some other thing they like better because it’s for their vertical or who knows.
1:15:04 So what do you think is the juiciest kind of opportunity, whether you’re an entrepreneur or an investor?
1:15:07 We think it’s in the application layer and the operating layer.
1:15:11 And so we are investing in things that can build network effects.
1:15:13 And we’re looking at verticals typically.
1:15:24 Where people can get rapid growth and network effects so that even after a year or two, their scale allows them to have a network effect, which makes it hard for anyone to compete with them.
1:15:25 What’s an example?
1:15:29 Maybe something you invested that you’re excited about, you think has kind of the right architecture to do well.
1:15:33 Oh, something like an AI dungeon, which is coming out with a multiplayer here.
1:15:34 I don’t know what that is.
1:15:37 AI dungeon is a role-playing game based on AI.
1:15:42 It was the first sort of AI gaming company, and they’re still the biggest and they’re still the most advanced.
1:15:51 And they’re in our portfolio and I work with those guys, and they’re going to build out a network effect around RPG games that are powered by AI.
1:15:57 So you think of gaming companies adding AI, but we were thinking AI companies creating games.
1:16:04 Or things like a company like an Even Up, which is AI for personal injury lawyers.
1:16:09 It’s a vertical Microsoft and Google don’t want, but it’s still $80 billion a year.
1:16:12 They need software to help them run their business.
1:16:13 It’s a great business.
1:16:16 I saw two billboards for personal injury on the way here.
1:16:16 Exactly.
1:16:17 We were just talking about it.
1:16:18 Exactly.
1:16:19 What is this industry?
1:16:20 Right.
1:16:21 And people don’t want to touch it.
1:16:22 What are they doing with AI with it?
1:16:26 Well, they have to submit these 300-page documents to the court.
1:16:27 Gotcha.
1:16:32 And they also have to evaluate the people who come in the door to see whether they should take the case on or not.
1:16:32 Right.
1:16:45 And the AI helps them collect the data, analyze the data, and then figure out what the court case would look like and whether they would actually get the money they want from this or not, which the judges actually like because then they’re not bringing specious cases.
1:16:48 They’re only bringing cases that, you know, should have some sort of compensation.
1:16:50 Okay.
1:16:50 There we go.
1:16:55 So application layer, operating system layers, specific verticals.
1:17:03 We’re also investing in some speed-ups for the overall tools and architecture.
1:17:04 Dev tools.
1:17:04 Dev tools.
1:17:05 Yeah.
1:17:11 And stuff like that because we think that you can get distribution quickly and then build lock-in the way Atlassian has done.
1:17:16 And if you were 25 again, and it’s 25 in the year 2025.
1:17:17 Yeah.
1:17:20 And it’s you, Stan, Rick, you guys are hanging out again.
1:17:20 Yeah.
1:17:22 What do you think you would be doing?
1:17:29 First, I would have the conversation, do we want to have a fun normal life, a fun striver life, or a global greatness life?
1:17:29 Right.
1:17:31 What’s your answer?
1:17:34 My answer is sort of global greatness.
1:17:43 I think that it’s just fun to play in that game to see if, like, at Tickle, we had registered 150 million users when there were 600 million people on the internet.
1:17:43 Right.
1:17:45 That was touching the world.
1:17:46 Right.
1:17:46 It was kind of fun.
1:17:49 I think it’s fun to do stuff at scale.
1:17:50 I’m really interested in scale.
1:17:50 Right.
1:17:55 Things at scale are software, media, money, a few other things.
1:17:57 And just, I like to work in those mediums.
1:18:03 But you have to decide, like, don’t think that you have to be Steve Jobs in order to live a great life.
1:18:05 Realize you can have a fun, normal life.
1:18:09 And you’re in the global greatness game, but you seem like you’re not Steve Jobs.
1:18:10 You seem like you’re happy.
1:18:14 Like, it was one of my notes was like, I love this guy’s lifestyle.
1:18:16 Like, you showed up in a fun shirt.
1:18:16 Yeah.
1:18:18 We hung out for a couple hours.
1:18:22 You told me how, you know, you’re like, I spend a couple months out of the year with my kids.
1:18:24 We try to travel as much as we can.
1:18:25 That’s as many months as they’ll have me.
1:18:25 Yeah.
1:18:27 You know, but I want to max that bar out.
1:18:28 Yeah.
1:18:29 You were writing a TV show for fun.
1:18:30 Yeah.
1:18:33 Like, you weren’t, like, Elon running six companies sleeping on the factory floor.
1:18:35 That wasn’t, like, you didn’t give that vibe, right?
1:18:35 Yeah, yeah.
1:18:41 You seemed like a happy, you know, happy dude who had kind of, like, balance, but you were still scaling.
1:18:45 So, like, you know, are you in that game or are you some other path at all?
1:18:47 Yeah, I’m upper middle class.
1:18:50 I’m lower upper class sort of in that area, if you want.
1:18:51 In that zip code.
1:18:52 I’m on that borderland.
1:18:58 You know, I get invited to the rooms where the global greatness is happening, but I love spending time with my wife and my kids.
1:18:59 Right.
1:19:02 And that’s my priority, is to have a great family life.
1:19:06 And, you know, everyone tells me that I look younger than I am, and I’m like, it’s because I love my wife and I don’t drink alcohol.
1:19:09 It’s pretty simple, you know?
1:19:13 And, yeah, we’ve taken the kids to hike to the Everest Base Camp.
1:19:14 We’ve sailed across the ocean.
1:19:16 We got attacked by orcas, and our boat was destroyed.
1:19:23 Like, we go snow camping in the winters and live in igloos, and, yeah, we do all the fun stuff with the kids.
1:19:27 Did you have to wait until you were wealthy to do those things, or were you doing it all along the way?
1:19:31 Because, like, I think if I’m listening to this, I’m like, yeah, good, well, cool.
1:19:32 You’re sort of rich and retired.
1:19:33 I get it.
1:19:34 I want to get rich and retired.
1:19:35 But until then, I’m going to grind.
1:19:36 No, no, no.
1:19:42 What I did was right after college, I moved jobs every six months and sailed across both the Atlantic and the Pacific.
1:19:43 I learned how to paraglide.
1:19:44 I learned how to scuba dive.
1:19:46 I did all the adventure stuff.
1:19:47 I lived in Hong Kong.
1:19:48 I lived in Beijing.
1:19:49 20s.
1:19:50 20s.
1:19:50 Yeah.
1:19:55 And then I realized that I wanted to do some global greatness, so I started grinding.
1:19:58 And so I ground for three years at Battery Ventures as an associate in Boston.
1:20:05 And then I ground – actually, I had a lot of fun at Harvard Business School for a year and a half where I met my wife.
1:20:09 And then I ground in my startups.
1:20:14 But then what was interesting is once I had plenty of money, then I ground again because it was fun.
1:20:15 It was type two fun.
1:20:15 Yeah.
1:20:16 It was creativity.
1:20:17 It was generativeness.
1:20:18 You know, and this is the thing.
1:20:24 I love this word generative because if you want to understand what Elon is doing, he’s just generating.
1:20:25 He’s generating tweets.
1:20:25 He’s generating kids.
1:20:26 He’s generating companies.
1:20:29 He’s just moving stuff around.
1:20:39 And a lot of people here in the Bay Area, I find, are like that, not as extreme, but like Craig Donato, who, you know, is the head of revenue at Roblox.
1:20:45 That guy has generated – he’s like Howard – he’s like John Galt.
1:20:50 The guy’s like terraforming the American River to create an incredible camp for him and his friends.
1:20:50 Right.
1:20:51 And he worked on it.
1:20:55 He bought it for $240,000 and he worked on it for 22 years with his own hands.
1:20:56 Right.
1:21:00 And yet he’s worth way more money than any of us need because that’s what he loves doing.
1:21:01 It’s type two fun.
1:21:12 So there’s always been this approach to adventuring that I’ve had and I ground and tried to get someplace for like, I don’t know, eight years.
1:21:19 And other than that, it’s all just been, you know, pick up the adventures every minute you can because life is short.
1:21:19 Right.
1:21:31 You don’t seem – maybe this conversation feels different, but like you didn’t seem to me like you were somebody who was kind of like in the –
1:21:33 like a lot of people are like Elon worship camp.
1:21:35 It’s like, oh, I like – you know, he’s the North Star.
1:21:40 Like everybody else is just some like – some, you know, standard deviations away from Elon.
1:21:45 And you just feel bad about yourself for not being your standard deviations or closer to Elon.
1:21:45 Yeah, yeah.
1:21:50 Whereas like I think you – you’re kind of in my camp, which is like you admire parts of him.
1:21:51 Yeah.
1:21:51 Not all.
1:21:59 And of the parts you admire, you sort of incorporate that into your game or your life, you know, whether it’s his speed or maybe his fearlessness.
1:22:01 Things that are like unquestionably admirable.
1:22:02 Totally.
1:22:04 I am curious, like who do you admire?
1:22:05 Who do you learn from a lot?
1:22:10 Like who’s kind of like your mentor, whether you know them or you just read about them a lot?
1:22:11 Like who are the people that inspire you?
1:22:16 I’m certainly inspired by what Elon’s been able to do.
1:22:20 You know, when I knew him in the 2000s, he and I were in some of the same circles.
1:22:22 He just seemed like a normal guy.
1:22:23 Really?
1:22:23 Yeah.
1:22:28 He just seemed like a really generative, cool guy like Craig Donato or like anybody else.
1:22:30 So you couldn’t have picked in a room.
1:22:31 You wouldn’t have been like, that guy.
1:22:32 That guy’s going to be one.
1:22:33 No, I wouldn’t have.
1:22:34 I wouldn’t have.
1:22:35 Somebody else might have.
1:22:36 But I wasn’t capable of doing that.
1:22:46 And I remember in 2000s, what I admire about Elon is that in 2007, after the third rocket blew up, I emailed him and I’m like, Elon, the next one’s going to work.
1:22:48 I said, it’s going to work eventually.
1:22:51 And when you do, it’ll make it all the more sweet, man.
1:22:52 Just keep going.
1:22:52 Wow.
1:22:54 And he emailed me back like four hours later.
1:22:55 He’s like, thanks, man.
1:22:56 I needed that.
1:22:58 You know, like he was in the trenches.
1:23:00 He was putting everything on the line.
1:23:05 You know, he’s an entrepreneur doing entrepreneurial things and that’s what’s admirable about him.
1:23:11 And whether you’re doing a bakery or whether you’re doing a construction company or whatever, you’re going through that same journey.
1:23:16 And that was what was admirable about him is that he was clear eyed in his effort toward doing that back then.
1:23:22 And he just keeps expanding the purview, the sort of scale at which he’s operating.
1:23:27 You also had this idea for one world currency.
1:23:28 Yeah.
1:23:29 Before Bitcoin.
1:23:29 Yeah.
1:23:32 In 1997, there was a thing called Cyber Gold.
1:23:40 And I was at Battery Ventures at the time and I was trying to convince my bosses we should take a look at this because we were going to have software-based currencies.
1:23:42 And where’d that come from?
1:23:43 I mean, that’s not obvious.
1:23:44 It’s not obvious.
1:23:45 Were you reading sci-fi?
1:23:50 No, it’s just I was an associate and I was talking to companies and this guy approached us and he said, I got this thing called Cyber Gold.
1:23:55 And I think that we’re going to have software-based gold and it’s going to be currencies.
1:23:56 We’re going to pay each other.
1:23:58 And I said, that actually sounds like logical.
1:23:59 That sounds like the real future.
1:24:14 And then the second thing that happened was we were at Tickle a few years later and we saw a Korean company that was selling a digital rose, 32 pixels by 32 pixels or something, or 64 by 64, for $4.95.
1:24:18 And one of my engineers said, hey, James, come take a look at this.
1:24:20 And it was in Korean, so we didn’t know what was going on.
1:24:25 But we could see that there was a price on this little digital thing that I could send to a girl on this social network that they had.
1:24:33 And Stan was standing behind me and I turned around and I looked at him and he looked down at me and I goes, there it is.
1:24:35 People are going to buy pixels.
1:24:39 This was, I don’t know, 2000, 2001, 2002, something like that.
1:24:45 And people are going to buy pixels because it’s just like buying a thing because it just affects your brain.
1:24:47 You know, it’s all in our minds, right?
1:24:54 And then we realized, okay, so now we’re going to have digital goods that people pay for even though there’s nothing to it.
1:24:58 And we’ve got Cybergold and then Second Life comes along.
1:25:00 So I had this funny experience.
1:25:10 I go to a tech conference called PC Forum and there’s this guy there and he’s sitting next to me during one of the lectures and we go out and he’s like, oh, I want to show you my thing.
1:25:11 And I said, great.
1:25:15 And so he waves over these other two guys and it turns out it’s Larry and Sergey.
1:25:24 And so the four of us sit on a couch in the sun and he opens up his laptop and he’s like, I’ve got this thing and it’s a virtual world and it’s called Second Life.
1:25:28 This is how it works and I’m like, so do you have a currency?
1:25:29 He goes, yes, we do.
1:25:30 It’s called Linden Dollars.
1:25:32 And so I said, okay, very interesting.
1:25:35 And so he gave us this demo and it was very cool.
1:25:37 And so I went out to him.
1:25:40 He and I walked outside and Sergey and Larry went elsewhere.
1:25:48 And I said to him, this is going to be like, I said to him, the only question now is, Philip, what color are the robes?
1:25:51 Meaning I see what you’re doing.
1:25:52 You’re creating a religion.
1:25:56 Like you’re moving humanity into this other realm.
1:25:59 And he was like, oh, he’s like, you really know what I’m doing.
1:26:02 Like you, you, you get it at a deep level.
1:26:02 I’m like, yeah.
1:26:07 And so I ended up on his board with Mitch Kapoor and Bill Gurley and whatnot for five years.
1:26:07 And.
1:26:09 And Second Life got big.
1:26:09 It got big.
1:26:11 It was on the cover of every magazine.
1:26:13 It was the talk of the town.
1:26:16 They raised it over a billion dollars from Goldman and others.
1:26:19 And in the end, it didn’t end up becoming the world changing thing.
1:26:30 But what Zuckerberg is trying to do right now with his virtual world is still behind what Corey Andraka and Philip were able to do with the technology in 2003 and four.
1:26:31 Right.
1:26:32 And still behind it.
1:26:32 They had.
1:26:36 I’ve never seen any company that was 20 years ahead in the digital realm.
1:26:38 And they are still that far ahead.
1:26:40 And what way are they ahead?
1:26:46 Well, just the pixelation, the controls, the world, how the world functions.
1:26:46 Right.
1:26:47 The integration.
1:26:49 Creating an actual functioning digital world.
1:26:52 The cool thing about that was a lot of games have an in-game currency.
1:26:53 That’s not what the Linden dollars are.
1:27:03 The people, the players of the game, like, use the currency as a real currency to buy, sell, trade, like, at a, like, full level.
1:27:05 Like, it’s been going for years and years and years.
1:27:05 Right.
1:27:07 It was like a fully baked currency.
1:27:12 Not like, not just like, oh, I got to buy gems to get the power up and then I’m, I’m out of here.
1:27:12 Right.
1:27:12 That’s right.
1:27:14 It was so multiplayer.
1:27:15 Everybody’s using it with each other.
1:27:16 People really valued it.
1:27:19 And you could trade Linden dollar against U.S. dollars and British pounds.
1:27:19 Right.
1:27:20 On open exchanges.
1:27:20 Right.
1:27:23 And we would manage the fluctuation of the currencies.
1:27:26 And we had, it took us a few years to figure that out of us.
1:27:35 It took them a few years to, it wasn’t me doing it, but I was watching them do it and I was meeting with them and learning about how they were balancing the currency so it didn’t have that many fluctuations.
1:27:36 And so.
1:27:37 We saw all that.
1:27:43 We saw all that and, and, and, you know, the way we measured the world was $760 million of GDP.
1:27:48 And what are the number of people who are making more than a thousand dollars a month in Second Life?
1:27:52 And we would watch that chart because it was actually people were living in there.
1:27:53 Right.
1:28:00 So we realized that money is just completely made up in our heads and that you can exchange it, whatever.
1:28:01 We went off the gold standard in 72.
1:28:02 There’s nothing to money.
1:28:03 It’s all just in our minds.
1:28:04 And so.
1:28:05 We say it’s all in our minds.
1:28:08 You just mean, as long as, as long as we all believe it, it works.
1:28:11 As soon as one of us doesn’t believe it, there’s nothing underneath it besides that.
1:28:13 It’s the belief network effect.
1:28:14 It’s the belief network effect.
1:28:17 It’s actually on the, one of the 17 network effects.
1:28:20 And Bitcoin is just purely a, Bitcoin’s a meme coin.
1:28:21 Right.
1:28:22 We just all believe in it.
1:28:23 It’s the best one.
1:28:25 It’s just the best meme coin, right?
1:28:27 It’s on a spectrum.
1:28:28 It’s not a different thing.
1:28:29 Right.
1:28:30 And the dollar is also a meme coin.
1:28:31 The dollar is a meme coin.
1:28:32 Absolutely.
1:28:34 And they just list out the reasons to believe.
1:28:36 What, what underlies the belief?
1:28:37 Why do you believe in the U.S. dollar?
1:28:38 We have aircraft carriers.
1:28:39 We have tax base.
1:28:39 Yeah.
1:28:40 Those are all reasons.
1:28:43 Those are more reasons to believe than Bitcoin.
1:28:43 Right.
1:28:45 But with Bitcoin, you can’t print anymore.
1:28:46 And that’s like a negative for the U.S. dollar.
1:28:49 So you just list out for every believable thing.
1:28:51 You just list out what are the reasons to believe.
1:28:51 Right.
1:28:53 And, and they’re on a spectrum.
1:28:54 It’s not, it’s not a different thing.
1:28:59 So in 2004, I bought a URL blue.com because I was like, we should create the world’s cyber
1:29:01 gold, the global currency.
1:29:02 Pricey domain, blue.com.
1:29:03 That’s premium.
1:29:04 It was pricey.
1:29:04 Yeah.
1:29:04 It was pricey.
1:29:05 But you believed.
1:29:06 But I believed.
1:29:06 I believed.
1:29:07 And I believe in language.
1:29:08 And I believe in naming.
1:29:09 And all that.
1:29:14 And so I went to Philip, I said, you know, we should create the world’s global currency.
1:29:16 And we should.
1:29:17 As one friend says to another.
1:29:18 As one friend says to another.
1:29:21 And we should call it blue because you have greenbacks, like, like dollars.
1:29:22 And then you have the blue currency.
1:29:24 So you have a global currency.
1:29:29 And so we got together every week on a Wednesday afternoon with Mitch Kapoor and Philip and
1:29:30 me and Stan.
1:29:33 And we would talk about how we were going to pull this off.
1:29:36 And so this was not just shooting a show.
1:29:37 This was like we were planning.
1:29:38 Yeah.
1:29:41 This is 2007, 2007.
1:29:42 That’s just one drunk conversation.
1:29:43 No, no.
1:29:45 It went on for a bunch of weeks.
1:29:46 It went on for a bunch of weeks.
1:29:49 And what we had back then was BitTorrent, right?
1:29:53 So BitTorrent was a distributed thing where everyone had a copy or pieces of the copy of
1:29:54 the movies and we could all share.
1:29:55 Right.
1:29:58 And so what we were going to create, we were going to create a torrented currency.
1:30:00 And it was going to be encrypted.
1:30:03 And we were going to leverage it off Linnodollar to start with.
1:30:05 It was going to be an independent company.
1:30:06 It was going to be its own thing.
1:30:10 We were going through, week by week, we were sort of nailing down all these topics.
1:30:18 But then we came to something we couldn’t figure out, which was this creates seniorage to the
1:30:22 U.S. dollar, which is illegal after the laws in place after the Civil War.
1:30:26 Remember, there were 1,600 different currencies in the U.S. before the Civil War.
1:30:27 Seniorage just means creating a currency?
1:30:29 Creating a currency that’s above the U.S. dollar.
1:30:30 Above meaning.
1:30:31 Senior.
1:30:33 You can’t do anything that’s above the U.S. dollar meaning.
1:30:39 Seniorage essentially outlawed any currency which wasn’t the U.S. dollar to be used.
1:30:48 And so we knew that if we were to do it, the FTC would come after us at some point.
1:30:55 Now, remember, the SEC and the FTC did shut Facebook down from launching Libra because Facebook
1:30:57 was already too powerful and the government saw them as a threat.
1:31:01 And it was there was going to be some seniorage and some cryptoma.
1:31:03 So we were right that at some point.
1:31:08 But we knew what had needed to happen is we need to have an immaculate conception.
1:31:10 We needed to be born so that no one knew it was us.
1:31:12 Because Philip had four kids.
1:31:13 I had four kids.
1:31:14 We had plenty of money.
1:31:15 We had all of our friends.
1:31:15 You don’t have a target on your back.
1:31:16 We like being an American.
1:31:19 We don’t want to have to move to the Bahamas or the Cayman Islands.
1:31:21 We don’t want to have a target on our back.
1:31:24 We don’t want the M16s banging on our door in the middle of the night.
1:31:25 We had too much to lose.
1:31:30 So we had to figure out how can we do this and not be known as the people doing it.
1:31:36 The problem was we had talked at the lobby, at David Hornick’s lobby, about one currency
1:31:37 to rule them all.
1:31:40 Philip and I had led a talk with about 20 people about this to get their ideas.
1:31:44 And at the end, they said, well, I guess we know who’s going to go do this.
1:31:49 So we knew that there was 20 people outside of the room who knew we were working on this.
1:31:52 And eventually someone would track it back to us.
1:31:55 And so we couldn’t solve that problem of anonymity.
1:31:58 And so we didn’t go forward with it.
1:32:04 And then about a year later, I get an email from Philip saying, is this you?
1:32:05 Did you do this?
1:32:07 And it’s the Bitcoin paper.
1:32:08 Wow.
1:32:09 And he was pissed.
1:32:11 He was like, cut me out.
1:32:12 You cut me out.
1:32:14 And I was like, no, dude, it’s not me.
1:32:18 And in fact, we both know that of the two of us, it’s more likely to be you.
1:32:19 Is it you?
1:32:22 And he said, no, it’s not me.
1:32:23 Wow.
1:32:26 So we missed out on creating Bitcoin.
1:32:27 So did you buy?
1:32:29 Yeah, of course.
1:32:29 Of course.
1:32:30 And I was lecturing about it.
1:32:35 And then what happened was the next lobby, I went and I led a session on Bitcoin.
1:32:38 About 35 people came and a whole bunch of people went and bought.
1:32:43 And six people have come up to me and said, I owe my house to you.
1:32:43 Yeah.
1:32:46 So why are you not like a hundred billionaire then?
1:32:48 You had the idea before the idea, right?
1:32:50 Like before the price was.
1:32:53 I bought a bunch, but I didn’t buy an infinite amount.
1:32:58 Did you have the, I have entrepreneurial stubbornness, which is when I had an idea and somebody else
1:33:01 did it, I sort of become like egotist.
1:33:01 I don’t know.
1:33:06 I want them to fail slash like, I don’t invest in it when it’s like, wait, I thought you believed.
1:33:07 Do you want, you believe so much?
1:33:09 You almost wanted to do it.
1:33:09 Yeah.
1:33:10 I have a resistance.
1:33:10 Yeah.
1:33:14 I don’t know if it’s, uh, uh, I think it’s creator, uh, stubbornness.
1:33:14 You want it.
1:33:17 You want to have been the creator rather than the participant.
1:33:18 Exactly.
1:33:18 Yeah.
1:33:18 Yeah.
1:33:19 I have that too.
1:33:24 The other one I was going to bring up was this great line you had to go, you talked about
1:33:26 some therapy, couples therapy you’d dip into or something like that.
1:33:30 And you said, uh, like therapy is just realizing how much of an asshole you are.
1:33:32 It makes you a better partner for your, for your wife.
1:33:32 Yeah, totally.
1:33:33 That was great advice.
1:33:39 No, I am, I am a big fan of, as is my wife, of taking any self-improvement thing that
1:33:40 comes along.
1:33:40 Right.
1:33:40 Why not?
1:33:41 What have you have to lose?
1:33:49 And anybody who’s hesitant to do that stuff, not only do I find you not courageous, but
1:33:55 I also think you’re missing out on the fact that interpersonal relationships is the most
1:33:56 important thing you do in your life.
1:33:59 It determines whether you’re going to be successful at your business.
1:33:59 Right.
1:34:01 It determines whether you have a good death.
1:34:05 Like all the things that are important are determined by that.
1:34:07 And yet we don’t spend nearly enough time on it.
1:34:11 You know, I, I, uh, have a friend whose boss told her once, oh, you don’t need a coach.
1:34:12 You’re fine.
1:34:13 Like what?
1:34:15 She wants a coach.
1:34:17 Like everybody should have a coach.
1:34:18 Like awesome.
1:34:18 Right.
1:34:20 Like just, you can always get better.
1:34:25 And I, and you know, I, I learned this just in life and it’s kind of obvious, but I also
1:34:28 learned it from my wife, who’s the nicest person in the world.
1:34:30 And of anyone I know, she’s the person who needs therapy least.
1:34:31 Right.
1:34:33 And she heard about this thing, Landmark Forum from our friends.
1:34:34 And she’s like, oh, I want to do it.
1:34:36 And I’m like, why?
1:34:38 She goes, oh, because then I might be able to love people better.
1:34:39 Right.
1:34:41 I’m like, oh, that is awesome.
1:34:41 What an attitude, yeah.
1:34:42 What an attitude, right?
1:34:46 And, uh, and so she and I took these five classes at the Landmark Forum over the course
1:34:47 of two years.
1:34:48 And I don’t think I’d be married without it.
1:34:53 Cause I just hadn’t been developed in the basic ways of, you know, if you go to Stanford
1:34:56 Business School and you ask people, what’s the best thing you took at Stanford?
1:34:57 They’re like touchy feely.
1:34:59 And if you go to Harvard Business School and say, what was the most important thing
1:35:00 you learned at Harvard Business School?
1:35:04 They’ll say lead, lead and touchy feely are the same class basically in the two different
1:35:04 schools.
1:35:07 And I find it’s the same thing in the world.
1:35:10 It’s like the most important thing you learn and let people don’t focus on them.
1:35:11 You go to Conscious Leadership.
1:35:12 That’s a great program.
1:35:13 You got Joe Hudson doing programs.
1:35:16 You got Hoffman Institute doing programs.
1:35:20 There’s all these ways to just further yourself and deepen yourself.
1:35:24 And that makes relationships like staying go easier and you can have as much money as you
1:35:25 want or as little money as you want to still be happy as hell.
1:35:26 Right.
1:35:27 So what are we doing?
1:35:34 You know, and literally on the fourth course at Landmark Forum, I’d suddenly like over
1:35:34 my eyes.
1:35:37 I’m like, oh, I’m a total asshole.
1:35:38 I understand.
1:35:42 I’m, you know, and all these ways I’m an asshole.
1:35:45 And unless you admit to yourself you’re an asshole, how can you stop being an asshole?
1:35:46 Right.
1:35:49 Step one of the asshole recovery program.
1:35:50 Yeah.
1:35:51 Love it.
1:35:53 James, thanks for doing this, man.
1:35:53 Long time coming.
1:35:54 Yeah.
1:35:55 Thank you, Sean.
1:35:58 I feel like I can rule the world.
1:36:00 I know I could be what I want to.
1:36:03 I put my all in it like no days off.
1:36:04 On the road.
1:36:04 Let’s travel.
1:36:05 Never looking back.
1:36:06 Oh.
1:36:06 Yeah.
1:36:06 Yeah.
1:36:06 Yeah.