Author: a16z Podcast

  • Shonda Rhimes on How to Create Stories (and Products) People Want

    AI transcript
    0:00:06 Hi everyone, welcome to the A6NZ podcast. I’m Sonal. Today’s episode, which was originally recorded
    0:00:14 at our most recent annual Innovation Summit in Los Angeles, features A6NZ co-founder Mark Andresen
    0:00:19 interviewing prolific writer and executive producer Shonda Rhimes, who will also premiere
    0:00:24 new content on Netflix along with an original slate of podcasts in 2020. So very fitting to
    0:00:29 be sharing that here. The episode that follows covers the challenges all creative founders face,
    0:00:33 whether for Hollywood show business or Silicon Valley tech companies or elsewhere,
    0:00:38 from scaling themselves beyond one person to figuring out how and when to use data or follow
    0:00:43 their intuition and much, much more. Hey everybody, thank you all for being here today.
    0:00:47 Shonda, thank you so much for doing this. Thank you for asking. We know you live a fairly busy
    0:00:52 life. And so it’s a big deal to get here tonight. We’re just thrilled to talk to you. So I’d like
    0:00:57 to start with a show of hands. How many people in this audience have seen the TV show, a little
    0:01:02 independent TV show on a little obscure network called Grey’s Anatomy. Is that right? Keep the
    0:01:06 hands up. Let’s keep the hands up. And then who on top of that, who has seen the TV show scandal?
    0:01:11 And then on top of that, let’s put up for how to get rid of murder. There we go. I see two hands
    0:01:16 up in the front. Fantastic. I’m a little concerned. I know who that is and the fact that she’s seen
    0:01:27 that show makes me a little nervous. So I’d like to start by quoting Ted Talk. So in your words,
    0:01:30 I think how you actually introduced yourself and described what you do in a Ted Talk a few years
    0:01:38 back. So quote, three shows in production at a time, sometimes four. The budget for one episode
    0:01:44 of network television can be anywhere from three to six million dollars, let’s say five. A new episode
    0:01:48 made every nine days times four shows. So every nine days, that’s 20 million dollars worth of
    0:01:54 television. Four television programs, 70 hours of TV, three shows in production at a time, sometimes
    0:01:58 four, 16 episodes going on at all times, three hundred and fifty million dollars a season in
    0:02:03 budget. My television shows are back to back to back on Thursday night all around the world. My
    0:02:10 show’s air in 256 territories and 67 languages for an audience of 30 million people. I think this
    0:02:17 gives us some stuff to talk about. So this is a conference about builders, about builders, about
    0:02:20 people who build things, people who create things, people who create products, people who create
    0:02:26 companies, create experiences. In Silicon Valley, when we talk about the building process, we talk
    0:02:31 about it in two phases. Going from what we call zero to one, which is creating something from
    0:02:35 scratch for the first time. And then we talk about the process of going from one to N, right,
    0:02:42 doing that thing then repeatedly, which is a whole other challenge. So I’d love to talk about
    0:02:48 both parts of that in your career. And so the zero to one part is how do you go from having no
    0:02:54 shows on network television to having one show on network television? That is the lightning in a
    0:03:02 bottle thing. It’s having the idea that sparks something for somebody that nobody else has had,
    0:03:08 that you don’t know is going to work, and you’re working your tail off day in and day out. It’s
    0:03:13 making the pitch, it’s getting in the room, and then it’s doing the work and hoping it works.
    0:03:20 And as somebody who had never had any experience in television before, it’s hard for me to say
    0:03:27 how it doesn’t work, which is an odd thing. For a lot of people, they started as a staff writer,
    0:03:30 and they worked their way up, they worked their way through the business, and then they get their
    0:03:37 own show. I had been writing movies, and I thought I’d like to write a television show, and I wrote
    0:03:44 Grey’s Anatomy. It really did work that way, and so I went from zero to 60 very quickly, which was
    0:03:48 terrifying. What was the process, and I should describe the audience, we’ll talk about this more
    0:03:53 later, but you did work in film. My favorite credit on your IMDB is that you know which one I’m
    0:03:58 going to say, right? In fact, the screenwriter for the Britney Spears highlight movie Crossroads.
    0:04:06 If you have a teenage daughter, she’s seen it. Absolutely, a hundred percent, and maybe if you
    0:04:13 haven’t. So you had worked in film, you were successful in film, you had credits and so forth,
    0:04:18 you had projects made. What was the process of going from that to being in the room pitching
    0:04:25 Grey’s Anatomy? How did that work? Basically, I had a child, and I was stuck at home suddenly,
    0:04:29 because when you have a child, you cannot leave your house. And I started watching television,
    0:04:34 which I hadn’t really been doing before, and realized that all of the really great character
    0:04:38 development that I had been really wishing for in movies was happening on television. I watched
    0:04:46 24 hours or 24 in 24 hours, like it was that fast, and thought like, wow, this is interesting. And so
    0:04:52 really went to my agents and said, can I have a chance at doing this? And went to the meetings,
    0:04:57 started thinking up ideas, started pitching, did the work of research, figuring out what was going
    0:05:03 to work, pitched an idea, didn’t have that one go, pitched another idea, I think I pitched maybe
    0:05:10 three ideas, and they said, sure, do this one. And medical dramas obviously have been a staple
    0:05:14 of television for a long time, and there have been many famous ones, well-regarded ones.
    0:05:20 What was it about the idea of a medical drama that you felt like it was sort of a pre-established
    0:05:23 concept at the generic level, but something that you could make special? Well, there were two things.
    0:05:30 One, I had done these ideas, and I’d pitched them, and they hadn’t worked, and it hadn’t worked,
    0:05:36 and so I said, well, what does Bob Iger want? Because, really, know what your customer wants.
    0:05:40 And this is literally Bob Iger. This is ABC. This is ABC. It’s literally Bob Iger, literally Bob Iger.
    0:05:44 Literally what does Bob Iger want? And they said he really wants a medical show, and I thought,
    0:05:49 okay. So, one, it was about that. I really wanted to make something that they wanted.
    0:05:56 And then it was about making something that I wanted to see. I was an audience that I knew,
    0:06:00 if I made something I wanted to see, I was going to be passionate about it. And so I started talking
    0:06:05 to young female surgical residents about what their lives were like, and I’d been watching all
    0:06:09 those weird surgery shows that used to be on TLC where they would remove giant tumors from people,
    0:06:14 and I thought that was super interesting, and melding those two ideas really came together.
    0:06:18 I was a woman. I was interested in surgery. I had the idea of surgery. Why would I be writing
    0:06:25 about a dude? Like, it didn’t make any sense to me. It felt like it made sense to me to write
    0:06:29 about, you know, young people entering this new profession and to make it a woman, and then to
    0:06:34 make it a bunch of different kinds of people. Okay, so then obviously, a great synonymy,
    0:06:38 they bought it very well. It’s still on the air, season 16 on the air.
    0:06:43 We just shot a 350th episode. Not that many shows make it to 16 seasons?
    0:06:51 Yes, not very many at all. Gun smoke? Yeah, mash. Mash? Yeah, great synonymy. So not bad. So,
    0:06:54 okay, so for a lot of people, that would have been obvious. That was a big success for a lot of
    0:06:57 people that would have been a career defining success, and maybe the definition of somebody’s
    0:07:02 career. How did you make the decision to go from having one show on the air to over time having
    0:07:06 two and then three, and then ultimately even larger number? I used to jokingly say I want to
    0:07:11 take over the world through television, and it, I’ll be honest in this room, it was not a joke
    0:07:14 for me. I really thought like I want to take over the world through television, like if I’m going
    0:07:19 to do something, I’m going to be really good at it. And that had been my first show, so it felt
    0:07:24 like a fluke, and I didn’t want it to feel like a fluke to me. So I wanted to do more. But also,
    0:07:30 it was this feeling of, you know, in the beginning, you made a show and it had gone for one season
    0:07:34 or two seasons, three seasons. I thought, well, we could get canceled at any minute. This could go
    0:07:40 away at any second. I need a second line. So it really was about finding like another show just
    0:07:46 in case. It was, you know, that thing of like, keep something else going. Right. And so I would
    0:07:50 imagine you were flat out working on Greys at the time. How do you kind of then create for yourself,
    0:07:54 for yourself at the time, but then also the organization around you to be able to then do
    0:07:59 more than one? In the beginning, it was about like overworking myself almost to the point of
    0:08:04 full out exhaustion, not really understanding what needed to be done. And then it really was
    0:08:08 figuring out how to build the infrastructure. You know, how non writing, producing partner,
    0:08:12 which was really helpful. Then it was taking the people who I’d worked with for a long enough time
    0:08:18 and, you know, spreading them out to understand like you guys go be where I can’t be because I
    0:08:24 already trust you and getting the talent pool large enough and training people enough to the
    0:08:30 way I thought so that if I wasn’t there looking, they were and trusting people. You have to,
    0:08:34 you cannot do a job like that if you don’t trust the people around you. Otherwise,
    0:08:37 you’re going to be trying to do everything and that’s going to flatten you very quickly.
    0:08:42 Right. So a lot of people who have one hit do try to create production companies and they do
    0:08:46 try to scale like that. Most of them aren’t able to do it. I think a lot of people are able to
    0:08:51 do it if other people are the creators. You know, if you have other creators, it’s a lot easier
    0:08:55 because it’s not all on you. For me, I had Grey’s Anatomy, Private Practice and Scandal all going
    0:09:01 at the same time for a while and that was brutal. Right. Today you have how many shows on the air
    0:09:07 in total? And in production? I think we have five shows in production right now. Could you maybe
    0:09:11 walk us through a day in the life? You know, now I have a company that has, I think there are 38 of
    0:09:17 us or maybe 40 of us working at my company. I now have a full scale basically mini studio with
    0:09:21 the head of production, a head of post production, a head of content, a head of digital content,
    0:09:26 a head of branding. So we have like this great group of people. So for me, it’s about coming in.
    0:09:30 I have an executive team. I have a leadership team. It’s about talking to everybody and finding out
    0:09:35 what’s going on. It gives me time to then go spend in my writer’s room with my writers
    0:09:39 to get my creative work done because honestly, that’s what Netflix is paying me for.
    0:09:44 And then to get all the creative work done and then I can talk to the other creators of the other
    0:09:48 shows that we’re doing and give them what they need. But sometimes it’s just mentorship. Sometimes
    0:09:52 it’s just listening to them rant about things. Sometimes it’s just telling them they’re doing
    0:10:00 a job and deal with actors or networks or whatever needs to be done. And then it’s about sort of
    0:10:03 coming together with everybody at the end of the day, figuring out what needs to be done. A lot of
    0:10:09 what I do is listening to the problem-solving that everybody else is doing for me. My head of
    0:10:14 production will say, “I did this and it saved $20 million from this,” or my head of content will
    0:10:19 say, “This was a nightmare, but it’s already taken care of. We’ve all worked together for so long at
    0:10:26 this point.” Everybody’s a very well-oiled machine. So let’s say I’m a newly-mented graduate of, let’s
    0:10:30 say, USC Film School or do a top-end program like that. Let’s say I want to come work for you and be
    0:10:35 part of this machine. I want to be number 41. What would I have to do to establish myself to the
    0:10:41 level that you would take a chance on me to be part of this? I like really interesting, hard-working
    0:10:50 people. For me, it’s not about pedigree or any of that. It’s about output. What have you done?
    0:10:56 What have you done that’s creative? How pull yourself up by your bootstraps? Have you been?
    0:11:00 We have a wonderful girl who works for us who, she doesn’t have a car, and so she has to Uber
    0:11:05 everywhere she goes, which is, you know, in LA is like a nightmare, and part of her job is like
    0:11:09 going to a million different places, I should say. But she is such a hard, amazing working person.
    0:11:13 I was like, “You know, we hire anyway. It doesn’t matter. We’re going to figure out how to make that
    0:11:18 work,” and we did. So to me, it’s about people who are passionate about what they do, who are going
    0:11:23 to sort of eat, sleep, and breathe it. I also like people who know how to have a life outside,
    0:11:27 because the more creative you can be on the outside, the more you bring to the inside.
    0:11:32 And then, I suppose I’ve been working for you for three, four, five, six years,
    0:11:35 and I poked my head up and I said, “Boy, I have an idea for a show I’d like to make,
    0:11:39 and I’d like to make it under your umbrella.” What do I have to do to get to that level?
    0:11:44 Well, that happens all the time. So the show we’re doing right now, called Bridgerton,
    0:11:47 which is being made by Chris Van Dusen. Chris was my assistant on Grey’s Anatomy.
    0:11:54 He’s making a show. Pete Nowak, who does How to Get With Murder, he was a baby writer on
    0:11:58 private practice, I think, and Grey’s Anatomy at a certain point in time. That’s how we roll.
    0:12:04 I like to raise the people who are going to be our next group of writers, mainly because they
    0:12:08 already know how to do everything, but also because there’s so many interesting people
    0:12:13 who come through who are the next great purveyors of ideas, who sometimes get overlooked.
    0:12:18 So one of the things that Hollywood and Silicon Valley has in common is we both launch these
    0:12:23 projects and some of them work and some of them don’t. And even the best entrepreneurs in Silicon
    0:12:27 Valley and even the best creators in Hollywood have projects, some projects succeed, some projects
    0:12:32 don’t. As you think about this kind of production company, studio umbrella that you’re building,
    0:12:37 as you have all these projects, what’s the success rate that you expect to have and why?
    0:12:45 What’s the right success rate? I’m very hard on myself. I’ve never created a show that hasn’t
    0:12:51 gone less than 100 episodes, so I’m very hard on myself. You’ve written treatments and screenplays
    0:12:56 for things that haven’t gotten picked up? Maybe one. But I’ve never produced anything that hasn’t
    0:13:00 gotten that way. You have a lot more projects underway now? Yeah, I have a lot more projects
    0:13:03 underway now and some of them aren’t supposed to go that long, so it’s not that thing. But I have a
    0:13:10 real panic about not doing well for you and me. But for shows that we’re making, it’s really about,
    0:13:16 a lot of it is about helping somebody figure out how you run a show. Running a show is not an easy
    0:13:21 thing. You go from being a writer who’s writing at home in your pajamas to having 350 people working
    0:13:28 for you, looking at you and saying, “What do we do now?” So it’s not a simple way of being. So to me,
    0:13:33 it’s about helping them stand on their own two feet because eventually they’re going to have to,
    0:13:37 whether or not you’re shoring them up or not, they really have to be able to do it for themselves.
    0:13:43 So for some people, that’s easier than for others. For some people, it’s like duck to water. For some
    0:13:48 people, it’s really teaching them how to swim. When do you know that a show is going to work?
    0:13:57 What’s the moment? I don’t know. Well, yes, I think you do. You know around episode 10. Is that
    0:14:02 right? You have to get that far into it before you feel certain. For the shows I make, for shows
    0:14:08 we make with other people, around episode 10, I become sure whether or not it’s going to survive
    0:14:14 really, whether or not it has an engine that can keep going, whether or not I feel like I understand
    0:14:19 what the show is because until then you’re still just finding it. You’ve just started to work with
    0:14:23 all these people. You’re all getting your feet wet. You’re figuring out what this thing is.
    0:14:28 You’re making a product and you’ve only been working together for, by that point, it’s
    0:14:34 maybe six months, seven months. You see these shows that they take, Parks and Rec was maybe a
    0:14:38 famous example of this. They kind of take a left turn. Yes. And then some of them take a left turn
    0:14:42 and get much, much better. Succession is a show. There are also people who talk about that way.
    0:14:46 I haven’t seen season two yet. Oh, it’s genius. No spoilers. No spoilers. But I’ve heard, I love
    0:14:51 season one, but I’ve heard it’s even better in season two. And so it’s a left turn to greatness.
    0:14:55 Is that the kind, it’s the result of the cohesion of the people? Is that the… It’s part of it.
    0:15:01 You figure out what you have. You gel, scandal. We, I feel like we were like, we don’t quite know
    0:15:05 what we’re doing season one. And then we got to the end of season one and we hit this episode
    0:15:10 where you sort of saw what happened in the past and we all let, okay, now we understand our show
    0:15:17 completely. Grace was very different. I sort of knew from the beginning what was going on,
    0:15:21 but it wasn’t until the ex-wife showed up. Like there were these moments when you sort of,
    0:15:27 when things gel and you know what the show is and it starts to sing. Do you do test screenings
    0:15:32 for your shows? The network does test screenings. Yes. Do you find value in test screenings or no?
    0:15:36 It’s an interesting question. I find value in it, especially when like, for instance, when we were
    0:15:43 making Grace and I was this kid who was making a show and they had no idea who I was and they were
    0:15:48 very worried about, you know, what is this show? There had never been a show where, you know,
    0:15:51 women were that competitive or a woman had slept with a guy the night before her first day of
    0:15:57 work where there were that many people of color in a show. They were very nervous. And so, you know,
    0:16:01 I’d been sort of keeping my head down and just doing my work and hoping for the best. Testing was
    0:16:07 great because testing then proved that the show was working for them. It proved what I felt,
    0:16:12 you know, was a good show, was a good show for that. So testing does help because it backs up,
    0:16:17 you know, the suits who need to know that this is going to work if they need numbers for themselves.
    0:16:24 To show people. But it’s never been a thing that I’ve really paid attention to in a real way
    0:16:28 in network television because testing in network television is really about opinion.
    0:16:34 I’m very excited about it at a place like Netflix because the data is very different than testing.
    0:16:40 So that’s my next question. So what kinds of data would you find useful in the creative process?
    0:16:46 Well, right now I’m excited by the concept that I could be told, for instance, like exactly when
    0:16:48 a whole group of people decide they’re going to stop watching something.
    0:16:53 Because that’s very different than, you know, in network television, people will say like,
    0:16:58 I hate that character. And that’s fine. But that doesn’t mean that they’re going to start
    0:17:00 stop watching. You know, people say they hate somebody and they love to hate them.
    0:17:04 They’re going to keep watching. It doesn’t matter. But it can be interpreted differently.
    0:17:08 But in data, when they say like everybody stopped watching exactly at this moment,
    0:17:14 that is real. And that helps us, you know, if you really want to know it. And I haven’t gotten
    0:17:18 to use it yet. But I’m excited by the idea of getting to we’ll talk more about Netflix in a
    0:17:22 few minutes. But I’d love to talk a little bit more about the distinction between film and TV,
    0:17:26 because it feels like something very important is happening. So TV is like mass market entertainment.
    0:17:29 It may be not expected to be at the same creative bar, although there were there were obviously
    0:17:34 exceptions along the way. And then it feels like something maybe flipped is the right way to think
    0:17:37 about is that television is the writer driven medium, as you mentioned, where the writers are
    0:17:41 actually given control of the show. And of course, legendarily, in the film industry,
    0:17:44 that is not the case. It’s directors. Yes. Right. And then there have been actually books written
    0:17:47 about how terrible it can be for the writers to see the results of their work go through the
    0:17:51 the sausage making machine. And so would you agree with the thesis that there’s been this inversion
    0:17:56 of quality from film to TV? Would you agree it’s because it’s writer driven? Or would you have
    0:17:59 a different point of view on that? I don’t like to use the word quality, because I think that
    0:18:07 quality makes it it about what’s good and what’s bad. I think that movies like Star Wars and Jaws
    0:18:15 and all these really awesome blockbuster movies changed the idea of what a movie could be. And
    0:18:22 the pursuit of of a big blockbuster changed what people were interested in making. And over time,
    0:18:26 you know, for a while it meant they could make blockbusters and they could make these amazing,
    0:18:30 you know, smaller character driven movies. And then over time it began, they made more
    0:18:35 just big blockbuster action movies than they made more blockbuster action movies and just remakes.
    0:18:42 And at a certain point that began to be what was lucrative for them, period, less prestige films
    0:18:48 and more just bigger movies. And, you know, I like a good Marvel movie, so I’m fine with it.
    0:18:54 But it did mean that a lot of that character based stuff didn’t get made. And at a certain point,
    0:18:58 I think a lot of writers realized that if they wanted to make those kinds of stories and if they
    0:19:03 wanted to have control of them, there was you could make a lot of stuff on television. It literally
    0:19:08 was 2003 or four when I sat down and said, oh, all the good character driven stuff
    0:19:13 can be made on television. So it is that time. Right. And was it putting the writers in charge?
    0:19:19 Was that the… Well, I mean, television wasn’t, I mean, in film, we always say the director fires
    0:19:23 the writer and in television, the writer fires the director. Like, and that’s always been the way
    0:19:28 it’s been. So I think that it’s just a writer driven medium. Right. It’s amazing because you
    0:19:33 just think of it in films. The director is so important. Yes. And yet in TV shows, you see,
    0:19:37 it’s every episode is a different director. And the director is very important. It’s simply that
    0:19:44 the writer has to continue. You’re writing a continuously long, crazy, epic novel. So the
    0:19:48 writer is the person who’s the through line. Right. Okay. And then another analogy between
    0:19:53 Hollywood and the Valley that I think about a lot is both of our worlds, there’s a form of creative
    0:19:56 expression. There’s creative expression in the form of creating the product and then creating the
    0:20:00 company. Right. That makes the product. But then it’s also a business. And I think one of the
    0:20:04 things that you’ve said is that everybody does need to eat. Yes. And so it is important to also
    0:20:09 treat it as a business. Like, how do you navigate as a creative professional? How do you navigate
    0:20:14 that line between art and business? Well, part of what I think is that, you know, you have to really
    0:20:20 think about your audience. And I don’t think that there’s any shame in that. I enjoy writing for
    0:20:26 my audience, not necessarily to my audience or, you know, like thinking about my advertisers in
    0:20:32 that way. But I enjoy writing for the audience that I’m writing for. You know, there’s a lot of
    0:20:37 entry points for the audience that we have. And they’re awesome. You know, they’re loyal and
    0:20:43 they’re wonderful and they pay attention and they care. And you have to respect that. And I don’t
    0:20:47 think that there’s any shame in that. Like there’s something about the idea that you can ignore
    0:20:54 your audience and think that you’re still going to get somewhere that is not very smart. So I enjoy
    0:20:59 writing for the audience and really enjoy the stories that I’m telling. And I do think that if
    0:21:06 you’re passionate about that, you can still be creative. Your shows are very adventurous. Many
    0:21:10 things happen in your shows and the characters do many things. How do you know when you’re pushing
    0:21:18 the audience too far? Is that possible? It definitely is possible. Usually, by the time I’m
    0:21:24 pushing them very far, they’ve been with us for so long that they’re just like, oh, gosh,
    0:21:29 you’re going there. You know, so it’s sometimes it’s okay. Yeah. I mean, at one point on Scandal,
    0:21:33 two of the characters ended up basically being sociopathic serial killers in a
    0:21:38 love-struck relationship. It’s Washington. And by the way, like we watched every episode.
    0:21:43 It’s Washington. Yeah, well, it is. But you know, a lot of bad things that happened to them. And I
    0:21:48 felt like the right place for them to go. But it was this very, you know, it went with the idea
    0:21:55 that like DC was filled with monsters at the time. Not literal monsters. But it was this very dark
    0:21:59 world. And there’s a lot of things that happen. And I feel like you’re, you know, you’re following
    0:22:05 story and following story and following story. Sometimes, sometimes it works. Sometimes it doesn’t.
    0:22:12 So I remember watching, you know, watching Scandal. Scandal started in 20, probably 12, 13.
    0:22:17 Yeah, 2012. So 2012. And I remember thinking, okay, boy, like this is a crazy version of Washington,
    0:22:23 DC. Yeah. And I am so glad that like normal Washington, DC isn’t crazy like this. And then
    0:22:26 I watched season two and season three. And then I started paying attention to normal Washington,
    0:22:31 DC. And I was like, Oh, my goodness, things are getting crazy in real life. And so then it was
    0:22:35 like, you know, given what I would give on a Thursday night, do I watch Scandal or do I watch
    0:22:40 the news? Is it a challenge for somebody writing a show like that? Well, what happened for us is
    0:22:48 first we wrote about this made up thing that we made up called Thorngate, where if you there was
    0:22:53 a spy thing that could like use your phone to spy on you. And it’s absurd. I mean, that’s just
    0:22:57 paranoid. Yeah, exactly. And it could, you know, listen to your conversations. And we thought we
    0:23:04 were just being like wild. And then two months later, if it was happening. And like that kept
    0:23:08 happening to us mainly because we were sort of reading the papers and sort of extrapolating
    0:23:13 like what ifs. Then, and we felt that was fun. And the, you know, the critics thought it was fun.
    0:23:18 And we thought like this isn’t this cute. But then we made up like the wild and crazy like
    0:23:26 Southern like billionaire who wanted to run for president and, and seemed to be like just
    0:23:33 somebody. And then it was happening. And that was not as funny because it was like
    0:23:41 too real. And it kept being very real. And then at a certain point, we thought, we can’t surpass
    0:23:45 what’s happening in Washington. Like there was a moment when I just thought, I don’t even know
    0:23:52 how to surpass what’s happening in Washington. We did our inauguration. And it just felt like
    0:23:57 what’s happening in real life is just way crazier. And I thought like, I’m done,
    0:24:01 which is why we ended in season seven. I thought, I cannot write anymore about what’s
    0:24:05 happening. We’d have to go the other way. We’d have to go like way serious in order to make it
    0:24:09 that interesting. For a long time, I used to ask my friends in DC, is Washington more like scandal
    0:24:14 or veep? And for a long time, the answer was veep. I know. I know when I was very proud of that.
    0:24:18 Yes. So we’ll finish up by talking about tech and talking about what you’re not doing with Netflix.
    0:24:24 First, I’d love to ask, has social media kind of arrived, kind of made these shows for you and
    0:24:30 kind of made your career? Has social media changed how you do what you do? Scandal really helped
    0:24:36 change how people use TV shows to do what they do. Like we were part of the start of, you know,
    0:24:41 live tweeting shows. That was one of the things that we all did at the very beginning, and the
    0:24:46 live tweeting of shows was really a big deal and how we interacted with fans. So it’s changed the
    0:24:50 way we interacted with fans. It didn’t change the way we wrote the shows or create the shows,
    0:24:57 but it was a very quick means of communicating with critics, talking to the press, and hearing
    0:25:01 what the fans had to say. I’ve heard a theory from friends of mine in the movie business that
    0:25:05 the social media has made movies much harder because you used to be able to release a movie on
    0:25:10 Friday. And if the movie wasn’t that great, people would still see it three, four or five days.
    0:25:14 You could have that first opening weekend. You could maybe still make a profit in that movie.
    0:25:18 Today, the movie comes out, you know, it shows up in theaters five o’clock by six o’clock or seven
    0:25:24 o’clock on Friday night. The buzz is out. The buzz is not good. The movie just dies. And so one
    0:25:27 of the arguments I’ve heard is that that’s one of the things that’s reduced risk taking in the film
    0:25:32 business. Oh, that’s interesting. Do you buy that? It’s highly possible. I mean, one of the things
    0:25:37 that was great for us was because the live tweeting was so important and because it meant that if
    0:25:42 you missed it, you missed the conversation, we sort of brought back watching a show in real time.
    0:25:49 So it worked great for network television for that moment. But I do think for things like movies,
    0:25:54 it’s dangerous because people will also spoilers. I’ve seen things where people like completely
    0:25:59 tell the ends of movies on Twitter and things like that. Streaming, I think it’s a good thing
    0:26:03 for an audience as well because it does get the word out. Right. Well, we’ll talk, as I said,
    0:26:07 we’ll talk about Netflix. But when you make your shows for Netflix now, will they be released
    0:26:11 weekly the way you have been? Or will you do the binge now? I hope, I really am big on binge
    0:26:17 watching myself. So I’m hoping they’re all released in a binge way. So then one of the things you
    0:26:21 hear about, one of the questions about, I mean, binging as a consumer proposition is amazing.
    0:26:26 And I think we all love it. One of the things you do hear is it does reduce that water cooler
    0:26:30 effect, that kind of simultaneous experience. And you do get these shows, like what’s the,
    0:26:34 you do get, obviously Game of Thrones has been a recent example of this, where it’s just like,
    0:26:37 where it feels like, at least for a brief moment in time, the whole country is watching the same
    0:26:41 thing again. Is that, do you think that that’s something that should be preserved or is that
    0:26:46 just, is that not necessary? I’m not that worried about it. I mean, and I think I’m not that worried
    0:26:50 about it because I still, you know, I’m in the grocery store and I still turn around the corner
    0:26:55 and there’s a 12 year old staring at me and suddenly I’m Jesus. And I realize, oh,
    0:27:01 you’ve just watched 300 episodes of Grey’s Anatomy, like at once. So I think that binging,
    0:27:06 no matter what, still works. And I don’t think you have to have your water cooler moments all at
    0:27:11 once. I think that there’s something interesting about telling somebody like, oh my God, have you
    0:27:15 seen, you know, dark, which is my favorite show. Have you seen dark? And you have to watch it and
    0:27:19 you go crazy on it and then somebody else watches it and it’s sort of like you’re passing on like a
    0:27:24 secret. Yeah, almost like a novel. Yeah. Yeah. Great. Okay. Well, let’s talk about Netflix. So,
    0:27:28 so you made this huge announcement recently. You’re moving to Netflix and you have this big
    0:27:32 new deal relationship with Netflix. I was going to ask you as well, the shows you make for Netflix
    0:27:36 be different than the shows you make for ABC. But you have said, I believe that the shows that you
    0:27:41 made for ABC are shows made for ABC, whereas shows made for Netflix will be shows made for the world.
    0:27:46 Yeah. I mean, I think there’s a difference. ABC has a very specific audience of people who watch
    0:27:52 shows on ABC. They have a brand themselves. And there’s a group of people they are making shows
    0:27:58 for. They have advertisers who they need to keep happy. And there’s a, there’s a, there’s a system.
    0:28:03 And I think that that’s great. I mean, that’s what’s been working. So Netflix’s thing is very
    0:28:10 different. Like the idea for Netflix is my job is to make shows that make people want to subscribe
    0:28:15 to Netflix, which is very different than keeping people watching. You know what I mean? It’s,
    0:28:20 it’s just different, bringing people to a show for a specific hour of time. So it means we can
    0:28:26 make almost anything as long as it’s good. And so for us, it’s been really fun to expand the content
    0:28:32 of what we’re making while still keeping what I think, you know, are the same core audience members
    0:28:37 in our minds. Right. What does, what does, what does that, I mean, in general terms, not
    0:28:41 just for specifics, but in general terms, what does Netflix ask from you when you want to make a
    0:28:45 show as part of your new partnership? I can tell you exactly in specific terms what they ask from
    0:28:50 us, which is make whatever makes you happy, which has been fantastic. I mean, that’s an extraordinary
    0:28:57 deal to have to, to get to work with people who are like just to make stuff that’s good.
    0:29:02 And they’ve been very supportive about that. Do they try, do they connect that back to like
    0:29:06 projections on subscriber numbers or retention? Or does that come later? Or do they, that’s just
    0:29:09 not part of the coverage? Yeah. No, there’s no, we don’t have to ask those questions. Like,
    0:29:14 that’s not a thing that happens. It’s more about, are you excited about this? That’s great. Go.
    0:29:17 We go to them and we say, we’re going to make, you know, eight episodes, this or 10 episodes,
    0:29:22 this or we’re excited about this. And they’ve been very supportive. Right. That might change if we
    0:29:25 start to make things that are terrible. But right now they’re very, very supportive of us making,
    0:29:31 you know, our shows. Right. And it’s the right format, one of the sort of, the formats of entertainment
    0:29:34 kind of change the technology. And so the, you know, there’s, there’s sort of, you know, arguments
    0:29:37 about why, you know, TV shows are half hour and an hour and it has to do with, you know, the
    0:29:41 distribution of, you know, commercials, commercial placement has to do with, you know, the viewing
    0:29:45 patterns and how long people will sit and so forth. Is, is like the 45 minute one hour drama
    0:29:49 and the half hour comedy, is that the stable state even in a streaming world? Or do you think the,
    0:29:54 the, the, the sort of shape of, of, of programs will change? You know, it’s interesting. I think
    0:29:58 it was Amazon that made the 30 minute show homecoming, which was, there was a drama, but it
    0:30:02 was 30 minutes. And it was really interesting and people stayed riveted. They’ve made a couple of
    0:30:08 things that have been like 15 minute comedies, which are surprising. I don’t know about the
    0:30:14 length. I know that for me, writing something that’s about 60 pages long, which is about 45
    0:30:20 minutes long on television feels right. It’s, it’s what I know how to do. And it feels good to
    0:30:23 me. I have not reached a point now where I’m thinking like, I need to write something that’s
    0:30:27 an hour and 15 minutes, or that I need to write something that’s only 20 minutes long. That’s
    0:30:31 not my thing. Right. I’ve also read, I’ve also read, I’ve seen studies over the years, there’s a
    0:30:35 great Stephen Johnson, the author wrote a book called Everything is Bad is Good for You, where
    0:30:38 among other things, he makes a very positive case for, for television. One of the things he
    0:30:42 shows in that book is that television shows have gotten much more complex over time. And so if you
    0:30:47 chart the plot of a drama from the 1970s and compare it to the Sopranos or to Grey’s Anatomy,
    0:30:51 like it’s just like a wildly different level of complexity and therefore kind of stimulation.
    0:30:56 I’ve heard an argument that streaming will lead to a dramatic, even increase in complexity and
    0:31:01 sophistication as a consequence of the fact, no commercial breaks. Right. So no need for the,
    0:31:05 the cliffhanger, and then pick the narrative back up. And then also no need to have the
    0:31:09 recap of the, of the next episode, because you, I guess you assume the, the, the bingeing model.
    0:31:12 Does this like, does this open the door to a much more sophisticated form of entertainment?
    0:31:16 I think it can. I mean, and I think what’s very interesting for somebody coming from
    0:31:22 so many years of writing network television, it’s been a, it’s been fun to really play with that,
    0:31:26 to know like, we don’t have to recap, we don’t have to have out act breaks. We don’t have to worry
    0:31:31 about like how to get somebody from that episode to this episode. You know, there’s a lot of
    0:31:35 things that go away when you don’t have to do that. And it does feel like stories can get more
    0:31:42 complex because you don’t have to worry about driving the things forward in that way. But I
    0:31:48 also am like, I like a good plot. Like I like when things are moving forward. I enjoy the pace of
    0:31:55 something like scandal. Writing it is fun. And so to me, I, you know, a lot of streaming shows get
    0:31:59 really slow because they know they can, because they know you’re streaming them. I don’t think
    0:32:03 that’s for me in terms of the way I write things. I enjoy watching them, but I don’t think it’s
    0:32:09 for me. So we’re still moving at a pace. And then on your, I saw an interview you did about
    0:32:13 your Netflix deal, your company Shondaland is moving to a new facility. And there’s a vignette,
    0:32:17 one of the stories that has you and your partners looking at photos on the wall of the Founders
    0:32:23 United Artists, which is a studio from classic Hollywood, from Golden Age, Golden Age Hollywood.
    0:32:28 Maybe, and you talked about, I think a little bit or alluded maybe that’s a little bit of an
    0:32:32 inspiration for where you’re headed with Shondaland or it’s maybe there’s some historical legacy
    0:32:37 there to. We’ve really created that we were able to create a model in the beginning when we first
    0:32:44 got there to find a way to hold on to a series of our writers and to make it sort of a creative
    0:32:50 home for people to stay versus, you know, you have to go away and take a deal here and come back
    0:32:54 there and get hired for this show and come back as a, I was like, can’t we have more of an incubator
    0:33:00 for writers? And Netflix was very excited about that idea and amenable to that idea. And I felt
    0:33:04 like that felt like, you know, a home of a little, a bunch of creative people, like all running in
    0:33:08 and out of their offices and screaming about how things aren’t working and helping each other felt
    0:33:13 good. So United Artists, the history for those who don’t, the history of United Artists was it was
    0:33:18 a studio founded by some of the legendary creative talent at that time. That was Farah Banks, Mary
    0:33:22 Pickford, a series of these people and it ran for quite a while with the kind of model that you’re
    0:33:28 describing. But then at a certain point that ended in the sort of modern studio world that we know
    0:33:33 I’ve kind of dominated for the last 50 years. Like, did that have to end? And why would now be the
    0:33:37 right time for that to come back? Because we can and we’re enjoying ourselves and we can do it. And
    0:33:44 also it feels like a really good creative time. Everything feels new. You know, we’re on this
    0:33:49 new horizon of where we can go in terms of this industry. You know, something is sort of going
    0:33:54 down and something is coming up and that means, I don’t know, just a new space for us. That’s
    0:33:59 great. Maybe we could close on three recommendations from you for TV shows, films or books that aren’t
    0:34:09 made by you. Well, yeah, there’s plenty of those. I highly recommend Dark, which is a German show
    0:34:14 on Netflix and it’s so good. Now, do I watch that with dubs or do I watch that with subtitles?
    0:34:18 It depends on if you’re a dub or subtitle person. Dark is one of those shows where
    0:34:22 they’re speaking German, but the actors who do the German also do their own dubs. So it’s actually
    0:34:29 really good. And the fact that I know that means I’m a super nerd. Succession, which you have not
    0:34:36 seen, but you obviously need to see because it’s genius. Succession, that shows nonfiction, right?
    0:34:43 Yeah, that’s another one of those shows. And probably Barry, which is really fantastic.
    0:34:46 A comedy on HBO. Yeah, it’s a comedy on HBO. It’s really beautiful.
    0:34:50 Yeah, what makes Barry special? I think just the way it was written and the way it’s performed,
    0:34:53 that show feels like nothing else on television right now.
    0:34:58 All right, that’s great. Shonda Rhimes, thank you. Thank you.

    Hollywood and Silicon Valley seem so different, but are more alike than we think. What challenges do tech startup founders and other creative founders — like showrunners and executive producers — similarly face? Both have to deeply understand and respect their audiences; learn how to scale themselves beyond one person; and even figure out how and when to use data… or follow their intuitions.

    In the end, it’s all about creating a story (product!) that sticks.

    In this conversation with Andreessen Horowitz cofounder and general partner Marc Andreessen, Shonda Rhimes — executive producer, writer, creator of hit 100+ episode shows hows like Grey’s Anatomy and Scandal, and founder of the media company Shondaland — shares the mindsets that drive her to pitch ideas, think about new mediums, and what happens when make believe veers too close to reality.

    Rhimes is the recipient of several industry awards and accolades, including a Golden Globe for Outstanding Television Drama, the Peabody Award, Time 100 most influential people, Fortune’s “50 Most Powerful Women in Business”, and lifetime achievement awards from the Directors Guild of America, the Writers Guild of America, and the Producers Guild of America. She has been inducted into the National Association of Broadcasters Broadcasting Hall of Fame and to the Television Academy of Arts & Sciences Hall of Fame. She is also the creative director of Dove’s #RealBeauty campaign and authored NYT bestseller Year of Yes.

    The conversation originally took place at our most recent annual innovation Summit — which features a16z speakers and invited experts from various organizations discussing innovation at companies large and small, as well as tech trends spanning bio, consumer, crypto, fintech, and more.

  • The Journey from 0 to 1, from Mosaic to Netscape

    AI transcript
    0:00:03 – Hi everyone, welcome to the A6 and Z podcast.
    0:00:06 Today we have one of our special guest hosted episodes
    0:00:08 as part of a new series where we share
    0:00:12 select A6 and Z partner appearances elsewhere here.
    0:00:15 This one is with A6 and Z co-founder Mark Andreessen.
    0:00:18 The episode is cross-posted from the new show
    0:00:21 Starting Greatness, hosted by Mike Maples Jr.
    0:00:25 In the show that follows, Mark shares some rare
    0:00:28 behind the scenes details on his journey
    0:00:31 to product market fit from zero to one
    0:00:34 from the University of Illinois and Mosaic to Netscape.
    0:00:36 – So it was a strange time.
    0:00:37 There’s an old William Gibson quote,
    0:00:40 the author of Neuromancer, all the great science fiction books.
    0:00:41 He says the future’s already here,
    0:00:43 it’s just not evenly distributed.
    0:00:45 And so this was a great example of that.
    0:00:46 – That’s Mark Andreessen,
    0:00:50 who’s now a famous venture capitalist at Andreessen Horowitz.
    0:00:52 At age 22, he founded Netscape,
    0:00:54 the company that kicked off the internet age.
    0:00:56 How did Netscape even happen?
    0:00:59 And what was it like when it was about to blow up?
    0:01:00 This is Mike Maples Jr. a floodgate
    0:01:03 and it’s go time with Mark Andreessen.
    0:01:05 (upbeat music)
    0:01:08 Welcome to Starting Greatness,
    0:01:10 a podcast dedicated to ambitious founders
    0:01:14 who want to go from nothing to awesome, super fast.
    0:01:15 When you’re a startup founder,
    0:01:18 you have to channel your inner James Bond,
    0:01:20 your MacGyver, your Wonder Woman.
    0:01:23 I’m going to help you win by curating the lessons
    0:01:24 of the super performers.
    0:01:26 But before, they were successful.
    0:01:30 So without further ado,
    0:01:32 – Vignition sequence start.
    0:01:35 – Let’s get started.
    0:01:38 (upbeat music)
    0:01:42 I decided to do some things a little differently
    0:01:42 with this interview,
    0:01:44 because I wanted to capture things
    0:01:46 about Mark’s startup journey
    0:01:47 that most have likely not heard.
    0:01:50 I wanted to get a level deeper about how Netscape
    0:01:53 and the early web grew out of mosaic project.
    0:01:55 But I also wanted to help people see a side of Mark
    0:01:57 that few people see in public.
    0:02:01 While you might see him share books he likes on Twitter,
    0:02:02 it’s hard to connect this
    0:02:04 to what it’s like to spend time with him.
    0:02:06 He’s an incredibly avid reader
    0:02:09 in diverse areas like technology, science, art,
    0:02:12 literature, science fiction, history, politics,
    0:02:14 economics, psychology,
    0:02:17 and he can synthesize ideas and connect the dots
    0:02:19 in a blink of an eye.
    0:02:21 And that curiosity combined with his technical depth
    0:02:23 is definitely a superpower.
    0:02:26 If you’ve wondered about the origin stories of the web,
    0:02:28 what it was like to be in the middle of it,
    0:02:31 Mark goes into a depth that I haven’t seen before.
    0:02:32 And he also reveals the three things
    0:02:34 he wishes Netscape had done differently
    0:02:37 that would have made the internet better today.
    0:02:39 I’m excited about how the conversation went
    0:02:40 and hope you enjoy it too.
    0:02:42 Let’s talk to him.
    0:02:45 (upbeat music)
    0:02:48 Mark Andreessen, welcome to the podcast.
    0:02:50 – Hey, it’s great to be here.
    0:02:52 So Mark, you’ve been involved with some pretty big wins.
    0:02:54 So why don’t we just start out by asking you,
    0:02:56 what’s your advice to people
    0:02:57 who want to build something great?
    0:02:59 – So the first piece of advice is don’t do it.
    0:03:00 (laughing)
    0:03:02 – It’s impossible.
    0:03:04 – It’s impossible, so it’s so hard.
    0:03:07 John Parker has the best line on starting companies.
    0:03:09 Starting a company is like chewing glass.
    0:03:12 Eventually you start to like the taste of your own blood.
    0:03:14 And so don’t do it.
    0:03:16 And the reason that’s the first piece of advice
    0:03:18 is because number one, if you can be talked out of it,
    0:03:19 you definitely shouldn’t do it.
    0:03:21 So if you listen to advice number one,
    0:03:22 you definitely shouldn’t do it.
    0:03:24 If you ignore advice number one,
    0:03:26 you might have the personality type to be a founder.
    0:03:28 So that’s the first gut check.
    0:03:30 And then you see this a lot, I’m sure,
    0:03:32 is there are a lot of people who would like
    0:03:35 to start a company, the goal is to start a company,
    0:03:37 and then they kind of try to back in on an idea.
    0:03:38 We call this sort of synthetic,
    0:03:40 we call these sort of synthetic startups.
    0:03:41 It’s like I want to start a company
    0:03:43 and I am now going to apply myself.
    0:03:44 – Market white space companies.
    0:03:45 – Yeah, exactly.
    0:03:47 Boy, wouldn’t it be great if X,
    0:03:50 whatever X is just something I read in the magazine that day
    0:03:52 or just a, you know, by the way,
    0:03:54 there have been some successful synthetic startups,
    0:03:54 like some have worked.
    0:03:57 The more common thing is an actual honest to God,
    0:03:59 organic idea that is actually something
    0:04:02 that you are like deeply immersed in, right?
    0:04:03 The odds that it’s going to be like
    0:04:05 a flash of inspiration or very low,
    0:04:07 but like if it’s a field that you’ve been working in
    0:04:09 for five or 10 years and you know it inside out
    0:04:10 and it’s just like obvious to you
    0:04:12 that it should work a different way,
    0:04:13 then maybe you’ve got something.
    0:04:15 But you got to like really deeply,
    0:04:17 like number one, you have to deeply believe
    0:04:17 because you have to really be
    0:04:19 irrationally committed to it because it is so hard.
    0:04:20 But the other thing is like,
    0:04:21 you have to actually validate your beliefs.
    0:04:23 Like it has to actually like, you have to be right.
    0:04:26 – And gates and jobs are the same way in PCs.
    0:04:28 You’re obsessed with a field for its own sake
    0:04:29 and you start noticing things
    0:04:31 because you’re down the rabbit hole.
    0:04:32 – Yeah, that’s right.
    0:04:32 And it’s very hands on.
    0:04:35 And you know, both the Microsoft and Apple founding stories,
    0:04:36 both companies started very small and very humble
    0:04:37 because they were literally working.
    0:04:38 Like, you know, Apple,
    0:04:40 they were building their first computers by hand.
    0:04:41 – Yeah.
    0:04:42 – You know, there was no abstraction to it.
    0:04:43 – Right.
    0:04:44 – There was no master plan, there was no theory.
    0:04:46 It was can we build a hundred computers
    0:04:48 made out of wooden boxes and sell them at the trade fair
    0:04:50 and it built out of that.
    0:04:52 But to your point, like they were living in that world.
    0:04:53 – I would love to just know about
    0:04:56 just how you got to building Mosaic.
    0:04:58 How did you get involved with the internet in the first place?
    0:05:00 – So it was a strange time.
    0:05:02 There’s an old William Gibson quote,
    0:05:03 the author of Neuromancer,
    0:05:04 all the great science fiction books.
    0:05:06 He says the future’s already here.
    0:05:07 It’s just not evenly distributed.
    0:05:09 And so this was a great example of that.
    0:05:12 And so what I sort of semi-realized,
    0:05:13 when I chose to go to Illinois,
    0:05:15 part of it was because they had a top-flight
    0:05:17 engineering program, computer science program.
    0:05:19 But in particular, they were picked in the mid-80s
    0:05:22 to be one of four federally funded centers
    0:05:23 for supercomputing at the time.
    0:05:25 And this was a specific government program
    0:05:26 that basically had two parts.
    0:05:30 One was to basically buy these $25 million supercomputers
    0:05:33 from companies at the time like Cray and thinking machines
    0:05:34 and basically put them in,
    0:05:36 basically with four locations in the U.S.
    0:05:38 And then for scientists to be able to use
    0:05:40 for drug design and studying black holes
    0:05:42 and doing all kinds of stuff.
    0:05:45 The $25 million computer occupied a full room.
    0:05:46 And in fact, in those days, what they would do
    0:05:49 is actually build an entire building for the computer.
    0:05:50 And then they would actually,
    0:05:51 they’d build the shell of the building,
    0:05:52 they’d build the walls,
    0:05:53 they’d leave the ceiling open,
    0:05:54 then they’d lower the computer down
    0:05:57 through the ceiling, using a crane to lower it into place.
    0:05:59 And then they’d finish the building.
    0:06:00 So this was a big deal at the time.
    0:06:01 These things were super expensive.
    0:06:03 And so they only put them in four locations
    0:06:05 and they wanted other scientists and researchers
    0:06:07 all over the country to be able to use them.
    0:06:08 And so the part two of the program
    0:06:10 was this program called NSFNet.
    0:06:12 It was National Science Foundation Network,
    0:06:14 which was the funding group that they’d pay
    0:06:15 for this whole thing.
    0:06:17 So those programs are authorized in the mid-80s.
    0:06:19 And then I got to Illinois in ’89.
    0:06:21 And so they basically had been rolled out at that point.
    0:06:23 And so Illinois in those days,
    0:06:27 it was like a fully broadband wired internet native campus.
    0:06:29 And it was one of exactly four of those.
    0:06:30 But just because you have the internet
    0:06:32 doesn’t mean that it’s actually all that useful
    0:06:33 for anything, right?
    0:06:34 That there’s, you know, like if you’re a scientist,
    0:06:36 like how exactly are you communicating with every,
    0:06:38 you know, with your colleagues on different campuses?
    0:06:41 How exactly are you storing and analyzing your research?
    0:06:44 How exactly are you gonna share your research with the world?
    0:06:45 That stuff was all yet to be built.
    0:06:48 And so the purpose of this group was to build,
    0:06:49 you know, basically to build the early systems
    0:06:51 that would let people collaborate.
    0:06:53 – So then you’re building these early systems.
    0:06:56 Where does the idea for the mosaic browser come from?
    0:06:58 – So funny story there.
    0:06:59 So basically, so the project I ended,
    0:07:02 I got hired into work on was a project called Collage,
    0:07:06 which basically was sort of, I don’t know,
    0:07:08 maybe Zoom’s the current comp or something, or Skype.
    0:07:11 So, sort of, but sort of general purpose,
    0:07:12 real time conferencing, right?
    0:07:16 So video, audio video, but also like,
    0:07:17 it’s all the standard compliment,
    0:07:19 whiteboard sharing, you know, document,
    0:07:21 collaborative document editing, Google Docs kind of thing.
    0:07:24 You know, this is like what, in 1991, 1992, right?
    0:07:26 So they kind of had all those ideas back then.
    0:07:27 It’s one of those funny things.
    0:07:29 Like it’s when people talk about this,
    0:07:30 but like the role of timing and the stuff
    0:07:31 is always so interesting.
    0:07:33 ‘Cause like that stuff’s all happening now, right?
    0:07:35 Like Zoom goes public now, right?
    0:07:37 ‘Cause it’s like 30 years later, right?
    0:07:41 So the lag on these things can be quite something.
    0:07:43 – Okay, so you’re trying to help these ideas
    0:07:45 take some early baby steps.
    0:07:46 How’d you think about what to work on?
    0:07:47 – Well, there were a few things.
    0:07:48 So there were a few things.
    0:07:49 And so then you basically say, okay,
    0:07:50 real time isn’t gonna work.
    0:07:51 So it was sort of internet variations
    0:07:54 on the bulletin board systems of the PC hobbyists
    0:07:55 in the mid-80s, right?
    0:07:56 And so it’s sort of those ideas
    0:07:57 being transplanted to the internet,
    0:07:59 which is kind of what all the social networking
    0:08:02 has been doing for the last 30 years.
    0:08:03 There was that.
    0:08:04 And then there was this new thing called the web,
    0:08:07 which had been developed in Switzerland at CERN.
    0:08:09 But that was like super early.
    0:08:10 And there were like, I don’t know,
    0:08:12 two or three websites at the time.
    0:08:13 And like the software was like,
    0:08:15 it was just very early.
    0:08:18 And so if you would read like an article
    0:08:20 about the internet at that point,
    0:08:21 it would, the article would be like,
    0:08:23 well, why would anybody wanna use the internet?
    0:08:25 And then a lot of the articles just ended there.
    0:08:26 But if they would go on to describe
    0:08:27 why you might use the internet,
    0:08:28 it’s like, well, you can kind of do email.
    0:08:29 And then there’s this FTP thing.
    0:08:30 You can download files.
    0:08:32 And then if you really wanna get weird,
    0:08:34 you can like be on Gopher and wait.
    0:08:35 You can like go to Gopher and view menus.
    0:08:37 You can go on Waze and do searches,
    0:08:38 you know, kind of clay, clay to be molded.
    0:08:41 And so basically the original idea for Mosaic was, okay,
    0:08:43 how about the universal client, right?
    0:08:44 How about, okay, because the problem is like,
    0:08:45 all this stuff was like,
    0:08:46 these are all fragmented programs.
    0:08:47 They were hard to use.
    0:08:48 They were hard to install.
    0:08:50 But most of this stuff was open source.
    0:08:52 It was like, you had to be pretty sophisticated to install it.
    0:08:54 By the way, it seems obvious that like,
    0:08:55 everybody’s gonna have this stuff.
    0:08:57 It seems obvious that kids are gonna wanna keep using this
    0:08:59 stuff once they graduate from college.
    0:09:01 It seems obvious that there’s gonna be, you know,
    0:09:03 software on servers and clients.
    0:09:04 It’s gonna be used to share information.
    0:09:07 It’s like, why wouldn’t you be able to have a link?
    0:09:09 Well, number one, you don’t wanna have a text-based display
    0:09:10 ’cause you don’t wanna be able to read stuff.
    0:09:12 Like most computer UIs up until that point
    0:09:13 were not text-based, right?
    0:09:15 They were like, you know, they were like buttons
    0:09:17 and switches and levers, right?
    0:09:19 Like old style nuclear control panels or something.
    0:09:20 And this software metaphor was like,
    0:09:21 put everything in a document.
    0:09:23 So that was new, but we thought that was obvious
    0:09:25 ’cause you’d like to be able to read things.
    0:09:28 And then we thought, okay, hypertext is probably obvious.
    0:09:29 So there were a set of these things that we thought were obvious,
    0:09:31 but it’s kind of like, okay, if they’re so obvious,
    0:09:32 why haven’t they happened?
    0:09:37 – Yeah, and I remember, was it Vannevar Bush wrote something?
    0:09:39 He talked about this thing called the Memex, I think,
    0:09:41 and it hypertexts like in the ’40s maybe even,
    0:09:42 like a long time ago.
    0:09:44 – So I started to do a lot of research.
    0:09:45 So luckily, Illinois has a big library.
    0:09:47 So I started to do, and again, I was just stressed again,
    0:09:49 this is like pre-Google.
    0:09:51 So this is like, go to the card catalog,
    0:09:54 and try to figure out like, can I swear on this podcast?
    0:09:55 – Yeah, it’s okay with me.
    0:09:56 – Okay, go to the card catalog and feel like,
    0:09:58 who the fuck wrote a book about this?
    0:10:01 Like please God, could somebody have written a book about this?
    0:10:04 – So basically, the history was there had basically,
    0:10:06 tracing back in time, there had been Doug Engelbart,
    0:10:09 basically, who basically developed a lot of these ideas
    0:10:11 and demonstrated a lot of them working in prototype form
    0:10:12 in the late ’60s.
    0:10:13 And so there was like an intellectual heritage
    0:10:14 going back to Doug.
    0:10:17 Contemporaneous, but even before that was Ted Nelson,
    0:10:20 who had sort of invented the term hypertext.
    0:10:23 And so there was this idea of linking that kind of existed,
    0:10:25 but like Ted is the guy who kind of picked up those ideas
    0:10:26 and kind of put them in the idea
    0:10:28 that a computer should be able to do this.
    0:10:30 And so there was kind of that heritage.
    0:10:31 And then there was, as you alluded to,
    0:10:34 there was this guy named Vannevar Bush who in 1945,
    0:10:36 that wrote a paper called As We May Think,
    0:10:38 which is one of those great old style,
    0:10:41 1940 style titles for papers.
    0:10:44 And it basically outlined a hypothetical system.
    0:10:47 This is 1945, so Vannevar Bush is important guy.
    0:10:49 He was FDR, science advisor during the development
    0:10:50 of the nuclear bomb.
    0:10:51 And so he was like a very important guy.
    0:10:54 And he basically, he defined basically how the federal
    0:10:56 government would fund research for the next like,
    0:10:57 basically 70 years.
    0:10:58 So he was like a very important guy,
    0:10:59 pillar of the establishment.
    0:11:01 So he wrote this document, which the Atlantic
    0:11:03 at the time published back when they used
    0:11:05 to publish things like this.
    0:11:07 That’s the day they’d publish a piece about how bad it is,
    0:11:09 but at the time they just like published a piece
    0:11:10 describing it.
    0:11:12 Basically outlined a system called Memex,
    0:11:14 which was, which is funny ’cause 1945,
    0:11:16 so it’s actually like pre-digital computer,
    0:11:18 like digital computer was like a brand new idea.
    0:11:22 And he didn’t, but like these ideas go way back.
    0:11:25 You know, they’re fairly obvious fairly quickly, right?
    0:11:27 You know, ’cause it’s like, okay, that would be a good idea.
    0:11:29 It’d be a good idea to be able to store large amounts
    0:11:30 of information, retrieve it, share it,
    0:11:33 transmit it over long distances, search it.
    0:11:35 There we were sitting in like 1992 being like, okay.
    0:11:37 So basically it’s like, are we crazy?
    0:11:38 Right, is the rest of the world crazy?
    0:11:40 Or is it just the right time?
    0:11:43 – Yeah, and it’s funny because it’s one of, to me,
    0:11:45 you know, we both know this guy, well,
    0:11:48 biology, Srinivasan, one of the things I really like
    0:11:50 is his notion of this idea maze.
    0:11:52 I think Chris Dixon talks about it too, right?
    0:11:55 It’s, to me, it’s a way better way to come at the question
    0:11:59 because a lot of the, like, all of it will happen someday,
    0:12:00 right?
    0:12:01 And so the question is just,
    0:12:03 what’s the right time for it to happen?
    0:12:05 And the idea maze is kind of this technique
    0:12:08 for understanding all the attempts that have occurred
    0:12:10 in the past and kind of understanding why those ideas
    0:12:13 got blocked and now do they get unblocked all of a sudden.
    0:12:15 How do you decide what to build first
    0:12:16 and which ideas are worth pursuing?
    0:12:18 – So what we needed to have was a network effect.
    0:12:20 We needed to have a flywheel kick in.
    0:12:22 We did the browser, we also did the web server
    0:12:23 at the same time.
    0:12:24 And that web server actually now is,
    0:12:28 Apache is the modern descendant of that web server
    0:12:30 over the last 25, 30 years.
    0:12:32 What we needed was kind of a ping pong effect, right?
    0:12:34 Where, ’cause what you want is the flywheel,
    0:12:35 where, like, more people reading with the browser,
    0:12:37 at least more people wanting to publish with the server,
    0:12:38 the more people who publish with the server,
    0:12:39 the more incentive there is to read
    0:12:42 and then you get the flywheel effect.
    0:12:42 So what we needed for that,
    0:12:45 the advantage we had is we basically had a hack.
    0:12:47 One of the things we say at our firm is
    0:12:49 if you’re gonna start a new network effects
    0:12:50 are like the best businesses in the world,
    0:12:52 but to get a network effect going,
    0:12:53 to get through the bootstrap phase,
    0:12:56 you need some hack, you need some strategy
    0:12:58 to kind of get you through that initial phase
    0:12:59 to the flywheel catching.
    0:13:02 And so our hack actually was the fact,
    0:13:05 well, the internet, it was sort of the NSF net,
    0:13:07 the other hack actually was at the time,
    0:13:11 internet news groups, and so we were actually the carrier.
    0:13:13 And so it just like, it turned out,
    0:13:15 and this is one of those kind of stroke of luck things,
    0:13:17 it just turned out there was latent demand.
    0:13:19 There were enough people on this thing.
    0:13:20 They weren’t, it kind of goes back to,
    0:13:21 they weren’t online at the same time,
    0:13:23 but they were online.
    0:13:27 And so there were enough people online where you could,
    0:13:29 there was a big incentive to be able to share,
    0:13:31 even to the small number of people who were there.
    0:13:33 And then there was a big incentive to consume
    0:13:35 if there was anything at all to read.
    0:13:37 And then this was like the prototypical early adopter crowd
    0:13:39 where they just like to try new things.
    0:13:40 And so there were a set of internet news groups
    0:13:42 that were kind of actively baiting,
    0:13:44 discussing all these kinds of topics.
    0:13:47 And so we were basically able to just kind of use that
    0:13:48 as the carrier wave.
    0:13:50 One of the first blogs was a page I maintained.
    0:13:51 I wouldn’t say it was the first one, not necessarily,
    0:13:52 but it was one of the first ones.
    0:13:55 So we had what was called the What’s New page.
    0:13:57 And the What’s New page, I would update it every,
    0:13:59 you didn’t get into work and update it every morning,
    0:14:02 or say when I got into work late in the afternoon,
    0:14:02 as the case might be.
    0:14:05 – Probably started out as just everything that’s there.
    0:14:07 – No, it’s literally every new website, right?
    0:14:09 And it was literally like, I would just get emailed,
    0:14:11 like, okay, you know, I launched a new website
    0:14:13 that’s got the menu of my favorite Indian restaurant,
    0:14:15 and you know, Cardiff.
    0:14:16 I’ve got a new website that has, you know,
    0:14:19 lyrics for the REM songs, right?
    0:14:20 It was just like random stuff like that.
    0:14:23 A lot of it was just people experimenting.
    0:14:25 And so it was literally, and you know,
    0:14:26 it started out being like one a day.
    0:14:28 I was like, okay, and then it started being two a day,
    0:14:29 and then it started being three a day,
    0:14:31 and then it went to five and 10, 20, 30 a day.
    0:14:33 And so you could just, you could kind of,
    0:14:34 there were two ways to see the flywheel.
    0:14:36 One was the incoming email.
    0:14:37 There were two incoming email boxes
    0:14:38 where you could see the flywheel kick in.
    0:14:40 One was entries for the What’s New page,
    0:14:42 ’cause the What’s New page was the main distribution method.
    0:14:43 It was the main way people were finding out
    0:14:45 about new webpages because this was pre-Google
    0:14:47 and everything else, pre-Yahoo.
    0:14:49 But the other email was customer support email
    0:14:53 for the browser, which was the thing that almost–
    0:14:53 – The ones you didn’t want to get.
    0:14:55 – The thing that almost killed me.
    0:14:55 – Okay.
    0:14:56 – It was providing customer support
    0:14:58 for the entire internet.
    0:15:02 But that’s another part of the story later on.
    0:15:03 So basically, so literally what happened was,
    0:15:05 so this whole thing started taking off.
    0:15:07 The more and more people at Illinois
    0:15:10 started working on this, the teams size started to expand.
    0:15:11 We became more ambitious.
    0:15:12 And then we actually went for the second round
    0:15:15 of NSF National Science Foundation funding.
    0:15:16 This is all, all this is happening.
    0:15:19 I mean, I was making minimum wage, $6, $0.25 an hour.
    0:15:22 But that $6 and $0.25 an hour was being paid for
    0:15:23 by the National Science Foundation
    0:15:25 through a very generous, generous grant.
    0:15:26 And I’m grateful for that.
    0:15:27 – At least you didn’t get deluded.
    0:15:31 – No, it was hard to delude $6 and $0.25 an hour.
    0:15:34 In fairness, they say, keep your burn rate low.
    0:15:36 Yeah, that’s a good way to do it.
    0:15:37 – Mission accomplished.
    0:15:38 – So we actually went, we actually,
    0:15:40 so literally what was happening was we were just,
    0:15:41 it was working.
    0:15:43 And so we had the, we were the dog that caught the bus,
    0:15:45 you know, kind of thing where it’s just like the,
    0:15:46 like literally what happened was,
    0:15:47 you know, the number of customer support emails per day
    0:15:50 was like, you know, 100 and then 200 and then 300.
    0:15:51 And then, you know, kind of up into the right.
    0:15:55 So we went to NSF for grant number two to basically like,
    0:15:57 you know, basically make this thing real.
    0:15:58 Like, and kind of fully build it out.
    0:16:00 And of course they denied the grant.
    0:16:02 (laughing)
    0:16:05 – We don’t want to pay money to take all these support emails.
    0:16:06 – Yeah, exactly.
    0:16:07 Which is literally, and what I, at the time I was like,
    0:16:08 well, that’s kind of your, it’s kind of, you know,
    0:16:09 they have a thing that’s working
    0:16:10 and they’re shutting off the money.
    0:16:12 Like, okay, that seems kind of dumb.
    0:16:14 And then I realized actually later on, I was like,
    0:16:15 oh, that was actually smart.
    0:16:17 Like, so specifically, like, it’s a research institute.
    0:16:19 It’s NSF, it’s research.
    0:16:21 It’s intensive on scientific research.
    0:16:23 And so clearly, yeah, customer support emails are like,
    0:16:25 you know, the 14th version of the Mac client, like, is not.
    0:16:28 – Yeah, so maybe that’s an initial sign
    0:16:30 of product market fit is when the university says,
    0:16:33 you know what, we’re done with you using our resources here.
    0:16:35 You’ve outgrown this university.
    0:16:36 – Yeah, exactly.
    0:16:38 – That happened kind of with Google too, I think, later on.
    0:16:39 – Yeah, right, right, right.
    0:16:39 At some point, Google would have taken
    0:16:41 over the entire computer-sized department.
    0:16:42 – Yeah.
    0:16:43 – Right, eating all the computers.
    0:16:44 And it was, yeah, you get kicked out of the nest.
    0:16:46 – Yeah, so they were kind of pushing you out of the nest.
    0:16:49 – So in retrospect, they did exactly the right thing.
    0:16:51 They did exactly the right thing at exactly the right time.
    0:16:54 – So did you decide, okay, I want to start a company?
    0:16:56 Or were you just like, well, that’s a bummer.
    0:16:57 My grant money just went away?
    0:16:58 – The second.
    0:16:59 – Okay.
    0:17:01 – So then, so like, now you’re just answering
    0:17:02 customer support emails.
    0:17:03 – No, I was like, shit, I have to get a job.
    0:17:04 – Okay.
    0:17:06 So what year were you at college?
    0:17:06 – I was graduating.
    0:17:07 – Okay, so you were about to graduate.
    0:17:08 – It coincided with graduation.
    0:17:09 – Okay, okay.
    0:17:10 – It coincided right around that time.
    0:17:11 And I was like, well, shit, I got to get a job.
    0:17:13 And so like, and they were, you know, basically,
    0:17:14 there’s not, you know, very, there’s very little
    0:17:15 actually in Champaign-Urbana.
    0:17:18 – Okay, so now you got to get a job.
    0:17:19 You’re interviewing for jobs.
    0:17:20 – Nope.
    0:17:21 – No, what was this?
    0:17:22 – Well, I had a slight advantage in my job search.
    0:17:23 – Okay.
    0:17:25 – Which is like, you controlled Mosaic.
    0:17:26 – I controlled Mosaic.
    0:17:27 (laughing)
    0:17:28 And specifically I controlled Mosaic,
    0:17:29 which is like, I got to decide what people saw.
    0:17:30 – Okay.
    0:17:32 – And so I made sure they saw my resume.
    0:17:33 – Okay.
    0:17:33 – Yeah.
    0:17:34 – Nice.
    0:17:35 (laughing)
    0:17:36 – Yeah, yeah.
    0:17:37 – That’s a growth hack.
    0:17:38 – Yeah, yeah, it’s a growth hack.
    0:17:39 For your career, you just go in the browser
    0:17:42 and you add to the browser a button to see your resume.
    0:17:45 And so in fairness, I didn’t put it on the homepage,
    0:17:48 which I could have done, that was a step too far,
    0:17:50 but I put it in the about page.
    0:17:50 – Okay.
    0:17:54 – And so I got a set of offers, some on the East Coast,
    0:17:55 some on the West Coast.
    0:17:56 I almost joined the Java team.
    0:17:57 – No kidding.
    0:17:59 – In ’94, yeah, ’94 when I first came out here.
    0:18:00 (laughing)
    0:18:01 But they offered me–
    0:18:02 – When it was called Oak.
    0:18:03 – It was called Oak at the time.
    0:18:04 This was Java pre-Java.
    0:18:06 And they, but they, at the time it was a,
    0:18:09 it was a spin-out from sun, but it was only a partial spin-out.
    0:18:10 And so they offered me something
    0:18:11 called Phantom Stock Options.
    0:18:14 – So, you know, but it’s also funny
    0:18:16 because all of us were thinking about,
    0:18:19 okay, there’s gonna be this network-centric future.
    0:18:22 But most people were framing it in yesterday’s metaphor.
    0:18:24 They were talking about the digital superhighway.
    0:18:25 – Yeah, that’s right.
    0:18:27 – And so as a result, people thought the center of gravity
    0:18:29 is gonna be like set-top boxes and video game consoles.
    0:18:33 And I don’t know if others had this reaction,
    0:18:36 but when I first saw the Mosaic browser,
    0:18:38 it was instant, like instant ignition,
    0:18:40 this is how it’s gonna play out, right?
    0:18:42 I just immediately knew the way
    0:18:43 we’ve been thinking about this is wrong.
    0:18:45 It’s not gonna happen on these set-top boxes.
    0:18:47 It may someday, but like the browser
    0:18:49 is gonna happen right here, right now.
    0:18:51 Like there was just no doubt in my mind, right?
    0:18:52 – Well, no, so what I would nominate on the point
    0:18:53 that you made, I think the point you made
    0:18:55 is an important point that we see all the time
    0:18:57 in our day job, and we see it all the time today,
    0:18:59 which is it’s like, it’s, I would nominate
    0:19:00 two kinds of dynamics to that.
    0:19:03 So top-down versus bottom-up.
    0:19:04 – Yeah.
    0:19:05 – And one-way versus two-way.
    0:19:06 – Yep.
    0:19:08 – Right, and these are still battles that are playing out.
    0:19:09 I mean, this is the whole battle
    0:19:10 on cryptocurrency that’s happening right now.
    0:19:11 Like you see this all over the industry,
    0:19:12 all over the world, like this battle,
    0:19:15 and by the way, this is like many of global politics
    0:19:16 are based on this battle right now.
    0:19:18 And so top-down versus bottom-up,
    0:19:19 like the view at that time, right,
    0:19:20 it was the information superhighway,
    0:19:23 it was gonna be sort of, it was gonna be set-top boxes,
    0:19:25 interactive television, but it was gonna be provided
    0:19:26 by big companies.
    0:19:27 – Yeah, or should the government–
    0:19:28 – Or the government.
    0:19:29 – Yeah, they built the regular highway,
    0:19:31 should they build a digital superhighway,
    0:19:34 and that’ll help us against Japan, quote-unquote.
    0:19:35 – Exactly, that was the big thing.
    0:19:36 That was the thought process.
    0:19:38 – Family, the country that was gonna take everything
    0:19:40 at the time, but it was gonna be top-down.
    0:19:41 And so the magazines and newspapers,
    0:19:43 100% of the coverage, 100% of the commentary,
    0:19:45 like all of the media coverage, it was all around,
    0:19:46 it was gonna be, right, the government,
    0:19:48 or it was gonna be Time Warner in those days,
    0:19:52 or AT&T, or Verizon, or the big cable company
    0:19:54 with a predecessor to Comcast.
    0:19:57 And so it was gonna be these giant media telecom companies.
    0:19:59 And then Microsoft and Oracle,
    0:20:00 giant software companies were trying
    0:20:01 to kind of wedge their way in
    0:20:03 to kind of be part of it, is top-down thing.
    0:20:05 But they would decide what it was gonna be.
    0:20:08 And then that goes to the second thing,
    0:20:09 which is One Way versus Two Way,
    0:20:11 which was it was gonna be a primarily video,
    0:20:13 but a one-way push, right?
    0:20:15 And so this is why the whole metaphor
    0:20:16 is that 500 channels, like the whole thing was,
    0:20:18 oh, today you’ve got 14 TV channels,
    0:20:20 in the future you’ll have 500.
    0:20:21 That’s the information.
    0:20:22 – And it’ll be interactive TV.
    0:20:23 – Well, it’ll be interactive TV.
    0:20:24 – You’ll be able to push a button, or a pizza.
    0:20:26 – You’ll have remote control.
    0:20:28 You won’t have a keyboard, right, or a mouse,
    0:20:29 or anything unless you get into trouble.
    0:20:30 – You’ll just have a button
    0:20:32 that has a slice of pizza on it.
    0:20:33 – Yeah, exactly, exactly.
    0:20:34 We really had those.
    0:20:35 – Or like, you know, American Idol,
    0:20:37 basically, they’ll all be like American Idol.
    0:20:38 It’ll just be like, oh, you can vote for the person
    0:20:40 who’s singing the best, or something like that.
    0:20:43 But the idea that an individual user
    0:20:45 was gonna be contributing into this environment,
    0:20:47 the idea that an individual user
    0:20:49 would be publishing a video, right,
    0:20:51 or making a post, or anything like that,
    0:20:53 was just like setting up a website.
    0:20:55 There was just, there was no incorporation
    0:20:57 of that kind of two-way idea at all.
    0:21:00 And so, I think what put the whammy on people was,
    0:21:03 if you came from the established power structure,
    0:21:05 if you came from the big companies,
    0:21:07 or the press that was used to covering the big companies,
    0:21:11 it obviously had to be top down in one way, right?
    0:21:13 And by the way, the press, the press was one way at that time.
    0:21:15 I mean, this was before the audience could talk back.
    0:21:17 And so, if you were at Time Magazine,
    0:21:18 or NBC News, or The New York Times,
    0:21:19 like you were used to–
    0:21:21 – You controlled the conversation.
    0:21:22 – Yeah, exactly, and like, maybe you published
    0:21:23 the occasional editor to the editor,
    0:21:24 but like, you constrained that shit.
    0:21:26 Like, you don’t let people get carried away.
    0:21:28 And that’s, you know, 1/48th of the space
    0:21:30 on, you know, one page of the paper.
    0:21:32 And so, there was that.
    0:21:33 And so, all the people who thought
    0:21:35 that they were in a position to decide had this,
    0:21:36 had that view.
    0:21:39 But then, all the regular people, right?
    0:21:41 Or at least especially the, let’s just say,
    0:21:44 the nerds, including ourselves, the regular people,
    0:21:45 the people who were just like,
    0:21:46 “Look, I just want to be able to do things.”
    0:21:47 – Yeah.
    0:21:48 – Right, and by the way, do things.
    0:21:50 I want to be able to consume, but I also want to create,
    0:21:51 and I want to contribute, and I want to build.
    0:21:55 – Yeah, and the thing that I’ve just seen time and again,
    0:21:56 it’s like, you think about it,
    0:21:58 when you were at the University of Illinois,
    0:22:00 you’re hanging out with his supercomputers,
    0:22:02 and you’re building a browser.
    0:22:04 It’s almost like the world was thinking
    0:22:05 in Cartesian coordinates,
    0:22:08 and you were raised only thinking polar coordinates, right?
    0:22:12 And so, like, your mind was prepared to receive the insight,
    0:22:14 because like you said, you were living in the future.
    0:22:16 You may not have even known it at the time
    0:22:17 that you were living in the future,
    0:22:21 but it just, and like so much of entrepreneurship I found is,
    0:22:22 it’s like noticing.
    0:22:25 It’s, you’re living in the future,
    0:22:27 and you notice something, and you solve your own problem.
    0:22:29 And you’re not necessarily trying to get rich at the time.
    0:22:32 You’re just like, I’m working on cool stuff,
    0:22:34 and to do more cool stuff, I got to build this thing.
    0:22:35 So, yeah.
    0:22:36 – When I found it with myself,
    0:22:37 or I found it with the other founders
    0:22:39 who are like what you’re describing is,
    0:22:39 it’s just obvious.
    0:22:43 Like it’s just like, oh, obviously this should be this way.
    0:22:45 But then there’s like cognitive dissonance,
    0:22:46 which is like, if it’s so obvious,
    0:22:48 why hasn’t everybody figured this out yet?
    0:22:50 Now, most of the time, when people come to that conclusion,
    0:22:51 – They’re just wrong.
    0:22:54 – They’re just wrong, or insane, right?
    0:22:56 – They have a vision, but it’s like a hallucination vision.
    0:22:58 – Exactly, exactly.
    0:22:59 But every once in a while,
    0:23:01 you’ve got somebody who really does decode something.
    0:23:02 And I think to your point,
    0:23:05 on kind of the preconditions for it,
    0:23:06 some of it is you get to see the,
    0:23:07 you get to see the early kind of pings.
    0:23:09 I always talk about like, they’re pings from the future.
    0:23:11 Is there a way that, like,
    0:23:13 you can see these things actually running today.
    0:23:14 And so you get in a position
    0:23:15 where you can see something like that.
    0:23:16 So that’s part of it.
    0:23:17 But the other thing that happens is,
    0:23:19 just like you get to operate,
    0:23:21 it’s the people who get to operate with new assumptions.
    0:23:22 – Right, right.
    0:23:24 – Yeah, and like when you’re your age,
    0:23:26 starting Netscape, you don’t have to translate, right?
    0:23:29 Like people who lived in Cartesian coordinates,
    0:23:31 they have to translate to go to polar, right?
    0:23:33 And so people who lived in the world of,
    0:23:36 tops down one way digital superhighway interactive TV,
    0:23:40 they had to translate that to what you were already doing.
    0:23:42 But to you, it’s just obvious, right?
    0:23:44 It’s like there wasn’t anything for you to unlearn.
    0:23:47 – Yeah, and then on top of that, I had no power, right?
    0:23:49 And so like, I was not the CEO of AT&T.
    0:23:52 Like I couldn’t do any of the stuff
    0:23:53 that all these fancy people could do.
    0:23:55 I didn’t have that level of control.
    0:23:57 And so like anything that I was going to do
    0:23:59 was gonna have to be bottomed up.
    0:24:00 It was gonna have to be two-way.
    0:24:01 Like, you know, kind of by definition,
    0:24:03 if it wasn’t two-way, I’d be blocked out.
    0:24:05 – So then speaking of powerful people,
    0:24:07 how did you find Jim Clark?
    0:24:08 Or how did you guys connect?
    0:24:10 – And this is where I got really lucky.
    0:24:14 So Jim Clark, kind of quick recap, Jim Clark at that time,
    0:24:15 Jim Clark had been the founder
    0:24:17 and original CEO of Silicon Graphics,
    0:24:19 which was at the time, you know, the companies,
    0:24:20 as you said, you were there.
    0:24:22 It was the company at the time,
    0:24:23 it’s probably most analogous today to,
    0:24:26 I don’t know, some combination of, I don’t know, Google.
    0:24:29 And I mean, it was like, it was the company.
    0:24:32 It was the company that all the smart,
    0:24:33 it was like, if you were a smart person
    0:24:34 in the computer industry, it was the company
    0:24:36 you either worked for or wanted to work for.
    0:24:39 It was like the brain center of the industry.
    0:24:41 And this was when they really drove
    0:24:43 computer graphics to be what they are today.
    0:24:45 – Total GWIS company, right?
    0:24:47 Best graphics engineers in the world,
    0:24:48 best networking engineers in the world,
    0:24:50 ’cause you have to push the pixels over network.
    0:24:52 I mean, it was just an incredible place to be.
    0:24:53 – Fortunately for me, Jim had a problem.
    0:24:56 And the problem was Jim had grown very dissatisfied
    0:24:59 with the state of affairs at Silicon Graphics at the time.
    0:25:00 He got frustrated by a number of things.
    0:25:02 He left the company.
    0:25:04 He decided to start his second company.
    0:25:06 But he had a very specific problem,
    0:25:09 which was that he had a non-solicit at SGI.
    0:25:11 So he had spent the previous 15 years
    0:25:13 hiring all the smartest people he knew in the world into SGI,
    0:25:15 and now he couldn’t take them with him.
    0:25:17 And so he literally had like a,
    0:25:19 he had a, what’s that called, a warm meat problem.
    0:25:26 He didn’t have any bodies to work on, to work with him.
    0:25:28 And so he literally went out to a whole bunch of people
    0:25:31 in the industry who he knew, who weren’t at SGI,
    0:25:32 and he talked to them about maybe,
    0:25:35 you wanna start something or work on something.
    0:25:38 And then he met me through a mutual, a guy,
    0:25:40 actually a guy, he worked with SGI who I didn’t know,
    0:25:41 but who knew about me.
    0:25:43 He was actually one of the guys at SGI
    0:25:45 who actually was responsible for all the demos.
    0:25:46 They were a famous demo company.
    0:25:48 – Oh yeah, that’s how we sold our computers.
    0:25:49 – Yeah, and so the guy who ran the,
    0:25:51 I think it was designed the demos
    0:25:53 or built the demos for the briefing center.
    0:25:57 Basically it was up on all the leading edge stuff
    0:25:58 ’cause he was the demo guy,
    0:26:00 and so he basically knew about all this stuff.
    0:26:03 And so he, I apparently happened to mention at Jim
    0:26:04 that A, that I existed,
    0:26:07 and then B, that I had just recently moved out here.
    0:26:09 And so I get a random call from Jim Clark,
    0:26:10 like one afternoon being like, hey.
    0:26:12 – Okay, and did you know who he was?
    0:26:14 – Oh yes, yeah, no, it’s like, literally,
    0:26:15 it’s like Steve Jobs calls you,
    0:26:17 or you’re like, marriage age calls you.
    0:26:19 Hey, you know, and this is Larry Page,
    0:26:21 would you like to talk about starting new companies?
    0:26:22 You know, you’re like, oh, okay.
    0:26:23 – You think?
    0:26:25 – All right, you know, gee, I don’t know,
    0:26:26 let me check my calendar, right?
    0:26:26 – Yeah, yeah.
    0:26:28 (laughing)
    0:26:29 – So I’m like, yeah, you know,
    0:26:32 basically, yeah, sure, name the time and place.
    0:26:34 – And so did you guys get on pretty well
    0:26:35 in the early days?
    0:26:36 – Yeah, so a couple of things happened.
    0:26:38 So one is to my enormous shock,
    0:26:39 the other people he were talking to,
    0:26:41 the other people he was talking to were too risk averse,
    0:26:43 and they didn’t, and I should also,
    0:26:45 this was during a very sort of down period
    0:26:46 in Silicon Valley.
    0:26:48 This was not an exciting time.
    0:26:49 This was like ’93, ’94.
    0:26:51 So there had been a really big recession
    0:26:52 and a lot of companies had failed.
    0:26:53 And so there were a lot of people
    0:26:54 who just like wanted a job.
    0:26:55 – Yeah.
    0:26:57 – But he did not get as nearly a positive response
    0:27:00 as I would have imagined from a lot of people
    0:27:01 who had like actual, you know,
    0:27:02 and had careers, let’s say.
    0:27:05 And so through process of elimination,
    0:27:07 in part, I think it came down to me.
    0:27:10 And then he and I started brainstorming.
    0:27:12 And we actually, well, and then, yeah,
    0:27:14 and then we started working together on plans.
    0:27:18 – So he wasn’t saying, I want Mark Andreessen,
    0:27:19 because he invented the Mosaic browser.
    0:27:24 It’s like, I can’t get any of these killer SGI engineers.
    0:27:25 He’s maybe another new smart guy
    0:27:27 that I can get and not get sued.
    0:27:29 – Yeah, I think that’s part of it.
    0:27:31 And I think it’s, you know, probably just channeling Jim.
    0:27:32 He probably, you know, at the very least,
    0:27:33 he knows how to build something new.
    0:27:33 – Yeah.
    0:27:35 – You know, which not everybody does.
    0:27:36 And so at least he’s done it once before.
    0:27:39 But the reason why the escape idea was not obvious
    0:27:40 is because even after all of that,
    0:27:42 it still wasn’t obvious that the internet would be a business.
    0:27:45 And part of that was it wasn’t a business,
    0:27:46 like nobody had made it into a business.
    0:27:47 – Yeah.
    0:27:48 – And so there was just, it was just this thing,
    0:27:50 which he goes to the top, bottom, sub thing,
    0:27:51 which is just like, even after all that,
    0:27:53 and I saw the adoption cycle and the whole thing,
    0:27:54 and I stayed on all the mailing lists,
    0:27:55 and I saw everything.
    0:27:56 It was just like, okay, like, I don’t know.
    0:27:58 Like, what are we gonna, like, this is all open source.
    0:28:00 Like, you know, there’s no commercial transactions
    0:28:00 on the internet.
    0:28:02 It had been illegal to do commercial transactions
    0:28:04 on the internet until 1993.
    0:28:06 And this is only the spring of 1994.
    0:28:07 So there was no e-commerce.
    0:28:08 There’s no Amazon.
    0:28:09 There was none of that stuff.
    0:28:09 – Yep.
    0:28:10 – There was literally nothing to buy.
    0:28:11 There was no money.
    0:28:12 There was no nothing.
    0:28:12 Right.
    0:28:15 And so it was just like, okay, there was not an obvious business
    0:28:16 to be built.
    0:28:18 – And I remember for a couple of years, right,
    0:28:21 Upside Magazine at the time and things like that would say,
    0:28:24 you know, when’s the internet gonna have a business model?
    0:28:24 – Yeah, right.
    0:28:26 – For about two years, people said nobody’s
    0:28:27 gonna have a business model.
    0:28:27 – Yeah, this is absurd.
    0:28:28 Everybody knows this thing.
    0:28:30 – Even Yahoo, people said, well, great,
    0:28:31 but no business model.
    0:28:32 – Yeah, of course, yeah.
    0:28:32 And Google had no business model.
    0:28:34 Like, all these things, yeah.
    0:28:35 None of these things had business models.
    0:28:35 Right, exactly.
    0:28:39 So basically, so, and then Jim had been in meshed,
    0:28:41 you know, selling graphics had gotten in meshed
    0:28:45 in two areas that were, goes back to the conversation
    0:28:46 about having interactive TV.
    0:28:48 So they were actually the provider of the technology
    0:28:50 for the Time Warner Interactive TV Project,
    0:28:53 which was like the most viable, it was the most
    0:28:55 actually developed version of the top-down information
    0:28:57 superhighway thing at the time in Orlando, Florida.
    0:28:58 This was written up in all the magazines
    0:28:59 and newspapers at the time.
    0:29:02 It was a really cool like system that’s kind of analogous
    0:29:04 to what you have today on a modern, you know,
    0:29:06 whatever Comcast or Direct TV set-top box or something,
    0:29:09 heard like Netflix kind of experience in 1994.
    0:29:10 It was impressive.
    0:29:12 It was just, it was like the capital cost per house
    0:29:14 was like, I don’t know, $60,000.
    0:29:14 Yeah, it was crazy.
    0:29:17 We had some of our high-end gear, right, power those boxes.
    0:29:18 It was not.
    0:29:19 So there was no, so we basically set out,
    0:29:21 plan number one was to build the software layer
    0:29:23 for interactive TV and then we basically realized,
    0:29:25 oh, shit, there’s not going to be actually
    0:29:26 any interactive TV.
    0:29:28 Like, the economics actually don’t work.
    0:29:31 And then the other decision was,
    0:29:34 SGI was building the graphics chip for the Nintendo,
    0:29:37 the Nintendo 64, the first game console with 3D graphics.
    0:29:41 And so the idea basically was to build what today
    0:29:42 you’d call like Xbox Live or PlayStation Live
    0:29:45 to build basically the network for Nintendo 64.
    0:29:47 The problem was Nintendo 64 was not going to ship
    0:29:48 for another two years.
    0:29:50 So literally we got to the point where we were like,
    0:29:51 okay, those two plans don’t work.
    0:29:52 And then it was like, are we going to,
    0:29:53 like, what are we going to do?
    0:29:54 Process of elimination.
    0:29:57 Okay, so if top-down interactive TV isn’t going to work
    0:29:59 and interactive gaming at that point wasn’t going to work,
    0:30:00 then what’s left?
    0:30:00 Yeah.
    0:30:02 What’s left is the internet, right?
    0:30:04 And so it’s like, okay, process of elimination,
    0:30:05 this thing that nobody’s taking seriously,
    0:30:07 that nobody thinks can be a business
    0:30:09 that breaks all the rules, that’s bottom’s up, that’s organic.
    0:30:12 By the way, messy and hackers and crime.
    0:30:14 And you probably don’t even think it’s a business yet.
    0:30:15 No, yeah.
    0:30:17 Well, now I have no actual business experience at that point.
    0:30:19 So I have no basis to evaluate anything in business.
    0:30:21 But however, it seemed like a stretch.
    0:30:25 But like, if it’s the only thing, then it’s going to win.
    0:30:25 Right.
    0:30:26 Because the only thing.
    0:30:28 Is the thing.
    0:30:28 Is the thing.
    0:30:31 And so it was weird because Jim was like,
    0:30:32 oh, that makes total sense.
    0:30:34 And what Jim actually realized, I think to his credit,
    0:30:38 was he was so, he was so, SGI was so powerful at that point
    0:30:40 that he was able, he was, he was in that,
    0:30:41 he was in that top down world.
    0:30:44 And he, and so he, I think he would say like,
    0:30:47 he was so fully in it and of it that he thought
    0:30:48 that that was how the world was going to work.
    0:30:50 And he was doing his best to make it work
    0:30:51 that way when he was in SGI.
    0:30:54 But then he’s got such amazing mental flexibility,
    0:30:56 which is extraordinarily rare to have somebody
    0:30:57 who’s this flexible in their thought process,
    0:30:59 where he was just like, when he got into this new context,
    0:31:01 he was kind of just shedding assumptions.
    0:31:03 He was able to replant himself into a true startup context.
    0:31:05 And able to shed all the assumptions and say,
    0:31:06 okay, from a standing start, what would you do?
    0:31:08 And come into a completely different set of conclusions.
    0:31:11 – Yeah, so then you decide to start this thing.
    0:31:12 – Right.
    0:31:17 – And you raise money from, well, he seed funds it at first.
    0:31:19 He’s probably already been seed funding
    0:31:20 just your little vision quest.
    0:31:21 – No.
    0:31:22 – No, no, okay.
    0:31:24 So you’re just on this vision quest.
    0:31:27 By process of elimination, it’s like, okay, we’re doing this.
    0:31:33 Then you just go raise money from John Dorr Kleiner Perkins or?
    0:31:34 – See, we ran about six months with Jim.
    0:31:36 We ran about six months with Jim’s money.
    0:31:38 And then it’s like, I’m rich, but I’m not that rich.
    0:31:42 And so he was like, we’re time to go raise money.
    0:31:44 So Jim zeroed in at Kleiner Perkins
    0:31:46 because KP had actually backed Son,
    0:31:48 which was SGI’s big competitor.
    0:31:49 And he had always really received,
    0:31:51 he told me he’d always really respected how…
    0:31:54 Son, both companies ended up being very successful,
    0:31:56 but Son had a much faster takeoff rate out of the gate.
    0:31:59 And then he had always respected how John went about
    0:32:01 being a board member at Son.
    0:32:03 – Okay, so you raised some money for Netscape.
    0:32:07 Not sure if it’s a business yet, but hey, let’s go for it.
    0:32:11 And this must be around the time when Mosaic
    0:32:13 has started to see even bigger lift, right?
    0:32:17 Because I seem to remember the summer of ’94,
    0:32:19 it was starting to really become a thing.
    0:32:21 – So it just knew it was a snowball rolling down the hill,
    0:32:24 picking up speed, and it was starting to mainstream.
    0:32:25 And so you were starting to be able to…
    0:32:26 You’re starting to get the first signs of consumers
    0:32:29 actually coming on the thing, which is normal people,
    0:32:30 which is like a big deal at the time.
    0:32:31 You’re starting to have companies
    0:32:33 starting to start launch websites.
    0:32:34 So it was around that time,
    0:32:35 I think it was around that time that AT&T
    0:32:39 ran the first internet ad on at the time.
    0:32:40 And because Wired had created a website
    0:32:42 and they ran the first internet ad on…
    0:32:44 The reason we have all these banner ads
    0:32:47 is because the first ad was a banner ad for AT&T on thewired.com.
    0:32:50 – When did you switch from Mosaic to Netscape?
    0:32:56 – Mosaic had been the name of the project at Illinois.
    0:32:58 We didn’t bring any of the code with us.
    0:33:00 It was… The code was open source,
    0:33:02 but copyright, University of Illinois.
    0:33:03 So we decided, and we needed to rewrite it anyway,
    0:33:05 because we needed a bunch of stuff in the code
    0:33:06 like security that we didn’t have.
    0:33:11 So we wanted to do a clean rewrite with what we knew now.
    0:33:13 But we figured it’s the name of the research project.
    0:33:17 I knew Sun, the name Sun was actually named after the research project at…
    0:33:19 Stanford spawned Sun was actually called
    0:33:21 the Sun Research Project.
    0:33:22 – Stanford University Network.
    0:33:23 – Exactly, exactly.
    0:33:25 So I was like, it’s not a…
    0:33:27 It’s just like the name of the research projects.
    0:33:29 It’s like a… It’s a free thing.
    0:33:32 So it’s just obviously we’ll just call this thing Mosaic Communications.
    0:33:33 We’ll figure out the product name later.
    0:33:38 And then University of Illinois then did a very sort of clever thing
    0:33:40 I had not seen before, and I don’t think I’ve seen Suns,
    0:33:41 which is they didn’t sue us.
    0:33:45 Instead, they sent lawyers to all of our potential customers
    0:33:46 and told them they were going to sue us.
    0:33:50 And so they’ve freezed us in our tracks.
    0:33:52 They basically blocked our ability to do business,
    0:33:55 because then they alleged to basically a broad range
    0:33:57 of trademark and copyright violations.
    0:33:58 The copyright violations weren’t true
    0:34:00 because we didn’t take any of the code,
    0:34:02 but they threatened to sue us for that.
    0:34:04 And then we had this problem, which is we had this name,
    0:34:07 which there’s ambiguity as to whether there was a trademark on it or not,
    0:34:10 but there did seem to be a clear…
    0:34:11 – Hard to explain away.
    0:34:12 – Yeah, yeah, yeah, yeah.
    0:34:13 Just like inconvenient facts, as they say.
    0:34:18 And so we actually ended up suing them before,
    0:34:20 I believe it’s what is it, restraint to trade and purchase…
    0:34:23 – So are you feeling kind of pissed at them right about now,
    0:34:25 like thermonuclear super pissed?
    0:34:27 – Yeah, right about now, like today, sitting here?
    0:34:28 – Yeah, even now.
    0:34:29 – Very much so, yes.
    0:34:31 Yes, I’m still extremely angry.
    0:34:33 Thank you for asking.
    0:34:35 – How does that make you feel, Mark?
    0:34:37 – Exactly, exactly.
    0:34:41 We’ll pick that up in part two, the psychotherapy section of the thing.
    0:34:42 So we actually ended up suing them,
    0:34:44 and we actually ended up suing them,
    0:34:46 and then we negotiated a settlement and we paid them,
    0:34:48 and as part of the settlement, we changed the name.
    0:34:48 – Okay.
    0:34:52 – Yeah, and that was the last penny.
    0:34:54 – So you changed the name to Netscape.
    0:34:57 – So then, so you do the Netscape browser,
    0:34:59 did it just immediately blow up?
    0:35:01 I mean, it was just everybody knew who you were,
    0:35:04 everybody knew that you were the voice of browsers, it just…
    0:35:05 – Yeah.
    0:35:05 – So like what was it?
    0:35:06 – That was a super fact.
    0:35:08 Well, it was this thing of,
    0:35:10 it was basically a continuation of the Mosaic phenomenon,
    0:35:11 and we were the clear inheritors of that
    0:35:12 because we had built it,
    0:35:14 and so it was just one of these things where like,
    0:35:16 it was a cold start as a company,
    0:35:19 but it was building directly in the momentum from the previous thing,
    0:35:20 and then we knew, what else do we know?
    0:35:22 We knew Illinois was not going to continue the Mosaic project
    0:35:23 because we knew they didn’t…
    0:35:24 – Yeah, they didn’t want to do it.
    0:35:25 – Right, exactly.
    0:35:28 And so we kind of knew that it had to be picked up.
    0:35:29 And then look, the other thing was like,
    0:35:30 there were just a set of things that you just,
    0:35:32 you needed, like it was time,
    0:35:34 it was time to be able to like do financial transactions, right?
    0:35:36 So it was time that you needed encryption,
    0:35:38 which the original browser didn’t have.
    0:35:44 – So then, so was there any sort of palpable moment
    0:35:47 where you’re just like, holy crap, this is blowing up,
    0:35:49 or had it kind of already blown up
    0:35:51 even before Netscape really got started?
    0:35:54 Like was there any moment where you’re inside a Netscape
    0:35:56 and you’re just like, holy shit?
    0:35:57 – Well, the big moment was the night of the original release
    0:36:00 of the browser where we hooked up one of the computers
    0:36:04 to the stereo system and had the Canon fire sound effect
    0:36:05 for every time somebody downloaded it.
    0:36:07 And the Canon started to go off before long.
    0:36:09 The Canon was going off continuously.
    0:36:11 – Like how long?
    0:36:13 – Oh, that was like in a couple, that was a few hours.
    0:36:15 But I mean, that was, but again,
    0:36:16 it was feeding on this moment.
    0:36:18 It was just like everybody, yeah.
    0:36:19 We knew everybody who was using Mosaic.
    0:36:20 We knew how to get to them.
    0:36:21 We just said, hey, there’s this new thing.
    0:36:22 It was much better.
    0:36:24 I mean, it was built correctly.
    0:36:25 It was our second implementation.
    0:36:28 And so we just, we knew it was better.
    0:36:30 – Okay. And so now it’s probably what the,
    0:36:32 this is probably late ’94?
    0:36:34 – Yeah.
    0:36:36 – Okay. And so, and if I remember,
    0:36:41 you went public like in early ’95 with no profits.
    0:36:41 – August.
    0:36:42 – Did you have any revenue yet?
    0:36:43 – Yeah, yeah. So we had revenue.
    0:36:45 We doubled revenue every quarter of that year.
    0:36:47 So the revenue that year was,
    0:36:49 my quarter was 5 million, 10 million, 20 million and 40 million.
    0:36:52 And we went cash flow positive,
    0:36:54 like I think right around the time we were,
    0:36:55 we went public.
    0:36:56 And I think we were,
    0:36:57 if I remember correctly,
    0:36:59 we were cash flow positive continuously
    0:37:00 all the way to when we sold the company.
    0:37:01 So one of the legends that,
    0:37:03 one of the legends myths that built up around the company
    0:37:04 is that it was this early precursor
    0:37:06 for these unprofitable companies.
    0:37:06 – Really?
    0:37:07 – And actually we,
    0:37:08 we actually prodded ourselves at the time
    0:37:11 of like delivering cash flow basically through the whole thing.
    0:37:13 – So was the decision to go public pretty obvious then
    0:37:14 at the time?
    0:37:16 It was just like your revenues are exploding.
    0:37:18 People want the product.
    0:37:19 – It was obvious to Jim.
    0:37:22 So, so yeah.
    0:37:23 So like, what’s it like?
    0:37:25 So you’re just barely out of college
    0:37:27 and all this stuff’s happening around you.
    0:37:28 Like what’s that like?
    0:37:30 – You know, it was just,
    0:37:30 I mean, it was literally,
    0:37:32 we were so heads down.
    0:37:33 It was just like, you know,
    0:37:34 go work somewhere.
    0:37:35 There was one of those things.
    0:37:37 There was so much to do.
    0:37:38 There was so much to do.
    0:37:39 I mean, it’s like it’s building a company
    0:37:39 which is incredibly hard,
    0:37:40 but on the top of that,
    0:37:42 like the whole thing started to work.
    0:37:42 And then there’s just like,
    0:37:44 you have like a thousand ideas.
    0:37:44 – Yeah.
    0:37:44 – Right.
    0:37:45 And then it’s just-
    0:37:46 – Well, and a few more customer support calls.
    0:37:47 – And all that.
    0:37:49 Yeah, all this, all this other infrastructure to build.
    0:37:49 And you know, and then look,
    0:37:50 I’m learning business.
    0:37:52 I’m learning like basically all the business on the fly.
    0:37:52 Right.
    0:37:53 – Uh-huh.
    0:37:54 – I’m basically learning like, you know,
    0:37:55 I don’t know, whatever is in an MBA,
    0:37:57 plus another 10 years of operating experience.
    0:37:57 – Yep.
    0:38:00 – You know, and like as fast as I possibly can.
    0:38:00 Right.
    0:38:01 So I’m basically either like,
    0:38:02 I’m either at work or I’m like,
    0:38:03 at home reading business books.
    0:38:05 Like those were the only two things that I did.
    0:38:09 – So now you know about the theories
    0:38:11 of product market fit and all that stuff.
    0:38:14 Like how do you reconcile what happened at Netscape
    0:38:15 with the notion of product market fit?
    0:38:16 Like, yeah.
    0:38:18 So how do you, because it just seems
    0:38:19 like one of these rare cases
    0:38:21 where it’s just like lightning just struck
    0:38:23 and it was like huge right away.
    0:38:25 – I think for B2B, there’s like,
    0:38:26 there are deterministic ways to try
    0:38:27 to get to product market fit.
    0:38:30 For consumer stuff, it’s less clear to me even still.
    0:38:31 – Yeah.
    0:38:32 – We actually use the term lightning strike.
    0:38:33 – Yeah.
    0:38:34 – It may just be.
    0:38:35 Well, here’s one of the questions.
    0:38:36 It’s like, there are these companies,
    0:38:38 there are quite a few companies that have had
    0:38:41 lightning strike consumer hits in the last 20 years.
    0:38:42 And that led to the creation
    0:38:43 of like very interesting companies.
    0:38:44 And there’s probably, I don’t know,
    0:38:47 in the U.S. alone, 50 or 100 or 150 of those, right?
    0:38:49 How many of those, how many of those ever had another one?
    0:38:50 – Yeah, very few.
    0:38:52 – In the same company that they didn’t have
    0:38:53 to go acquire from outside.
    0:38:54 – Yeah.
    0:38:56 – And I think it’s maybe zero.
    0:38:58 – Now people talk about the internet
    0:39:02 as being easy for hackers to get to fundamentally insecure
    0:39:05 as an architecture or needs to be rethought in some ways.
    0:39:08 Knowing what you know now, are there things
    0:39:09 that you think you could have done
    0:39:11 or that Netscape could have done
    0:39:15 that may have made it play out a little differently?
    0:39:16 – Yeah, so there’s three big things,
    0:39:18 there’s three big things that we should have done
    0:39:21 that would have made a big difference early on.
    0:39:23 And one of them, well, there’s one thing we did
    0:39:25 that mattered a lot, I’ll talk about that.
    0:39:27 There’s one thing we tried to do and couldn’t get there,
    0:39:28 which remains a hot topic today.
    0:39:30 And there’s a third thing that didn’t even occur to us,
    0:39:31 which I kicked myself, we didn’t think about this,
    0:39:32 but I’ll explain why we didn’t think about it.
    0:39:35 So the thing that we did do is we got encryption in there.
    0:39:36 – That’s huge.
    0:39:38 – And that was a fight then.
    0:39:41 By the way, it looks like it’s gonna be a fight again now.
    0:39:44 The various Western governments are once again,
    0:39:46 pushing to try to restrict the use of strong encryption.
    0:39:48 Like we, and for people who don’t know the history of that,
    0:39:51 like we fought that battle and Netscape navigator
    0:39:54 was the first commercial implementation of encryption
    0:39:55 that became widely used.
    0:39:56 There had been other products before,
    0:39:58 but we were the first one that millions of people used.
    0:40:03 And so we, at the time, we developed Netscape
    0:40:05 to have strong encryption in the browser method.
    0:40:08 The browser was classified under U.S. federal law
    0:40:09 with criminal penalties as a munition.
    0:40:12 It was classified in the same export control category
    0:40:13 as Tomahawk missiles.
    0:40:16 And so we were not allowed to export.
    0:40:17 The version was stronger encryption.
    0:40:18 We could sell it in the U.S., we couldn’t export it.
    0:40:21 We had to deliberately export it, we had to export it weakened version.
    0:40:21 – Wow.
    0:40:24 – So our sales pitch to a user in, you know,
    0:40:25 France or Australia or something is like,
    0:40:27 “Hey, congratulations, you get the one that’s easy to crack.”
    0:40:28 – Okay.
    0:40:28 – Yeah, you know.
    0:40:31 – The U.S. government can have their way with it.
    0:40:32 – I hope you like it.
    0:40:32 Right, exactly.
    0:40:35 Yeah, and I say, has it pre-wired effectively
    0:40:36 because they could just crack it easily.
    0:40:40 And so we fought really hard in the ’90s,
    0:40:42 since there was an encryption wars at the time.
    0:40:44 And ultimately, the government actually backed down.
    0:40:47 And as of like ’97 or whatever, they actually changed policy.
    0:40:48 And they actually legalized,
    0:40:50 essentially legalized strong encryption globally
    0:40:52 for U.S. companies to be able to build products globally.
    0:40:55 That battle keeps getting refought.
    0:40:57 And it has come, and probably in my view,
    0:40:57 it’s come back to life.
    0:41:00 I think it’s just an absurd thing to be.
    0:41:03 It’s just like, do you want secure systems or not?
    0:41:03 – Right.
    0:41:04 – Could somebody please decide?
    0:41:05 – Right.
    0:41:07 – If you don’t want secure systems, fine.
    0:41:08 I guess we’ll stop trying to build them.
    0:41:10 I guess they’ll get built in other countries.
    0:41:12 And the U.S. tech industry will not be relevant anymore.
    0:41:13 So that’s an option.
    0:41:13 – Yeah.
    0:41:15 – But if you want American companies to win at tech,
    0:41:17 like maybe we should be able to build secure systems.
    0:41:18 And if you want us to be able to protect
    0:41:21 and defend the United States against cyber terrorism
    0:41:23 and criminals and all this stuff, presumably that’s a good idea.
    0:41:25 But anyway, we got that one in there.
    0:41:29 The one that we tried to do was integrated financial transactions.
    0:41:33 So payments, obviously, was something that you would want.
    0:41:35 And we tried to build that in.
    0:41:36 We tried hard there.
    0:41:39 The problem there is, obviously, money payments transactions
    0:41:41 have been historically highly regulated.
    0:41:42 – Right.
    0:41:44 – And so we made arguably the mistake in that case
    0:41:46 of asking for permission, which is we went to the banks
    0:41:48 and the credit card companies.
    0:41:49 – We should have let the pirates go crazy.
    0:41:49 – Probably.
    0:41:51 The problem was we didn’t have the technology yet.
    0:41:52 We didn’t have Bitcoin.
    0:41:53 We didn’t have cryptocurrency.
    0:41:54 This was pre-cryptocurrency.
    0:41:55 – Yeah.
    0:41:57 – And so had we let the pirates go crazy,
    0:41:58 we would have had to just implement a system
    0:42:01 that just let you transfer money with no permission.
    0:42:02 – Yeah.
    0:42:04 – And probably we would have gotten nuked for that.
    0:42:05 – Yeah.
    0:42:06 That would have even been worse than the encryption.
    0:42:07 – Yeah.
    0:42:09 Like PayPal figured out a way to bootstrap a system
    0:42:11 a few years later, but they almost died.
    0:42:12 Like they came close to dying.
    0:42:13 – Yeah.
    0:42:15 – They almost got regulated out of existence.
    0:42:16 They just barely got through it.
    0:42:20 And so that was the big one that we should have had
    0:42:21 and we missed.
    0:42:21 But we did try.
    0:42:24 And that’s one of the reasons why I’m so strong now,
    0:42:27 so positive on cryptocurrency and blockchain and Bitcoin
    0:42:28 and Ethereum and all these things today.
    0:42:30 It’s just like internet scale, money, and trust
    0:42:31 needs to happen.
    0:42:31 – Yeah.
    0:42:33 – It was a huge problem that we didn’t have it early.
    0:42:36 Had we had internet scale, money, and trust wired in early,
    0:42:38 like the internet economy today would not be based
    0:42:38 on advertising.
    0:42:38 – Yeah.
    0:42:39 – Right?
    0:42:41 It would not be based on any of this privacy stuff
    0:42:42 that people are worried about today.
    0:42:43 It would be based on money and trust.
    0:42:43 – Yeah.
    0:42:45 – And it would be a fundamentally better, stronger system.
    0:42:49 And so, and so we like with our view is like
    0:42:51 with cryptocurrency, we have a chance to go back
    0:42:52 and kind of redo that.
    0:42:52 – Yeah.
    0:42:54 – Now, of course, they’re trying to, in various forms,
    0:42:55 keep that from happening as well.
    0:42:56 – Yeah.
    0:42:59 – They, but we’re going to try.
    0:43:01 And then the one that I wish we had had,
    0:43:03 but we just didn’t even occur to us
    0:43:05 as real names, real identities.
    0:43:06 – Oh, interesting.
    0:43:08 – Which is the other part of trust, right?
    0:43:10 Which is like, okay, who are you dealing with?
    0:43:10 – Yep.
    0:43:10 – Right?
    0:43:13 And so all the issues, you know, spam and fraud
    0:43:15 and like all these issues of abuse and harassment,
    0:43:16 all that stuff.
    0:43:17 Like it’s basically, you can’t solve any of that stuff
    0:43:18 if you don’t have real names.
    0:43:21 And so, I mean, it’s hard enough to solve those problems
    0:43:22 when you have real names.
    0:43:22 – Yeah.
    0:43:23 – It’s impossible to do it
    0:43:24 if you don’t have real names, I think.
    0:43:26 – Okay.
    0:43:27 Well, thanks, Mark.
    0:43:28 – Good.
    0:43:28 – Thank you, Mike.
    0:43:29 – Great talking to you.
    0:43:32 [music]
    0:43:34 Thanks for listening to Starting Greatness.
    0:43:37 You can follow me on Twitter @M2JR
    0:43:39 and please shoot me an email with any comments
    0:43:41 or questions to greatness@floodgate.com.
    0:43:44 I hope you’ll subscribe on Apple, Spotify,
    0:43:46 or wherever you get your podcasts.
    0:43:48 And if you like the show, I’d be grateful
    0:43:50 if you could leave us a review on Apple podcasts.
    0:43:54 Never let go of your inner power to do great things
    0:43:55 in whatever matters to you.
    0:43:58 And until we meet again, remember,
    0:44:00 Greatness is a Decision.
    0:44:05 [music]
    0:44:15 [BLANK_AUDIO]

    As part of a new series where we will share select a16z partner appearances on other podcasts with our audience here, this episode is cross-posted from the new show Starting Greatness — featuring interviews with startup builders before they were successful — hosted by Mike Maples junior.

    In the conversation, a16z co-founder Marc Andreessen shares some rare, behind-the-scenes details of his story from 0 to 1 — from the University of Illinois and Mosaic to Netscape — and along the journey, really, to product-market fit… 

  • Direct Listings, Myths and Facts

    AI transcript
    0:00:05 The content here is for informational purposes only, should not be taken as legal business
    0:00:10 tax or investment advice, or be used to evaluate any investment or security and is not directed
    0:00:15 at any investors or potential investors in any A16Z fund. For more details, please see
    0:00:21 a16z.com/disclosures. Hi, everyone. Welcome to the A16Z podcast.
    0:00:26 I’m Sonal. We’ve covered a lot of company building advice, including strategic financial
    0:00:30 milestones for startups from the case study of the Open Table IPO on the show a couple
    0:00:36 of years ago and a list of 16 things CEOs should do before the IPO and shared a detailed
    0:00:42 IPO readiness checklist to also recently sharing the behind the scenes process of the roadshow
    0:00:47 and pricing, all of which you can find at a16z.com/ipos.
    0:00:51 You can also find at that link our explainer about another route to the public markets,
    0:00:56 the emerging trend of direct listings, which is the topic of this episode. There, Jamie
    0:01:00 McGurk explained the process and tradeoffs of the methods in detail for those who are
    0:01:05 interested. But in this episode, we bring together two experts from the front lines,
    0:01:10 the architect of the direct listings and their current form, Barry McCarthy, CFO of Spotify
    0:01:15 and former CFO of Netflix, along with Stacy Cunningham, the president of the exchange
    0:01:19 where they were listed, the New York Stock Exchange, to share more about the what, the
    0:01:25 how, and the why from an insider perspective. We also touch on the big picture and secular
    0:01:28 shifts in the public and private markets, go into the nuances of all the different
    0:01:34 pricings and market mechanisms involved, share some behind the scenes details on the process,
    0:01:39 and throughout, we demystify some common myths around both methods for going public.
    0:01:44 But first, we begin with the differences between direct listings and IPOs. Let’s break down
    0:01:48 what a direct listing is, how it works, some common myths and misconceptions. The reality
    0:01:53 is that both are valid pets. People will take whatever pets they need to go public. And
    0:01:56 there’s some people may go to the IPO route, and then there’s those I may want to go the
    0:02:00 direct listings route. The number one question I want to start with is the main differences
    0:02:04 between a direct listing and an IPO. Because one of the things that Jamie and I talked about
    0:02:09 a lot is that the actual activities are very similar. You still have to engage with investors.
    0:02:13 You still have to provide information, but there’s key differences. And one is that there
    0:02:18 is no O or offering. The filing process is the same. You’re still finally submitting
    0:02:25 an F1 or an S1. So that’s the same. Your obligations as a public company are the same. The differences
    0:02:30 come down to one, it’s equal access for everyone, all institutions and retail, and there are
    0:02:36 no lockup periods. And can we quickly answer the question of why, what is the point of
    0:02:40 doing this? There are a number of reasons why companies would choose to access the public
    0:02:46 markets. One is access to capital. Two is liquidity for early investors or for their
    0:02:51 employees, as many of them are getting RSUs or options for many years and want to have
    0:02:58 access to liquidity there. Three is the currency so they can engage in M&A. And four is just
    0:03:02 the visibility of being a public company so they can go out and attract new customers
    0:03:06 by saying they’re already a publicly traded company and gives them a certain credibility.
    0:03:11 So I mean, those are kind of the four drivers and traditionally raising capital or access
    0:03:15 to capital was the primary driver for companies to go public. Which these days you need less
    0:03:19 because there’s more and more capital available in the early stage markets as well. And even
    0:03:22 late stage investors have come into the early stage markets. As we all know, there’s a lot
    0:03:27 of secular shifts that are also driving a lot of this. And importantly, you can either
    0:03:31 raise it before in the private markets or raise it later in the public markets. If you choose
    0:03:36 a direct listing, it doesn’t mean you don’t have access to capital. You’re just decoupling
    0:03:40 the raising of capital from the moment in time that you’re listing. You just don’t need
    0:03:44 it right now. It’s all about timing. Yeah, I would say if you need liquidity and you
    0:03:49 want efficiency, then pretty tough to beat the public market where price is the ultimate
    0:03:55 clearing mechanism for supply and demand. And you only have to look to WeWork to convince
    0:04:00 yourself that the private market sometimes not very efficient in terms of setting price.
    0:04:04 Bad habits grow quickly with big companies. You start to see that if there isn’t good
    0:04:07 discipline and governance and they’re much larger, it’s much more impactful with a large
    0:04:13 company. You don’t have the same kind of valuation that you get from the public markets because
    0:04:16 there is less liquidity, less buyers and sellers. There’s a smaller subset of the market determining
    0:04:22 the price. But in a worst case scenario, you actually have misvaluations that are intentional,
    0:04:27 right? So there’s a lack of transparency in the private markets that can lead to misvaluations
    0:04:32 and that can impact your employees when they’re part of that transaction.
    0:04:39 The private market doesn’t enable the flow of information nearly as well as the public
    0:04:47 market does because filing requirements. And so oftentimes we would find that the employees
    0:04:52 were being taken advantage of by large investors who were willing to provide liquidity, but
    0:04:57 at less than let’s say the full conviction price. And ironically, they had more information
    0:05:03 about the performance of the business than the employees did. We had no ability to restrict
    0:05:10 the sale of shares in the secondary market, none. And for an assortment of tax reasons
    0:05:15 unique to Sweden, we had relatively short life options. So the company had been around
    0:05:21 for 10 years. Many employees had options that were expiring, they needed to sell them. In
    0:05:27 total, before we won public, there were $3 billion that had traded hands in the secondary
    0:05:32 market in the year before we won public in 2017, a billion to change chance, which would
    0:05:37 have made it one of the largest tech IPOs that year, I think.
    0:05:40 Right. And it’s by the way, just a quick note on this. One of the things that Jamie wrote
    0:05:45 about in the direct listings post that we wrote is that if you think about the difference,
    0:05:48 because I asked why wouldn’t you just do all this in a secondary market versus in like
    0:05:54 the public markets, is that a secondary market is not a true marketplace because you’re matching
    0:06:00 an end of one buyer with an end of one seller, whereas a true marketplace of the public markets
    0:06:05 allows the true market price to be set because you have more volume, more people, more buyers
    0:06:08 and sellers to actually reach that sort of equilibrium of that pricing.
    0:06:13 A traditional IPO is just a financing event. And it comes with lots of public disclosures,
    0:06:20 scrutiny, rigor. But at the end of the day, narrowly from a CFO perspective, it’s about
    0:06:24 raising money. So the question is, can you do it cost-effectively there or are there
    0:06:29 other opportunities that you can exploit to your advantage in a relatively low-cost way
    0:06:34 because of inefficiencies in the capital markets to raise money? Like today, you’d be hard
    0:06:39 pressed to argue that there isn’t a very inexpensive capital to be had in abundance.
    0:06:43 You want to think about the difference between raising capital and access to capital.
    0:06:44 That’s a really important nuance.
    0:06:50 I’ve been at this for 227 years. Companies were not IPO-ing back then. They were direct
    0:06:54 listing. They were becoming public companies and being traded on an exchange, and then
    0:06:59 they had access to capital through that mechanism. It’s only been since the ’70s that there
    0:07:04 is now a offering that is part of that, where raising capital is the only way to come to
    0:07:08 the public markets. And that’s just not true. And so Barry challenged that perception that
    0:07:10 you have to raise capital to become a public company.
    0:07:16 I love this anecdote. I read it first time in an article authored by Alan Patrikoff.
    0:07:21 Nasdaq is founded in ’71, later that year. What we now understand to be tech IPOs happens
    0:07:28 for the first time until comes public. 64 underwriters, they raise $8 million. And it’s
    0:07:32 roughly the same process today as it was then.
    0:07:37 That’s insane given how much things have changed. Can you guys answer the question then about
    0:07:41 the relationship with investors? Because if there is one advantage supposedly of the road
    0:07:47 show process, first of all, the criticism is that it’s handcrafted. It’s hand-allocated.
    0:07:51 It’s not pure mathematical. But the advantage of that hand-crafting is you’re essentially
    0:07:56 selecting in the investors, the big institutional investors you want to hold your stock.
    0:07:59 There’s a lot of conventional wisdom here, which I think is ill-considered.
    0:08:00 Go ahead.
    0:08:07 So what then is the advantage of having those institutional investors hold your stock?
    0:08:09 Oh, actually, that’s my question for you.
    0:08:16 Yeah, I don’t think there is one. I used to think price stability. But then I came down.
    0:08:24 As I watched the average number of shares traded in Netflix over the years decrease significantly
    0:08:32 as the dollar value of daily trade skyrocketed, I realized that the price isn’t set by the
    0:08:37 long-term shareholders. They don’t participate at all. Their shares are on the shelf. It’s
    0:08:41 the high-frequency traders and the hedge funds who are setting the price.
    0:08:45 It’s artificially constrained in an IPO. Even the long-only institutions that might hold
    0:08:48 a stock for a long period of time aren’t getting the allocation that they might want at the
    0:08:53 time of the IPO. So then they’re left coming into the market later. So it takes a company
    0:08:57 more than six months to get to where they finally can have all investors with access.
    0:09:02 Right. They have to build up their position over time because of the such a limited volume
    0:09:07 that’s given up at the actual listing. Yes. It’s artificially constrained because they
    0:09:09 might not get the allocation that they were requesting.
    0:09:14 So the second argument I’ve heard is that, well, if they can’t accumulate a position
    0:09:20 in the IPO, they won’t ever own the stock. And I’ve seen many examples where that’s just
    0:09:21 not true.
    0:09:25 So it’s conventional wisdom that you’re basically saying is just false. These are no longer true
    0:09:26 or they were true at maybe at one point.
    0:09:31 Well, I would say it’s not without its advantages, but the principal advantages you get to have
    0:09:35 conversations with really smart people who make good use of your time because if they
    0:09:38 do decide to buy, they’re buying a lot.
    0:09:41 And those conversations can still happen in a direct listing.
    0:09:42 Absolutely.
    0:09:43 Absolutely.
    0:09:44 And did.
    0:09:47 One of the other differences is because you don’t have an underwriter in a bank, you don’t
    0:09:51 have a stabilization agent coming out of a direct listing, but you do have a DMM in
    0:09:55 both of those cases and they do commit capital throughout that process. And it might make
    0:09:59 sense to just take a step back and talk about how we open stocks every day.
    0:10:02 Every company that’s listed on the New York Stock Exchange has a market maker that’s
    0:10:03 assigned to that company.
    0:10:05 That’s an actual person, not a machine.
    0:10:09 It’s an actual person and a firm behind the person. And it’s known as the designated market
    0:10:12 maker or DMM.
    0:10:17 That person has the responsibility to open stocks every single day and close them every
    0:10:23 single day. And they commit capital when there’s a disparity and they can step in and facilitate
    0:10:29 that process. So every day there’s a reference price. In a stock on a normal day of the week,
    0:10:33 that reference price is the prior day’s closing price. And so the market knows this is where
    0:10:35 the stock closed yesterday.
    0:10:40 In the case of an IPO, it’s the IPO offering price. You know, where do those shares trade
    0:10:41 hands?
    0:10:43 Which is different than the listing price.
    0:10:46 Which is different than the listing price. And in all cases, it’s different than where
    0:10:50 it opens, right? So on the case of a direct listing, the SEC was saying, well, there’s
    0:10:56 no price. What’s the market going to do? And so we tried to explain that those prices,
    0:11:01 whether it’s the last day’s closing sale or the IPO offering price, do not influence where
    0:11:06 the stock opens the next day. The stock opens where supply and demand is offset.
    0:11:07 The true market price.
    0:11:11 Yeah, where there is a market price. That might inform an investor of what the prior
    0:11:15 participants valued the company, but it doesn’t indicate at all where it’s going to open the
    0:11:19 next day. And if you look through history, it’s not at all reflective of anything.
    0:11:23 It’s a funny little vestigial artifact, like the tailbone of the IPO process, this idea
    0:11:27 that you need this reference price in the first place. It’s almost like a psychological
    0:11:28 crutch in many ways.
    0:11:33 We have to file rules with the SEC around this. So it’s set based on secondary trading.
    0:11:38 If there is secondary trading, an active secondary market. And if it’s not, it’s set by the
    0:11:40 New York Stock Exchange in consultation with the financial advisor.
    0:11:44 Do you think that at some point in the evolution of the direct listing, we should just drop
    0:11:48 the reference price altogether and just let the market decide by pure matchmaking and
    0:11:49 transparency?
    0:11:51 We do let the market decide.
    0:11:52 Right.
    0:11:55 This is really just a number, just like it is on any other day. It did turn out that
    0:12:01 it was a useful number to have for many broker dealer systems who are used to inputting a
    0:12:07 number. There is a certain psychology associated with it because it gets used as if it wasn’t
    0:12:12 offering sometimes in the media and you’ll see, in the case of Slack or Spotify, hey,
    0:12:15 this was up or down X amount from its reference price.
    0:12:18 But in fact, it’s finding true equilibrium, which is actually the better point.
    0:12:19 Right?
    0:12:25 The most relevant number is where is it trading now based on demand and buyers and sellers?
    0:12:30 We set the reference price the night before and it goes out to the industry so they can
    0:12:35 leverage that number. But it’s really the morning, the next day where the price discovery
    0:12:38 starts. And that’s when the DMM is looking at what all the buy interest and sell interest
    0:12:42 is. They’re choosing that price. In the case of an IPO, they’re doing that in consultation
    0:12:45 with the underwriter. In the case of direct listing, they also work with the financial
    0:12:48 advisor and letting them know what they’re seeing and where they’re planning to open
    0:12:49 the stock.
    0:12:52 What’s the point of the stabilization? Can you explain that a little bit?
    0:12:57 It’s just intended to provide some stability coming out of the offering so that you would
    0:13:00 commit capital to maintain that kind of offering price.
    0:13:05 The recurring theme that I’m hearing is that there’s a lot of orchestration to make markets
    0:13:08 natural. And why not just let markets be natural?
    0:13:14 And that was one of the organizing theories behind. Wisdom of crowd, Trump’s expert intervention,
    0:13:19 if you just eliminate all the friction that’s been created over time, you’d get to equilibrium
    0:13:20 right quick.
    0:13:26 I do think one of the myths around the direct listing is that there are, that there’s no
    0:13:31 human intervention. And so you still have that market maker at the time of opening who’s
    0:13:36 looking at all the supply and demand and choosing the price and committing capital. It’s not
    0:13:40 just an algorithm because if we’re just an algorithm, you can open right at 930. But they’re
    0:13:45 looking for enough liquidity so they feel like it’s really representative of supply and
    0:13:47 demand and representative of the market.
    0:13:52 So it can take a long time. And in direct listing, it takes even longer. I mean, we had a universe
    0:13:58 of two so far to date. Spotify was 1243. Slack was 1208. Alibaba was the largest IPO of all
    0:14:02 time and it opened at 1153. So we’re kind of in a universe where they’re a little bit
    0:14:08 later. But when you look at the amount of shares that traded hands, that’s where it gets
    0:14:14 really interesting because Slack, as an example, the more recent one where I think now it was
    0:14:18 more well known by the market, there are many retail broker dealers that didn’t allow the
    0:14:23 retail firms to trade in Spotify’s listing because they were concerned that it was an
    0:14:25 untested mechanism and they were trying to protect their clients.
    0:14:28 This is a classic theme to we’re trying to protect these people when in fact they’re
    0:14:31 depriving sometimes some of those opportunities of access.
    0:14:35 I think there were some concern that if things didn’t go well, the retail clients would be
    0:14:36 the ones to pay for it.
    0:14:37 Right.
    0:14:41 So it’s getting a little bit more conservative. With Slack, that wasn’t what we saw. And if
    0:14:46 you look at the amount of volume that traded hands in that opening trade on Slack, it was
    0:14:52 almost $1.8 billion on a company whose market cap was $19 billion. That is the third largest
    0:14:59 opening trade period of all time. And if you look through the three largest, one was Alibaba,
    0:15:05 it was a $25 billion IPO at Facebook and then Slack. That’s real price discovery and it’s
    0:15:10 a much, it was a much smaller company. So to have a trade that size really indicated
    0:15:15 the overall interest, which means you’re getting to a more mature place much more quickly.
    0:15:20 The Citadel handled both Slack and Spotify and did just a remarkable job.
    0:15:27 Yeah, they traded over 20% of volume in those securities and committed a lot of capital
    0:15:31 through that process. So while there’s no stabilization agent, you always have a DMM
    0:15:34 and they’re going to commit capital throughout that process.
    0:15:38 So your point is that the myth is that it’s purely algorithmic when in fact there is going
    0:15:39 to be a human agent in the middle.
    0:15:43 Yeah, there’s a human being that is overseeing the opening of that stock. The model that
    0:15:47 we have in place, there’s a human being that oversees the opening of stocks all the time.
    0:15:53 If it’s not as complex situation that can be automated, the more complex the situation
    0:15:57 is and so IPOs are typically more complex than a direct listing, you increase the level
    0:15:58 of human participation.
    0:16:03 I would say the other myth is that direct listings open differently than traditional
    0:16:04 offerings.
    0:16:08 Yeah, what we do is we collect the buyers and we collect the sellers and the DMM looks
    0:16:12 at that book of business and figures out where is their price. Now they’re looking not just
    0:16:17 for where does supply meet demand, but they’ll wait for a time and this is why it sometimes
    0:16:21 takes a little bit longer to see that there’s stability above and below, that there’s enough
    0:16:25 interest below the opening price and above the opening price so that when it opens,
    0:16:30 it isn’t very volatile, which is why it takes some time to get to a place where it really
    0:16:36 feels like it’s representative and what’s fascinating is one of the concerns that we
    0:16:40 had and there were a lot of people involved in this process who’ve been in the markets
    0:16:44 for a long time that disagreed on this point that there would be buyers and no sellers.
    0:16:47 So when Spotify came to market, I mean I didn’t think it was in your F1 barrier that there
    0:16:51 would be more volatility, it could be more volatility in the listing, but Spotify actually
    0:16:58 traded with less volatility than the typical tech IPO and Slack was, there was so little
    0:17:00 volatility in the first day of trading Slack.
    0:17:04 So what I love about that though, this is where there were of course plenty of headlines
    0:17:09 in both cases that, oh my gosh, the next day or it’s now going low when in fact it doesn’t
    0:17:15 have the pop phenomenon, the performative ticker type of thing where everyone is avidly
    0:17:19 looking at the opening price and does it pop or not and that is the thing that people have
    0:17:23 been so trained that it’s actually, they’re missing the point that, hey, hey, wait a minute,
    0:17:27 that pop thing is an actual distortion when you actually want the true state.
    0:17:32 Yeah, there is a viewpoint that the bigger the pop, the more successful the IPO and it’s
    0:17:34 actually the opposite of that.
    0:17:40 And in fact, as we know, as we all know, many IPOs sort of are artificially under price
    0:17:44 in order to orchestrate the sensation of a pop.
    0:17:46 I don’t know if there’s a good reason for that.
    0:17:51 I think it worked in the existing system because you essentially give people these sensation
    0:17:56 that they are getting a gain, but what is the point of the pop and can the pop go away
    0:18:00 altogether with a direct listing?
    0:18:03 We talked about the fact that companies are coming to market much larger.
    0:18:07 Historically, when they were much smaller and they were lesser known and there wasn’t
    0:18:12 a lot of public market investment in the private market space, shares were being allocated
    0:18:16 in the IPO and investors were taking a little bit of risk with a lesser known company and
    0:18:19 they were taking it with this understanding that they’re going to get some benefit on
    0:18:20 day one.
    0:18:22 That game has changed.
    0:18:26 Everything now doesn’t have the same risk profile with companies that are well-established
    0:18:29 large companies to this date.
    0:18:35 So I think it’s somewhat, the markets have evolved in a way that that first day pop is
    0:18:36 really changed.
    0:18:42 I was out here a couple of weeks ago at a conference, a guy named Jay Ritter from Florida
    0:18:48 done some research over the last 10 years on the size of the pop and ironically the pop
    0:18:56 was the largest for the two premier investment banks and I think it peaked out at 36, 37%.
    0:19:00 So everybody talks about the fee being the cost of the transaction, but in our case,
    0:19:05 we were looking at transactions that had raised more than a billion because the rule of thumb
    0:19:09 is you would issue say 10 to 15% of the outstanding shares.
    0:19:16 So if we had a 20 billion market cap, we would have done a $2.5 billion listing.
    0:19:23 So from 2011, I think there were 11 transactions that have raised more than a billion.
    0:19:31 And if the objective is 100% turnover in shares issued, which it is in a typical transaction
    0:19:40 and say 30% appreciation first day, if the bankers and the capital market experts are
    0:19:46 really expert, you would expect that most of the time they would achieve those two objectives.
    0:19:53 So one of the 11 transactions, 9%, hit the benchmark for first day appreciation, all
    0:20:00 the others were over and under and only two hit the turnover objective.
    0:20:02 So basically they’re all mispriced.
    0:20:03 They’re all mispriced.
    0:20:04 And money is being left on the table.
    0:20:08 And you have to ask yourself, is it happening because they’re really not very capable?
    0:20:10 No, that’s clearly not the case.
    0:20:13 So the world’s leading experts, no question about it.
    0:20:17 It’s because the process is just fundamentally broken in my view.
    0:20:19 So actually, Barry, why don’t you tell us about this process?
    0:20:20 Like what did it take?
    0:20:25 I mean, honestly, it’s nuts that you guys decided, hey, we’re going to use this old
    0:20:29 tool that’s been around that actually is used for companies that are splitting or trying
    0:20:34 to come back from bankruptcy or debt, and we’re going to now use it to go public.
    0:20:36 Tell us more about why you did that.
    0:20:38 We needed to become public.
    0:20:43 We had a billion, 700 million of cash on the balance sheet and no debt.
    0:20:47 If we could find a way to do it without raising capital, which we didn’t need and couldn’t
    0:20:53 deploy, we wouldn’t be diluting our shareholders, our founders, our employees.
    0:20:57 It was in our economic self-interest to explore alternatives.
    0:21:02 And I felt I had my Wizard of Oz moment when I thought about the scale of the business
    0:21:06 relative to other public companies that I had known.
    0:21:11 The lesser CEO wouldn’t have had the courage to be different, being different as part of
    0:21:13 the ethos of the company.
    0:21:19 And so I began the conversation with Daniel by saying to him, hey, I have this idea.
    0:21:21 It’s never been done before.
    0:21:27 And for him, one of his primary objectives was equal treatment for employees.
    0:21:35 So the absence of the lockup, the radical transparency, the equal access, the price discovery, well,
    0:21:37 we never could have done it without the folks at Latham.
    0:21:41 It’s a relatively easy thing to ask the question, how do I do this?
    0:21:44 Could I do this and explore and tease out all the options?
    0:21:46 You mean Latham and Watkins legal firm?
    0:21:47 Yeah.
    0:21:48 Right.
    0:21:52 It took almost two years of prep work to make it live.
    0:21:57 I mean, this is hyper technical stuff and engage the SEC constructively in a conversation
    0:21:58 about how to do it.
    0:22:00 It was in the process of doing that.
    0:22:01 It was a well-trodden path.
    0:22:03 Many people had done it.
    0:22:08 The stocks had performed horribly and you had to ask yourself, well, was it the transaction
    0:22:09 itself?
    0:22:12 It was inherently flawed or was it the companies that the world didn’t care about or was it
    0:22:15 some combination of both?
    0:22:18 If you’re using a well-trodden path, why do you have to spend time convincing the SEC
    0:22:19 about it?
    0:22:25 Well, the backstory here is when we began the process, we thought under section 12 of
    0:22:31 the 34 Act that we could become a publicly traded company.
    0:22:34 And the SEC was dead set against that.
    0:22:37 We had a lengthy negotiation about it.
    0:22:42 At the end, they got what they wanted, which was the 33 Act registration, which brings
    0:22:47 with it strict liability for companies different from a traditional 10 to 5 defense.
    0:22:52 I think the perspective being that even though there weren’t shares being sold, it still was
    0:22:57 an offering to be a public company was the SEC’s view.
    0:23:01 And if you made a material misstatement, you were guilty.
    0:23:06 You didn’t need to prove reliance, you didn’t need to prove many of the other nuance things.
    0:23:07 You were just toast.
    0:23:09 That’s what they wanted.
    0:23:11 But what I wanted was radical transparency.
    0:23:18 I wanted to be able to speak openly to prospective investors as if we were already public.
    0:23:23 But traditionally, in a traditional IPO and a 33 Act filing, there’s something called
    0:23:26 the quiet period that ties your hands.
    0:23:30 Specifically, what I wanted was in terms of acting like a public company was to be able
    0:23:35 to hold an investor day, present in great detail the strategy of the business and allow
    0:23:40 investors to see the people who are running the business in order to make an informed
    0:23:44 decision about whether they wanted to invest behind them and the strategy.
    0:23:47 And historically, that’s not done in IPOs.
    0:23:52 There’s a traditional roadshow process, but it doesn’t include that.
    0:23:56 And then secondly, I wanted to give guidance like a public company.
    0:24:02 It was a muscle that we’d been developing over many years before we began the process.
    0:24:07 And instead of the kabuki dance that happens in a traditional offering, I thought we should
    0:24:13 tell investors ourselves, now, after the fact, I came to understand with Michael Grimes help
    0:24:17 more recently, just how important the giving guidance is because if the company doesn’t
    0:24:22 do it, nobody else in the investor community is doing it.
    0:24:27 And if the market has no idea how you’re going to perform, they’ll guess, and their
    0:24:32 guess won’t be nearly as accurate as your guess would be and bad things would happen
    0:24:33 as a consequence.
    0:24:40 I think that work that Spotify and Latham and we did also at times was important to establish
    0:24:46 what the direct listing is today, because now it does offer fair access and full transparency,
    0:24:50 which had they not persevered on that front to be able to have an investor day and have
    0:24:52 that broadcast to anyone.
    0:24:53 So it’s not just a roadshow.
    0:24:55 That goes only to private institutional investors.
    0:24:59 The traditional IPO, there are shares being allocated and there’s a story being told to
    0:25:01 a select group of people, not just to anyone.
    0:25:06 So when Spotify blazed this trail, it was everybody can hear the same information.
    0:25:07 At the exact same time.
    0:25:11 You just go to the Spotify website, you can watch the investor day and you get four hours
    0:25:15 full of what’s their story, what’s going on.
    0:25:16 And anyone can see it.
    0:25:18 And then when it starts trading, anybody can participate.
    0:25:24 There were over almost 19,000 people who’ve streamed that investor day, which would never
    0:25:25 happen in an additional roadshow.
    0:25:26 That’s fair access.
    0:25:28 That is very democratizing.
    0:25:31 My mom and dad could tune in as well as like fidelity and all the big investors.
    0:25:35 Equal access was a very important objective for us.
    0:25:39 Two things I will say that don’t get quite as much attention, but are byproducts of being
    0:25:43 public companies is it does introduce a lot of discipline and governance when a company
    0:25:48 is public, because there is so much transparency and so many aspects of your business are filed
    0:25:49 with the SEC.
    0:25:53 But the other thing that often gets left off and talked about is, is you’re then allowing
    0:25:55 others to share in your success when you’re a public company.
    0:26:00 I’m glad you bring that up, that there is a lack of access for regular retail investors,
    0:26:05 that they don’t have access to that capital because of the company staying private longer.
    0:26:06 I just don’t think it’s particularly important.
    0:26:10 Like in a traditional IPO, the retail allocation is about 10%.
    0:26:12 Their growth in the market after they’re public, right?
    0:26:13 Exactly.
    0:26:19 At a Salesforce IPO in 2004, so 15 years ago, if you had the opportunity, which retail
    0:26:25 doesn’t, to buy into the IPO, that performance is up 5,500% since their IPO pricing.
    0:26:29 But even if you look at the first day of trading where then retail does have access, up 3,300%,
    0:26:32 compared to 163% in the S&P 500.
    0:26:35 That’s a big difference, because while I agree with you, Barry, that the retail allocations
    0:26:40 are so small and already a small float to begin with, the fact is that retail investors are
    0:26:41 deprived of that.
    0:26:43 That’s something very democratizing about going public.
    0:26:48 You both think a really good point about the structural change in the evolution of the
    0:26:49 capital market.
    0:26:56 So by way of comparison, when we took Netflix public in 2002, there were 600,000 subscribers.
    0:26:58 There were 76 million in revenue.
    0:27:05 We had, I think, 13 million of cash on the balance sheet, no secondary sales.
    0:27:11 When I left at the end of 2010, so eight years later as a public company, it was 2.2 billion
    0:27:22 of revenue, 20 million subscribers and 150 of net cash, net of debt on the balance sheet.
    0:27:28 So fast forward, historically, early buyers of the public market have moved downstream
    0:27:33 into late-stage private, and the private market is a washing cash, which is enabling
    0:27:35 companies to stay private longer.
    0:27:44 Spotify is coming public. It’s more than 10 years old. It has 4.4 billion USD of revenue,
    0:27:52 71 million subscribers, a billion to trade it in the 12 months prior to coming public
    0:27:56 in the secondary market, and 1.7 billion of cash.
    0:28:01 So almost twice the size of Netflix after Netflix was public for eight years.
    0:28:04 That never happened before.
    0:28:10 Yeah, we call it the quasi IPO, which is this phenomenon that companies stay private longer.
    0:28:13 Well, I think you don’t get the valuation that you get from the public markets.
    0:28:15 I mean, the public markets is real price discovery.
    0:28:19 You have real buyers and sellers coming together, and that’s exactly what the direct listing
    0:28:21 is designed to address.
    0:28:25 What about on your end when you had to do from the exchange side, I mean, how did you guys
    0:28:26 have to do this?
    0:28:30 Yeah, I think some of the things that Barry touched on, we had to work with as well because
    0:28:33 it was part of what our listing standards require, and so we had to adjust some of the
    0:28:38 rules that we have at the New York Stock Exchange, not too dramatically because it isn’t so unique,
    0:28:44 but a couple of the things that we had to do was introduce the concept of a financial
    0:28:45 advisor.
    0:28:49 The SEC wanted to know that there was a bank or somebody.
    0:28:54 The secret about the stabilization efforts, the market makers would tell you is that the
    0:28:59 banks today don’t really commit capital to stabilize. They don’t really underwrite anything
    0:29:00 anyway.
    0:29:05 Think of the value exchange. It really happens in a traditional IPO. It’s exactly what happens
    0:29:10 in a direct listing except the fees paid in a direct listing bear no relationship to the
    0:29:14 size of the offering because there’s no offering. We’re just paying them for their advice and
    0:29:18 counsel, which is the value they provide in a traditional.
    0:29:22 Well, and also the relationship brokering, but that’s something that in this case, again,
    0:29:26 with the structural shift of the markets and the fact that a lot of late stage capital
    0:29:30 investors are following these companies early on, there’s a lot more public information
    0:29:32 about these companies, what their products are, et cetera.
    0:29:36 I mean, didn’t you guys still do relationship building with some of these institutional investors?
    0:29:40 That’s exactly the point. Most of that is happening regardless, and it has been happening
    0:29:45 for several years. And so by the time you’re ready to go public, you have already formed
    0:29:49 strong relationships with the people who are most likely to buy your offering.
    0:29:56 So in a traditional allocation, I think it’s 26 to 35% of the offering would go to the
    0:30:06 top 10 investors and the next 25 to 30% would go to the next 20. Retail gets 10 and everybody
    0:30:10 else gets a balance, and it’s the same 200 investors every single deal, deal after deal
    0:30:14 after deal. So you already have relationships with the accounts that matter.
    0:30:17 The fact that you’re doing an investor today doesn’t prevent you from going out and talking
    0:30:22 to investors that you want to target. Slack did that. They did like a mini road show
    0:30:24 as well as an investor day. Yeah, it doesn’t prevent you from doing that. It just allows
    0:30:29 you to share information more broadly. Coming back to the road show stuff, we also met
    0:30:33 with them there. So we were in Boston, New York, London, Stockholm, because given the
    0:30:39 scale of the business, you just couldn’t afford to ignore it. And the day of the investor
    0:30:42 day, we had 18 research analysts already writing about the story.
    0:30:45 What do you guys think of this other recurring theme here, that Slack is a company people
    0:30:50 use Spotify? You guys are one of the world’s largest streaming music companies that something
    0:30:54 people use all the time in their daily lives, that only well-known brands can do a direct
    0:30:59 listing, that you can’t be like a wonky software company that only certain businesses use,
    0:31:04 for instance. What would you say to demystify that myth or respond to those folks?
    0:31:10 It probably was helpful for the first one, Spotify, to have a well-known brand. I coming
    0:31:14 out of the Spotify listing thought, “Oh, you need to have a well-known brand, and you need
    0:31:18 to have a distributed shareholder base and lots of holders, so that there will be liquidity.”
    0:31:23 I’ve evolved that thinking after Slack. And it’s less, while Slack is a very well-known
    0:31:29 brand in the tech community, it’s not a household name to many people. And they didn’t have
    0:31:33 a broad distributed shareholder base, but you need to have sellers, right? You need to have
    0:31:38 some liquidity. So that’s really, I think, a myth that you need to have a household name.
    0:31:42 Yeah. And I would also point out that this is where tech has a real inflection point,
    0:31:46 because many, many years ago, my mom would never have said, “I’m investing in Twitter.”
    0:31:50 She doesn’t even know what Twitter is. But they watch TV. Tech has permeated our lives
    0:31:54 in a very different way. So I think we just have to acknowledge another huge secular shift,
    0:31:56 which I think is another underlying reason right now is the time.
    0:32:02 I think the reason there is more conversation about direct listing now is because of Slack,
    0:32:06 right? After Spotify went, it was kind of a yawn. The view was, yeah, they’re different
    0:32:11 through Swedish. It’s big scale. It’s like not everybody can do that.
    0:32:15 It took a long time to bring this thing to life. Barry first came to the New York Stock
    0:32:24 Exchange in 2016. And when I first had a conversation with Barry about this idea he had, I was certainly,
    0:32:29 you know, I was not so concerned about Spotify and how it would go then. I was more concerned
    0:32:33 about the second one, because not everyone has Barry McCarthy kind of at the controls
    0:32:38 thinking about how this is going to go, thinking about all the things might miss something.
    0:32:43 And Slack, I think that really told the market this is a tool people can use and it’s not
    0:32:50 just a one time success story. What about the forward looking guidance? So you mentioned
    0:32:54 that was really important to you to do that. And the difference between a direct listing
    0:32:59 and IPO is in the case of an IPO, the filing does not become effective to like the night
    0:33:03 of, whereas in the case of a direct listing, it can be rendered effective like 10 days
    0:33:08 in advance or a certain period. So what was the point of the forward looking guidance?
    0:33:12 Because I’m kind of hearing mixed messages on one hand where, yes, you guys want the
    0:33:16 market to decide based on the true transparency of the information. But on the other hand,
    0:33:20 we want to give guidance. I don’t quite understand the nuances of that.
    0:33:25 Yeah. Well, let’s just acknowledge that there’s a school of thought that argues against the
    0:33:29 wisdom of giving guidance. And I just think it’s foolish.
    0:33:32 Guidance is definitely a hotly debated topic.
    0:33:39 So the analogy I like to use is if you’re in a relationship and it’s date night, something
    0:33:44 comes up at the end of the day, you’re supposed to meet at seven, you don’t show up till 10.
    0:33:47 If you haven’t called, your night’s not ending well.
    0:33:51 Whereas if you text and give an update, okay.
    0:33:56 Right. Lands much better. Guidance is the equivalent of making the phone call or sending
    0:34:02 the text. Now, one perspective on the wisdom of giving guidance as it relates to an IPO.
    0:34:06 I previously mentioned there was this kabuki dance that happened. So the company has a
    0:34:11 forecast. They don’t want to miss it when they share it with the bankers. So they detune
    0:34:16 it. They hand it to the bankers during the IPO process. The equity research analyst for
    0:34:20 your underwriters will come over the Chinese wall. You’ll, you’ll take them through your
    0:34:27 forecast, teach them the business in preparing their own forecast. They’ll take the forecast
    0:34:31 you gave them, which you detuned before you gave it to them, and they will detune it.
    0:34:36 And then they will, they will basically teach the street because the SEC won’t allow you
    0:34:40 to talk about future performance. They will speak for you to the street and then the street
    0:34:46 will take the forecast they got from the equity research people, which was a dummy down version
    0:34:49 of the dummy down version you gave them, and they will dummy it down.
    0:34:50 It’s like a game of operator.
    0:34:53 And so by the time the institutional investor gets it, there’s good chance you don’t even
    0:34:59 recognize it anymore. But it’s the, it’s the underwriters, equity research people who
    0:35:04 are teaching investors what the future performance of the business might be. So you can short
    0:35:09 circuit that entire process by just telling people what it is you’re going to do. If you
    0:35:14 look to the public market for best practice, most companies give guidance.
    0:35:19 The counter view is that if you’re telling, if you’re providing quarterly guidance, you’re
    0:35:23 managing your business to the quarterly guidance, investors are demanding that you hit those
    0:35:29 numbers and that it creates a short-term view for, for leaders versus long-term and it’s
    0:35:30 debated.
    0:35:34 And my view is you’re getting held accountable for their expectations, whether you inform
    0:35:40 them or not. As long as investors get rewarded based on quarterly performance, public companies
    0:35:44 are going to be under a lot of quarterly performance pressure. That doesn’t mean that’s how you
    0:35:49 need to run your company. In fact, if you do become short-term oriented and eventually
    0:35:52 the performance of business will fall apart and so will your stock price.
    0:35:55 Right. So your point is that you’re going to be held accountable for the expectations.
    0:35:57 So you might as well control those expectations.
    0:36:00 Yeah. So figure out what you need to do over the long run in order to be successful and
    0:36:04 then break it down on a quarterly basis and tell them what that is. And sometimes they’ll
    0:36:08 like what they’re hearing and sometimes they won’t. The only way to manage your stock price
    0:36:11 is to take care of the performance of your business. And if you do that, eventually the
    0:36:15 stock price takes care of itself. But coming back to the guidance thing, if you’re not
    0:36:21 speaking in a direct listing, nobody is speaking in an informed way about what the expectations
    0:36:22 are for the business.
    0:36:28 Now, how the street interprets your guidance is something else entirely. So I was a public
    0:36:36 company’s CFO for 35 quarters before Spotify. And for that entire time, we told the street
    0:36:40 that our guidance was actually what we expected and people came to understand that. And we
    0:36:46 said we were going to manage ourselves the same way at Spotify and still in our first
    0:36:50 quarter, when we did what we said we were going to do, the stock traded down because
    0:36:57 people had learned to expect outperformance in that first public quarter and it didn’t
    0:37:03 matter that we told them that we were going to be different. They just didn’t hear it.
    0:37:08 So there’s some puts and calls, but I think the wiser course is to try to lean in and
    0:37:12 manage people’s expectations, recognizing that in a direct listing, there’s this vacuum
    0:37:17 and it’s different than a traditional offering where the equity research of your underwriters
    0:37:21 plays an important role in informing investor expectations.
    0:37:25 What would you say to the myth that public investors don’t like direct listings?
    0:37:30 During our roadshow, we spoke to a number of large investors and the biggest surprise
    0:37:32 for me was their enthusiasm.
    0:37:33 Why?
    0:37:40 Because if you run a large portfolio, by the time you receive your allocation, it’s so
    0:37:45 infinitesimally small as a percent of the assets you run, it’s completely immaterial
    0:37:46 to you.
    0:37:50 Oh, totally. The assets under management for most of these funds, I mean, how big a role
    0:37:51 IPO is in these stocks play.
    0:37:56 Yeah, so that big first day pop is meaningless for them and they get cut back in the allocation.
    0:37:59 Yes, because of the limited volume.
    0:38:03 So what’s different about the direct listing is if they have full conviction, they can
    0:38:06 back a truck up and buy the whole thing and they love that.
    0:38:07 Which then gets advertised.
    0:38:12 I mean, part of why the process takes longer in the morning is we’re sending out an indication
    0:38:16 of price range that’s much wider than you would in a normal IPO because this is the
    0:38:20 price discovery process happening unlike the allocation the night before.
    0:38:24 And so institutional investors can see that and determine where they want to put their
    0:38:29 interest into the market and over time, it narrows down to a place and they can actually
    0:38:32 attract more sellers by indicating their overall interest.
    0:38:36 This is great because I think a common misconception that I’ve heard from a lot of the lay commenters,
    0:38:40 which is not always fun to read Twitter, but a lot of people complain about the fact that
    0:38:44 direct listings are self-serving for early stage investors because they don’t have to
    0:38:45 worry about a lockup period.
    0:38:49 But it does make a difference in the market side because of the availability of the volume
    0:38:50 of that stock.
    0:38:54 Lockups make a difference in how people trade and look at the stock for a period of time,
    0:38:56 just knowing that there’s going to be shares that can come to market.
    0:38:57 Right.
    0:38:58 So you actually are obviously saying-
    0:38:59 It’s an artificial constraint.
    0:39:00 Yeah, it’s another artificial constraint.
    0:39:03 You guys just short the heck out of the lockup best price and there’s all kinds of market
    0:39:04 manipulation.
    0:39:07 Yeah, you’re removing a lot of that trading that might occur around lockups.
    0:39:08 Right.
    0:39:12 That’s, in fact, the other secular shift we haven’t talked about is the reality of HFTs
    0:39:14 like high frequency trading, hedge funds, et cetera.
    0:39:17 All these things that have also changed the way markets transact around public.
    0:39:21 We have to wrap up, but do you have any advice for how people should think about pricing their
    0:39:22 IPO?
    0:39:26 Because in the traditional IPO, you have the legacy of the sort of fake price that’s set
    0:39:29 and then you have this and dance with the road show.
    0:39:30 You’re not pricing your IPO.
    0:39:34 You’re telling your story about running your business and the market is pricing your listing.
    0:39:35 That’s actually the best advice ever.
    0:39:36 But it’s true.
    0:39:39 I mean, you’re running a business, you’re talking about what you have planned for the
    0:39:43 business in the future and you share metrics and numbers and the market tells you what
    0:39:44 they think your company is worth.
    0:39:45 Barry and you were forced to do the reference price.
    0:39:47 Would you like to get rid of it all together?
    0:39:50 I think it was just completely irrelevant to the process.
    0:39:52 It doesn’t matter whether it exists or not, honestly.
    0:39:53 Nobody pays attention to it.
    0:39:58 I do think, I think it’s been a helpful, from a mechanical perspective, it’s been helpful.
    0:39:59 We worked with the SEC.
    0:40:03 It was important to them that there be some reference out there in the market.
    0:40:08 We introduced the concept of a financial advisor that would work with the DMM as needed.
    0:40:13 We had to introduce a new way to meet our listing standards and we used a market cap
    0:40:16 test because companies typically do that through the IPO.
    0:40:19 So we had to introduce that piece of it.
    0:40:24 And then the other things that the SEC wanted were the transparency and the filing, the
    0:40:25 investor day.
    0:40:30 We should give the SEC credit, especially a director of Corpfinn, Bill Himman, was really
    0:40:34 constructive in trying to find a way to provide new tools in the market.
    0:40:38 And we’ve had many conversations with them about what’s worked so far, what have we learned,
    0:40:40 and what can we do in the future?
    0:40:45 Could you introduce primary raising using the same mechanism if you wanted to kind of
    0:40:48 recouple the raising capital?
    0:40:49 Yeah, I would like to second that.
    0:40:51 He led every meeting.
    0:40:53 They were difficult discussions.
    0:41:00 They went a long way to accommodate some of our disclosure requests in the context of
    0:41:01 the 33 filing.
    0:41:04 And I think the public interest was well-served as a consequence.
    0:41:09 I mean, their job is to protect and ensure that there are healthy markets to protect investors.
    0:41:15 Did you get critiqued a lot on the street or by your peers for this, like after the opening
    0:41:16 itself?
    0:41:17 How did you feel?
    0:41:20 Caught a little bit of the dead cat bounce when people first began to hear about what
    0:41:21 we were doing.
    0:41:23 And no one knew how to understand it, interpreted it.
    0:41:30 And so we spent time on background with members of the financial press and the media helping
    0:41:33 them understand just what it was.
    0:41:37 And then we stepped back and they performed a very valuable role, which is they debated
    0:41:40 endlessly the pros and the cons of it.
    0:41:43 And after that, I just went back to work exhausted.
    0:41:47 I think to date, and it’s only been in universities too, it’s much more work for the company to
    0:41:53 go the direct listing route than a more traditional IPO, where you sign up, show up and get shepherded
    0:41:54 through the process.
    0:41:58 I would say if you’re going to do an investor day, it’s considerably more work.
    0:42:01 But aside from that, it’s pretty much the same.
    0:42:07 And my team did it themselves with the lawyers for the most part, with on the back end, important
    0:42:10 input from the banks, all three of them.
    0:42:13 I was going to say though, for an investor day, just to be clear, that’s a single day
    0:42:17 while it may take a ton of work to plan, prepare, share that story.
    0:42:20 That’s all practice for your future earnings calls and everything else you’re going to
    0:42:22 be doing and thinking anyway.
    0:42:24 One more mechanical detail.
    0:42:26 Why the ringing of the bell?
    0:42:29 Because theoretically, you didn’t have to ring the bell anymore.
    0:42:33 And I think it’s great because Stuart asked his mom to ring the bell for Slack’s idea.
    0:42:35 So there are two different bells that you’re talking about.
    0:42:36 One is the bell that starts trading each day.
    0:42:41 So at 9.30, and that bell rings for 10 seconds, it actually tells the traders on the floor
    0:42:44 that they have 10 seconds to get their orders in before the market is open.
    0:42:45 They’re not looking at the clock.
    0:42:48 And so the bell, they actually are very particular about the bell ringing for the right amount
    0:42:49 of time.
    0:42:54 And then it’s a ceremonial first trade bell that rings when the stock opens for the first
    0:42:56 time as a public company.
    0:43:00 And we give the opportunity for a CEO or whoever they might want to delegate that responsibility
    0:43:01 to.
    0:43:03 I have a question for Barry though, if we have one more minute.
    0:43:05 Do you have the flags displayed anywhere?
    0:43:07 What are the flags?
    0:43:08 We do.
    0:43:11 We have them in one of our large conference rooms.
    0:43:16 So we were concerned that with this new way of coming to markets, things could go wrong.
    0:43:19 And there are lots of things that run through your head.
    0:43:23 At the time, I was chief operating officer, and so you worry about all the things that
    0:43:24 could happen.
    0:43:31 What we didn’t account for was that we would hang the wrong flag outside in honor of Spotify’s
    0:43:35 listing day and an attempt to hang the Swedish flag outside.
    0:43:36 Oh no.
    0:43:38 Somebody grabbed the Switzerland flag.
    0:43:39 Oh my God.
    0:43:44 We hung outside the exchange for about seven minutes before it was realized that the wrong
    0:43:46 country’s flag was put up.
    0:43:52 On listing day, my wife had sent me a picture from the exchange, which I forwarded to Tom
    0:43:56 Farley, and he wrote, he thought I was pulling his leg.
    0:43:58 That was a joke.
    0:43:59 Yeah.
    0:44:00 So Tom was pretty upset about that.
    0:44:03 And I said to him, Tom, this is the only thing that goes wrong today.
    0:44:04 It’s a win.
    0:44:11 We leaned into it a little bit and sent Barry and Daniel the flags, the all three flags
    0:44:12 that hung outside.
    0:44:13 The Swiss one included.
    0:44:16 The Swiss one, the Swedish flag, and the US flag too, hung outside.
    0:44:18 Thank you for joining the A6 and Zee podcast.
    0:44:19 Thank you.

    We’ve covered a lot of the strategic financing milestones for startups seeking to build a sustainable and enduring business — from mindsets for startup fundraising to when and how to build a finance functionwith a CFO to what it takes to do an initial public offering (IPO) and stories from the inside out. There’s also a lot that goes on behind the scenes en route to IPO, including how they’re priced and what the “pop” means.

    Yet another route to the public markets is the direct listing, recently reinvented for tech companies (with Spotify and Slack so far). We explained the process and tradeoffs in this early primer by Jamie McGurk, so this episode of the a16z Podcast brings together two experts from the frontlines: the architect of the direct listings in their current form, Barry McCarthy, current CFO of Spotify (and former CFO of Netflix); and Stacey Cunningham, president of the NYSE where they were listed — in conversation with Sonal Chokshi to share more about the what, the how, and the why from an insider perspective.

    What’s the bigger picture here, including secular shifts in the public and private markets? Zooming in closer, what are all the details and nuances involved in true pricing, investor days, forward guidance, and other market mechanisms for “radical transparency”? What did it take behind the scenes to make this all happen, and what’s still happening? And finally, what are some of the common myths and misconceptions around direct listings (and IPOs) as methods for going public? Turns out, there’s a lot that goes into making markets… and market making.

    The views expressed here are those of the individual AH Capital Management, L.L.C. (“a16z”) personnel quoted and are not the views of a16z or its affiliates. Certain information contained in here has been obtained from third-party sources, including from portfolio companies of funds managed by a16z. While taken from sources believed to be reliable, a16z has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation.

    This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only, and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any fund managed by a16z. (An offering to invest in an a16z fund will be made only by the private placement memorandum, subscription agreement, and other relevant documentation of any such fund and should be read in their entirety.) Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by a16z, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. A list of investments made by funds managed by Andreessen Horowitz (excluding investments for which the issuer has not provided permission for a16z to disclose publicly as well as unannounced investments in publicly traded digital assets) is available at https://a16z.com/investments/.

    Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Please see https://a16z.com/disclosures for additional important information.

  • The Stories and Code of Culture Change

    AI transcript
    0:00:05 Hi everyone, welcome to the A6NZ podcast. I’m Sonal and today I’m so excited since we finally
    0:00:11 have our interview, the A6NZ podcast way of co-founder Ben Horwitz on his new and best-selling
    0:00:16 book, What You Do is Who You Are, How to Create Your Business Culture. The conversation, which
    0:00:21 took place recently at the Computer History Museum between me and Ben, probes on the themes of business,
    0:00:26 culture and tech from the book and beyond, with lots of nuanced discussion on everything from
    0:00:32 common tropes such as reality distortion fields, fake it till you make it, Silicon Valley folklore,
    0:00:37 whether companies and people can change diversity and inclusion and so on. All told through some
    0:00:42 tough stories. On that note, just a note for listeners with kids in the car that this podcast
    0:00:47 talks about historical themes with various mentions of violence. Finally, we try to share some
    0:00:53 practical advice throughout for both leaders and even for employees going through cultural change
    0:00:57 and crowdsource questions from our audience as well that are answered at the end. You can read
    0:01:05 more about and order the book at a6nz.com/whatyoudo. 100% of the proceeds will go to anti-recidivism,
    0:01:09 helping people get out of jail, stay out of jail and towards making Haiti great again.
    0:01:15 We’re here to talk about Ben’s best-selling new book, What You Do is Who You Are, which is really
    0:01:20 about culture and we all know it’s important but no one really tells you how to shape it, how to
    0:01:25 set it, even how to fix it when things go wrong and what I love about Ben is he’s not only a
    0:01:29 builder but a bridger of cultures and that’s why it’s so significant that we’re sitting here at
    0:01:34 the Computer History Museum because this represents the heart of Silicon Valley which itself has been
    0:01:39 going through lots of cultural change and so the first question I want to ask you Ben is a very
    0:01:44 obvious straightforward question to actually define culture because you say it’s not corporate
    0:01:52 values, it’s not perks, but then what is it? Yeah, you know one of my kind of favorite semi-definitions
    0:01:57 of culture or pieces of it is from The Way of the Warrior, the Bushido, which is the ancient code of
    0:02:02 the Samurai. They say a culture is not a set of beliefs, it’s a set of actions which is where the
    0:02:07 title of the book came from so it’s not what you believe, it’s not what’s in your heart, it’s not
    0:02:12 what you tweet, it’s what you do, that’s who you are culturally. But when you get into a company
    0:02:20 context it ends up being really small subtle things that determine your culture, determine the way
    0:02:25 you treat each other, determine the way you treat your business partners and your customers and
    0:02:31 they’re very amorphous, nearly invisible things. Do you return that phone call in an hour, in a day,
    0:02:38 in a week? Never. Do you go home at five or at eight? When you do a business deal it’s about the
    0:02:45 partnership or the price. All these things, that’s your culture and they’re not in your KPIs or your
    0:02:53 LKRs or your mission statement or any of that. And then how do you move and shape them because in the
    0:02:59 conventional kind of method, I can tell you it doesn’t work, which is oh we’ll bring in the HR
    0:03:05 consultants and we’ll have an offsite and we’ll put a bunch of values on the board and then once a year
    0:03:10 in people’s performance reviews we’ll say does he have integrity? What are those values again?
    0:03:14 Well the real thing is like how do you know if you return the phone call, you don’t even know if you
    0:03:20 got the phone call and so like how do you get that behavior going in the direction that you want it
    0:03:25 and that’s you know what the book is about and that was really the hardest, most difficult thing for
    0:03:31 me to learn as CEO so I thought it was a good thing to write a book about. Sitting in Computer
    0:03:36 History Museum, I think of the book as culture as code and you actually use a lot of words, I’ll
    0:03:41 read some of them out loud but you describe culture as code, you talk about programming culture, you
    0:03:46 talk about reprogramming culture, you talk about how it’s hard to debug, every culture has bugs,
    0:03:52 I mean you basically use a lot of digital words but your examples are all analog. I mean the most
    0:03:57 recent one was maybe 20 years ago and it was from prison where there was a lot of technology and
    0:04:01 frankly they go back over a thousand years, specifically the example that comes to mind is
    0:04:07 the samurai. What drew you to that example of culture as code and why? Well it’s interesting,
    0:04:12 the first example is the Haitian Revolution which is an amazing story because it’s the only
    0:04:18 successful slave revolt in human history and it’s a story of how Toussaint Louverture reprogrammed
    0:04:25 slave culture to be kind of military culture which is an incredibly difficult job for many reasons
    0:04:32 but the tragedy of the Haitian Revolution is they lost the culture almost the instant they
    0:04:38 won the revolution and it was a kind of crazy story about what happened to Toussaint who’s
    0:04:43 double crossed by Napoleon and thrown in jail in a diplomatic meeting and Jean-Jacques Desolines
    0:04:47 took over and went completely different direction. That was his second in command. Yeah, yeah, yeah.
    0:04:53 But the samurai code lasted at least a thousand years depending on how you count it and so I
    0:05:00 really wanted to kind of go through all the things they did to make it last so long
    0:05:06 and amazingly so. So with the samurai code lasting so long, it’s another programming word,
    0:05:10 it was a system and I have to ask about this because on one hand in the book you say,
    0:05:15 hey you can’t have platitudes but it was a system of words, like they had a code with
    0:05:19 eight principles and so how do you reconcile that? You can describe your actions in words,
    0:05:25 I’m not anti-word. So one of the things with culture that you run into is things that you think
    0:05:29 that you want to put in your culture can get weaponized against you and they tell a story
    0:05:36 in the book about slacks. So Stuart Butterfield early on had this cultural value empathy and his
    0:05:42 intention was look, I don’t want people to just state their point of view, I want them to understand
    0:05:48 the other person’s point of view thoroughly and then decide if they still want to argue the point
    0:05:55 as opposed to just going at each other. Well, it wasn’t defined where the boundaries were and so
    0:06:00 forth and so what ended up happening is employees would be getting their performance reviews and
    0:06:04 the manager would say, well I need you to improve here and there and they’d be like,
    0:06:09 you’re in violation of the culture, you’re not being empathetic. And so he was like, okay,
    0:06:14 got to get rid of that value if that’s not going to work. And the samurai developed over a very
    0:06:20 long time, but it’s amazing how they had sort of points and counterpoints and where the
    0:06:26 virtues worked in a system that would govern itself. So for example, you know, they were an honor
    0:06:32 culture. If somebody dissed you or insulted you, they had to go. That was it because that insult
    0:06:38 was really could have been a diagnostic to say, is this guy weak? Can I besmirch his honor
    0:06:43 and get away with it? Because if I can do that, I can probably stab him in the head or rob him or
    0:06:51 whatever. And there’s a really great story in the Hagukari about a samurai who has a flee
    0:07:00 on his shoulder. And another person says, excuse me, you have a flee on your shoulder
    0:07:06 and the samurai cuts his head off. And you go, wow, that was like a pretty harsh response.
    0:07:09 And they ask the samurai, why’d you cut his head off? He’s like, look, I’m not an animal. I don’t
    0:07:17 have fleas. Call me that. And so when you have a kind of a virtue like that, you need something
    0:07:23 to balance it. And you know, one of the things that they did is really establish a very elaborate
    0:07:30 system of how they treated each other in this virtue known as politeness. And politeness means
    0:07:35 the best way to show someone love and respect and respect is very, very important because,
    0:07:40 you know, you don’t want to say they’re an animal with a flee. And it’s everything to how you bow
    0:07:48 to how you set up the tea ceremony to every aspect of how you make somebody maximally comfortable
    0:07:55 so that they feel how you feel about them. But right, if that was fake, just so you didn’t get
    0:08:01 your head chopped off, then that really wouldn’t be good either. So one of the things in the code is
    0:08:08 politeness without veracity is empty. It has to be honest. It has to come from the right place.
    0:08:14 It has to be true. And so these are the kinds of ways that they created a system that built a much
    0:08:20 kind of stronger and long lasting culture. That is honestly my favorite example from the book,
    0:08:24 because you describe this interlocking system of eight values in the Bushido code.
    0:08:28 They did them. Let’s talk about the difference between that. They didn’t just put them on the
    0:08:33 wall. Virtue is what you do. Actually, you are trying to rebrand the word values into virtues.
    0:08:37 Well, it’s not so much a rebranding. It’s a different thing. A value is what you believe,
    0:08:43 what you want to be, what you aspire to. A virtue is what you do. And so I think from a chief executive
    0:08:49 perspective and a company, you want to think through not just what you want, but how you’re
    0:08:54 going to get it. And when you talk about culture, people just go, well, here’s what I want. And
    0:08:58 then I’ll just tell people it in all hands, and then I’ll get it. And that never happens.
    0:09:02 Like, then you know what your culture is? Hypocrisy, because I have all these values
    0:09:07 on the wall, and I don’t do any of them. So it’s trying to kind of move the mindset into how do
    0:09:11 you do it? Like, what are the mechanisms? What are the mechanics? What do you think the power
    0:09:16 of storytelling is then in disseminating and sharing that culture? In fact, one of the lines
    0:09:21 in your book is that stories and sayings define cultures. I have to ask what the difference is
    0:09:27 between the story and those sort of hypocritical value statements on a wall. Like, what power does
    0:09:32 story have? Yeah, so, well, I’ll give you an example. Let’s stay with the samurai for now.
    0:09:39 My favorite. So there’s a great story. So one kind of really powerful cultural virtue is loyalty.
    0:09:42 And then there’s kind of a question, okay, well, like, how do you show its importance? How do you
    0:09:49 kind of make that stick? And one way is either in a company or in an ancient Japanese warrior society,
    0:09:54 you can do that through a story that’s so compelling that people literally can’t get it
    0:09:58 out of their head. And so here’s a story I’m going to tell you that you won’t be able to get out of
    0:10:04 your head. Oh, no. So there was this lord in ancient Japan. His name is Lord Soma. And,
    0:10:09 you know, in those days, the status symbols weren’t what we have today. But one of the things that
    0:10:14 they had that like everybody was kind of proud of if they had a good one was their genealogy.
    0:10:20 And it was on scrolls and it’d be written out and generations of who your ancestors were and kind
    0:10:26 of the more you knew who you were, like that was a big thing. And Lord Soma had the best genealogy
    0:10:33 in all of Japan and had a name was the Chai Ken Marikoshi. And then working for him was a samurai
    0:10:40 who was like just a mediocre guy, clumsy, always getting things wrong, messing things up. But he
    0:10:48 was always sincere and loyal. One day, Soma’s house catches fire and it’s engulfed in flames.
    0:10:54 I mean, it is like burning down and there’s no way to deal with it or put it out. And inside the
    0:11:01 house was the Chai Ken Marikoshi, his genealogy. And the samurai runs into the house engulfed in
    0:11:06 flames. Lord Soma was shocked. He’s horrified. They watched the house just burn to the ground
    0:11:12 and they know he’s dead. And they go in and sure enough, they’re looking for him and he’s face down
    0:11:20 and it’s horrible. But then they notice that he’s in a pool of blood and they’re going,
    0:11:24 why is he in a pool of blood? You know, he just ran into a fire and they turn him over
    0:11:30 and there’s a slit in his stomach and they open the slit and inside it is the genealogy.
    0:11:37 He cut himself open, put the genealogy in and saved it. And it was known from that day as the
    0:11:43 blood genealogy. And everybody knew that even if you were mediocre, if you had that kind of loyalty,
    0:11:47 you could be great. So that was the story. No one’s going to forget it. And I am sure
    0:11:53 everyone in this room is wondering quite honestly, why are all your stories so far so violent?
    0:11:59 I’m wondering that right now too. I think I can only answer that with another violent story.
    0:12:06 Some of them I got before I was actually like writing the book. Yeah. Like it’s just me and
    0:12:11 Shaq in the backyard and I’m barbecuing and like he tells me these stories and I’m like, wow,
    0:12:17 when you hear it, just think that’s how I heard it. So Shaq, who’s in the book, went to jail
    0:12:22 for a murder he did commit. He was in jail 19 years, seven years in solitary confinement. But
    0:12:28 this story is about his first day in jail. So in prison, him and a group of guys are in quarantine,
    0:12:32 which is where they keep you until they put you in general population. They come out into
    0:12:39 general population very first day. They’re in the recreational area and a prisoner walks up to
    0:12:46 another prisoner and stabs him in the neck with a shank, pulls the shank out. The prisoner bleeds
    0:12:53 to death, dies. The other prisoner throws the shank in the trash and walks into the cafeteria and
    0:12:59 has a sandwich. And Shaq said, you know, all the prisoners are looking like, where in the hell are
    0:13:08 we at? And I had to ask myself, could I do that? And I said, wait a minute, you murdered a guy to
    0:13:16 get in here. You did do that. And he said, oh, no, Ben, I didn’t do that. I said, I was dealing drugs.
    0:13:22 One of my customers came. He was supposed to come by himself. He brought another guy. The other guy
    0:13:28 is in the back seat of the car. I’m already traumatized because I had been shot like 18 months
    0:13:32 earlier. This guy in the back of the car is supposed to stay in the back of the car. He opens the
    0:13:37 door. He comes out. He comes at me real aggressive. I react. I had a gun in my pocket. I shot him.
    0:13:45 That’s what I did. This guy spent two weeks taking a two liter bottle and filing it into his shank.
    0:13:51 Then he decided, am I going to stab this guy in the stomach and wound him? Or am I going to stab him
    0:13:57 in the neck and kill him? I couldn’t do that. But I had to ask myself, could I do that? Because
    0:14:04 that’s what it took to survive here. And that is new employee orientation. That’s getting indoctrinated.
    0:14:10 You guys laugh. I’m about to explain to you why the book is so violent. That’s how you get
    0:14:15 oriented into such a violent culture with an experience like that. People join a company.
    0:14:19 First thing they do. First thing all of you did when you joined a company.
    0:14:26 Who’s successful here? Who’s the person everybody looks up to? What’s their behavior like?
    0:14:31 Oh, that guy’s making all the money. He’s got the big job. He’s the one, the golden boy.
    0:14:36 Oh, and he just took credit for her work? That’s what I have to do to succeed here.
    0:14:43 That’s cultural orientation. That’s way higher impact than the value statement. And I have
    0:14:47 conversations with CEOs all the time. I’m like, look, you have to take onboarding seriously. You
    0:14:54 have to take new employee orientation seriously. You have to train your managers and your people
    0:14:59 on like what’s expected of them behavior wise in the culture from day one. And they don’t listen
    0:15:06 to me. So I needed a real story that they would remember and understand that would get them
    0:15:11 to do the right thing. Because culture, it feels very invisible. You’re like, why do I have to do
    0:15:15 that? Like I see that person doing something wrong, but it’s not that wrong. And I don’t want to hurt
    0:15:20 their feelings by calling them on it. But you’re not looking at the knock on consequences, the knock
    0:15:25 on cultural consequences that you’re setting up by not addressing it. And so a lot of what the
    0:15:29 book is about is, you know, can you recognize culture? So a lot of the examples in the book
    0:15:35 are things that people are not familiar with. And the reason for that is nobody can see their
    0:15:40 own culture. Like it’s just, that’s just my way of doing things. That’s my culture. That’s my
    0:15:45 behavior. Well, like maybe it’s not, but you can’t see it because it’s you, but you can see prison
    0:15:51 culture. You can see slave revolt culture, these kinds of things. Yes. And something to borrow from
    0:15:56 and think about and kind of riff on in your own way. I want to let people know that Chaka is
    0:16:00 actually a wonderfully kind, empathetic person. No, he’s amazing. One of the great stories in the
    0:16:06 book is how he transformed not only his own culture from that super violent culture, but also the
    0:16:10 culture of the Milanics, which was a gang he ran. And you know, a lot of the guys, his guys that
    0:16:14 got out and you know, it’s an amazing transformation that somebody could do that. I want to ask you
    0:16:19 about that. I know Chaka because he’s a friend of yours and both actually just a plug for this. Ben
    0:16:25 and Chaka co-host a podcast series called Hustlin Tech, which is guides to technology for everyone.
    0:16:30 You can find that on our website. But what’s really amazing is that in the book, the story was
    0:16:37 about how he took a group of outcasts and built a more cohesive team. And that’s how you described
    0:16:41 it in the book. For me, I wondered coming at it from again, this theme of the vantage point of
    0:16:45 Silicon Valley, I understand what you’re saying about the, you know, using examples that are
    0:16:50 shocking and strong that you can learn from. But part of me was like, why is there a jail example
    0:16:56 in a book about business culture? And so then I wondered, well, maybe can we draw an analogy
    0:17:01 between a group of outcasts, like technologists, like in this room, and they can do the same thing,
    0:17:06 and we can draw lessons from that? Or is that too far a stretch? Look, so let me tell you where
    0:17:10 the analogy doesn’t work. You know, people in Silicon Valley, some people may be outcast, they
    0:17:16 may have like not fit in as a kid and, you know, spent more time with the computer or what have you.
    0:17:23 People get to prison very often because they’re really severely abused as kids. And so the thing
    0:17:30 that prison culture or prison that I thought was very instructive was, we can tell you culture
    0:17:35 for granted here, because when you hire someone, you can expect certain things. You know, you can
    0:17:41 expect them to be reasonably on time for their interview. You can expect them to be literate.
    0:17:46 You can expect them to, you know, there’s just a lot of cultural things that you can take for
    0:17:51 granted, like more functional things. Yeah. Whereas in prison, you know, there’s really nothing you
    0:17:57 can take for granted, including things like literacy and so forth. So when you go through the way
    0:18:04 Chaka built the culture of the Milanics, he really had to start from first principles. And
    0:18:09 sometimes in a culture, in a company, you’ve got to do that same thing. So one of the things that
    0:18:17 Chaka did to kind of create loyalty is, you know, he just had the guy spent a lot of time together,
    0:18:23 eating together, working out together, and it was required to be a member. And these things,
    0:18:28 just that proximity and the nature of how they did it and so forth, kind of built the culture.
    0:18:34 So one of my portfolio companies, a nation builder and the CEO, Leah Andres calls me up one day,
    0:18:41 and she’s like, Ben, we just, our cash collections are always late and not a hundred percent.
    0:18:46 And I said, well, you have like big customer satisfaction issues. She’s like, no, no, no,
    0:18:50 like we’re just not collecting the money. And she’s like, but I don’t, I tell them, you know,
    0:18:54 like we need to collect the money and it never happens. And I get it. And I was like, well,
    0:18:58 you know, you have to start from first principles. I took her through what Chaka did. And I said,
    0:19:03 like, this is how we’re going to apply it here. I want you to hold a meeting every day with the
    0:19:08 cash collections team, every day, eight in the morning, everybody comes to work, like we’re
    0:19:13 having a meeting. And in that meeting, the very first thing that I want you to say is, where’s my
    0:19:21 money? And then what you’re going to find out is they’re going to have all kinds of weird reasons
    0:19:26 why they can’t get you your money. And they’re all going to be very easy to fix because it’s a
    0:19:31 cultural problem, not an actual problem. And so sure enough, she goes, she calls me up after
    0:19:34 the first day. She’s like, you’re not going to believe it. You know what one of the biggest
    0:19:39 things is? We have an email that we send to collect the cash and auto email that’s really
    0:19:45 poorly written. And I’m like, you know, it’s not a big company. And so she every day has this
    0:19:49 meeting and works through it. And like pretty soon they were, you know, collecting literally
    0:19:54 twice as much cash as they had been previously. And it was just a culture change. But it was a
    0:20:00 culture change taken from a prison example. And because you can’t make cultural assumptions when
    0:20:05 you’re in prison, so often CEOs make cultural assumptions they shouldn’t. I love that you
    0:20:11 brought up first principles because I’m fascinated by first principles type thinkers. I think some
    0:20:16 of the greatest CEOs, scientists, innovators are first principles thinkers. And one thing I often
    0:20:22 wonder, I always ask myself this when I observe the evolution of technology and innovation is,
    0:20:26 are there maybe two camps of people, people who can be first principles thinkers,
    0:20:31 and some who can’t and a Silicon Valley folklore story of Reed Hastings CEO of Netflix. You tell
    0:20:36 this briefly in the book of how he wanted to pivot the Netflix business from DVD streaming.
    0:20:41 He would say he didn’t want to pivot it. He said the plan was always to be a network.
    0:20:47 He wanted to evolve the network in his view from the outset to a streaming service.
    0:20:50 Yeah. So I shouldn’t use the word pivot because that’s even more powerful, frankly, from a first
    0:20:55 principles perspective that he had the vision upfront and the confidence to know that I’m
    0:21:00 going to pace myself by doing the DVD business before I do the streaming business. But then he
    0:21:06 built a successful DVD business and then he kicked out the leaders of his DVD business from the room
    0:21:10 when they were talking about the streaming business, which felt like a very bold first
    0:21:14 principles move as Silicon Valley folklore. You tell the story in your book. I read that and I
    0:21:20 was like, would you really advise your CEOs to do that? Was there something about him uniquely
    0:21:24 that he could make such a bold move or is this really advice that people in this room should
    0:21:29 actually go translate into their work? No. It was actually analogous to the move that
    0:21:34 Toussaint Louverture made in the Haitian slave revolt. The leader of the, you know,
    0:21:39 as I said, the only successful slave revolt in human history. He was obsessed with culture and
    0:21:47 one of the things that he wanted to move from a kind of a broken slave culture to a world-class
    0:21:53 military and not only military, but like societal culture because he thought, hey,
    0:21:57 he could be a first-class country. And one of the decisions he made just to make that priority
    0:22:03 clear because like the default culture in a slave revolt is revenge, a revenge culture.
    0:22:09 When it came to the decision of what to do with the plantation owners, the slave owners,
    0:22:13 you know, he could have executed them. He could have seized the land. He could have done a lot of
    0:22:19 things. He actually left them in place, let them keep the plantations, but said he had to pay the
    0:22:23 workers as opposed to have them as slaves. And in order to facilitate that, he lowered their taxes.
    0:22:31 So that was a decision to set the culture away from revenge and towards reconciliation and caring
    0:22:37 about the economy and caring about the go-forward. Reed wanted to get to streaming. His big fear
    0:22:43 was that a pure streaming company would come along and he would be stuck in the DVD business.
    0:22:47 And he couldn’t figure out how to change the culture to do that. And then one day he said,
    0:22:52 even though the DVD business is 100% of the revenue, like imagine that 100% of the revenue,
    0:22:56 I’m going to let everybody know that streaming is more important. And the way he did it is he
    0:23:02 kicked all the DVD people out of the executive staff meeting. And anybody who knows about companies
    0:23:07 knows that’s a meeting everybody wants to be in, that executive staff meeting. They’re like,
    0:23:13 that’s going to really hurt feelings. But it wasn’t like Reed was so great that he got to do it and
    0:23:18 people would be okay with it. He was just willing to take that because the principle was so important.
    0:23:22 And the same way people were mad in the Haitian Revolution when Toussaint did that,
    0:23:28 but they were working towards something, you know, a higher cultural principle.
    0:23:34 – You described it as creating a shocking rule that does that kind of a reset. One recurring
    0:23:38 theme I noticed in the book, and for those who haven’t read it, this is just something people
    0:23:42 in marketing and brand talk about too, which is the power of the why. And I noticed almost every
    0:23:47 other chapter, every other sentence, every other paragraph, you kept emphasizing this message,
    0:23:51 the why matters more than the what. The why matters, the why matters. And it seems obvious on the
    0:23:58 surface, but I really want you to share with us why the why is so important. – So I’ll give you two
    0:24:03 very different examples. One is, well, Andrews and Hearts. One of the things that we wanted in
    0:24:10 the culture from the outset was we wanted to respect the entrepreneur and the entrepreneurial
    0:24:16 process. Now, there is not a venture capitalist in the world who won’t say that, but there’s a big
    0:24:23 cultural force that screws that up in venture capital, which is this dynamic. I have the money.
    0:24:29 You want the money. In order to get the money, you got to come see me and ask for the money.
    0:24:35 And then I get to decide whether you get the money. So that could make a person disrespectful.
    0:24:40 And I’ll tell you what it does, because anybody here raised venture capital money.
    0:24:47 How often did the VC show up on time for that meeting? Okay. – No one’s raising their hand.
    0:24:52 – You know, why is that? Well, they say it, but they don’t believe it. They aspire to it,
    0:24:59 but it’s a value, not a virtue. And so I set a rule early on, which was if you’re late
    0:25:07 to a meeting with an entrepreneur, you owe me $10 a minute. And oh, you have to go to the bathroom?
    0:25:12 No problem. $50. Oh, you had a really important phone call on the deal. We all want to close.
    0:25:21 No problem. $100. And people would come to me and they’d go, why? – Why? – Why am I paying you to
    0:25:28 work here? I’m like, look, because I need you to know how important and valuable an entrepreneur’s
    0:25:32 time is when they’re trying to build a company, and you’re not going to waste any of their time
    0:25:35 if you’re here. You’ve got a plan when you go to the bathroom. You’ve got a plan when you have
    0:25:39 that phone call. And I know you can do it, because if you were getting married, you wouldn’t be five
    0:25:49 minutes late to the altar. You would have gone to the bathroom already. But every time somebody’s
    0:25:53 got a plan, when they use the restroom, when they make their phone calls and so forth, which is
    0:26:00 every day at the office, they have to say, why am I doing this? Oh, I remember why, because we
    0:26:07 respect entrepreneurs and what it means to build a company. And so that’s a kind of technique to
    0:26:11 move the culture, right? – Yeah. I said to tell everyone in the room, since you gave that A6NZ
    0:26:16 example, they actually formally call those breaks biobrakes. They actually schedule in
    0:26:22 bathroom breaks into the schedule. But anyway, onto your other example. – So a different one,
    0:26:28 ethics turns out to be really tricky in a company. And people make fun of Dara at Uber for saying,
    0:26:33 like, we’re going to be ethical. Our new corporate values just do the right thing, period. It’s
    0:26:40 like, what the hell’s the right thing? It actually turns out to be fairly subtle, much of the time.
    0:26:46 So in a company, you could imagine, okay, we made promises to all the employees about what
    0:26:50 their stock was going to be worth and to Wall Street about the numbers we were going to hit.
    0:26:56 And like, we live up to our commitments. In order to make the number, we got to get this deal.
    0:27:01 In order to get this deal, they need this feature, but they need a quarter and we’re
    0:27:07 not going to deliver for a year. So is it ethical to whiff the quarter and have lied to all the
    0:27:12 investors and the employees? Or is it ethical to stretch the truth to the customer and like,
    0:27:18 get the money? Well, you better be clear on that and you better get to some kind of higher
    0:27:22 principle than do the right thing. And so a great example of this is in the Haitian Revolution,
    0:27:28 this is a war over sugar. It’s the British Army, the Spanish Army, the French Army,
    0:27:35 and the slave army all fighting for control of this colony. And so it is the most mercenary
    0:27:41 kind of endeavor that you could ever imagine. All of the European armies are letting their guys
    0:27:49 pillage all they want. And Toussaint makes the decision that he’s going to not allow any pillaging
    0:27:57 in the slave army because you can’t fight for liberty if you’re taking people’s liberty.
    0:28:03 And it was an amazingly powerful thing because the stories of some of the stories in the book,
    0:28:09 but the story would be of like the Spanish Army going in, setting the plantation on fire,
    0:28:16 killing all the animals, robbing everybody, raping the women on the plantation. And then
    0:28:23 the slave army would show up starving and they would not touch the thing. No violence, no pillaging,
    0:28:33 no nothing. And the knock on effect of that ethic was that Toussaint had the support of the locals,
    0:28:40 including the white women in the colony, who referred him as father, like amazingly, to that
    0:28:44 level of loyalty. He didn’t say do the right thing because to the right thing is pillage.
    0:28:51 You pillage, the guys get paid, they fight harder, they win the war, you end slavery.
    0:28:56 Like that seems like pretty legit. So you can’t just say do the right thing. You have to say
    0:29:01 here’s what we’re doing and here’s why we’re doing it. And that’s why I emphasize the why.
    0:29:06 The power of the why. I have two follow-ups on this and I want to actually shift gears to more
    0:29:11 practical techniques based on these wonderful principles and violent stories as well. In
    0:29:16 the Dara example and the values and why the why matters, I also read it and heard it a little bit
    0:29:23 as maybe mistakes of omission are more important than mistakes of commission, that what you don’t
    0:29:27 say is more important than what you do say. And so then it wondered like practically,
    0:29:32 does that mean as someone in this room, for instance, wants to write their, figure out their
    0:29:38 code, their Bushido for their company, do they start with what they’re not? Or is there room for
    0:29:42 them to figure out what they are? Like how does that sort of play out practically? Well, now I do
    0:29:49 think one like the universe of what you’re not is too big. Yeah, sure. But here’s the thing
    0:29:54 that is true in every culture. And this is the thing that Toussaint did. So effectively you have
    0:30:01 to make ethics explicit. If it’s, oh yeah, we’re going to do the right thing. Oh yeah, like it’s
    0:30:10 going to be like, yeah, don’t don’t be evil. That’s just not good enough. And you know, a great example
    0:30:16 of this is Uber under Travis. Travis would get criticized for building a bad culture, but he
    0:30:23 actually had the bestifying culture in Silicon Valley. And if you read the original values that
    0:30:29 he had, always be hustling, you know, super pump, toe stomping, whatever, like they, they were all
    0:30:36 really creative, well crafted, energizing kind of set of principles that they worked on. But he
    0:30:41 went way beyond that. They really trained people on them. They had Uber University and they trained
    0:30:47 people on the culture. And it really stuck. And probably the most powerful virtue that defined
    0:30:53 the company was competitiveness. They were like massively competitive. And really great at that.
    0:31:00 But what he did not do is he didn’t say where the line was. So ethics were just like unstated
    0:31:08 completely. And so a lot of people would interpret that competitive virtue to be like
    0:31:14 whatever at all cost, you know, even say hashtag winning, right? And so when Susan Fowler joined
    0:31:20 the company, she gets sexually harassed her first day on the job by her manager in writing,
    0:31:27 like she snapshots it sends a HR. Now anybody who knows anything about HR law knows if you get
    0:31:31 any kind of complaint, let alone one in writing with proof, you have to investigate it. Like
    0:31:35 that’s not like a practice. That’s the law. That’s the law. Yeah, you like you just have to do that.
    0:31:42 But this HR person said, Oh, that manager is a high performer. So like we can move you. But like
    0:31:46 we’re not doing anything. There’s no way like Travis wanted that manager to do that. It’s just
    0:31:51 like a dumbass thing to do. Like even if you didn’t care about sexual harassment, like that’s
    0:31:58 idiotic. That’s ridiculous. But when you don’t counterbalance the culture, if you don’t say
    0:32:02 what the ethical line is, which we won’t cross, particularly in business, because every conversation
    0:32:06 you have is how do we make the number? How do we get better? You know, how do we get more customers?
    0:32:12 How do we grow the user base? All that. And so if you don’t have any countermeasure on that that
    0:32:19 you talk about out loud, then it can run away from you like very hard and very fast. And so that’s
    0:32:24 why when you talk about what not to do, it’s really like, where is the ethical line in this
    0:32:30 company? And then particularly in Uber’s case, it was tricky because they were flirting the law
    0:32:35 on a lot of things. So the law wasn’t even the line, right? Because they’re challenging the
    0:32:41 regulation, the laws of the land in place. And so what is the line? Definitely not something that,
    0:32:45 you know, every employee would just figure out on their own. I loved that because one of the
    0:32:51 things that I think is a through line through the book is this idea that the very strength you
    0:32:56 have is also your weakness. And that it’s all a difference of degree, not a difference of kind,
    0:33:00 which I think is such a powerful idea because there’s a fuzzy area between the yellow and the red,
    0:33:05 you know, strength weakness. So it’s kind of on a continuum. I do have one question for you about
    0:33:11 the Uber example. I’m just curious about it because I love a comeback story. And the idea that you
    0:33:19 can change, do you think that Travis himself could have led that change at Uber or that they needed
    0:33:24 to bring an outside person or that he could have come back like 10 years later, like Steve Jobs
    0:33:31 at Apple on his second time? I guess my question is, can the same person actually make that change
    0:33:36 of a culture? Does it have to come from the outside? Yeah. So look, I think that Travis could have
    0:33:40 done it, but Travis would have had to change if that makes sense. When Chaka changed the prison
    0:33:47 culture when I go through it in the book, it couldn’t change until he changed. And I think that,
    0:33:53 you know, with Travis, he may be changed now, but he didn’t change then. And I don’t think he ever
    0:34:01 saw the lack of explicit ethics as the problem, getting the medical records from the women in
    0:34:09 India or the sexual harassment or the hell application where they hacked the lifter. Like
    0:34:14 all of those things were individual incidents. They weren’t systematic, I think in his mind. So
    0:34:20 like, unless you believe it’s systematic, and you know, I go through the story in the book where
    0:34:25 they have the confrontation with the nation of Islam where Chaka realized that it was systematic,
    0:34:30 the violence was systematic, and that’s when he changed and that’s when they changed.
    0:34:34 And he turned his whole group, the gang of the Milanics around.
    0:34:40 Yes, yes. And I think that that’s very unusual and difficult to do. There are other things where
    0:34:47 there’s a competency issue. So, you know, there’s a lot of Boeing in the news lately on the 737.
    0:34:51 And I think anybody who’s been in a company knows that there were people in Boeing that
    0:34:55 knew that thing wasn’t safe. Like, there’s no question. There were engineers that knew it wasn’t
    0:35:00 safe and they think it’s come out even that they told the CEO it wasn’t safe. But somewhere in the
    0:35:06 culture, whatever it was, being on time with the product release or earnings or whatever became
    0:35:12 more important than safety. And in a place where lives are on the line, you probably can’t have a
    0:35:20 leader that lets that stand culturally. So, in that case, I would probably say you have to remove
    0:35:24 them because you have to shock the system hard enough to reset the culture to the point where
    0:35:31 they value safety over whatever it was that they were valuing. If he or someone else in this position
    0:35:36 who’s trying to turn around or reset their culture did actually become to your point self-aware,
    0:35:41 what would they have to do then to then communicate that to their company? Or how do they sort of
    0:35:49 convey that this is a shift? I think that it’s very, very hard and detailed work. I don’t make
    0:35:55 light of it and probably the best example is kind of, you know, shock in the book. I hate to say
    0:35:59 read the book, but like that one’s complicated. I actually do want to tell people to read the book
    0:36:04 because I actually think no matter how much we talk about it here, it doesn’t do justice to the
    0:36:09 nuance and the layers of meaning within meaning within meaning without reading that. You can
    0:36:15 actually almost only convey that in the written form in some ways, but one thing about this idea
    0:36:21 that you have to be self-aware have truths that you know. I also wonder if it’s at odds with the
    0:36:27 sort of Silicon Valley technologist culture of reality distortion fields to use the phrase that
    0:36:32 Walter Isaacson used to describe Steve Jobs, but the other thing is we work in venture capital.
    0:36:36 We see founders every day. There’s a certain will to power that you need to get through and punch
    0:36:42 through an industry that is hard to penetrate. And you kind of have to have some lies that you
    0:36:47 tell yourself. So for me, it felt like a bit of a contradiction between lies and truth and being
    0:36:53 self-aware. Like how can you be a founder and also self-aware at the same time? It feels like
    0:36:58 they’re at odds. So look, when you talk about a reality distortion field or like a founder who
    0:37:05 like, you know, has a crazy idea or whatever, that’s innovation. And so on those ideas,
    0:37:13 what you’re really saying there is 99.999% of the world believes X and the founder believes Y.
    0:37:21 But when it’s really a breakthrough, the founder is actually right. So these people were all deceived
    0:37:25 or thought they knew the truth, but didn’t. And the founder did. And that’s always what
    0:37:30 innovation looks like. But that’s believing something but not knowing it. And that’s different
    0:37:38 than lying where you know something and then you say something else to try and move things.
    0:37:43 That’s why I hate the term fake it till you make it because that’s like lie to get what you want.
    0:37:49 That’s got all kinds of bad cultural implications that’s going to come back and eat you alive in
    0:37:54 your own company if you’re not careful. So I think that those are two different concepts. I don’t
    0:37:58 think you have to reconcile. Yeah. So some quick lightning round style questions with you on a couple
    0:38:03 of things. So one is superstars, 10 X engineers, brilliant jerks, you know, other outliers in a
    0:38:11 company. When is cultural cohesion more important than those types of special unique individuals
    0:38:16 and their performance? Like, is there a tension between the two? Yeah. So almost all the time,
    0:38:20 John Madden had a great line on this. He said, look, on a football team, there’s one guy
    0:38:26 that you can hold the bus for. Like everybody’s got to be on time, but that person is so great.
    0:38:30 It’s okay. We’re going to hold the bus. Yeah. And the reason it can only be one is
    0:38:34 you have to make it clear to everybody else that you’re going to let that person be
    0:38:38 outside the culture. They’re clear exception. But you have to have great skill. Like John Madden
    0:38:45 was an amazing football coach and so forth. So generally you wouldn’t do it, but if you want
    0:38:51 to do it, they better be the one. Okay. So pirates versus Navy. And you’ve actually talked a lot in
    0:38:56 your other writings about wartime versus peacetime CEOs. I love that because it comes from the
    0:39:00 Godfather, the wartime peacetime conciliary, one of my favorite movies of all time. By the way,
    0:39:03 I’m a big fan of Godfather one, not Godfather two. And there’s two camps on that. Godfather two
    0:39:07 is good. It’s good, but it’s not great. It’s not as good as Godfather one. And Godfather three,
    0:39:13 let’s not even talk about it. Well, because you’re an editor, Godfather one, the editing was way
    0:39:18 tighter. I agree with that. I’m glad we agree. Or someone on that. But pirates versus Navy.
    0:39:24 Is there a phase when every startup and inevitably starts off as pirates and becomes a Navy?
    0:39:29 How does someone navigate that cultural transition? So, you know, there’s a great story
    0:39:34 in Andy Groh’s book, only the paranoid survive about this. So when they had the, whatever the
    0:39:41 floating point error, which was like, you know, and Andy Groh’s was like, it’s not going to affect
    0:39:47 anybody. These guys are all stupid. F off. Because Andy was, he didn’t suffer fools. But it was a
    0:39:53 huge catastrophe for Intel. And what he said he learned, and it was kind of this transition from
    0:39:59 pirates to the Navy is when you’re dealing with consumers, how they feel matters, these things,
    0:40:04 these other things matter more than the actual technical answer. And so, you know, he had to
    0:40:08 make that transition. I’m going to skip some of the other ones until we have time for everyone’s
    0:40:13 questions. I’m going to ask some of the questions that came from the audience. So the first question
    0:40:18 is, Ben, given the importance of culture in any organization, how would you evaluate candidates
    0:40:24 for culture fit? Yes, I think that’s very tricky, because people can change their culture. So one
    0:40:30 thing that you can get with exact culture fit is a lot of homogeneity, right? We went to the same
    0:40:37 school, we read the same books, we believe the same things, you know, and there’s a power in that,
    0:40:46 but it’s a slippery thing. So you have to be careful. So what I find to be powerful is to
    0:40:50 really define your culture. And, you know, like, we have a very comprehensive culture
    0:40:55 document at the firm. And one of the things that we do, which actually learned while writing the
    0:41:02 book, is we don’t let anybody sign their offer letter without agreeing to the culture, saying,
    0:41:08 I’m going to live in this culture. I’m going to adhere to these standards. So, like, if somebody
    0:41:13 says, oh, they’re not a culture fit, it’s like, why? Like, what exactly about them doesn’t fit
    0:41:18 into our culture? And it’s that element we want in our culture or not want. And, like, you have to
    0:41:24 be able to have at the conversation at that level. And so I would just say, like, doing it in a fuzzy
    0:41:29 way is very dangerous. Doing it in a specific intentional way and knowing that people can change,
    0:41:35 I would say, would be the correct approach. This is a follow-up related question from another
    0:41:40 person. I’m just kind of theming these. You talked about building culture. What do you do if you
    0:41:43 walk into — this is now from the employee perspective — what do you do if you walk into a new
    0:41:47 company and you find yourself a misfit in terms of culture? I don’t know if you have any thoughts
    0:41:50 on that, but I’m very curious for what you think about that. Well, like, if you don’t believe
    0:41:57 in the behaviors of that company and you’re coming in at the individual contributor level,
    0:42:03 you probably want to move on. I think it’s very difficult because what’ll end up happening is
    0:42:06 that culture will change you. And I know a lot of you have probably worked in organizations where,
    0:42:11 you know, people be rate each other. And then what happens, right? Like, if you’re in that,
    0:42:16 like, you’ll go home and do that. And, like, you’ll pick that up. And so you don’t do that to
    0:42:20 yourself. Don’t become a person you don’t want to be. I would also add to that, because I’ve heard
    0:42:25 this from you so many times, and it’s in our values, too, that we celebrate difference. It shouldn’t
    0:42:29 be — the assumption should not be that someone following a code means that everyone’s in the
    0:42:33 same cult mindset. Like, there’s room for a variety of people in different ways of being.
    0:42:38 So, you know, and we talk about at the firm, which is what I always say is, like, if you have an
    0:42:45 NFL team, you’re going to have players that weigh 350 pounds, and you’re going to have players that
    0:42:52 weigh, like, 180 pounds and run fast. And if you have all 350-pound players, you’re going to lose.
    0:42:56 And if you have all skinny guys who run fast, you’re going to lose. And so we have to value
    0:43:01 each other’s strengths. And it can’t always be, like, I only value the strengths that I have.
    0:43:06 And that’s basically where people screw up the whole diversity and inclusion equation is
    0:43:14 they can’t see the talents that they don’t have. And so then they try and use a proxy,
    0:43:20 like race or gender or whatever. When, like, if you could see the talent, like, you’ll get diversity,
    0:43:24 you just have to be able to see what people can do. And I talk about this a lot in the book,
    0:43:30 but, you know, that really is important. But you have to see and value the things that you can’t
    0:43:36 do. Right. So this is also related. I don’t know if you have a different thought on this angle.
    0:43:41 What can I do to change a culture at my company as a rank and file employee? Like, do they
    0:43:47 go to HR? Do they talk to someone? What advice would you have for this? Well, to change the culture.
    0:43:53 Yeah. How can they change it from that perspective? I think the thing that that’s different companies
    0:44:02 versus a society, like, in society, like Jay-Z can change the culture. Yeah. Companies, the hierarchy
    0:44:10 has a heavier weighting to it. So if the, like, let’s say you wanted to change the culture so that
    0:44:15 everybody was, you know, on time and respectful about each other’s time. And the CEO always showed
    0:44:20 up to everything a half hour late. Like, it’d be really hard to do. And so I think that if you’re
    0:44:25 an individual coming in, you kind of have to compel the top of the organization to do it for
    0:44:29 starters. Otherwise, like, you’re just going to be fighting the tide. Yeah. And I have to say,
    0:44:33 I actually appreciate that you’re someone that I can come walk into your office and tell you the
    0:44:36 truth of what I’m thinking and you don’t actually get mad at me for that. Yeah. And then, you know,
    0:44:41 as a leader on the other hand, like, everybody’s culture is broken in some way. Like, I never
    0:44:46 met a company that has anything close to 100% cultural coherence. Like, and people who tell
    0:44:50 you they have or just literally don’t even know they’re lying to themselves. They publish it.
    0:44:56 Like, it’s a mathematical terms. It’s a complex adaptive path dependent system. Like,
    0:44:59 everybody’s behavior is moving the culture all the time. And you’re going to have breakage and
    0:45:04 you’re going to have slippage and you’re going to have regressions and all that kind of stuff.
    0:45:08 So as a leader, if somebody says, like, I think we have a cultural problem,
    0:45:13 you know, you can’t tell them to pound sand or like you can, but that thing is going to
    0:45:17 fester and grow. We call that a kimchi problem. That’s great. My Korean friends.
    0:45:22 It’s funny, too, because you say in the book, the goal is to be better, not perfect,
    0:45:26 which I think is a much more attainable thing for someone to do, which I loved.
    0:45:31 So here’s another employer-oriented question. How can I evaluate company culture before I
    0:45:34 join? How can you tell from the outside if you don’t have a culture doc and the kinds of things
    0:45:41 that we and others do? Well, you know, like, I think you have to ask specific questions
    0:45:48 about the kinds of, you know, behaviors that you’re concerned about. If you ask about a behavior,
    0:45:54 people won’t know even to try and like head fake you on it. If I send somebody an email here,
    0:45:59 like, how long will it take to get back to me? Like, that’s a, that’s a very telling thing in a
    0:46:03 culture, right? Like, because people are either responsible or they’re not. If I go to a meeting
    0:46:07 or people are going to be listening to me, are they going to be like on their laptops and computers?
    0:46:11 Like, because in different companies run differently that way. And so you just have to
    0:46:15 think about, okay, where are you going to be effective? And what are the behaviors that, like,
    0:46:20 you want to be part of? And what is going to drive you bananas?
    0:46:25 Right. Here’s, oh my God, I love this question. In the blood genealogy story, you mentioned the
    0:46:29 samurai was a mediocre performer. Yeah. How do you decide whether or not to keep that mediocre
    0:46:37 performer without he or she having to demonstrate value in such an extreme way in an extreme situation?
    0:46:42 Yeah. You know, I love that question. That’s a great question. Well, it’s interesting because
    0:46:52 in the story, if you’ll recall, the Lord Selma really had an affinity for the samurai,
    0:46:57 despite all his issues. And I always say, one of the things I really believe in is
    0:47:03 you value people on the magnitude of their strength, not their lack of weakness. And that’s in kind
    0:47:08 of hiring. And as you go forward, and the late Raiders owner used to say something I really
    0:47:13 like, it says coach them on what they can do. Like, not everybody can do everything, but like,
    0:47:20 if what they can do is world class, and you need that, then that’s a real thing. And, you know,
    0:47:28 he would do his level best at whatever you needed him to do 100%. And, you know, that shows up more
    0:47:32 than just when he went and got the genealogy. It’s how you look at people. I would always
    0:47:37 rather have somebody world class it’s something that I really needed than like, above average at
    0:47:42 everything. And, you know, and horrible at something else. We have people in the firm like that, as
    0:47:48 you know, like, and I value that. And I’m okay. And you do have to have that conversation. No,
    0:47:53 you can’t go do that job, because you’re no good at that. I love that. Yeah, I love that. And I
    0:47:57 love that we’re all really honest about that. And we allow that I have it because we just because
    0:48:01 we talked about Godfather earlier, I have to say that I call this my capo theory of management,
    0:48:07 which is that there’s a capo layer in every company. And I sometimes wonder to myself that
    0:48:11 kind of loyalty, does it actually really pay off? Like sometimes with the that what I love about
    0:48:16 that question that person asked was, it almost made me wonder, like, I don’t want to be that blood
    0:48:21 genealogy person, like I’d rather be excellent at something than mediocre and have to prove myself
    0:48:26 that way. But not everyone. Anyway, that was a real test. Okay, so this is a great one as an
    0:48:30 investor and board member. This is kind of a governance related thing. How do you keep your
    0:48:36 company management responsible on the question of culture? Is it something that you actually even
    0:48:41 ask? Like, is it around processes, KPIs, priority versus profit? Does it come up at a board level?
    0:48:46 Yes, I know, like it does at least it does for me, because I spend a lot of time,
    0:48:52 at least with the CEOs in my portfolio, talking to them, and it starts with hiring, like,
    0:48:59 let’s not I don’t care about like your close rate on your candidates and all that right now.
    0:49:06 What I want to know is, how are you onboarding them? How long does it take them to get productive?
    0:49:11 What is your in place satisfaction? What are your attrition rates? And this is actually,
    0:49:18 this is the biggest mistake people make on diversity is they measure how many
    0:49:24 women underrepresented minorities are coming through the door. Yeah, that’s not the metric.
    0:49:31 The metric is, what do promotion, attrition, in place satisfaction means around across race and
    0:49:36 gender? Yeah, can you see the talent? Do you value it? Do people enjoy their career there?
    0:49:42 Because if they do, then you can get the talent. But if you don’t recognize the talent and you just
    0:49:47 force people in so you can get the gold sticker that says you’re not racist and sexist, then you’re
    0:49:53 going to make everybody miserable. All your employees. So anyway, sorry. That’s great. No.
    0:49:58 Okay, a couple more and then we can wrap up. If you could be world-class at only one thing,
    0:50:02 culture or product, which do you choose and why? And by the way, for those in the audience who
    0:50:06 haven’t read this book, one of the recurring themes Ben does talk about is this tension that
    0:50:12 culture is this abstract thing. So how do you make those choices? Let’s not get confused about one
    0:50:16 thing. You have a great culture and you build a product that like people don’t want. Your company
    0:50:22 is going out of business. Nobody’s going to worry like that’s that. So like the product has to work
    0:50:31 for you to have a business. But having said that, and I talk to entrepreneurs about this all the
    0:50:38 time, the most important thing about your company isn’t necessarily going to be the success or the
    0:50:45 deals you won or like the customers you had. It’s going to be what that time was like, you know,
    0:50:50 that time of your life and the life of all the employees who spent most of their waking hours
    0:50:57 with you at your company. What did that feel like? How did you treat each other? How did you treat the
    0:51:02 people you work with? Did everybody’s lives get better? Did they become better people or worse
    0:51:07 people? And that’s your culture. And so that’s like a real thing with incredible value. So I don’t
    0:51:13 want to say, you know, just because you can’t succeed through culture alone doesn’t mean it’s
    0:51:22 not incredibly important. Okay, so last one. If starting a VC fund like A6 and Z today, what would
    0:51:28 be the most important to build the right culture? Well, you know, like it depends what your business
    0:51:34 strategy is and not every culture is for everybody. And one of my favorite examples that I have in
    0:51:40 the book is, so you take Amazon. Amazon, one of their cultural things is frugality. And you know,
    0:51:45 they used to have, your desk used to be a door like in the old days at Amazon, so just to let
    0:51:50 you know, we’re not going to buy you a desk. That’s how cheap we are. But their business strategy was
    0:51:56 to be the low cost leader. So that from a customer perspective, if I went to Amazon, I didn’t have
    0:52:01 to price compare because I knew they had the lowest cost. And to get to that, you need to not waste
    0:52:06 money. You contrast that with Apple. Apple doesn’t have that strategy. They’re not trying to be the
    0:52:13 low cost, low price leader. They’re trying to build the best product possible, the most beautiful,
    0:52:19 best designed, spare no expense. Steve Jobs even got fired by sparing no expense his first time around.
    0:52:24 And to be like, you go to their campus, it like costs $5 billion. And it’s like gorgeous. And the
    0:52:30 doorknobs cost like thousands of dollars, all that kind of thing. And that works for them.
    0:52:35 You know, that culture kind of produced the products that they produced. And Apple’s products
    0:52:39 probably will always be more beautiful than Amazon’s products, which are not very beautiful.
    0:52:45 But they’ll also always be more expensive. And so that culture was right for Apple and
    0:52:49 the other culture was right for Amazon. So, you know, and for Apple to take Amazon’s culture
    0:52:52 wouldn’t have been productive for them because it didn’t go with their business strategy.
    0:52:58 That’s great. So I have one question that the Computer History Museum asked us to do as well.
    0:53:03 So you made the best seller list. And it’s in the category for advice and how to, which I personally
    0:53:07 love, the business category is not out yet, but I love that because I found the book very therapeutic
    0:53:11 and reading it. And there’s something about personal development as well as career development
    0:53:17 and leadership in it. On that note, for you sitting where you are today, knowing everything you know
    0:53:23 now and what you could tell your younger self, the Computer History Museum has a one word initiative
    0:53:28 where they ask you to reveal one word of advice to a young person. And it could be for yourself or
    0:53:34 to any young person today. Could you share what your word is and the story behind it? Sure. Do I
    0:53:38 have it here? I don’t even know what it is. I don’t know if you’re going to read it. It’s persistence.
    0:53:44 This is for entrepreneurs. Because like entrepreneurship makes you want to quit all
    0:53:50 the time from fundraising to like everything going wrong to problems with customers to your
    0:53:59 employees telling you your culture sucks. And like if you’re not absolutely committed to getting
    0:54:07 better and learning and changing and making it go, then you’re not going to get there. And if you
    0:54:13 think about the top, top entrepreneurs, they are amazingly persistent people. This is something
    0:54:17 that I think if you want anything in life, this is what you need. One last question. I want to
    0:54:22 ask you about the process of writing the book because of course as an editor, I have to know.
    0:54:27 And also frankly, before I met you and came to Andres and Horowitz almost six years ago,
    0:54:30 I thought it was kind of sticky and gimmicky that you would put rap lyrics at the top of your
    0:54:34 blog post. I was like, no offense. I’m just going to say this out loud. But I’d be like, who is this
    0:54:40 like white guy putting rap lyrics on his post? Judged by my culture, not my color. I agree. I
    0:54:46 agree. But I had that thought in my mind. And I was like, what’s up with this? And you also say
    0:54:51 in the book that the majority of your entrepreneurial and business and culture ideas occur to you
    0:54:55 when you’re listening to hip hop. And so what I want to ask you because now that I know you and I
    0:55:00 know that there’s layers and layers and meanings behind what you do, what specifically about hip
    0:55:05 hop culture draws you and what’s the bigger cultural context for the rap lyrics that you put
    0:55:11 at the top of your blog post? Yeah. So rap music is very entrepreneurial in nature. The original
    0:55:17 rap music, because they created a new musical art form out of nothing. And nobody would put it on
    0:55:21 the radio. MTV won’t play the videos. Nobody would sign the guys for the first 10 years of rap
    0:55:25 music. Nobody would sign them. And so they did all these things. They sold records out of the
    0:55:29 trucks of their cars, that kind of thing. And they kind of built this whole thing that it ended
    0:55:36 up being the biggest musical art form in the world currently. And they tell those stories in
    0:55:40 the songs. And they’re very related to the entrepreneurial journey. So I have a lot of
    0:55:45 those things in it. And then, you know, and of course now I listen to so much rap music. A lot
    0:55:50 of other things come to mind. So if you think about the opening quote for the culture and revolution
    0:55:54 chapter, it’s from Nas, who I spent hours and hours talking about the Haitian Revolution with.
    0:56:01 And he had a song on his album, Stillmatic, the introduction to the album. And this album,
    0:56:07 you have to understand, his career, like they had buried him, like he was dead. And Jay-Z came out
    0:56:13 with this like very aggressive diss rap against him, which he countered with a song called
    0:56:21 Ether. But the opening line is Blood of a Slave, Heart of a King. And I was like, that’s too sound
    0:56:28 overture. Blood of a Slave, Heart of a King. And so those kinds of things. So it’s kind of telling
    0:56:33 the hidden story in the book, you know, the rap lyric in the Chaka chapter from a young woman,
    0:56:39 Dejloff, really describes the culture he came from, well, but she’s also from Detroit. So it’s
    0:56:45 just kind of the backstory on the book. It’s how I tell that for the really avid readers.
    0:56:49 One of the things I’ve learned from you, and I agree it’s about judging a person based on their
    0:56:56 culture, not on their color, is that the influence of hip hop is outsized in our culture. And we
    0:57:01 did, you did an episode, you did an event with Dapper Dan. And that was a great example of how
    0:57:08 a man from Harlem, his design, his influence, many, many, many other great designers. And
    0:57:12 there’s a riffing culture, but sometimes it’s also a borrowing culture, a remix culture, that’s
    0:57:17 TikTok. So I think what I love about it is that hip hop has had an outsized cultural influence in
    0:57:22 our world today. And it’s very powerful because you constantly bridge these cultures for us too.
    0:57:27 Yeah, so I want to go back to culture in that color, because that actually comes from something
    0:57:35 that Toussaint did. So in 1797, he was actually running the colony as part of France. There was
    0:57:42 a guy, Vincent Vaublanc, who hated the idea of a slave running a French colony. And he lobbied a
    0:57:48 French parliament. He said, look, the colony’s been overrun by ignorant and brutish Negroes.
    0:57:54 And Toussaint had to counter this argument. And the counter argument was really interesting
    0:58:00 because he said, look, black people are not savages. It’s slavery that makes them so.
    0:58:06 And then he went on to basically break down point by point why the Haitian revolution was far less
    0:58:12 bloody and brutal and savage than the French revolution. And some of the things I talked
    0:58:17 about, like they didn’t pillage, made his case. And he won that argument with the French parliament.
    0:58:21 But it was so interesting to me the way he phrased it, because it was the culture of slavery
    0:58:29 that created the perception of these guys that had nothing to do with it. It just got a color
    0:58:34 assigned to it. And I think that with hip hop, it’s the culture of entrepreneurship. And it has
    0:58:40 nothing to do with being black. It has to do with that culture. And that’s why I think that a lot
    0:58:47 of entrepreneurs resonate with it. And we get divided up into these dumb demographics, age,
    0:58:53 gender, color, zip code. But what you do is who you are. That’s your culture.
    0:58:57 That’s fantastic. I want to say to everyone, thank you for joining this episode of the A6NC
    0:59:02 podcast. We’re here at the Computer History Museum. Thank you, everyone, for coming today and joining
    0:59:03 us. Thank you.
    0:59:06 (audience applauding)
    0:59:10 (audience applauding)

    There are some common tropes that can kill your company culture — whether it’s that corporate values can be weaponized; “fake it til you make it”; the “reality distortion fields” of visionaries vs. liars; and so on. All of this just reveals the confusing, sometimes blurry line between the yellow zones and red zones of behavior, because the very things that are strengths can also become weaknesses (and vice versa!). The fact is, in any complex adaptive system (which is what a company is), even the seemingly smallest behaviors will move the culture where the loudest proclamations do not.

    That’s why so much of culture — whether building and setting it or fixing and changing it — comes down to the difference between actions and words, to the tacit vs. the explicit, to the difference between what you do vs. what you say (and what employees see vs. what they hear). So in this episode of the a16z Podcast, based on a conversation that recently took place at the Computer History Museum in Silicon Valley, Sonal Chokshi interviews Ben Horowitz about his new book, What You Do Is Who You Are, probing on all the tricky nuances of the themes covered in it — and also how to practically apply principles from it to the tech industry and beyond.

    Are mistakes of omission more important than mistakes of commission, when it comes to ethical lines? What can employees, not just leaders, do when it comes to culture? Where does the idea of “culture fit” come in? What happens when startups go from being the pirates to being the navy? Drawing on examples of culture as code from a thousand years ago to today — spanning empires, wars, revolutions, prisons, and even hip-hop — Horowitz shares the power of song and story. Including even violent, “shocking” ones that reset cultures… because they make you ask, WHY?!

    100% of the proceeds from the book will go to anti-recidivism, and to making Haiti great again

  • Of Container Ships, Supply Chains, and Retail

    AI transcript
    0:00:06 Hi everyone, welcome to the A6NZ Podcast. I’m Sonal. In this episode, we’re resurfacing
    0:00:11 one of our favorite episodes on one of the most seemingly boring, but not to us, topics,
    0:00:15 container ships, the logistics of supply chains, and more. In this episode, first recorded
    0:00:21 over two and a half years ago in Washington, D.C., we interviewed the box author Mark Levinson.
    0:00:24 Here’s the original intro with more details about what follows.
    0:00:29 Hi everyone, welcome to the A6NZ Podcast. I’m Sonal. Today’s episode with me and Hannah
    0:00:34 is another one of our podcasts from our recent road trip with voices from the ground in Washington,
    0:00:38 D.C., though this one actually takes us all around the world. Our guest is economist,
    0:00:42 historian, and journalist who was last at the Economist, Mark Levinson, the author of the beloved
    0:00:46 book, The Box, which is about how the shipping container made the world smaller and economy
    0:00:51 bigger. But this Hallwaystall conversation is actually a quick tour through all his books,
    0:00:55 starting from his most recent one, An Extraordinary Time, where we touch briefly on the topic of the
    0:01:00 golden age of productivity and beyond, to the topic of the death of retail and his book The
    0:01:06 Great A&P, to finally wrapping up on logistics, transportation infrastructure, supply chains,
    0:01:10 and touching very briefly on the future of work, and where government comes in policy-wise and all
    0:01:15 this or doesn’t. We’re so excited to have you. Welcome, Mark. Thank you. Glad to be with you.
    0:01:20 So those seem like really different topics. What’s a big idea that drives the thrust of
    0:01:25 your work that kind of connects all the dots? I’m really interested in the connections
    0:01:34 between economics and the world we live in. A lot of my work starts out at a microeconomic level,
    0:01:40 looking at particular companies, looking at particular industries, and tying the developments
    0:01:46 there to broader trends that really affect how we live, affect our standards of living. More
    0:01:53 recently, I’ve been focusing on some of the trends in productivity growth because I believe that a
    0:01:58 lot of the improvement in our living standards really comes out of these kind of micro improvements
    0:02:04 at the private sector level rather than as a matter of great policy. And what that means,
    0:02:08 and this is a frustration for public officials, is that there are no easy government solutions.
    0:02:16 We’ve now been through generations in which politicians and the economists who advised
    0:02:22 them said that they had the cure for poor productivity growth. I argue in an extraordinary
    0:02:28 time that actually this was what was behind the political swing to the right in the late 1970s,
    0:02:35 early 1980s, when we got Margaret Thatcher and Ronald Reagan. Because the more social democratic
    0:02:41 type of governments before that hadn’t been able to restart productivity growth. And so voters
    0:02:47 turned to people with other ideas, but the people with the more free market ideas proved no more
    0:02:52 successful than the people with the more statist idea. What are we actually comparing to as we’re
    0:02:57 thinking about these ideas? Well, this is not good enough. What are we holding up as something
    0:03:02 that we’d prefer it to be? The end of the post-war boom and the return of the ordinary economy.
    0:03:10 The story I’m telling is that the quarter century after the war was an unusual period of very rapid
    0:03:19 economic growth. The period from 1948 to 1973 was probably the period of the fastest economic
    0:03:25 growth in the history of the world. GDP around the world grew at more than 5% a year. Now,
    0:03:33 at 5% a year, something doubles in 14 years, quadruples in 28 years. So even with some population
    0:03:39 growth, people’s incomes were growing very rapidly. People’s living standards were rising
    0:03:45 in a way that was visible to them. They were able to buy houses for the first time and cars for
    0:03:51 the first time and send their kids to high school and maybe even college. And we had all kinds of
    0:03:56 very rapid advances in living standards. What was that due to? What was the big driving force?
    0:04:03 We had an unusual confluence of factors in the post-war period that people have really forgotten
    0:04:10 about now. One is that there was a great deal of underused capacity, underused resources in the
    0:04:17 economy. I’d like to remind people that at the end of World War II, we still had 3 million mules
    0:04:21 on farms in the United States. Wow. It’s such a technical post-industrial revolution time. You
    0:04:28 don’t even realize it. You had millions of people, and not just in the United States. European peasants
    0:04:34 and Japanese farmers are owned half an acre of land who could be moved from very low productivity
    0:04:40 jobs into very high productivity jobs in the cities. And we had a lot of that in the 50s
    0:04:48 and 60s. So that was one big boost to productivity. We had very rapid increases in education levels,
    0:04:54 and we know that education is associated with productivity. In the United States at the end
    0:05:03 of World War II, going to college was not common. Just a few percent of the population of 18-year-olds
    0:05:08 actually went on to college. And the average education level was around eighth or ninth grade.
    0:05:14 So in a very few years, governments spent a lot of money building a more educated workforce,
    0:05:18 and it paid off. The government was the one that seeded that, or was that just a shift in the fact
    0:05:25 that adolescents existed and childhood change? No, this was heavy expenditures, building universities
    0:05:29 all over the place. Take a look at how many universities in the United States started after
    0:05:34 World War II. That’s when a lot of government money started. It was no longer an elite thing
    0:05:39 to go to university. And how about women entering the workplace? Well, women entered the workplace.
    0:05:44 The other thing I think that was really consequential in this quarter century, I’m describing,
    0:05:49 was that we had the growth of motorways, the interstate highway system in the United States.
    0:05:53 So public infrastructure, like the transportation infrastructure. And think about what that does
    0:05:59 if you are a manufacturer or a retailer that lets you sell over a wider area, lets you operate
    0:06:04 your facilities more efficiently. You don’t need a warehouse in every town. You can have one little
    0:06:09 serve a large area. If you’re an employer or a worker, it’s changed the size of your labor market.
    0:06:16 I mean, in Silicon Valley, San Jose and San Francisco are now part of the same labor market,
    0:06:20 right? That wasn’t the case after World War II. These were very different cities and they were
    0:06:27 a considerable drive apart. And so that creates a better fit between people and jobs and then
    0:06:33 leads to higher productivity. They can’t be repeated. Once you’ve moved those sharecroppers
    0:06:41 to the cities to take jobs in industry using heavy machinery, they’ve moved. And you don’t have
    0:06:46 those underused resources again. There were countries around the world that literally went
    0:06:54 25 years from 1948 to 1973 without a single year of recession. We had countries that had
    0:06:58 less than 1% unemployment back then. So how did this burst of productivity,
    0:07:04 this golden age actually come to an end? Well, in 1973, we really saw a trend change.
    0:07:09 That was the year of the great oil crisis that some people may remember.
    0:07:15 What we have moved into since 1973 is really an environment in which economic growth has been
    0:07:20 slower. The improvement in living standards has been slower. The unemployment rate in most
    0:07:27 countries has been permanently higher. We have not been able to recapture the very unique good
    0:07:33 times that we had in this golden age. And I think that we’re not going to be able to.
    0:07:40 What we’re experiencing more recently is actually normal. This is the way most economies work most
    0:07:45 of the time. And how it worked before this golden era? The golden age was actually the exceptional
    0:07:51 time. It’s not normal that economies grow at a rapid pace. It’s not normal that incomes double
    0:07:56 or triple or quadruple in the matter of just a few years. And I don’t think we should expect
    0:08:00 that to recur. I view this as analogous to child development and how human body and adult develops
    0:08:05 because there’s a rapid development that happens in the birth of a child. And then there’s another
    0:08:09 big rapid issue that happens in adolescence. And then you continue to grow, but it’s a little
    0:08:15 slower. And in fact, thinking about the natural conclusion of your argument is that that growth
    0:08:20 is now shifted to other countries like India, China, where they are now experiencing the kind of boom
    0:08:27 that you were describing that happened pre-1973. That’s a great analogy. Take Japan, which in the
    0:08:33 1960s or early 70s was growing at seven or eight percent a year. And then it downshifted. And then
    0:08:38 it downshifted some more. More recently, China went through a period where it was growing at ten
    0:08:43 percent a year. In China’s case, we do have to take the numbers with the big grain of salt.
    0:08:49 Even so, people were extrapolating and saying, you know, when China grows at ten percent a year
    0:08:53 for the next century, its economy is going to be twice as large as the rest of the world put
    0:08:58 together. But China’s not going to grow at ten percent a year for the next half century. It’s
    0:09:04 becoming much more like a normal, mature economy in which the growth rate is a couple of percent a
    0:09:09 year. And that’s all they’re going to be able to expect. But it doesn’t mean necessarily that,
    0:09:14 like in adolescence or growing as a human being, you only get one burst. These things can come in
    0:09:17 waves. There can be other kind of confluence of these factors. When you were talking about the
    0:09:22 Japanese farmers with their mules and the sort of move towards the way automation may end the move
    0:09:27 to cities, increased productivity, are there any inklings that you’re starting to see of
    0:09:31 possibilities like with the automation we’re starting to see happen today? And maybe even
    0:09:35 with autonomous cars, new infrastructure might, you know, city infrastructure, are there things
    0:09:41 that give you any sense of maybe a new era might be coming at some point? Or just even a way to
    0:09:46 juice the body on steroids, like just inject some more steroids into this economy? You’re asking
    0:09:53 great questions here. And the answer is maybe. I think that these are things we really can’t predict.
    0:10:00 If you look at past episodes of fast productivity growth, in general, they weren’t predicted very
    0:10:07 well. For example, we had a spurt of productivity growth, which translated into faster income growth
    0:10:14 in the late ’90s and the first years of the 2000s. This is the famous internet boom you may
    0:10:21 remember. So we remember it. But in 1992, no one predicted this. What happened was that there had been
    0:10:28 investments in infrastructure. There had been developments in technology decades earlier.
    0:10:33 And finally, during this period of time, they all came together. But I think a lot of people would
    0:10:37 argue that we’re in a moment like that again now. Well, I think that’s a question which we can’t answer.
    0:10:43 So if you take a look at a technology, will it actually revolutionize the way certain industries
    0:10:48 work? I don’t exclude the possibility. But you have to keep in mind that there are also a lot of
    0:10:55 complications. You’re seeing this right now as we go through this rather brutal shakeout in retailing.
    0:11:00 Yes, everybody knows that you can order goods on the internet. That’s not news these days.
    0:11:06 But the reality is that for a lot of retailers, there’s a problem here because they’re maintaining
    0:11:11 an internet business. They’re also maintaining a retail store business because some customers want
    0:11:18 that. So in some cases, their costs have gone up. They have not become online retailers. They have
    0:11:23 become bricks and mortar slash online retailers. Right. And they’re showrooming for the online
    0:11:27 sometimes. They’ve got multiple channels that they’re having to service. And that’s actually made
    0:11:31 their operations less efficient in a certain way. I would actually say there’s a flip side of this,
    0:11:36 though, again, which I think is really fascinating. Because when you think about the internet economy,
    0:11:39 birth of Amazon, which is less face at the behemoth and everything,
    0:11:44 the everything store, everything, everything. And they recently, as we know, started
    0:11:50 doing physical brick and mortar bookstores. The difference is that they started online and they
    0:11:57 went into physical using data to help stock and think differently about how to create their store
    0:12:02 in an internet native way in the physical world. So I also wonder if, while the debt or retail might
    0:12:07 be on the horizon, if after that there might be an entirely new post boom, a new boom around
    0:12:12 retail that’s completely reshaped by new technologies, we don’t know. That’s entirely possible.
    0:12:18 But just to give you something to think about, Amazon’s problem in terms of getting its books
    0:12:24 into its physical stores is entirely different from its problem getting its books ordered online
    0:12:30 to you, the customer. Yes. So now it needs a different kind of logistical system. It needs to
    0:12:36 figure out how to distribute to retail stores like the ones that apparently is building.
    0:12:42 That’s going to have a lot of costs attached. It may have some inefficiencies attached, at least
    0:12:49 while they’re developing it. So my point is to say that the path of, sometimes people who are
    0:12:55 involved in the tech industry kind of get very romantic about how quickly these great technologies
    0:13:01 are getting absorbed. But in reality, life is messy. And some of these technologies take a while to
    0:13:05 be used efficiently. And some of them will never be used efficiently. There are more failures in
    0:13:09 there are successes. There’s no question about that. So does it remind you at all of the sort
    0:13:15 of death of the supermarket that you talked about in your book, The Great A&P? In The Great A&P,
    0:13:20 I was writing the history of what was for about 50 years, the largest retailer in the world.
    0:13:25 People forget this now, but the Great Atlantic and Pacific. Is that what A&P stood for?
    0:13:29 I had one in my town. I didn’t even know that. Yes, it was the Great Atlantic Pacific. It was so
    0:13:35 named in 1869 for the Transcontinental Railroad. Wow. And at one point, it had more than 16,000
    0:13:42 stores in the United States. So it was a behemoth. It was the Walmart of its day. But one of the
    0:13:48 things that kept it so vibrant is that it remade itself continually because shopping trends change,
    0:13:54 consumer expectations change. From what to what? It started out as a seller of coffee and tea and
    0:14:05 spices. It made itself into a small grocery chain. And then in 1912, it developed the idea of having
    0:14:10 an economy grocery chain, which is to say it would have a very bare-bone store and sell
    0:14:17 products much cheaper than the competition. And that’s what drove its growth in a small
    0:14:22 period of years. It integrated vertically. So it made its own chocolate, its own macaroni,
    0:14:29 its own canned, its own salmon. And so it then had a huge network of manufacturing plants. And
    0:14:36 again, we’re in the 1920s here. And then it started building supermarkets. It was not the
    0:14:42 innovator in any of these things. A&P did not develop the idea of supermarkets. But once it
    0:14:48 saw how supermarkets would work and how they would fit with its business, it started building
    0:14:52 supermarkets all over the place. And by the end of the 1930s was the biggest supermarket operator
    0:14:57 in the country. So what ended up being its downfall? The company stopped innovating. The company
    0:15:04 stopped remaking itself. It was big. It was fat. It was happy. The two brothers who had controlled
    0:15:11 it for decades both died in the 1950s. And it was then run by people who had been with the company
    0:15:19 for decades and whose idea was to preserve it rather than to keep it changing. The beat that
    0:15:24 keeps coming up in this is basically the tension between this idea that you can innovate, but then
    0:15:29 you get too good at what you do, too comfortable, too complacent. So what’s the big then lesson or
    0:15:35 takeaway from that, from your work on the great A&P to this narrative around the death of retail
    0:15:43 today? Retailing is full of dead bodies. People like to talk about how unfair competition is
    0:15:49 sometimes because the big companies have more power than the little ones. But when you are a
    0:15:54 big retailer, you can’t change so easily. If you own one store and you think you need to do something
    0:16:00 else, you go in there with a hammer and some plywood and you can do it. If you own 1,000 stores,
    0:16:05 you’re stuck. You’ve got your locations. You’ve got your product line. You’ve got your brand name.
    0:16:11 And you can’t change easily. It’s a really difficult situation. And so a lot of stores
    0:16:16 end up dead. It’s innovator’s dilemma, classic case. So another theme that’s come up and that
    0:16:21 connects all the dots with this entire conversation, that this post boom world was one of the drivers
    0:16:27 was this rapid development of infrastructure. Amazon exists because of logistics and infrastructure,
    0:16:32 like innovations and being able to ship things and deliver things fast. We talk about the supermarket
    0:16:36 and the growth of suburbs around railroads and transportation. Transportation and logistics
    0:16:40 and infrastructure is like the thread that connects and drives all economies. So let’s
    0:16:44 talk about the box, which is all about logistics and infrastructure in the form of container
    0:16:49 shipping. You chose one very specific thing in the box to talk about. It had this massive effect
    0:16:54 on a global economy. Give us a little bit of a sense of what that story was like. I remember
    0:16:59 Tim describing when he pitched your book this incredible scene of just the giant
    0:17:04 mountains of peanuts in the ships. Like how quickly did shippers see this possibility and
    0:17:09 start using it? Was it fast or slow? Let me give you just a quickie history here. The idea that you
    0:17:16 could save money by shipping goods in containers came along in the 1700s. This was an old idea.
    0:17:20 And nobody had ever figured out how to make money out of it because what would happen was that
    0:17:27 where you’d make a container out of wood and nailed and you’d put your goods in it and then at
    0:17:32 the other end of the trip, somebody would break the container apart and use it for firewood.
    0:17:38 That was a pretty inefficient system. And nobody ever found this to be viable. It actually cost
    0:17:44 more to ship goods in containers. What made this whole thing work was the arrival of a guy named
    0:17:50 Malcolm McClain, who was a trucker. So he didn’t come from the shipping industry. And he understood
    0:17:57 that what was needed was not particularly a container, but a new system for moving freight.
    0:18:02 And the container was just a piece of what… It was just a container. It was just a container.
    0:18:10 And a lot of people back in the ’50s and ’60s who were in the shipping industry were very enamored
    0:18:15 of their ships and they thought they were in the shipping business. And McClain’s basic position
    0:18:19 was nobody cares about your ship. They just want to get their goods from here to there and let’s
    0:18:25 design an efficient system for doing that. So shipping containers first came into use in the
    0:18:34 United States in 1956. They started being used internationally across the Atlantic in 1966.
    0:18:39 And the industry was pretty substantial by the 1970s. By that time, most of the older vessels
    0:18:45 had gone out of service. But it was really in the 1980s when modern logistics took off.
    0:18:50 There were a couple of things that happened. You had in this country freight deregulation,
    0:18:57 which meant that you could actually sign a single contract to import products and that would cover
    0:19:02 delivering the goods to a port and moving them inland by rail to a final destination
    0:19:07 or having a truck pick them up and move them to a final destination. So you could actually
    0:19:12 integrate all these modes of transportation and have some assurance that the goods would get there.
    0:19:19 And then you had improvements in communications. This was referred to as electronic data
    0:19:25 interchange. So all of a sudden it became possible to run an international supply chain
    0:19:31 in the 1980s. Now you could send instructions across the ocean quickly about how you wanted
    0:19:37 something shipped or how you wanted something made. And so this innovation, the container that had
    0:19:42 really come about in the ’50s, started to make a substantial difference in the world economy
    0:19:45 in the 1980s when we had the birth of modern supply chains.
    0:19:50 The most fascinating thing to me, the idea that astounded me most about the box was the idea that
    0:19:57 the containerization of moving goods was allowed things to travel multimodally. That because of
    0:20:03 that, this modularization, you could now break things across ship to train to plane across the
    0:20:07 world. And that is like a really eye-opening idea. And I think it’s really interesting that you
    0:20:12 reference the EDI because the analogy that I was thinking of was actually packets and moving data
    0:20:17 across lines like the Ethernet. And that packetization of data also led to this thing where
    0:20:23 you can move things across phone lines, Ethernet lines, other computer lines, broadband, etc.
    0:20:25 And essentially reassemble them at the other end.
    0:20:27 That’s a good analogy.
    0:20:33 It’s a really mind-blowing idea. So I guess the question I have is what’s happening next and now
    0:20:38 that you think is interesting in the next evolution in supply chains that is along these lines?
    0:20:42 Well, there are a couple of things that are going on in supply chains and they’re not necessarily
    0:20:47 good. International trade and manufactured goods actually grow more slowly than the world economy
    0:20:51 for the past six or seven years. That’s a big reversal from the previous trend.
    0:20:56 Why is that? One of the reasons is that supply chains have become less reliable.
    0:21:03 These ship lines went out and purchased very, very large vessels. And I’m sure your listeners
    0:21:06 have seen these vessels can carry that. I’ve actually seen them firsthand because I went to
    0:21:10 the Panama Canal and it’s incredible. Panama Canal doesn’t handle the biggest one.
    0:21:12 That’s right, because they’re actually greatly limited by the Panama X ship.
    0:21:17 The biggest container ships now at sea can carry more than 10,000 truck-sized containers.
    0:21:19 Wow. That’s amazing.
    0:21:24 These are enormous vessels. So what has happened? Well, imagine you’ve got a port,
    0:21:30 but instead of having a ship carrying 2,000 containers showing up every day,
    0:21:34 now you’ve got a ship that carries 10,000 containers showing up once a week.
    0:21:38 You’ve got a mess on your hands because you’ve got this enormous load of traffic,
    0:21:41 which you need to get all these containers out of the port.
    0:21:43 That’s too much. Think of bottleneck congestion.
    0:21:49 Yeah, that’s right. You’ve got a bottleneck. This has come at a time when growth in trade has been
    0:21:55 pretty slow. So there’s considerable overcapacity in the industry, and even so, the reliability
    0:22:04 has fallen. So what you’ve seen is actually manufacturers and retailers contracting their
    0:22:09 supply chains. They would like to make things closer to where they’re used because they think
    0:22:14 there’s less risk. One of the things that I think happened in the growth of these international
    0:22:21 supply chains is that companies paid a lot of attention to cost. They said our hourly labor
    0:22:27 cost in China is a lot cheaper than it is in Detroit. They didn’t really pay much attention to risk.
    0:22:34 And risk is a cost factor. There were a number of US companies that failed or came very close to
    0:22:40 failure because of supply chain disruptions. Key merchandise wasn’t available when they needed
    0:22:44 it for their factories or for their store shops. I mean, this is the story of hardware startups.
    0:22:48 The problem isn’t that they can’t plan out and predict and build. It’s that they need to lock
    0:22:52 down that supply chain inventory at the right time, but yet they have the issue that they don’t
    0:22:56 know how many products their customers are going to buy, so they don’t know how much to make. So
    0:22:59 there’s a sort of chicken egg problem. It’s the same thing in book publishing.
    0:23:04 So you’ve got the container ship lines that essentially created their own crisis.
    0:23:10 They’ve got bigger and bigger ships because that was more efficient for their purposes,
    0:23:15 their own costs running ships went down per container as the ships got bigger.
    0:23:20 They didn’t devote too much thought to the problems of the ports or the railroads or
    0:23:25 the truck lines, and all of them have had a lot of difficulty coping with this flood of containers.
    0:23:32 And so I think one question facing this industry going forward is whether these
    0:23:36 long-distance supply chains will continue. Well, I have to ask a question though, if that’s,
    0:23:41 is that necessarily a disaster because isn’t that also the inevitable sort of cycle of things
    0:23:46 aggregating, unaggregating, lengthening and contracting, et cetera. And also in that same
    0:23:49 context, one of the arguments I’ve heard for, there’s actually advantages to shorter supply
    0:23:54 chains. For example, in the case of hardware and software innovation, there’s this rapid
    0:23:59 iteration and back and forth that happens. So if you have a components manufacturer in Mexico
    0:24:04 and you’re designing a chip or some piece of hardware, you could rapidly iterate on your designs
    0:24:08 without the long delay that happens when you have a big time difference and a bunch of other
    0:24:14 logistical issues with someone doing the same thing in China. So there’s some argument that
    0:24:18 it’s actually not a bad thing because it actually speedens innovation almost in some cases.
    0:24:24 In some cases, it may speed innovation. In general, I think that manufacturers and retailers are
    0:24:32 expecting that it’s going to reduce risk. Another trend that you see is that many manufacturers
    0:24:39 and retailers are now looking to multiple sourcing. Now, in many industries, it’s cheaper to have
    0:24:45 a single source because you’ve got huge economies of scale. One factory makes a ton of stuff,
    0:24:49 and that’s great so long as it’s working. It’s cheaper because of the stuff, right?
    0:24:56 But maybe it’s worth paying a little bit more and have an extra warehouse. We’re seeing a lot of
    0:25:04 that now. We had, for example, a work stoppage out of Los Angeles, actually the West Coast ports
    0:25:12 in general, in the early part of the century, a lockout by the port employers. How did that
    0:25:15 affect companies? Was it a lockout? You mean like it was like… They locked out the union workers
    0:25:21 as part of a labor dispute. Right. And so a lot of companies said, well, maybe we ought to redirect
    0:25:30 some of our traffic to ports on the US East Coast. They still send their goods to Los Angeles or
    0:25:35 Long Beach or Oakland, but they also send a portion of them now to Savannah or New York
    0:25:41 because they want to have options. They want to not have the risk that their supply chain will
    0:25:46 be shut down. There’s another fascinating analogy with the digital world here because it reminds
    0:25:50 me of the time of the early days of the internet when as internet became super popular and more
    0:25:55 multimedia started coming online, there were tremendous bottlenecks in data traveling through
    0:26:00 pipes. And so they had to figure out new methods to essentially reroute and decentralize it from
    0:26:04 these central choke points. So it’s kind of a fascinating thing. And also now, by the way,
    0:26:08 I explained when I was in Panama, I was a little struck by this thing where every single ship that
    0:26:13 goes through spends a day being inspected before you can even put it through. And it costs like a
    0:26:16 million dollars per ship to put it through or some, I forgot the amount, but it’s some significant
    0:26:21 amount. And it just blew my mind like there’s so much extra work. But now I understand because of
    0:26:26 one ship bottlenecks, that entire thing, nothing gets through for like the entire day. And that’s
    0:26:32 a huge blockage. Yeah, exactly. It’s kind of fascinating. So what we’re seeing in container
    0:26:39 shipping now is a lot like what we saw in the United States with the railroads in the 1870s,
    0:26:47 1880s, 1890s, when many railroads went bankrupt, we went from a country that had hundreds of railroads
    0:26:54 each a few miles long to a relative handful of large railroad networks. We went through
    0:27:00 something similar when we had airline deregulation starting in 1978. You may remember we used to
    0:27:08 have lots of regional carriers around the country, had had a number of national airlines and only
    0:27:13 two international airlines that were heavily protected by the government. Now there’s a lot
    0:27:18 more potential competition. And of course, the carriers have dealt with that by merging. So
    0:27:23 you’ve actually now got a situation in which you’re supposed to have cutthroat competition,
    0:27:28 but they’ve tried to find a way around it by by emerging and reducing the number of airlines.
    0:27:32 It’s inevitable cycle. And we’re headed in the same direction with container shipping now.
    0:27:38 Many container carriers are in financial distress. A lot of them have merged into the big carriers.
    0:27:45 There are now probably three so-called alliances of container carriers that kind of dominate
    0:27:52 world trade. So we may be in an environment in which there are few enough players that they’ll
    0:27:58 be able to have a better handle on prices, on shipping rates. And that will mean less competition.
    0:28:02 That will be good for their shareholders. It probably won’t be good for shippers.
    0:28:05 Okay. So the wrap up, we started this with your view that connects the dots between
    0:28:12 all these books. And you have this perspective of this economist historian. And the question is,
    0:28:16 is it good to know that this is an ordinary economy or are we just talking about cycles of
    0:28:20 things that are just going to inevitably decline and grow? How do you know it’s just not a typical
    0:28:26 waning and that it’s actually really is something different? I think this actually has a lot of
    0:28:33 political implications. For decades and decades, we’ve trained people to believe that the government
    0:28:40 can provide a very steady income, can provide low unemployment, can provide rapid economic growth.
    0:28:46 And I think the government’s ability to do this is limited. What we’re seeing, I think,
    0:28:51 and not just in the United States, is somewhat of a crisis of expectations.
    0:28:52 It’s a reckoning.
    0:28:58 If you take a look at what’s going on now in Europe or in Korea or in Taiwan, people expect
    0:29:04 more of their public officials than their public officials can deliver. People want their incomes
    0:29:10 to grow quickly. Their public officials promise, “Yeah, we’ll bring back the good old times. We’ll
    0:29:16 make your incomes grow quickly.” But in reality, we’re in a normal age in which people’s living
    0:29:21 standards rise slowly. I feel like while you’re saying this, all I can think is like, “Well,
    0:29:25 only really time can teach us that that’s not…” Because I’m trying to think, “Well,
    0:29:32 what can we do to reset those expectations?” But we can’t, really. It’s just time and not…
    0:29:34 Understanding, possibly.
    0:29:39 And not having the same growth, right? Getting used to not having the same growth,
    0:29:41 which is sort of disheartening when you think about it.
    0:29:42 It is on one level.
    0:29:44 Because my question is like, “So how did we move beyond that?”
    0:29:50 On one level, it’s disheartening. On another level, I think we have trained people to believe
    0:29:54 that government can deliver things that really can’t deliver.
    0:29:56 So how do we start to undo that?
    0:30:02 There is a question about how the available income is distributed, which is really quite
    0:30:07 separate from the question of how fast productivity is growing, how fast the economy is growing.
    0:30:14 And I think we have to have a real discussion about how income is being distributed and how
    0:30:16 automation is going to affect our workforce.
    0:30:20 This is a time of mine for everybody, including us, guests, everybody.
    0:30:26 And I bring this up not really in an economic sense, but almost more in a psychological sense.
    0:30:31 There’s a lot of concern about where the jobs are going to be for people in the future.
    0:30:32 I’m not too concerned about that.
    0:30:36 I’m pretty confident that we’ll have ways in which people can earn livings.
    0:30:44 But so many people get some degree of satisfaction from their work.
    0:30:51 And if what we’ve got is a world in which people are doing part-time work, occasional work,
    0:30:52 unsteady work…
    0:30:53 I mean, work itself has become containerized.
    0:30:59 That’s right. What are people going to be moored to in this sense?
    0:31:05 And we can do anything we want to guarantee your income.
    0:31:10 But the fact is, if all you do is wake up in the morning and watch television,
    0:31:14 because you’ve got nothing else to do, you’re not going to be very happy.
    0:31:21 So I think we have an issue here that really goes beyond economics to finding meaning in
    0:31:22 our lives as human beings.
    0:31:23 To the human condition.
    0:31:25 One last thing.
    0:31:27 You talk about a crisis of expectation.
    0:31:30 But the reality, and this is actually another theme that connects the dots,
    0:31:32 is that these problems are multifactorial, multimodal.
    0:31:34 There’s crisis of expectations around the world.
    0:31:39 And they’re playing out in ripples and waves and different ways across France, Europe,
    0:31:41 the US, and so many different ways.
    0:31:46 So I also wonder if there’s some change in the geographic or
    0:31:48 governance structures that we have to think about.
    0:31:51 Do you have any thoughts on the geopolitical implications of this?
    0:31:53 There’s any last parting thought on that front?
    0:32:00 We’ve seen, obviously, a big shift away from faith in the nation state
    0:32:05 to people wanting power and control closer to home.
    0:32:10 I think we’ve seen over the centuries cycles in that, that sort of comes and goes.
    0:32:17 Will city governments be able to deliver satisfaction in a way that national governments can?
    0:32:20 I’m not convinced of that.
    0:32:27 But in some issues, some areas related to people’s quality of life, they can be very important.
    0:32:36 I think another issue that we face is that there are things we know that will improve
    0:32:43 productivity over time. We can’t predict how that’ll work, and we still need to make those
    0:32:50 expenditures. So, for example, we know that improving education levels is in general good for
    0:32:57 countries’ productivity. So we need to invest in education, but can we say if we spend an extra
    0:33:01 billion dollars in education now that it will improve productivity three years from now?
    0:33:03 We can’t say that. We’re doing this somewhat on faith.
    0:33:05 Especially if the skills and jobs of the future change.
    0:33:12 Well, that’s correct. We know that as a general proposition, it’s been important for economic
    0:33:18 growth that we’ve had scientific research going on. Does that mean that if we put more money into
    0:33:24 scientific research now that we will be able to benefit from the consequences at any predictable
    0:33:26 time in the future? The answer to that is no.
    0:33:29 Right. And these are the reasons exactly why we tend not to make these decisions.
    0:33:33 That’s exactly right. That’s exactly right. These are very tough choices because you’re asking for
    0:33:38 our tax money to be spent, and you really can’t promise the return.
    0:33:41 It’s like investing in the future. Difficult to do.
    0:33:44 Well, Mark, thank you for joining the A6NZ podcast.
    0:33:47 Thank you so much for having me. It’s been great fun.
    0:33:47 Thank you.
    0:33:57 Thank you.

    This podcast rerun — first recorded over two and a half years ago, now being rerun as one of our evergreen classics on the tails of the world’s largest designated shopping days (Black Friday, Singles Day in China, Prime Day online, and so on) — is ALL about the container ship. Also known as “The Box“, with author Marc Levinson (in conversation with Sonal Chokshi and Hanne Tidnam). But this episode is really about connecting the dots between logistics, transportation, infrastructure, and much more.

    What do we make of the so-called “death of retail”, especially when seen through the retail history of the once-largest retailer in the world? How are supply chains changing today? One thing’s for sure: the shipping container made the world much smaller… and the world much economy bigger.

     

    image: Kevin Talec / Flickr

  • Nursing Today, From the Bedside and Beyond

    AI transcript
    0:00:03 The content here is for informational purposes only,
    0:00:05 should not be taken as legal business tax
    0:00:06 or investment advice,
    0:00:09 or be used to evaluate any investment or security
    0:00:11 and is not directed at any investors
    0:00:14 or potential investors in any A16Z fund.
    0:00:18 For more details, please see a16z.com/disclosures.
    0:00:21 – Hi, and welcome to the A16Z podcast, I’m Hannah.
    0:00:23 For many of us, nurses are essentially
    0:00:25 the face of the healthcare system.
    0:00:27 The person you’ll see the most of while you’re in it,
    0:00:30 who will monitor your vitals, administer medications,
    0:00:32 hold your hand when you’re in pain or scared,
    0:00:35 answer all the questions you forgot to ask the doctor.
    0:00:37 In this episode, we talk all about the role
    0:00:40 of that unsung hero of the healthcare system, the nurse.
    0:00:44 Iman Abouzade, CEO and co-founder of Incredible Health,
    0:00:45 a hiring platform for nurses,
    0:00:49 and A16Z general partners Jeff Jordan and Julie Yu
    0:00:50 on the consumer and bio teams,
    0:00:52 discuss with Hannah Tidnam
    0:00:55 how the scope of the job is changing today and why,
    0:00:58 what’s driving the looming nursing labor crisis
    0:01:00 and all the ways we might be able to impact that,
    0:01:01 what it’s like to build
    0:01:03 an innovative marketplace platform in healthcare
    0:01:05 and how best to introduce innovation
    0:01:08 into the healthcare system overall.
    0:01:09 So we’re here today to talk about
    0:01:10 the role of the healthcare worker
    0:01:12 and specifically the role of the nurse.
    0:01:15 We’ve all of us, I’m sure, interacted with nurses.
    0:01:16 I think we have a sense of what the job looks like
    0:01:18 when you’re there in the doctor’s office,
    0:01:19 but can we zoom out a little bit
    0:01:21 and talk about what the job looks like
    0:01:22 from an industry level?
    0:01:24 – So there’s a lot of clinical workers in healthcare
    0:01:27 and it’s a very labor intensive industry.
    0:01:30 And so as of say like 2018,
    0:01:32 I became the biggest industry in the US
    0:01:34 in terms of number of workers.
    0:01:36 And it’s a very labor intensive industry.
    0:01:39 So the majority of those workers are nurses.
    0:01:41 So 60% of clinical workers are nurses.
    0:01:43 – Oh my gosh, that’s a really high percentage.
    0:01:44 – It’s a really high percentage.
    0:01:46 – How many nurses are there in the United States?
    0:01:48 – So there’s 3 million nurses in the US.
    0:01:50 – That’s like 1% of the US population.
    0:01:51 – And when you say labor intensive,
    0:01:54 do you mean physically labor intensive or ours?
    0:01:55 What do you actually mean by that?
    0:01:56 – What I mean by labor intensive
    0:01:58 is you need a lot of workers to deliver the care
    0:02:01 in the same way a restaurant is labor intensive.
    0:02:02 There are team players,
    0:02:04 they’re involved when patients are entering
    0:02:06 the hospital or healthcare facility
    0:02:09 during their entire stay and also during discharge.
    0:02:12 They make a huge impact on the patient’s experience
    0:02:13 while they’re in the facility.
    0:02:14 – Nurses are kind of the engine
    0:02:16 of how hospitals and clinics work.
    0:02:19 When you think about an encounter as a patient,
    0:02:22 the number of minutes that you spend sort of interfacing
    0:02:23 with any of the healthcare workers,
    0:02:24 the vast majority of those minutes
    0:02:25 are likely to be with the nurse.
    0:02:28 It’s on admission, even the upfront triage,
    0:02:30 when you get referred to a facility,
    0:02:33 oftentimes that first point of contact
    0:02:34 where they are trying to qualify,
    0:02:36 where in the hospital should I even send you,
    0:02:38 sometimes is a nurse.
    0:02:41 Because of the need to actually clinically understand
    0:02:42 what is happening to you as a patient.
    0:02:45 The doctor is typically kind of the primary type
    0:02:47 of provider that one thinks about
    0:02:49 when interacting with the healthcare system,
    0:02:51 but oftentimes the physician is actually the one
    0:02:52 that you spend the least time with
    0:02:54 in a healthcare encounter vis-a-vis a nurse.
    0:02:56 – That’s right, yeah.
    0:02:58 – So when you say labor intensive,
    0:02:59 what does that actually break down to?
    0:03:01 How many patients for how many nurses?
    0:03:03 – Yeah, it’s funny you bring that up
    0:03:05 because that’s a really controversial topic.
    0:03:07 The topic of staffing ratios,
    0:03:09 how many patients to a nurse.
    0:03:11 So in the state of California, it’s actually regulated
    0:03:15 and it’s five patients to one nurse at any given time.
    0:03:16 It’ll vary by unit.
    0:03:18 So for example, in the intensive care unit,
    0:03:19 it’s more like two patients to one nurse.
    0:03:21 But California is one of those rare states
    0:03:24 that we’re just a little bit more regulated here.
    0:03:26 Now there are nurses all over the country
    0:03:27 fighting for staffing ratios
    0:03:31 because when you have too many patients to one nurse,
    0:03:34 your quality of care goes down, nurses get burnt out.
    0:03:37 A nurse who’s working beyond the 12 hour shift, right?
    0:03:39 They’re on hour 15, 16.
    0:03:41 The research shows they are 2.5 times more likely
    0:03:43 to create a medication error.
    0:03:45 There’s also research that shows when you’re understaffed,
    0:03:47 your patient mortality goes up by 4%, right?
    0:03:49 So the patients are literally more likely to die
    0:03:51 when the hospital’s understaffed.
    0:03:52 It’s a really challenging problem.
    0:03:54 – And that’s not regulated as well.
    0:03:56 It seems like if you’re regulating the ratios,
    0:03:58 like you would not be regulating the–
    0:03:59 – It should be, but you know.
    0:04:01 – They relate truckers, but not nurses.
    0:04:04 – So let’s actually talk about the scope of the job.
    0:04:05 What does that look like today?
    0:04:07 The job is changing in clinical terms.
    0:04:08 Is it also changing in other ways?
    0:04:11 – There’s increasingly more and more administrative work
    0:04:14 to be done just because of the way hospitals bill
    0:04:16 and the way medical records work
    0:04:18 that things have to get recorded.
    0:04:21 So also for a bunch of liability and malpractice reasons,
    0:04:23 you also have to record everything.
    0:04:24 And so the nurses heavily involve
    0:04:25 in documentation as well.
    0:04:27 – Which also involves reimbursement.
    0:04:28 They’re a pretty core function
    0:04:30 for both the patient and the provider.
    0:04:31 – And anything reimbursement related,
    0:04:33 oftentimes that’s viewed as something
    0:04:35 that is sort of below the pay grade of the physician.
    0:04:37 Health plans and insurance companies oftentimes
    0:04:39 are employing droves of nurses
    0:04:41 for things like prior authorization
    0:04:44 and sort of medical necessity assessment
    0:04:46 because you do need to literally review
    0:04:48 and actually notes around that patient encounter
    0:04:49 to determine whether or not
    0:04:51 it is something that should be reimbursed
    0:04:53 under those medical circumstances.
    0:04:55 And right now there’s not a great way
    0:04:57 to sort of automate that process.
    0:04:58 And so it does require human judgment.
    0:05:00 And oftentimes, again, those folks are nurses
    0:05:02 because it’s expensive to do it with a nurse,
    0:05:04 but it’s even more expensive to do it with a physician.
    0:05:07 And so it’s sort of the lowest sort of level of clinician
    0:05:09 that you can still have that judgment,
    0:05:12 but do it in as cost-effective of a way as possible.
    0:05:14 – So we’re in the middle of a big nursing shortage.
    0:05:17 There’s been a lot of coverage about this looming crisis
    0:05:20 in nursing, and I understand the regulation to make it
    0:05:23 so that nurses aren’t handling 25 patients at one.
    0:05:26 But why are nurses in such short supply?
    0:05:28 – Our demand for healthcare as a country keeps going up
    0:05:30 as our population ages,
    0:05:32 growing demand, not enough supply of workers.
    0:05:35 The nursing shortage is a number one skilled labor shortage
    0:05:36 we have in this country.
    0:05:38 And it’s estimated that by 2024,
    0:05:40 we’ll be one million nurses short.
    0:05:43 – The shortage of workers is estimated to be three times
    0:05:46 larger than the shortage of engineers in the United States.
    0:05:48 So I mean, these are big, big numbers.
    0:05:49 – Are there other reasons as well,
    0:05:51 besides just the growing system?
    0:05:53 Are there things specific to the job
    0:05:56 that people are not bringing in more talent?
    0:05:58 – The other reasons that kind of just exacerbate
    0:05:59 the situation is one,
    0:06:02 nursing schools are not able to take in as many students
    0:06:06 as they would like because their faculty is also retiring.
    0:06:08 You know, the biggest group of nurses right now
    0:06:10 is millennials, but the second biggest is the baby boomers.
    0:06:12 So it’s expected that 20% of nurses
    0:06:14 are expected to retire in the next three years.
    0:06:17 And that includes not just the nurses on the floor
    0:06:19 or in the units, but also the nurses
    0:06:21 who train other nurses in nursing schools.
    0:06:23 So there’s also a shortage of faculty too.
    0:06:25 – There’s also geographic mismatches
    0:06:28 where they’re acute shortages in certain places.
    0:06:30 – But it’s prevalent throughout.
    0:06:31 So even in all the big cities,
    0:06:34 whether it’s New York City, LA, San Francisco,
    0:06:36 they are all suffering from shortages.
    0:06:39 – So does that mean it’s a good career to get into
    0:06:40 because you’re highly desirable?
    0:06:42 – It is an amazing career to get into.
    0:06:45 For job security, it also pays quite well.
    0:06:47 And because of the labor shortage,
    0:06:49 the compensation does keep moving up.
    0:06:52 So for example, in California specifically,
    0:06:56 the average salary for a nurse is $100,000.
    0:06:59 In the Bay Area, it’s closer to $140,000.
    0:07:02 In LA, the average is $120,000.
    0:07:04 It has traditionally been looked at as a blue collar job,
    0:07:06 but they’re getting white collar compensation now.
    0:07:08 And it does require a degree.
    0:07:11 It does require training and certifications.
    0:07:15 So you have OR nurses, ICU nurses, emergency nurses,
    0:07:18 oncology nurses, with more expertise,
    0:07:20 with more certifications, with more training
    0:07:21 in specific areas.
    0:07:24 So I think there’s a perception that it’s blue collar,
    0:07:24 but it’s actually not.
    0:07:26 – I mean, it’s a pretty rigorous curriculum
    0:07:29 with certifications and tests and things like that.
    0:07:30 I’ve talked to a number of young people
    0:07:32 who are considering a career in nursing
    0:07:34 and they’re like, I know it’s gonna be hard work.
    0:07:36 I know it’s gonna take a long time,
    0:07:38 but the prize at the end is rewarding.
    0:07:40 – Actually, what does that look like?
    0:07:42 How much education, how much certification?
    0:07:45 – Yeah, so the usual degrees are either the BSN,
    0:07:46 Bachelor of Science in Nursing,
    0:07:48 or the Associate’s Degree in Nursing.
    0:07:50 The Associate’s Degree is kind of falling out of favor
    0:07:53 as hospitals increasingly require a bachelor’s degree.
    0:07:56 And then even after the degree, you start working,
    0:07:58 but you are also training and/or specializing
    0:07:59 in specific units as well.
    0:08:01 – And is that degree falling out of favor
    0:08:03 because nurses are doing more and hospitals want nurses
    0:08:05 with a higher degree of education?
    0:08:06 – Yeah, you just stumbled on another
    0:08:09 really controversial topic.
    0:08:12 There’s a certification for hospitals called MAGNIT,
    0:08:15 and one of the requirements to be MAGNIT certified
    0:08:16 as a hospital is to have, you know,
    0:08:19 the majority of your nurses with bachelor’s degrees.
    0:08:21 So like many, many things in healthcare
    0:08:22 because it’s a regulated profession
    0:08:25 and a regulated industry, but it’s also an industry
    0:08:27 that they’re very big on brands
    0:08:30 and it’s yet another stamp that a hospital
    0:08:31 or an academic medical center can get.
    0:08:33 – Okay, so the hospitals are getting squeezed
    0:08:36 by the regulation and then also by this increasing demand
    0:08:38 for a certain level of expertise.
    0:08:40 And the nurse’s job is growing.
    0:08:42 What is the bottom line for hospitals at the moment?
    0:08:45 How are they dealing with this kind of increased pressure?
    0:08:46 – Yeah, so here’s the bottom line.
    0:08:50 When you’re understaffed or when you don’t have enough nurses,
    0:08:54 you end up spending on overtime, on contract workers,
    0:08:55 and you can’t see as many patients.
    0:08:57 So this whole issue that–
    0:08:58 – So higher costs and lower revenue.
    0:08:59 – Exactly.
    0:09:00 – Other than that, not an issue.
    0:09:03 – Exactly, higher costs and less revenue.
    0:09:06 And it is probably the number one issue
    0:09:08 for hospital executives, staffing is,
    0:09:10 and it’s definitely certainly their number one cost.
    0:09:13 And the thing to keep in mind is that hospitals
    0:09:15 are thin margin businesses.
    0:09:17 The average margins is 3%.
    0:09:19 – That’s interesting because I think the common perception
    0:09:21 is that hospitals tend to be places
    0:09:23 with huge high volume financial flow.
    0:09:24 – Cost structures are so high
    0:09:27 that it’s hard to operate in the black.
    0:09:28 I mean, the other thing that’s contributing
    0:09:30 to a lot of this is, you know,
    0:09:32 we talk a lot about the unbundling of the hospital
    0:09:33 and the fact that a lot of the care
    0:09:35 that used to require coming to a hospital
    0:09:38 is now being provided sort of out of the communities
    0:09:41 in urgent care clinics and, you know, retail type settings.
    0:09:44 And many of those clinics are actually staffed by nurses.
    0:09:46 And so, you know, at the same time
    0:09:47 as you have these shortages,
    0:09:49 sort of in the traditional care settings,
    0:09:51 you also have more demand coming
    0:09:53 from these sort of alternative sites of care
    0:09:55 that are designed specifically to be staffed
    0:09:58 by lower acuity providers, not physicians.
    0:10:00 And the whole purpose of those care settings
    0:10:03 is to reduce costs on the delivery side.
    0:10:05 But it’s just this sort of vicious cycle
    0:10:07 where that’s also contributing to higher demand
    0:10:08 for this kind of skill set.
    0:10:10 – What does that process look like today
    0:10:12 for the profession of finding the right job,
    0:10:14 you know, the right hospital, the right clinic?
    0:10:16 – Yeah, it’s pretty broken right now.
    0:10:19 So if you’re looking for a job, for example, as a nurse,
    0:10:23 you have to apply to probably 10, 15, 20 places.
    0:10:25 And most of the time you don’t even hear back.
    0:10:26 And if you hear back, it could take months.
    0:10:28 – But why, if they need them so badly,
    0:10:29 I don’t understand, it seems so.
    0:10:32 – So we talked a lot about the shortage and the under supply,
    0:10:34 but the other thing that kind of plagues
    0:10:35 this industry is inefficiency.
    0:10:38 And the talent acquisition teams or HR teams
    0:10:40 inside hospitals are armed
    0:10:42 with pretty outdated tools and processes
    0:10:45 that really haven’t changed since like the 90s.
    0:10:48 And they’re primarily using external job boards
    0:10:51 like Indeed or LinkedIn or their own hospitals job board,
    0:10:53 put a posting out there and hope something happens.
    0:10:55 That’s really difficult when you are going after
    0:10:57 a group of workers that are in high, high demand.
    0:10:59 And so you’re basically waiting
    0:11:00 for the right people to come.
    0:11:02 And it’s really quantity over quality.
    0:11:06 So when people apply, the HR teams are manually sifting
    0:11:07 through all of those applicants
    0:11:10 and manually matching them as well.
    0:11:13 And so that just creates an insane amount of inefficiency.
    0:11:15 At any given time, one hospital recruiter
    0:11:16 is trying to fill a hundred jobs.
    0:11:18 – Another contributor to inefficiencies
    0:11:21 on the health system side are really when patients come in,
    0:11:24 how do you sort of effectively match demand to supply?
    0:11:27 And today that’s done in a barely brute force way,
    0:11:30 there really aren’t technology tools with intelligence
    0:11:33 that allow you to route and triage patients
    0:11:36 to the right type of provider or the right type of nurse
    0:11:38 or even distinguish whether or not a patient
    0:11:41 is appropriate to see a nurse versus a doctor.
    0:11:43 And that’s one of the highly evolving areas
    0:11:47 of the market right now is the scope of practice concept
    0:11:51 where things that maybe used to be only possible
    0:11:53 to do by a physician, increasingly
    0:11:55 those boundaries are being redrawn
    0:11:57 and nurses are taking on a lot more of that.
    0:12:00 But that’s not yet reflected in sort of that routing logic,
    0:12:01 so to speak.
    0:12:03 And so you often will end up with situations
    0:12:06 where a patient will end up waiting eight weeks
    0:12:07 to see a physician when in fact,
    0:12:09 that person likely could have gotten in
    0:12:10 to see a nurse much sooner.
    0:12:13 And that has not only clinical implications,
    0:12:14 obviously for the patient,
    0:12:16 but operational inefficiency implications
    0:12:18 for the physicians in the hospital system
    0:12:21 where that doctor is not being effectively utilized
    0:12:22 for their unique expertise
    0:12:25 versus a lower sort of acuity provider.
    0:12:26 And then for the health system,
    0:12:27 they’re losing out on potential revenue
    0:12:29 if again, if those slots are not being fully utilized
    0:12:30 to their full extent.
    0:12:31 – I just had this happen to me last week.
    0:12:33 My doctor was unavailable for two weeks
    0:12:36 and then the nurse practitioner would see me the same day.
    0:12:37 – Yeah, and there are real sort of societal
    0:12:39 and cultural challenges with that.
    0:12:42 I think Americans are not yet fully bought into
    0:12:44 sort of going to a nurse for something
    0:12:46 that they think they should go to see a doctor about.
    0:12:47 And we hear that all the time in the market.
    0:12:49 In fact, it might be better to go to a nurse
    0:12:51 for certain things because you are gonna get
    0:12:52 a different level of empathy,
    0:12:55 a different level of care and support and service.
    0:12:56 And so that’s also contributing to this,
    0:12:58 but that’s sort of the notion
    0:13:01 of the most effective use of clinical resource.
    0:13:03 I think it’s a big component of the challenge here.
    0:13:05 – The process is largely on the same way
    0:13:07 it was a generation ago.
    0:13:08 It’s a paper oriented process
    0:13:10 because the tech tools don’t really work
    0:13:13 for something this specialized and this unique.
    0:13:15 So, you know, the dominant job platforms
    0:13:18 are LinkedIn and Indeed and Zip Recruiter,
    0:13:21 but they’re not engineered to have this level
    0:13:23 of specificity and this granular of matching.
    0:13:25 You know, they’re not checking licenses
    0:13:27 and credentials and certifications
    0:13:31 and aren’t set to match those with existing job openings
    0:13:33 ’cause the horizontal platforms kind of fall prey
    0:13:35 to the least common denominator factor.
    0:13:37 – Can you explain a little bit more about what you mean
    0:13:40 by that, Jeff, that the horizontal platforms fall prey
    0:13:41 to the least common denominator?
    0:13:44 – If you’re trying to fill everything from a CEO
    0:13:47 to a sales rep to, you know, oncology nurse,
    0:13:49 you’re not going to have the same certifications
    0:13:50 clearly for the CEO.
    0:13:54 For the nursing and that general purpose tool
    0:13:57 does not work well for that highly specialized vertical.
    0:14:00 We see a natural progression that tends to repeat over
    0:14:03 and over where, you know, the one horizontal platform
    0:14:05 serves the needs of multiple verticals.
    0:14:08 eBay, you know, started as trading collectibles,
    0:14:10 but then they added computers and sporting goods
    0:14:12 and clothes and, you know, and cars.
    0:14:14 We even sold an airplane when I was there at Gulfstream.
    0:14:18 And so the same platform is being called, in this case,
    0:14:21 to service all the needs of that vertical.
    0:14:23 And early on in platform development,
    0:14:26 that typically is sufficient because it’s so much better
    0:14:28 than the analog alternative.
    0:14:31 But as these platform gets big and the individual verticals
    0:14:34 on that platform get big, there’s an opportunity
    0:14:37 for new codes to come in and better serve the needs
    0:14:41 of that vertical relative to the one size fits all.
    0:14:45 For example, StubHub came along and did a highly tailored
    0:14:48 offering for the resell of secondary tickets.
    0:14:52 They had time and energy and site space to do things
    0:14:54 like ensure electronic delivery of tickets, you know,
    0:14:57 have a trust and safety function for if the ticket
    0:14:59 didn’t work when you got to the venue.
    0:15:03 And as a result, StubHub was able to build a big business
    0:15:06 in the secondary ticket market, taking a lot of that business
    0:15:06 away from eBay.
    0:15:10 Right now, StockX are doing collectible sneakers.
    0:15:13 You know, Poshmark is doing apparel and each of those
    0:15:17 is building verticals that in some cases taking one
    0:15:18 of their verticals and doing it better.
    0:15:21 – So what do we need to see then if we’re to better serve
    0:15:23 the needs of the specific vertical?
    0:15:25 – To be honest, most healthcare workers are not on LinkedIn.
    0:15:27 And then so that makes the search and discovery
    0:15:29 for the employers very difficult.
    0:15:31 And the search and discovery fields, you know,
    0:15:33 they’re not healthcare specific either.
    0:15:36 And then you have the in-mail product that the response rates,
    0:15:38 like it’s less than 10% the response rate on in-mail.
    0:15:40 So there’s a lot of improvement needed.
    0:15:43 – So high signal is better than low signal.
    0:15:44 – Yeah.
    0:15:47 – So now you’re in a narrow vertical one job description
    0:15:51 and the complexity and optionality is enormous.
    0:15:54 How could that horizontal platform begin to address it
    0:15:58 if it’s highly challenged in a highly constrained environment
    0:15:59 to address it really well?
    0:16:02 So I mean, that’s a lot of the thesis is it takes that level
    0:16:06 of focus specialization, maniacal optimization
    0:16:09 to add value to the healthcare system
    0:16:13 and to the nurses that helps bridge the gap.
    0:16:15 – So if now is the moment for the healthcare vertical
    0:16:17 to kind of be better addressed,
    0:16:20 what does that actually look like in tactical detail?
    0:16:21 – We’ve done three or four things
    0:16:23 that are specific for this industry.
    0:16:26 Number one is that the employers apply to the talent
    0:16:27 instead of the other way around.
    0:16:29 We get away with that because there’s such a big shortage
    0:16:31 and honestly, that’s what’s needed
    0:16:33 given the supply, demand and balance in this market.
    0:16:36 The second thing is we’ve largely automated the screening
    0:16:38 things like licenses and certifications
    0:16:40 and experience and skills.
    0:16:42 All of these things that the hospital usually does manually
    0:16:44 by using technology, you can just deliver
    0:16:47 a lot higher quantity and quality of talent to the employers.
    0:16:50 – A highly curated sample based on their specific need.
    0:16:51 – Exactly.
    0:16:53 And so then the third piece is the custom matching, right?
    0:16:56 So it is not helpful for a recruiter
    0:16:59 to log into their web application and see 200 candidates.
    0:17:02 They need to just see the 12 out of the best fit.
    0:17:04 – Right, no, 200 just makes you want to close it again.
    0:17:04 Do something else.
    0:17:06 – Think of the gains the hospitals.
    0:17:08 If you all of a sudden, the process goes
    0:17:12 from a torrent of inbound to highly curated sample.
    0:17:15 The number of resumes you review goes way down.
    0:17:18 The number of interviews you do typically goes way down.
    0:17:20 The time to hire goes way down
    0:17:22 because you’ve got that curated sample
    0:17:26 of qualified nurses for this specific position you have.
    0:17:29 You are creating a very high level of operational efficiency
    0:17:31 for the administrator at the hospital
    0:17:33 and that administrator is very, very busy.
    0:17:34 – And it’s the same experience on the talent.
    0:17:37 The nurse does not want to hear from 80 employers.
    0:17:39 They want to hear from the three that are the right fit.
    0:17:41 And so building those custom matching algorithms
    0:17:42 are really important.
    0:17:45 Dry the experience and the efficiency for both sides as well.
    0:17:46 And then the fourth piece,
    0:17:50 we provide pretty robust data analytics to the employers
    0:17:52 where they can see their utilization
    0:17:54 and their hiring process
    0:17:55 and they have a lot more visibility into it.
    0:17:57 And they can even see the number of days talent
    0:17:59 is spending between each step.
    0:18:01 And they’re able to benchmark that against their competitors
    0:18:04 ’cause their competitors are also using our platform.
    0:18:06 – So just shining a light on that kind of black box
    0:18:09 where things would languish in weird limboes
    0:18:10 for a super long time.
    0:18:12 I mean, just like any industry, any function,
    0:18:14 a lot of decisions should be based on data.
    0:18:17 And HR and talent acquisition is a function
    0:18:20 that has an insane amount of data,
    0:18:22 but sometimes it’s hard to get at.
    0:18:24 And that’s what decisions should be based on,
    0:18:26 how they can improve their internal hiring processes.
    0:18:27 – Can you talk a little bit about
    0:18:29 how this actually affects the bottom line
    0:18:30 of hospitals and providers?
    0:18:32 Like how does making a specific search field
    0:18:35 for certification actually turn into dollars saved?
    0:18:37 – Hospitals and health systems are able to hire
    0:18:40 and fill those roles for permanent nurses
    0:18:41 in less than 30 days,
    0:18:43 where that national average is 90 days or longer.
    0:18:45 That results in significant,
    0:18:47 like millions of dollars in cost savings for the hospital,
    0:18:49 because they’re not spending on overtime,
    0:18:51 they’re not spending on contract workers.
    0:18:53 – And healthcare is notorious for it being
    0:18:55 a very, very challenging place for technology companies
    0:18:56 to prove ROI.
    0:18:57 And this is one of those areas
    0:19:00 where there’s such a clear top line benefit
    0:19:02 because you can literally say my patient volumes
    0:19:05 are hurt or benefit from being able
    0:19:06 to hire nurses more quickly.
    0:19:07 – And hire revenue.
    0:19:10 – Because you have the capacity to take
    0:19:11 on the business you need.
    0:19:13 – The other place where the revenue piece shows up
    0:19:14 is just in terms of patient access.
    0:19:16 You know, one of the crises in this country
    0:19:19 is the fact that patients cannot access care
    0:19:20 because of these supply constraints.
    0:19:23 It goes back to this notion of kind of right sizing care.
    0:19:26 If you were a patient who had, let’s say, elevated PSA,
    0:19:29 that is a fairly wide spectrum of clinical,
    0:19:31 you know, may actually warrant going straight
    0:19:34 to a urologist versus you might have to be worked up
    0:19:36 and kind of go through a care journey.
    0:19:37 But if you were not doing this appropriately,
    0:19:40 you would essentially be sort of closing the door
    0:19:42 to patients because you were making them wait.
    0:19:43 The patient wouldn’t get the clinical benefit
    0:19:45 and then you were losing out on that revenue stream.
    0:19:47 And frankly, the physicians, you know,
    0:19:50 they would always say I’m optimizing for surgical yield.
    0:19:53 I want a mix of patients who are most likely
    0:19:56 to result in a case that is gonna take advantage
    0:19:57 of my unique skill set.
    0:20:00 And so even from a physician retention, satisfaction,
    0:20:02 et cetera, that perspective,
    0:20:03 that was a huge issue
    0:20:05 that these organizations were trying to deal with.
    0:20:08 – Did nurses get to optimize for anything like that as well?
    0:20:09 – Oh, absolutely.
    0:20:11 No, I mean, it’s the same thing where I think for nurses
    0:20:13 and even MAs and some of these other, you know,
    0:20:15 types of roles that have sort of popped up
    0:20:18 to kind of support the administrative overhead,
    0:20:21 you started to see, again, the administrative tasks
    0:20:23 be passed on to these folks
    0:20:26 who are very legitimately trained in clinical practice.
    0:20:29 And we’re taking on these sort of lower utility tasks.
    0:20:31 How can technology sort of effectively route people
    0:20:33 so that some of that burden disappears?
    0:20:36 – So when you’re creating a jobs marketplace like this
    0:20:38 where you’re matching up this highly vetted,
    0:20:41 highly curated with all these different requirements
    0:20:44 and challenges from regulation and certification,
    0:20:47 how do you think about vetting for the non-obvious stuff?
    0:20:50 Like about empathy, about bedside manner,
    0:20:51 how do you think about those?
    0:20:52 – That stuff is really important
    0:20:55 ’cause ultimately the mission of most of these hospitals,
    0:20:58 all of them probably, is to deliver amazing care, right?
    0:21:01 And putting all the hard skills aside,
    0:21:03 the licenses, the certifications, all the hard skills.
    0:21:05 There is a whole set of soft skills
    0:21:07 that people need to convey and practice
    0:21:09 when they’re on the floor as well.
    0:21:12 We have an entire interview preparation kind of like module,
    0:21:14 basically that helps nurses convey
    0:21:16 their softer skills and interviews.
    0:21:17 What are they motivated by?
    0:21:20 Are they truly motivated by patient care or not?
    0:21:22 How much empathy do they have?
    0:21:23 What are their motivations?
    0:21:25 What do they want to do with their career?
    0:21:27 We’ve taken a much more like hands-on approach
    0:21:28 with just like, hey, these are the things
    0:21:31 that you need to just really convey in your interview.
    0:21:32 – What was the most challenging thing
    0:21:33 for you to build into the system
    0:21:35 when you’re building these tools from the ground up?
    0:21:39 – I think the challenge of just the heterogeneity of this,
    0:21:42 like so we’re dealing with all RNs and NPs.
    0:21:46 There’s multiple specialties and multiple requirements.
    0:21:48 And then the employers also have lots of different needs.
    0:21:50 And when you’re trying to build technology
    0:21:53 that works for that, for all the users, it’s challenging.
    0:21:55 – The healthcare industry is notoriously difficult
    0:21:57 to disrupt with new innovation,
    0:21:58 often for very good reason.
    0:22:01 And because of the complex nature of the system itself,
    0:22:04 how do you see yourself fitting into an overall trend
    0:22:07 of new technological innovation in healthcare?
    0:22:09 Or I guess another way to say that is,
    0:22:11 what has your experience been like
    0:22:14 introducing a new tech into this particular system?
    0:22:15 – I actually feel a lot of empathy
    0:22:17 for some of the hospital executives
    0:22:19 and the administrators and the nurse managers
    0:22:22 and so on who are trying to manage the operations, right?
    0:22:24 Internally, they’re dealing with multiple issues
    0:22:25 at the same time.
    0:22:27 First of all, like reimbursements going down, right?
    0:22:29 So they had a lot of revenue pressure.
    0:22:32 Number two, it’s actually not completely clear
    0:22:33 in the healthcare industry or in a hospital
    0:22:35 who your actual customer is.
    0:22:37 Common sense would say it’s just the patient,
    0:22:40 but the patient doesn’t actually, for the most part,
    0:22:42 doesn’t pay for the care directly, right?
    0:22:45 So they also have to take into account health insurance,
    0:22:47 the payers, how they’re ultimately making money
    0:22:48 and how they’re getting reimbursed.
    0:22:50 So that’s why you see a lot of the technology investments
    0:22:53 in healthcare or in a hospital are more around billing
    0:22:56 than around optimizing operations, right?
    0:22:59 And then you also have employers in the healthcare industry
    0:23:01 who are ultimately also the ones who are paying for the care.
    0:23:04 And their employers are offering the health insurance
    0:23:07 to the employees and they’re making decisions
    0:23:09 about what plans to offer
    0:23:11 and there’s not much clarity on pricing.
    0:23:13 It’s just like a very convoluted industry, right?
    0:23:17 Where just like the normal free market forces
    0:23:19 and competition that we see in other industry
    0:23:21 doesn’t necessarily apply.
    0:23:23 – The stakes are just so much higher
    0:23:24 than any other industry.
    0:23:25 If you turn an engineer,
    0:23:26 you’re probably gonna lose a little bit on productivity
    0:23:28 and maybe not ship some code.
    0:23:31 But here, if you are constantly churning talent
    0:23:34 and turning over folks who are staffed in these environments,
    0:23:36 there is such huge risk
    0:23:37 from a patient safety perspective on that
    0:23:40 because these teams have protocols
    0:23:42 and they have ways that they respond
    0:23:44 to sort of emergency situations and whatnot
    0:23:46 to train and really sort of get up to speed
    0:23:48 on those types of environments,
    0:23:50 very complex environments takes time.
    0:23:52 If you’re not doing that match upfront
    0:23:54 in a way that sort of guarantees
    0:23:56 or at least raises the probability
    0:23:58 of longer retention of these employees,
    0:24:01 then there’s a real high stakes risk to patients.
    0:24:04 – Actually, let’s talk about that retention piece specifically.
    0:24:06 We’ve talked about the talent acquisition,
    0:24:08 but not so much how do you hold on to good talent?
    0:24:11 What’s the turnover rate like in this profession?
    0:24:15 – The annual turnover for nurses in the US today is 20%.
    0:24:17 – Oh my gosh, is that because it’s so hard
    0:24:19 or because people move or what?
    0:24:21 – The number one driver is understaffing, right?
    0:24:22 ‘Cause when you’re understaffed,
    0:24:24 you’re burning out your existing workers.
    0:24:26 And then also it’s a really tight labor market.
    0:24:28 You tend to change jobs more often when there’s a shortage.
    0:24:29 – So what happens?
    0:24:31 You get the job and then you’re overworked
    0:24:33 and you start to become disillusioned
    0:24:34 and then you think you’re gonna have
    0:24:36 a better job elsewhere essentially?
    0:24:37 – Yeah, there’s probably three or four main factors
    0:24:39 why nurses change jobs.
    0:24:41 Number one is like, they’re tired and burnt out
    0:24:42 and just need a different unit
    0:24:44 or hope for a hospital that’s better managed
    0:24:45 or better staffed.
    0:24:47 Number two is they’re trying to reduce commute times.
    0:24:49 90% of nurses are women.
    0:24:51 Many of them are taking care of children.
    0:24:53 Many of them are trying to shorten commute times.
    0:24:55 – I can’t believe it, it’s 90% still, that’s so high.
    0:24:56 – Yeah, it’s still high.
    0:24:59 And then career advancement is another reason.
    0:25:00 So if you’re trying to grow your skill set,
    0:25:02 become more specialized and you’re not seeing those
    0:25:03 opportunities with your current employer,
    0:25:05 you’re gonna change and then higher pay.
    0:25:07 – As good market wages ’cause it’s applied
    0:25:08 to man in balance.
    0:25:10 – It’s funny, it sounds like all the normal reasons,
    0:25:11 but like super condensed into like a,
    0:25:14 where you feel them very acutely and it happens very fast.
    0:25:17 Okay, so on retention, what are the things
    0:25:20 that people can do then besides finding the right job
    0:25:24 the first time and supplementing the supply
    0:25:26 so that there is not a critical shortage
    0:25:29 and you’re working way long hours?
    0:25:31 What are other things that employers and hospitals
    0:25:33 can do to solve that piece of the problem?
    0:25:36 – The few factors that influence it and the hospitals
    0:25:39 that have the best retention do this extremely well.
    0:25:41 Number one is fast hiring.
    0:25:43 So it turns out if you have an amazing candidate experience
    0:25:45 while you’re getting hired, you are more likely
    0:25:46 to stay around.
    0:25:47 – Really?
    0:25:49 Even if you get disillusioned a little bit later?
    0:25:51 – Yeah, because that’s part of it.
    0:25:52 – Even disillusioned before you start,
    0:25:55 that’s usually not a good leading indicator.
    0:25:57 – That’s true, that’s true.
    0:26:00 If you’re hired in 11 days, you have a very positive
    0:26:01 impression of that employer, like oh my goodness,
    0:26:03 like they have their act together.
    0:26:06 And then that leads to higher employee engagement scores.
    0:26:07 – Wow.
    0:26:08 – And more likely them to stay.
    0:26:09 – I was talking to multiple venture capitalists
    0:26:11 when I made the move for being an operator
    0:26:12 to a venture firm.
    0:26:14 The first talk to me, the recruiting cycle
    0:26:17 was over six months before an offer came.
    0:26:19 And the offer only came after I started talking
    0:26:21 to Andreessen Horowitz and got to an offer
    0:26:23 within a few weeks.
    0:26:26 And then the six month person said oh, we’ll move fast.
    0:26:28 And so I was so disillusioned at that point,
    0:26:29 it was a pretty easy decision.
    0:26:30 – Yeah, it’s very telling.
    0:26:33 What have we learned from these other platforms
    0:26:35 that we can incorporate into the platform
    0:26:37 that’s better addressing a specific vertical?
    0:26:40 What is some of the kind of knowledge that does apply?
    0:26:42 – So we use these competitive tactics, right?
    0:26:44 When a hospital recruiter logs in,
    0:26:46 they know they’re competing with other employers
    0:26:47 at the same time.
    0:26:48 There’s a time limit.
    0:26:48 – You gamify it?
    0:26:50 – Yeah, yeah. – That’s awesome.
    0:26:51 – There’s a time limit.
    0:26:52 There’s a seven day countdown
    0:26:54 for them to send their interview requests.
    0:26:56 And they can see which candidates are popular.
    0:26:59 So we’re creating urgency, scarcity, and competition.
    0:27:01 – That’s at e-commerce to only one left.
    0:27:02 Yeah, that kind of thing.
    0:27:03 – It works.
    0:27:05 – So how is the adoption of this kind of thing?
    0:27:06 Like do you hit resistance along the way
    0:27:07 in certain areas?
    0:27:09 Is there friction to getting these new platforms
    0:27:11 integrated into the system?
    0:27:13 – Okay, so this goes back to what Julie had said earlier
    0:27:16 about ROI and the value proposition.
    0:27:19 You have to have a really, really strong value proposition
    0:27:20 and ROI.
    0:27:21 And whatever you’ve come up with
    0:27:23 has to be at least 10 times better
    0:27:24 than what’s already out there.
    0:27:25 So whatever we come up with,
    0:27:27 incredible health needs to be at least 10 times better
    0:27:29 than LinkedIn or Indeed or any of these other tools
    0:27:30 that they’re using.
    0:27:33 We now have over 150 hospitals in California
    0:27:35 using our platform in less than 18 months.
    0:27:37 Very short sales cycles.
    0:27:39 Because this is a hair on fire problem.
    0:27:43 The CEO and everyone in the C-suite cares about staffing
    0:27:46 and getting great talent and getting amazing nurses
    0:27:49 in permanent roles quickly impacts their bottom line
    0:27:51 and both revenue and cost.
    0:27:52 – That’s the other sort of case
    0:27:54 for why you need vertical solutions
    0:27:57 is the supply side of the market also has to believe
    0:28:00 that they are gonna be better represented on this platform
    0:28:02 than your sort of generic horizontal platform
    0:28:03 and that there’s something new to offer there.
    0:28:06 So what are you seeing on the response from the nurses side?
    0:28:08 – Yeah, it’s similar in that the value
    0:28:09 has to be really clear to them as well.
    0:28:11 Right now we’re the only platform out there
    0:28:14 that says create a profile, sit back and relax,
    0:28:16 employers are gonna apply to you.
    0:28:18 So employers send them interview requests
    0:28:19 and then the nurse gets to decide
    0:28:21 which ones to accept and which ones to decline.
    0:28:25 And what that does is it gives more control to the nurse
    0:28:27 and this is something that they do not normally experience.
    0:28:29 – Yeah, it sounds like a profession rife
    0:28:31 with a feeling of lack of control actually
    0:28:33 that you’re constantly being told what to do
    0:28:34 and where to go.
    0:28:37 – Yeah, this is a highly mistreated
    0:28:39 and underserved group of workers.
    0:28:41 The vision is to help them live better lives.
    0:28:42 It’s about the healthcare professionals.
    0:28:45 Whoever creates a product or an experience
    0:28:47 and treats this group of workers the best,
    0:28:49 appreciates them, celebrates them,
    0:28:50 gives them an amazing experience.
    0:28:51 All of that is gonna win.
    0:28:52 – That’s interesting.
    0:28:55 I blogged years ago about in two-sided marketplaces,
    0:28:57 the consumer side is the one that you should have
    0:29:00 to optimize for even if the institutional side
    0:29:01 is the one that pays you.
    0:29:03 You know, at eBay you optimize for the buyer,
    0:29:05 at OpenTable you optimize for the diner here,
    0:29:06 you optimize for the nurses.
    0:29:09 – The folks in the recruiting office of the hospital
    0:29:11 are actually consumers, right?
    0:29:12 And they’re gonna go home
    0:29:15 and they’re gonna use their iPhone and shop on Amazon
    0:29:17 and have these magical experiences
    0:29:18 in other parts of their lives.
    0:29:19 And then they get to work
    0:29:22 and they have these sort of highly legacy
    0:29:25 ossified archaic systems that sort of overall trend
    0:29:27 is what’s driving a ton of uptake
    0:29:29 of these novel technology solutions.
    0:29:32 – A few of the hospitals use Oracle PeopleSoft,
    0:29:34 some use Teleo, some use, you know,
    0:29:36 there’s lots of different software,
    0:29:37 whether they’re applicant tracking systems
    0:29:39 or more general HR systems.
    0:29:41 And we’re there and they’re like,
    0:29:44 oh, I have to use a 20 page manual to create a job rec.
    0:29:45 – Oh my gosh.
    0:29:46 – Right?
    0:29:47 And you look at it and it’s like, oh my God,
    0:29:50 this software looks like it’s from like the 80s.
    0:29:54 Like when software was first like a thing, right?
    0:29:56 And so when we come in,
    0:29:58 we’ve even had chief nursing officers say like,
    0:30:00 oh, wow, it looks like a dating app.
    0:30:01 – Yeah, I was gonna say that earlier
    0:30:02 when you were checking the nurses.
    0:30:05 – Yeah, match.com for nurses in hospitals, right?
    0:30:06 And so–
    0:30:08 – You don’t have to fake profiles and spam.
    0:30:10 – Yeah, yeah, yeah, yeah, yeah.
    0:30:11 Certainly a lot of the features we’ve built
    0:30:14 into the platform we’ve borrowed from consumer apps,
    0:30:17 like the countdown timers and who’s popular
    0:30:20 and kind of creating urgency and scarcity in the platform
    0:30:23 and just simply making it beautiful and easy to use.
    0:30:24 – You see now for the first time,
    0:30:28 it really grounds up demand from clinicians
    0:30:29 asking for better tools.
    0:30:33 They no longer are able to deal with kind of these legacy EHRs
    0:30:35 that have been implemented across the industry.
    0:30:36 One of the challenges has been,
    0:30:40 it is just so damn hard to sell to these organizations, right?
    0:30:42 If I’m looking at two options as an entrepreneur,
    0:30:45 either I build software that I need to somehow figure out
    0:30:48 how to distribute to this industry,
    0:30:50 make them change the way that they operate,
    0:30:53 deal with thousands of employees at these organizations
    0:30:54 that all have their own agendas,
    0:30:57 versus building sort of outside of the system,
    0:30:59 let’s say a full stack primary care clinic
    0:31:02 that I can build my own technology from the ground up,
    0:31:03 eat my own dog food.
    0:31:05 And therefore the packaging of that offering
    0:31:07 may look like a direct to consumer offering,
    0:31:08 but at the end of the day,
    0:31:10 I’m trying to solve the same problem,
    0:31:11 just sort of from the outside.
    0:31:13 And so those are the two attack vectors
    0:31:14 that we see out there.
    0:31:15 I totally agree that in some ways,
    0:31:18 the clinicians are sort of the forgotten end users
    0:31:19 of this whole thing.
    0:31:21 And you see a lot of emphasis on the patient,
    0:31:23 but at the end of the day,
    0:31:25 the high leverage point is actually putting better tools
    0:31:26 in the hands of clinicians.
    0:31:29 – Yeah, I mean, I meet many founders
    0:31:30 who are working in the healthcare industry
    0:31:32 and they’re usually building applications
    0:31:34 that are patient facing, which is great.
    0:31:38 But I don’t see enough working on the backend of healthcare.
    0:31:40 We took one part of it, which is staffing.
    0:31:43 There’s certainly a ton throughout operations.
    0:31:45 And there’s a lot of innovation needed
    0:31:48 in basically the full stack of healthcare.
    0:31:50 – So what kind of takeaways or advice would you have
    0:31:52 for other founders building companies
    0:31:55 in the particularly challenging space that is healthcare?
    0:31:57 – Like many things in entrepreneurship timing
    0:31:58 is everything, right?
    0:31:59 The healthcare industry is at a point
    0:32:02 where the cost pressure has never been more intense
    0:32:04 because reimbursements are going down
    0:32:07 and the competition is fierce among providers.
    0:32:10 And that creates opportunities for entrepreneurs
    0:32:12 and a bunch of hospital executives
    0:32:13 that may be willing to listen.
    0:32:15 And so when you’re creating your product,
    0:32:16 you need to come up with something
    0:32:17 that’s at least 10 times better
    0:32:19 than what’s already out there.
    0:32:20 Like at least 10, and you can measure that however you want.
    0:32:22 10 times better, 10 times cheaper,
    0:32:24 10 times more efficient, 10 times faster,
    0:32:25 like whatever it is.
    0:32:29 And have a really, really strong value proposition
    0:32:33 that clearly ties to ROI and impacts the bottom line
    0:32:35 for the hospital, clearly impacts it.
    0:32:38 Not like indirectly, but directly impacts it.
    0:32:39 – That’s awesome.
    0:32:41 Thank you so much for joining us on the A16Z podcast.
    0:32:41 – Thank you. – Thank you.
    0:32:50 [BLANK_AUDIO]

    “Constant attention by a good nurse may be just as important as a major operation by a surgeon”, diplomat Dag Hammarskjöld once observed — and that may be more true today than ever before. For most of us, nurses are essentially the face of the healthcare system: the person you’ll see the most of while you’re in it, who will monitor your vitals, administer medications, hold your hand when you’re in pain or scared, answer all the questions you forgot to ask the doctor.

    So in this episode, we take a look at the role of that unsung hero of healthcare — the nurse — at an industry level. Iman Abuzeid, CEO and co-founder of Incredible Health (a hiring platform for nurses), and a16z general partners Julie Yoo and Jeff Jordan discuss with Hanne Tidnam how the scope of the job is changing today and why; what’s driving the looming nursing shortage crisis, and ways we can help solve it; what it’s like to build a new marketplace platform in healthcare; and how best to introduce innovation into the healthcare system overall.

  • How We Podcast

    AI transcript
    0:00:05 Hi everyone. Welcome to the A6NZ podcast. I’m Sonal and we’re here today because we’re doing our
    0:00:14 500th episode of the A6NZ podcast. Episode 499 was with Margaret Wenmarkers, the head of marketing
    0:00:20 at Andreessen Horowitz, who built the A6NZ brand. And for the 500th episode, we’re here to answer
    0:00:24 for the first time. So it’s sort of a behind the scenes about how the podcast works. A lot of
    0:00:29 frequently asked questions people constantly ask us. And that also I got on Twitter, our special
    0:00:35 guest host and interviewer is A6NZ general partner, Connie Chan. Connie will also ask any
    0:00:39 questions she’s interested in because she’s actually very into podcasting and investment
    0:00:44 podcasting as well. So that’s a context. So let’s first start with the history of the A6NZ podcast.
    0:00:48 Tell me about how it got started, how you got involved. It was actually created before I even
    0:00:53 joined. There was already a culture of writing at Andreessen Horowitz before they even built
    0:00:57 an editorial operation. I mean, there was a popular P-marker blog. There’s Ben Horowitz’s blog and
    0:01:01 then book. And this all happened right before I joined. And they were also already writing blog
    0:01:06 posts about announcements. And they also had done very few specific op-eds that we talked about
    0:01:12 in episode 499. So that was a context. And then I believe the story was that Dixon, Chris Dixon,
    0:01:16 we all call him Dixon, came in one day as like, we should do podcasting. And Dixon was an early
    0:01:21 blogger. So my speculation is that I think he thought it was like the evolution of that sort
    0:01:26 of type of communication. And so the podcast was pushed by Chris Dixon and Kim Milosevic was
    0:01:30 hiring up the editorial team for Andreessen Horowitz. And she first hired Michael Copeland,
    0:01:35 who got the podcast off the ground and was the host for the first year. I started producing it
    0:01:40 behind the scenes, not hosting about three months in. And then I only started hosting about a year
    0:01:43 in, but I’ve been very involved since about three months in. There’s been a lot of stuff behind
    0:01:49 the scenes. So Lovelessut, what year was this? I think it was late 2013, early 2014. And it was
    0:01:55 actually that exact same year I had gone to XOXO. And I heard a talk from Marco Arment about the
    0:02:00 resurgence of podcasting because it’s been around for years, as you know. And he talked about how
    0:02:04 brands and others, when they do podcasting, there’s a certain intimacy that comes with it.
    0:02:09 And so it has a very similar feeling to blogging in that there’s parallels in the authenticity
    0:02:13 and intimacy of communication. In fact, the way I think of it is that if you think about our history
    0:02:18 of oral storytelling and how we can all sit around a fire in the olden days, that used to be an
    0:02:22 experience of one-on-one. And now we can do the almost the exact same thing where you have the
    0:02:27 feeling of a one-on-one intimacy, but it’s scaled to thousands and thousands. In our case, hundreds
    0:02:31 of thousands of people. What gave you the inspiration that we needed to double down on podcast?
    0:02:37 You invested so much of your thinking and your energy into this. What was it that audio was
    0:02:41 unlocking for you? It’s funny that you say audio because I actually did not think of it as audio
    0:02:45 then. But I love that you’re saying that because that’s how I do think about it now. At the time,
    0:02:50 quite frankly, I was scratching a personal itch, which was I had come from Wired where I had the
    0:02:55 opportunity to edit hundreds and hundreds of different thinkers, writers, famous thinkers,
    0:02:59 emerging tones. But all in written form. All in written form. I’d never actually done audio, by
    0:03:03 the way. I didn’t have that experience. And I got here and I kind of was like, oh my god, I love my
    0:03:09 team. I love the partners, but I’m going to kill myself with boredom if I only have eight partners
    0:03:14 where I had come from hundreds. And so for me, the podcast was a way to answer your question about
    0:03:19 doubling down to bring more diverse voices onto the platform. Right. Because before our blog posts
    0:03:23 were mostly just written by general partners. That’s right. And then with podcasts, now you
    0:03:28 open it up to more internal voices, more external voices. Exactly. And in fact, the external voices
    0:03:33 was built on what I did at Wired and building the expert opinion section there. And I had three
    0:03:37 views on it. So first was, I think it’s really interesting that in our modern world of media,
    0:03:42 we even have intermediaries at all to dilute the voice of an expert. Okay. So in your case,
    0:03:47 perfect example, you wrote a beautiful WeChat piece that we worked on. I remember it ran the
    0:03:52 exact same day that David Pierce at Wired wrote a piece about WeChat, which is also very good and
    0:03:58 well done. Very different pieces. Yours was a first person, first principles, first party expert
    0:04:03 take that was not based on reporting it, but in using it, observing it, bringing your own thinking.
    0:04:07 It was what I described as an ethnographic kind of piece. That’s first person expertise.
    0:04:11 David’s was reported. He talked to people at WeChat. He did interviews. He was coming out
    0:04:17 as a reporter. Also great. But in my view, why was a venture capital firm focusing on reported
    0:04:22 stories when we have a huge network? This is our defining thing, a network of networks, in fact.
    0:04:28 So why wouldn’t we bring in experts on various topics, but not have them diluted in their expertise?
    0:04:32 And so when they come on as guests, we have the first person versus the third person. That was a
    0:04:37 huge important thing to me. And it’s also my bias for builders and makers. And so as you bring in
    0:04:41 external folks, though, I mean, that puts a lot more pressure on how you program it,
    0:04:45 how you research for it and prep for these podcasts. Talk to me what that’s like.
    0:04:49 Yeah. Other questions people have on Twitter. One of the most common questions that came up
    0:04:52 is how do we program the podcasts? Like, how do you even decide who to bring on?
    0:04:58 So to give you some more context, I think of a podcast in three phases. There’s everything
    0:05:02 that happens before, during, and after. I would say that the majority of the work is before and
    0:05:06 after then during the podcast itself. Okay. So let’s talk about programming. And then I want
    0:05:11 to dive into each of those sections. Okay. So in programming it, I think of every episode as an
    0:05:15 op-ed or a feature story. And so just like an op-ed or a feature story, you think to yourself,
    0:05:21 what is the argument or topic or angle and what is the take? What’s the differentiated
    0:05:25 fresh view and then who are the people to have that? So do you take that same like editing
    0:05:30 framework as a written author and then think, okay, I need to have one main argument and a
    0:05:33 conclusion at the end? So obviously conversation is so much more organic than that. Okay. You
    0:05:38 actually don’t really decide the argument upfront. I would actually even argue writing is organic.
    0:05:41 Sometimes you kind of know what you want to talk about, but you just kind of go with it and figure
    0:05:45 it out as you write it out. It’s not like we walk into a room and say, hey, I’m going to come on
    0:05:49 the podcast and I’m going to argue X. That never happens. But what we do do is figure out, okay,
    0:05:54 so let me think of a good concrete example. Let’s say we want to do a topic on emojis,
    0:05:58 which is one of my all-time favorite podcasts. And there’s lots of different ways to take it.
    0:06:03 Well, okay. I think it’s really interesting that emojis are pervading our culture and that yet
    0:06:09 at the same time, people have to propose through proposals specific emoji to get into the set.
    0:06:14 So what if we did a conversation with someone who proposed the dumpling emoji? So Jenny Aitley did
    0:06:23 this. And then Fred Veninson, who actually translated Moby Dick into all emoji using
    0:06:28 mechanical Turk. And so you have two people at very different kind of perspectives on it.
    0:06:32 But here’s the thing they have in common. Very different takes. Both, however,
    0:06:37 are first principles, non-derivative experts who are going at it at a first person way.
    0:06:43 Secondly, through this lens, we can then bring in all the concrete and abstract,
    0:06:48 tangential ideas of governance, open versus closed, proprietary systems, how to design,
    0:06:54 Apple versus Android, Twitter, Facebook, and use that as a concrete way to have a really thoughtful
    0:06:59 conversation. It’s funny because you think the podcast is about emoji, but it’s actually about
    0:07:03 how innovation comes about when you’re trying to have a system across all. So how do you even decide
    0:07:07 I want an episode on emojis? Oh, well, that’s just what editors do. And this is actually probably
    0:07:11 the broader context for the editorial operation, which is you always ask yourself, what are the
    0:07:15 topics we want to cover and how. And you may not know the exact how, but you have an idea of how.
    0:07:20 And one of the things that I always tell people, if we were to take this up even a notch, the
    0:07:24 editorial operation is about innovation. And Margaret talked about this in our past episode
    0:07:29 499. And I’ve had a rule of thumb. People ask me this on Twitter. So I’m going to answer this question,
    0:07:36 which is whenever I think about any kind of brand or lens for content, I want it to go through two
    0:07:40 words. And the funny inspiration for this, by the way, is from Domino Magazine. They once did
    0:07:45 a feature about how you can find your signature style. And there’s like a stylist who would come
    0:07:50 in and say, Connie, you are urban warrior. And this is your two word word to describe your style.
    0:07:55 Here at Andries and Horowitz, it’s innovation brand. When I was at Wired, it was informed
    0:08:00 optimism that came from Chris Anderson. And when I was at Xerox Park, it was entrepreneurial
    0:08:05 scientists. And my point is that you use that as a lens with which to decide what to run,
    0:08:09 what not to run, and how to treat it, and even how to edit it. And that serves as a filter
    0:08:13 for what makes a cut and what doesn’t. We are about telling the stories of the future,
    0:08:17 building it, explaining it, and really how tech changes our world. So that’s a lens.
    0:08:20 So on the programming piece, how do you actually choose which guest to bring on?
    0:08:25 Right. So this is, again, going back to the same philosophy I had for the expert section.
    0:08:31 I am looking for the expert, not a expert. And again, going back to this idea of an
    0:08:34 individual op-ed or a feature story for every podcast, you ask yourself, if you’re doing
    0:08:39 a feature story, who are the third party experts you would bring in? So similarly,
    0:08:44 we look for either the expert or the next best expert or someone who has very specific expertise.
    0:08:48 We don’t really love consultants and derivative experts and people who just talk about the thing
    0:08:53 versus do the thing. And then I look for a complimentary expert. And this is sort of the
    0:08:57 person who can add texture. We don’t want two people constantly agreeing. We also don’t want
    0:09:01 them completely disagreeing. Sometimes people talked about in the early days, we should do podcasts
    0:09:05 where you have pro-con. And again, it’s like, exactly. I love debates and Oxford style debates
    0:09:10 in particular. But what I find, what I call the panel problem where podcasts becomes a conference
    0:09:14 panel. I don’t know if you’ve seen this at every conference you go to. Inevitably,
    0:09:19 the smartest people, four people, so smart on a single panel, it’ll be the dullest, dumbest
    0:09:23 conversation. And why is that? It regresses to the mean. And to me, it’s a pure statistical
    0:09:27 thing. It’s like in statistics, if you sample from the extremes of a data set, you essentially
    0:09:32 regress to the mean. It is literally the exact same thing happening when you do that with experts.
    0:09:37 So having a pro and a con, it’s actually a case of like negating the conversation. You want to
    0:09:42 have a thoughtful nuance conversation. So I like to avoid what I call one note narratives. I don’t
    0:09:46 want an expert who has just a single observation. They’re going to do it like 10 different ways.
    0:09:50 Do you kind of give them a guidance on what you’re going to ask about? Tell me about the prep
    0:09:55 on the actual figuring out what questions you want to run. Do you let people do a dry run as it’s
    0:10:01 scripted? What do you do? So the process is that I tell them, this is actually baked until all our
    0:10:06 emails and how they get on, that they are not supposed to prep. Now, people hate that because
    0:10:09 they want to prep. Yeah, I’m sure everyone wants to know what you’re going to ask them.
    0:10:12 Right. And in fact, I kind of realized early on like, oh, someone will just because you like
    0:10:16 that. I mean, everyone else likes it. What’s the downside of prepping? That’s a great question.
    0:10:21 So one of the things I learned when I was at park and I worked with a really good event producer
    0:10:26 for this event that we were hosting O’Reilly Media’s Make. It was a first inaugural hardware make
    0:10:31 workshop. And one of the event producers on that said, I never put two people in a green room before
    0:10:37 an event because inevitably everything they say on stage will refer back to what they were talking
    0:10:41 about right before coming on stage. And you’ve probably seen this at many events. And the audience
    0:10:47 doesn’t have that exact same sharpness that they feel when they hear that idea. For me, when I record,
    0:10:51 I start the recorder before the person even walks in the room and I stop it only when they leave
    0:10:55 because the best stuff comes when it’s a little bit unfiltered. So when we prep to answer your
    0:10:59 question, what I tell people is I don’t want you to actually tell me what you’re going to say,
    0:11:02 because actually then the second time, if you say it, it’s going to be 10 times worse.
    0:11:06 It’s much better raw and real the first time. Of course, the speakers get freaked out though,
    0:11:09 because they’re like, what if I sound like an idiot, which means that you have to do a lot of
    0:11:13 editing. Oh, we can come back to editing. I mean, it’s not by accident that you make a lot of us
    0:11:17 sound a lot more eloquent than we do in real life. Well, first of all, it’s not an accident because you
    0:11:22 guys are all also experts. Let’s just be very clear that one of the reasons this works is that A6NC
    0:11:28 does have experts and one of the number one rules of thumb I use for all editorial written
    0:11:32 podcasts or otherwise is the concept of what I coined a number of years ago called writer topic
    0:11:37 fit jokingly WTF. And the idea being that the writer has to have the topic and fit for the
    0:11:41 expertise. This is not credentialist. It could be earned expertise. It could be data, it could be
    0:11:45 whatever, but they have to have that. So the people who are freaked out about their executives
    0:11:49 coming on and not having any idea, we don’t send questions in advance. I like the conversation
    0:11:54 to be very organic. One of the questions people asked on Twitter was, do you prepare their script?
    0:11:59 And the answer is no, there is no script. What we do at the beginning of every episode is we,
    0:12:01 and sometimes these people have been in met each other. Sometimes you’re meeting Christina
    0:12:05 shoe for the first time and the three of us are doing a conversation about stickers and memes
    0:12:09 and live streams. So in that case, what we do is we’ll spend literally five minutes at the beginning,
    0:12:13 maybe less just talking about what we want to talk about, meaning topics, but not the
    0:12:16 actual argument. Exactly. Because then I get mad and I say, no, no, no, because people inevitably
    0:12:20 start sharing what they’re going to say. And I’m like, wait till we get to that part. So we do
    0:12:24 that. And then we just go through. And then this is where the editing lets you then reorganize it
    0:12:28 into an arc that makes sense. And by the way, by arc, I don’t mean it has to be linear,
    0:12:34 like point A, B, C, D. In fact, I want it to be nonlinear, slippery, raw, with an edge, not always
    0:12:39 clean and clear. At wired, I had a phrase, which I use for my op-eds, which is three turns of nuance.
    0:12:42 Like I like that kind of thing. What I’m doing with the editing of the story arc is again,
    0:12:46 just listening for how the listener is going to move through it. Do they hear the organization?
    0:12:50 Do they have to work to follow it? Can they just naturally flow along and learn as they go?
    0:12:55 Okay, so that means you’re recording how much footage an hour, an hour, and that gets edited
    0:13:00 down to what? Anywhere from 20 to like 45 minutes. 20 to 45 minutes. Right. But I want to say something
    0:13:05 about that. This is why there are what I consider two types of editors. There’s what I call shaping
    0:13:10 editors who are people who love as much raw material to work with as possible and then to kind of carve
    0:13:16 out the arc their own way. I think of this a bit like a sculptor who’s given a slab of marble
    0:13:20 and figures out the shape. That’s what I like to do. And then there are editors who take what
    0:13:23 they’re given and they do a really good job figuring out how to rearrange it, how to put it
    0:13:28 together, think about it. That to me is a more straightforward type of editing. As a shaping
    0:13:34 editor, I look for maximum optionality in my recording, in that hour recording period,
    0:13:37 because I want to have enough material to carve out the thing that I’m working on. Whereas for
    0:13:42 some of the other editors- So when you’re editing, it’s not just taking out ums and blank spaces?
    0:13:46 Oh my God. No. And in fact, I want to just deconstruct a myth here because we get a lot
    0:13:50 of flak for people saying, “You guys remove the brets and you guys do this.” And it’s actually
    0:13:56 ironic, we never do that. What we do do in fact is add brets because our people talk too fast
    0:14:01 and don’t pause. And so sometimes we have to manually slow them down. Mark Anderson does speak
    0:14:04 very quickly. It’s not just him though, he does. By the way, why do you joke about him when you get
    0:14:08 like a written transcript is for every written page, for every page of a transcript, you can
    0:14:13 estimate about two minutes. And in his case, it’s like one minute, the density is so high,
    0:14:18 but the rest of the firm talks pretty fast too. And so PSA for everyone, do not listen to our
    0:14:22 podcast at 1.5 or 2x speed. You should only listen to it at regular speed. But back to your
    0:14:27 question. So it’s not ums and aus. I mean, we do do some tics. So my rule about tics is we don’t
    0:14:32 want to remove all those tics, actually. We do however remove tics that are a little too repetitive
    0:14:38 to the point of being disruptive to the listener. And I, by the way, have this tick there. You’re
    0:14:43 going to love this. So when I first started doing podcasting, I was only a behind-the-scenes person,
    0:14:47 so I really was insecure about being a host quite frankly. Right. You didn’t host the whole first
    0:14:51 year. I don’t really want to host because I just felt like, no, no, I’m a behind-the-scenes person.
    0:14:55 What are you talking about? I’m an editor. I can’t be a host. So it’s funny because everyone hates
    0:15:00 Son of their own voice. And I noticed all my tics. And the first one would be like, uh-huh, uh-huh, uh-huh.
    0:15:05 Got it, got it, got it. Mm-hmm, mm-hmm, mm-hmm. Like, like, like, or yeah, you’re right. Mm-hmm,
    0:15:11 various versions of this. And so what I would do is I would hear my tics and then systematically
    0:15:16 decide conscientiously not to say them. Guess what happened? Well, they went away.
    0:15:21 And another one popped up in its place. It was like a game of whack-a-mole. It didn’t matter
    0:15:25 how many tics I got rid of. A new one just jumped right up in its place. And so my theory about this
    0:15:29 is, and maybe it’s grounded in science, I don’t know, I’ve never looked it up, is that there’s
    0:15:34 something psychological with how we use these tics, whether it’s an anxiety management or a natural
    0:15:39 way of thinking or like some kind of dead space words between thought-out words, like subconscious
    0:15:45 words even. Anyway, that is how people talk. So you edit those sounds or specific phrases and words,
    0:15:50 but the actual content, is it moving things? So a lot of the people on Twitter asked about
    0:15:55 how do you edit the podcast from, you know, the whole, it’s a story arc to rest. So the edits are
    0:16:03 to optimize for what I call insights per minute. There’s three things to that. One, it’s that
    0:16:08 if you have a non-cultiv personality show, and I talked about this before, how there’s a taxonomy
    0:16:13 of types of shows, and cult of personality shows, which are very host and personality driven.
    0:16:16 You mean like a Joe Rogan show? Like a Joe Rogan, that’s a perfect example.
    0:16:20 The audience is following Joe Rogan, they almost don’t care who his guest is, of course they care
    0:16:24 if it’s Elon Musk or someone else, but because of that combo, they’re willing to listen for three
    0:16:28 hours to the two of them on air smoking pot. Basically, you don’t want to abuse the user’s
    0:16:32 time. It’s not so much to abuse the listener’s time, it’s that ear shares and you mind share,
    0:16:37 you’re competing for that share. So the show has to be differentiated, and if you want people to
    0:16:41 listen to your show and it doesn’t have a cult of personality, then you have to make sure it’s
    0:16:45 resourceful, and they have a high insights per minute. So their time and their payoff is worth it.
    0:16:48 Insights per minute. Is that an actual metric, or is this like a new metric?
    0:16:52 No, it’s a thing that I coined, but it’s not like we measure it formally, but it’s what we
    0:16:58 listen for. And to answer your question about starting it off, it matters more in the first
    0:17:03 five to 10 minutes, because it’s just like editing an article. So I call myself a chartbeat editor,
    0:17:06 because when I was at Wired, I was obsessed with the leaderboard, and I, of course, like love
    0:17:10 seeing where I was on that, especially because I had a flailing section that I wanted to take to the
    0:17:15 top. And so I was very motivated by that. But then what I noticed in chartbeat besides a leaderboard
    0:17:19 is you saw where listeners, or sorry, where readers dropped off. And that was super valuable
    0:17:24 to me, because then I started seeing patterns of, oh, well, if people drop off here, I need to work
    0:17:30 harder to really get the nut graph up here before the third paragraph. And the more I work to make
    0:17:34 sure that every sentence is calculated to keep the listener, the reader engaged, the better the
    0:17:38 piece. And then by the middle and the end, when they’re committed, you have a lot more room to
    0:17:43 be loosey-goosey and fun. So in the podcast, that’s the exact same thing, the chartbeat model
    0:17:48 that I brought here. This is how I learned editing just by doing it. So to me, the first three to
    0:17:52 five minutes are incredibly important, because that’s the highest drop-off point. So we use the
    0:17:56 intro as a technique. This is why we actually record our intros after the fact, not before.
    0:18:00 Introing who the person is. We intro who it is, the topic, the range, and there’s various ways
    0:18:03 of doing it. We experimented for a while with having snippets. We did all kinds of experiments
    0:18:08 throughout the years. But what I find is that the intro is a tool to let you start the conversation
    0:18:12 in medias res, which is the term from literature for starting it in the middle of the story.
    0:18:15 And why that’s so important is if you don’t have a cult or personality show, like a Joe
    0:18:20 Rogan and an Elon Musk, if you have seen someone new who’s really smart, but no one’s heard of,
    0:18:24 if they start out with their personal story, that’s probably going to be boring because they’re not
    0:18:29 bought into this person. They don’t know who it is. However, if you start with their advice
    0:18:34 and the thing that you find resourceful and useful as a listener, then the listener is going to be
    0:18:38 like, oh, that’s interesting and remain hooked. And then by the middle or the end, you can then
    0:18:45 weave in their story. So the editing is about reflowing and rearchitecting that arc for that
    0:18:49 type of journey of a listener through the entire episode. And, you know, back on this note of
    0:18:54 scripting versus not scripting, one of the folks on Twitter asked, do you guys do these sort of
    0:18:58 informal hallway style conversations? And the answer is that’s how they actually started.
    0:19:03 But what I found is that if you’re really trying to grow the show, it was only when we started
    0:19:07 editing it that it significantly, you look at the charts, it was like upward curve with the edits.
    0:19:11 And that goes back to the fact that if you’re not a cult of personality, people don’t, I mean,
    0:19:14 doesn’t it bug you to hear people just chit chat when you’re not, you’re kind of like, get to the
    0:19:19 point. So we do do hallways to all conversations, but mostly they’re just kind of these organic
    0:19:23 conversations that are working towards some point of view. So tactically, how are you doing this?
    0:19:29 Are you using a document? Great question. One of the questions people had on Twitter was about
    0:19:34 the technology stack we use. So a couple of things on this. So I’m embarrassed to say that
    0:19:40 the way I edit podcasts is by starting with the transcript, because I’m a word person and do like
    0:19:44 a rough paper cut. And I actually do this without listening to the podcast. After the paper cut,
    0:19:49 the technical audio editor turns it into a first cut. And the reason I do it this way
    0:19:53 is because I want to see the whole shape of the narrative without being distracted by the sound.
    0:19:58 The problem with that approach is that when you see on a text is unidimensional and flat, whereas
    0:20:02 in voice, it’s much more multidimensional. There’s multiple factors. Yeah, like I might be super
    0:20:05 excited in one sentence. Right. And then you suddenly have up talk and down talk. And you
    0:20:09 can’t put that right next to another sentence where I’m quiet. That’s exactly it. So that’s why
    0:20:14 it’s kind of a dangerous method, which is why the tool descript is a really interesting one because
    0:20:18 they actually democratize the process. So to me, the first round is about seeing the global arc.
    0:20:23 The second round is about listening to it and really seeing how it truly works and flows. And
    0:20:27 the third round is really about sort of polishing it and making sure it just has this ease of listening.
    0:20:32 So when you’re editing, can you boil that down to principles that we should take away when we
    0:20:36 think about editing stuff? Yeah. So I guess the number one thing I would say is the biggest
    0:20:42 difference between text and audio is that audio is a living breathing organism. So every change you
    0:20:48 make introduces a new interaction effect. It’s like you’re adding a new variable. And so every
    0:20:52 time you decide like in this cut, I’m going to do this, when you listen to your next cut, it messes
    0:20:56 something else up, which is why tools like descript are so important because they shorten the time
    0:21:00 between what I call the design and manufacturing phase of designing something like a semiconductor
    0:21:04 chip. The ability to have that sort of iterative feedback loop is critical, which is why all the
    0:21:09 new editors are getting trained on descript. So the living breathing organism, the different
    0:21:14 framework required then as well. Yeah. It means it’s not unit dimensional, which I mentioned,
    0:21:18 it has multiple layers. And I described that for every podcast, there’s like five dimensions,
    0:21:22 or five levers even that you can use. So one is obviously the content itself, like what the substance
    0:21:26 of what people are saying. One is the energy of the individual speaker, their tone, their excitement,
    0:21:30 do they sound flat? And that can’t be edited, can it? Well, not really. I mean, you can actually do
    0:21:34 some manipulations like raise a voice a little to make someone not sound so flat, but you don’t
    0:21:38 want to distort the voice. Right, right, right. The third thing is charisma. Sorry, that’s a charisma
    0:21:42 of the speaker. So that’s not just their level of energy for how they talk, but their sort of
    0:21:47 charismatic way of drawing people to their ideas. Is that editable? Not really. You can do other
    0:21:51 things though, because what I find with charismatic speakers is that they often also talk in platitudes.
    0:21:55 And so one of the things that I tell our editors is you actually don’t want to be efficient with
    0:21:59 the words. You want to cut the platitude statement and then keep the specific wonky statement. So
    0:22:04 then they don’t come off as like BS. And then the fourth one is chemistry, which is the interaction
    0:22:09 of the guests all in the room. So what do you do with chemistry when sometimes we’re meeting
    0:22:13 that person for the first time? I don’t think having a pre-meeting helps with that chemistry.
    0:22:16 So I think a great episode for this maybe as an example would be me and David Yulovich
    0:22:21 when we did a podcast about what time is it and he has a fun chemistry and the two of us are just
    0:22:24 very irreverent. This is when he first joined. It was about six months in and we did a podcast
    0:22:27 about his career and the editing side. I put his story at the end because I don’t know if people
    0:22:31 know him that well. So we started with his advice for founders. So that was like one of the arc
    0:22:35 decisions I made because by the way, the fifth variable is arc or narrative flow. And anyway,
    0:22:39 we have such chemistry because we had this like fight in the middle of the episode about how to
    0:22:43 pronounce GIF or GIF. Which way do you say it? Oh my God, I say GIF, not GIF, which is what he
    0:22:47 says. Ugh, I don’t even get me started on that. But like, you guys listen to that episode if you
    0:22:52 want to leave a drop on that fight. But I kept it because it conveyed a certain chemistry. So to
    0:22:57 answer your question, you have these five levers and the job of the editor is to take the material
    0:23:01 they’re given with, whether fully all over the place like my material or more linear arc like
    0:23:07 others, and then shape it into what it needs to be and edit it. So often that means removing
    0:23:11 redundancies, but not to the point of being so efficient that it sounds like mechanical. It
    0:23:16 means tightening flow, insights per minute. And then this is a beauty now of this five framework.
    0:23:24 If you have like okay chemistry, but great content, you can work with that by rearranging the order
    0:23:30 because then you keep people hooked by the flow. If you have wonderful chemistry and energy, but
    0:23:36 very little substance, you can shorten it. So you have the energy, but reduce the length because
    0:23:40 the payoff is so low. So basically what I’m saying is you can use one of these five levers and
    0:23:46 manipulate them to get more or less dial it down or up or down to get what you need. And of course,
    0:23:51 there’s only so much you can do. But what’s really cool is Descript has a company called Liarbird
    0:23:55 and they are doing synthetic audios. And what’s up with timing? Like, is there a sweet spot for
    0:23:59 how long a podcast should be? Yep, this is so funny because what I found when I asked people,
    0:24:03 like, what’s your ideal length for a podcast? Guess what? The answer was exactly proportional
    0:24:07 to their commute or workout time. So if their commute was 15 minutes, that’s what they thought
    0:24:11 that was a perfect length. If there was 45, that was great. Is there like a time that you aim for?
    0:24:15 No, we don’t aim for a time. It seems like the sweet spot is somewhere between 20 and 30 minutes.
    0:24:21 My philosophy about time and length, and this is so strong both for written and spoken content,
    0:24:25 is I think discussions about length are so arbitrary, religious debate, it should be
    0:24:30 as long as it needs to be. So if it’s gratuitously long, cut it. If it needs to be longer because
    0:24:35 we’re going in depth and it’s so interesting, why would we cut that arbitrarily? But this is
    0:24:39 the caveat to that. The payoff and the insight per minute has to be proportional to the length.
    0:24:42 So if the person is listening for a long time, there’s not enough payoff,
    0:24:45 that’s a complete waste of their time, they’re never going to trust you, you destroy that trust,
    0:24:50 you lose them as a fan. So that’s the first thing. The second thing to your question about the ideal
    0:24:55 length, I do believe that short form podcasting is a really important form. That’s one of the
    0:25:00 trends in the space. And I had a moment, kind of an insight was, I had this realization that,
    0:25:04 gosh, all these other people are doing news shows like the New York Times Daily and Vox Today
    0:25:10 Explained. And again, it’s a reported model, third party experts, which is great. But why aren’t we
    0:25:14 doing a first person where people who know this industry are commenting on it directly
    0:25:19 and do that way? So I was like, I want to do a news show and news podcasting is actually a
    0:25:23 growing trend. And then why don’t we combine it with short form? So then I thought, let’s do
    0:25:28 it for 16 minutes because Andrews and Horowitz, A16Z, 16, why not? So it had 16 minutes.
    0:25:30 Now I think this one must be much harder to edit though.
    0:25:34 Well, first of all, I’ve not gotten it to 16 minutes. Sometimes it’s like 17. Sometimes it’s
    0:25:40 19. I try to only have it below 20s. A couple of times I’ve abused it. So for the first episode,
    0:25:45 I tried doing it where everyone just did one full take a few times. And then what I had found was,
    0:25:49 this is actually true for you in particular, you said different things on each take. And I was
    0:25:53 like, Oh my God, what she said there was so good. And what she said, the other take was also really
    0:25:59 good. So I use the editing to then seem together the best parts of what you said. And if you again,
    0:26:03 think about insights per minute and the fact that you have only this many minutes,
    0:26:06 how do you add value for the listener? You want the highest insight per minute,
    0:26:10 hence the editing. So yes, it’s now a more highly edited show. And I’m kicking myself
    0:26:15 for it because it takes a lot of time. It’s a lot of work and it’s freaking aiming to be a weekly
    0:26:16 new show. So I’m pretty burnt out.
    0:26:21 Okay. So how do you think about frequency of programming? Does it have to come out at the
    0:26:22 same time every week?
    0:26:25 It’s funny to leave. That’s another area where people have a lot of theories. And when I first
    0:26:30 joined someone from the outside said to me, it should be exactly every Friday at 3 p.m.
    0:26:33 There’s all kinds of theories around this. And that’s all wonderful. Here’s the three
    0:26:38 things I learned. The best content will always win. Time of day, all the other stuff aside.
    0:26:44 As you know, I am a master of timing things. This is how I made my section successful and
    0:26:47 writing the specific timing for zeitgeist and virality. But for podcasts, there is no such
    0:26:52 thing. So someone asked on Twitter about the tools for creators and distributors of podcasts
    0:26:56 for people seeking to start their own podcasts, because not everyone is a big brand like this,
    0:27:00 is actually sub-stack, which people think of as a newsletter only tool. It’s really about
    0:27:06 connecting writers and people with their audiences. So people are seeking a place to both host and
    0:27:10 distribute what better place than within the email ecosystem because you really own your
    0:27:14 audience when you own that. Here’s the thing. People may talk about a podcast on social.
    0:27:18 Like you’ll see a ton of people talking about a certain episode, but the reality that they’re
    0:27:24 actually listening to it is very little. And so I think that the evolution of social podcasting,
    0:27:28 which I know you were interested in as well, it’s still too early. So technically podcasts have
    0:27:33 what I call, quote, “slow burn virality.” They don’t just go viral overnight. It takes about a week,
    0:27:38 like the first wave of listeners is in that first week, and then you kind of see it grow from there.
    0:27:42 Kind of like how I watch TV now. Oh my God, that’s such a good point. Well, you and I did a podcast
    0:27:45 on a podcast about podcasting with Nick Quaw. People should listen to that episode if they want
    0:27:49 to hear our thoughts on the trends because we did talk about binge watching and other things.
    0:27:53 Back on the timing thing, I do believe editorially and especially for written content. And this thing
    0:27:57 that I dubbed the McCluskey curve after Mark McCluskey, my former colleague, got wired.
    0:28:02 He’s now at Sports Illustrated, I believe. But anyway, he always talks about how you add value.
    0:28:05 And I say it’s when you’re offering something new or differentiated or leading early in the
    0:28:11 cycle, or you do it in the end of a news and discussion cycle where it’s after it’s very noisy
    0:28:14 and you have a very fresh or differentiated take and kind of being in the middle of all the noise
    0:28:19 is like the worst position to be in in terms of value and for the timing of it. So that’s like
    0:28:23 literally my philosophy. One thing I didn’t mention in the cycle, because someone asked about
    0:28:29 the cycle from ideas to publishing that a big focus for us is around more promotion. And you
    0:28:33 know, that’s sort of the whole cycle of things. And so one of the experiments I had wanted us to
    0:28:38 do was to start doing audiograms and people promote podcasts through video. You know, the whole
    0:28:44 definition of what is a podcast is blurring. Tom Webster of Edison Research was sharing how
    0:28:49 for many young people, especially those that are streaming, whether on video or audio and Spotify,
    0:28:52 they don’t know the difference between whether it’s on video or not. And so when people say
    0:28:57 subscribe in your favorite app, it could be YouTube. What about sound effects music? Yeah.
    0:29:02 So on the sound effects and music, we tried. So Hannah did a great episode for Halloween a few
    0:29:06 years ago where she had sound effects for the person who was talking about the why behind the
    0:29:11 weird. I would like us to have music on our show. As long as it doesn’t come off as like corporate
    0:29:15 overproduced slick, because that’s not our aesthetic at all. However, I do think we need that and it
    0:29:19 adds more dimensionality. I mean, it just sets the tone in the beginning. So for Ben’s new show,
    0:29:24 it’s Ben Horowitz and Chaka Senghor. They co-host this show called Hustlin Tech, which is guides
    0:29:28 to technology for hustlers. But what it really means, it’s really helping people use technology
    0:29:35 to help themselves, which is an amazing concept. Basically, for that show, I did add music and
    0:29:40 it was interesting because I didn’t want like stock music. And so I asked Chris Lyons, you know,
    0:29:43 who runs our cultural leadership fund, but I didn’t even know he’d put his own sample in there.
    0:29:48 He sent me like six tracks, including all these stock things that had a more hip hop sound to it.
    0:29:53 And it turns out the one we all liked happened to be his personal one. So I was so excited,
    0:29:57 but it sets a tone for the show. And I do want that. The reason we haven’t been able to do it
    0:30:02 though is because licensing for songs is very complex. It’s not just copyright. It’s like layers
    0:30:04 and layers of record distribution labels. So music is like one of the things that you’re
    0:30:08 experimenting with. It almost sounds like you’re treating this like a startup or like a product.
    0:30:13 Totally. I had a moment of emotional where I got a little teary-eyed because I was solo
    0:30:17 for a long time. First, it was me and Michael. Then I was solo for a long time. Then I hired Hannah
    0:30:22 and then it was me and her. And then about almost a year ago, I hired Amelia to be our managing editor.
    0:30:29 And she’s growing the team so that we can scale this. And I had proposed that we hire an editor
    0:30:33 for every vertical so we can really just go deep and kind of channelize our insights there and
    0:30:39 truly self-select the audience. So anyway, to that point, I kind of got emotional when I saw
    0:30:44 that all these desks that had been empty around me had people sitting in them. I got kind of like,
    0:30:49 “Oh my God, is this how a startup CEO feels? If this is it, I’m in. Count me in.” Because I’ve never
    0:30:54 done that. Okay. What are some new experiments you’re thinking about? So in general, in podcasting,
    0:31:00 I’m fascinated by audio fiction. That’s like a really interesting and important trend. However,
    0:31:04 I cannot for the life of me think about what our version of audio fiction would be. So maybe I’ll
    0:31:07 just maybe do something personally. So who knows? At some point, I can experiment with that.
    0:31:09 I’m still waiting for your book, by the way. I know. So am I.
    0:31:18 Okay. So experiments in our podcast. Okay. So there’s a blending of, as you talk about, you wrote
    0:31:24 about this in your knowable post, that you get this found time with audio. One of the things that
    0:31:29 I’m interested in is that if the blinds and definitions of podcasting is blurring and you
    0:31:33 really talk about this more than anyone, Connie. So I feel like I’m preaching to the choir here.
    0:31:39 But the idea that audiobooks and podcasts and educational content all kind of blurs together,
    0:31:44 for that same reason, why wouldn’t people listen to blog posts in podcast form or email
    0:31:49 newsletters in podcast form? So I asked some of the other partners to read out loud their blog posts
    0:31:54 on air. I’ll probably read a couple. And I do want to experiment more with us doing more
    0:31:59 content in the audio form in that way. There’s already tools like autumn out there and media
    0:32:04 outlets, but just more like a voiced way and not so manual. There’s like a new set of tools
    0:32:09 coming about in that one. What are some experiments that didn’t work early? Oh, that’s a good question.
    0:32:13 So very early on, Michael Copeland recorded a conversation with like four kids from a youth
    0:32:16 and tech conference. And he told me about the footage and how complicated it was. And I was
    0:32:21 like, why don’t you make it into like a narrative where you narrate it? And he did a beautiful
    0:32:26 job of turning it into sort of an audio narrative story. So I’d like to do that. And it’s not that
    0:32:29 it didn’t work. It’s just that we haven’t invested in it because we were so building one style.
    0:32:33 So I’d like to do more of that. Experiments that didn’t work. So back to the question you asked
    0:32:38 me about the ideal length. So I thought, well, what if I experimented with interstitials, where we
    0:32:43 could segment an episode. Interstitials, like music in the middle. So not music. Kind of like
    0:32:47 a intermission almost like a pause point that the listener would know. Hey, if you want to take a
    0:32:53 break, this is a good spot. My thesis at the time was that people on campus, some kids on campus
    0:32:56 at Stanford told me they were listening to it like while walking a class. And they don’t want to
    0:33:00 listen to a long episode because the commitment was so big. So I was like, well, what if it’s a
    0:33:05 long episode, but I segment it for them like the way you have chapter turns. That didn’t really
    0:33:09 work because then I realized very fast from other people like, duh, I don’t need that. My app holds
    0:33:13 my spot. So it doesn’t really matter. So it’s kind of orchestrated and contrived. So that didn’t
    0:33:16 really work. Although that might come back because as with all experiments, sometimes it’s a matter
    0:33:20 of timing. You probably do a hundred little experiments that you just don’t even think about.
    0:33:25 Sometimes yes. But the reality is that I actually think you should have more focus. And I have a
    0:33:30 very specific focus and a strategy for the existing Zee podcast and what I believe and where it’s
    0:33:35 going. So I have a very particular vision for that. And when you have a vision for, of course,
    0:33:40 the big podcast, but also each particular episode, are you editing until it hits that vision? Oh,
    0:33:45 for an individual episode, how do you want to stop editing? Oh my God. This is the hardest question,
    0:33:50 believe it or not, because right now we’re onboarding some new editors. Yeah. And how do you
    0:33:54 teach other people? Well, this is what I’m struggling with. And frankly, I read Ben’s book
    0:34:00 recently and it’s beautiful, by the way. And how do I think about doing this culturally and thinking
    0:34:04 about it? This is the exact challenge because well, I learned podcast by myself, like everyone can
    0:34:08 do it. And I’m realizing that the way we do things is quite things that I take for granted
    0:34:12 as implicit or not that explicit, or they’re very tacit things or mindsets that are really
    0:34:18 unique and foreign. So to answer that question, the answer you can’t use when you’re scaling
    0:34:21 is, well, I’ll know it when I know it. Like, you know, the line from Justice Potter Stewart
    0:34:25 about porn, he said, I’ll know it when I see it. I mean, that’s how I think about investing sometimes.
    0:34:29 Really? So it’s like instinct. So this goes back to that whole like view of like instinct.
    0:34:34 But the reality is that instinct is trained by experience. But what I find is taste is very
    0:34:37 difficult to train. And you can’t just say to someone, well, you’ll know it when you hear it.
    0:34:42 That’s not a good enough answer. So it’s frankly not helpful. It’s not helpful. And it’s hard. I
    0:34:48 don’t have a full answer yet. But I will say that you can figure out the bar by having some
    0:34:51 principles for what you’re doing. So what are your editorial principles?
    0:34:56 They’re things like I mentioned non derivative experts, true to the maker, the culture of
    0:35:00 adding a very fresh and differentiated take. We don’t want to say what everyone else is saying,
    0:35:05 the art of timing. Does this meet the bar? Is this really adding value to the conversation?
    0:35:11 Is it signal versus noise? Is it more of the same? Is it spinning forward? I use that phrase all the
    0:35:14 time, spin it forward, spin it forward, spin it forward. How do we do it? At the same time,
    0:35:19 how do we make it concrete? Because our audience is not just people like big Fortune 500 companies
    0:35:24 thinking about the future of tech or startups. I mean, I hear people talk about the podcast who
    0:35:27 don’t work in tech. That’s to me is a bar of success right there. So actually,
    0:35:33 I describe it as the podcast is influencing the influencers. And so to me, when media outlets,
    0:35:37 reporters say like, oh, I listened to that episode, I love that because they may not write it up,
    0:35:41 but it informs their thinking. One of my big principles is that we need to either provide
    0:35:47 a framework for how to think about something, if not an answer, or tease apart height versus reality
    0:35:50 and think about like how big tech trends like VRAR or whatever the topic is,
    0:35:55 it may play out concretely, then it informs the influencers. Give me a concrete example,
    0:35:59 like what’s the proudest moment of that? So one of my most favorite moments and stories about
    0:36:04 the podcast is that a Senator, a US Senator was listening to the episode and this is a testament
    0:36:08 to the network and they come across our content and the whole thing kind of reinforces like a
    0:36:15 flywheel. And he heard the episode, it was about health data, and he literally had his staffer
    0:36:19 reach out to us and the staffer quoted his line to us, like what he said. And he’s like, I can’t
    0:36:23 believe this idea is not already being done already. I want to propose it in the upcoming
    0:36:28 session as legislation. Can you please put me in touch with that founder? So you’re affecting
    0:36:32 policy. I literally call it policy by podcast. Now, I don’t actually think that came about,
    0:36:36 but that is one of my all time favorite stories. Wow, that’s awesome. And by the way,
    0:36:39 in the early days, in terms of thinking about the audience, there was an incredibly strong brand
    0:36:44 that Mark and Ben and Margaret built as a base and a foundation for sure. And the network is
    0:36:49 a thing that continually reinforces it. But initially, I had to beg my contacts, people I
    0:36:52 edited people in the book publishing industry to get them on the podcast because A, they didn’t
    0:36:58 really know A, six and Z. B, it was a fledgling nascent podcast. It hadn’t had like an established
    0:37:02 presence. And so I convinced one or two of the key publicists and book publishers because I ran
    0:37:08 their excerpts in my section, I then got the, once I got one big name author in, then the rest
    0:37:12 started following. And then I started getting pitched because you must get pitched books all the
    0:37:17 time. Not only pitch books, we get at least five to 10 emails a week that are just pitching us.
    0:37:20 Then of course, people, book authors going on podcasts became a thing because it actually
    0:37:24 moves book sales. By the way, one author told me that he came on our show and we moved a thousand
    0:37:28 books in like a few days because it’s a very self selected audience that’s, you know, listening
    0:37:33 and very motivated and there’s no better way. But we try to break the script for book podcasts.
    0:37:37 So one of my rules is again, going back to editorial principles of differentiation is
    0:37:40 if you have someone like Yuval Harari who’s been doing the circuit and he’s like on every major
    0:37:45 podcast show and he’s a really well read author and the person who put him on is my friend,
    0:37:48 Rimjim Day. She’s one of the people who took a very early bet on us.
    0:37:50 He has to talk about something different with you.
    0:37:54 Well, it’s that he has to talk about his book, but we have to do it in different way.
    0:37:58 So I want to go back to a topic you mentioned early on, which is how in that first year,
    0:38:01 you didn’t like hearing your own voice. That’s why you don’t want to get on the podcast.
    0:38:06 But now I have been with you in public where people run up to you and say they recognize
    0:38:12 your voice. So how does that feel being a voice celebrity? I’ve seen people want to take photos
    0:38:16 with you, but what does that feel like? It goes back to feeling that sort of vulnerability of being
    0:38:20 a person who wants to be behind the scenes. I don’t know if you know this, but my first two years,
    0:38:26 I didn’t even put my name on the byline of the podcast. In fact, people found me proactively,
    0:38:30 which is crazy to me because I thought the goal of the host, because this is what editors do.
    0:38:35 Editors do tremendous work. The shaping editors do tremendous work to shape a piece. They practically
    0:38:40 co-write them. But I did not include myself on the byline because I thought it was my job to be
    0:38:44 invisible as the host and the moderator. And I always view myself as a shepherd for the audience.
    0:38:48 That is my job. Although it’s funny because over the years, then people started finding me. I
    0:38:52 eventually added my name on the byline. It’s incredible when people come up to you because,
    0:38:56 frankly, when you’re sitting in a room and this is what I love about podcasting, is that that’s
    0:39:00 intimacy. People think they know you. I love that. They feel like they know me because I’m in their
    0:39:05 ear, but there’s a huge asymmetry there. But anyway, it’s amazing and powerful and moving to see
    0:39:10 your work in action. And I’m so grateful to our fans and to Andreessen Horowitz for letting podcasts
    0:39:15 go off the ground. Dixon and Kim and Michael started it, but after a while, I don’t think
    0:39:19 really people paid attention to it. I think Mark told me about a year and a half in.
    0:39:23 I think it surprised us all. I think it did. People didn’t really think it’d be so big.
    0:39:27 But like I said, we had to earn those listeners because it’s not like you have brand and they
    0:39:31 come. It’s that you have the guest and then they listen and it gets better and this is where the
    0:39:38 editing comes in. Yeah. I feel like I have seen you edit and work magic. Even our WeChat piece
    0:39:42 that we did years ago, you made that into a completely different thing. I’ve seen you edit
    0:39:46 ever since and it’s really funny because once you were in the zone, like one time I was watching you
    0:39:51 on Google Docs edit and I really felt like I was watching a painter paint. I just saw these like
    0:39:56 sentences moving around and it was like watching a paintbrush. That’s so beautiful. I love that
    0:40:00 you’re saying that. Don’t make me cry on the podcast. Were there podcasts that surprised you,
    0:40:06 things that made you cry? The podcast that made me cry, there’s actually been two or three.
    0:40:10 So one was with Leila Gena of Sama Source. They were empowering people around the world
    0:40:17 with micro work. They found a way for a woman who previously had no spending money to be able
    0:40:23 to for the first time in her life by makeup. And that sounds so frivolous, but that made me,
    0:40:28 it completely, I started crying. I edited it out, but that was one of the episodes that made me cry.
    0:40:34 Another one that made me cry recently was Ben and Shaka when they interviewed Deshawn and Cherie
    0:40:40 about Maven and there was a moment that just brought me to tears and you should listen to that
    0:40:45 episode, but that was also another one of the episodes that made me cry. So I want to talk about
    0:40:50 your policy on cursing on the podcast. Do you do it? Do you bleep it out? It’s funny because I felt
    0:40:54 a lot of tension about it. I remember I once asked Ben and Margaret about it because I was like,
    0:40:58 you guys think it’s bad that I cuss? Should I stop? And Ben was like, entrepreneurship is hard,
    0:41:03 it’s a struggle. It’s meant to be hard. And then I started getting folks on Twitter, some being very
    0:41:06 helpful and some being judgmental. You know, we don’t think you should cuss. You’re such a beautiful
    0:41:11 voice and you sound so nice. Is it necessary? That would probably drive you to swear even more.
    0:41:15 It did. And frankly, the reason I wanted to keep it is because I believe when women,
    0:41:20 we’re asked to conform to so many things, no uptalk, no this, no that. There’s so many different
    0:41:25 things. And I’m just like, you know what? I want to be me, raw and real. But here’s why I did finally
    0:41:30 decide very recently to stop cussing on those shows. And no, I don’t bleep it out, but funnily
    0:41:34 enough on the podcast you and I did with Nick Kwaab, a podcast about podcasting, someone on Twitter
    0:41:38 totally teased me. They’re like, I think it’s hilarious that you bleeped out the name of a
    0:41:44 company to protect their confidentiality, but you didn’t bleep out your F-bomb. So now I edit it out.
    0:41:49 So I stop because they’re kids in the car. And in the beginning I was like, well, don’t listen.
    0:41:54 But now, and we’ve talked about ear shares and new mind share, people need to listen to podcasts
    0:41:57 with kids in the car. And by the way, the other trend I think is super interesting about podcasting
    0:42:03 is these new wave of shows just for kids. It’s one of my favorite things. I feel like in podcasts
    0:42:08 you’re taking something that’s previously just information and education and you’re forced to
    0:42:12 make it entertaining. Ah, you’re right. Well, I think the job of the moderator for me is to be a
    0:42:17 shepherd for the audience. And that means including stitching together statements, helping the listeners
    0:42:22 follow along with the arc, summarizing and explaining. But to the entertainment part, I agree with you.
    0:42:26 I do believe the future of podcasting is merging with entertainment. And that is going to be
    0:42:31 interesting to see. Tell me a little bit about what software, what technology do you use?
    0:42:35 Like the hardware, not just the software. Yeah. Yeah. So we use a zoom recorder and we use sure
    0:42:41 mics and we use like standard. At one point we use hall mics for our clamp. Do you use a mixer?
    0:42:44 Oh, no. So from the early days of the podcast, people would keep complaining on Twitter like,
    0:42:48 “I listened to your podcast. It doesn’t sound good.” I thought musicians always use mixers.
    0:42:52 Well, one of the negative legacies of podcasting tools is that a lot of them were grounded in the
    0:42:56 music world versus made natively for podcasting, which is why you like Descript and other tools
    0:43:00 came about. Basically, we got rid of the mixer and then our sound improved drastically because we
    0:43:03 can manipulate more because you record separate tracks. How did you know to get rid of the mixer?
    0:43:07 So this is my biggest, most invisible partner in crime who I want to give a shout out to is
    0:43:13 our sound engineer, Seven Morris. I brought him in and I was like, “Please fix our sound.”
    0:43:17 People keep complaining, “I cannot take no for an answer. You need to tell me what’s wrong
    0:43:21 and I want it fixed.” I’m just like, “There surely is a solution.” It was the funniest thing
    0:43:24 because what he did was he basically removed the mixer. He’s like, “You guys don’t need this.
    0:43:28 That’s what people use for live events. You’re editing. You want individual tracks. You should
    0:43:32 be plugging directly into the recorder, not having a mixer in between.” So that’s what we did. Our
    0:43:36 equipment is not that expensive. I give a lot of startups advice on how to do this stuff and
    0:43:42 the list of equipment is all under $1,000. We have sound panels and acoustic stuff, but not really.
    0:43:46 We use really standard equipment. I think the primary thing in the tech stack is that we’re
    0:43:51 now on Simplecast, which is our hosting platform. I think of them as the stripe of podcasting because
    0:43:56 they have an API model. We’re getting a lot of features in that and particularly going to be
    0:44:00 more important as we expand to more and more shows. The other thing is that, as everyone knows,
    0:44:04 analytics for podcasts have been very, very broken and very difficult because the industry has not
    0:44:09 standardized. What’s great is that Simplecast has been going through the process of IAB certification.
    0:44:14 For me, the wishlist has always been completion. Where do people drop off? I want chartpeat-like
    0:44:20 analytics for things. I want to know about audience overlap between shows. I want to know where people
    0:44:24 are more engaged. Are there parts where they’re repeating and trying to listen again? There’s
    0:44:28 so many million things I want to know. What’s also great is Amelia hired. I actually credit to Andrew
    0:44:33 on this because he had suggested as part of the hiring plan. He suggested we hire a growth and
    0:44:38 audience development person in addition to the editors. I’m really glad he did because Amelia
    0:44:44 hired a wonderful growth and audience development person for us, Jared. He is very much thinking
    0:44:49 about how to bring the promotion side. As we’re growing and thinking about, “Okay, we have our
    0:44:55 main show. Now we have the 16 minutes thing. We have hustling tech. What is the future of our
    0:45:00 podcast library look like?” I think, as a market has a great phrase, she describes our podcast and
    0:45:07 the editorial as a platform, which I think is exactly right for the podcast. I think of us
    0:45:11 as expanding into more of a network. Network meaning multiple shows. I want to try different
    0:45:15 types of shows, but you also don’t want to abandon your audiences. I don’t want to arbitrarily start
    0:45:20 a show. Then if we only have a few episodes, not keep that feed, which is why some of these
    0:45:25 shows are starting off as series. Then we can break it out into its own show and its own feed.
    0:45:29 Capsule collections in the beginning and then they break out. For some, we start from the get-go.
    0:45:34 So 16 minutes, that I knew from the beginning would be its own show. But what we did was
    0:45:38 we let it run on the main feed for the first 10 episodes. Someone on Twitter actually asked
    0:45:41 that. I thought it was the cutest question. They said, “Why is it 16 minutes? It’s not on the main
    0:45:46 feed anymore. This is the reason why.” Then we ripped off the Band-Aid and told people it’s no
    0:45:50 longer on this feed. So now people only subscribe there. You see a big spike when you gave those
    0:45:55 call-outs. That’s because I need to build a new show there. Let me just tell you how painful that
    0:46:00 is because after building a show at this 500th episode and now starting at 15, it’s a very different
    0:46:05 game. It’s like exercising new muscles all over again, but I love it because I miss that zero to
    0:46:08 a second child. I guess maybe it’s very similar because you’re going back to scratch again in
    0:46:14 some ways. That’s how you build that type of a network. Also, we will be verticalizing some of
    0:46:19 the channels so that people can subscribe to feeds. We’re going to have a separate channel
    0:46:24 initially for A6 and ZBio. That’s great because an audience can self-select. If people want to
    0:46:28 talk about journal articles without people who don’t want to hear about crypto policy,
    0:46:31 you don’t have to mix those. This is great because this is, to me, the future of media.
    0:46:37 I’m a big believer in Kevin Kelly’s 1,000 true fans and then going from there. Initially,
    0:46:40 when I started thinking of mapping out the territory of podcasts, I literally thought
    0:46:44 about it as mapping sales territory. I want to conquer the open-source community. I want to
    0:46:49 conquer Node.js. Let me bring someone on from there. I literally mapped it out geographically in
    0:46:52 community-wise to grow and aggregate that. This is how to take over the world.
    0:46:57 Software is in the world, but so is audio. I am so honored to be able to interview you today.
    0:47:03 Happy 500th episode. Thank you. Thank you to everyone for listening. I also thank you to
    0:47:08 our incredible, amazing team here. I want to thank especially our audio engineers,
    0:47:13 Sevin Morris and Tommy Herron. The first editor I hired, Hannah Tidnam, who’s now been here for
    0:47:19 three years. Now, Emilia and the rest of our team who’ve joined Das, Lauren, and Zoran,
    0:47:26 who are starting to podcast. Thank you to Margaret especially. Thank you to Kim, who reached out and
    0:47:31 hired me and also was funny. She actually told me she had never thought I would be into podcasting
    0:47:36 and I was like, “Me neither,” but I’m so grateful to the firm. Frankly, it’s a miracle that they
    0:47:41 would be so supportive of us doing this. I’m so thankful for that. Thank you, everyone,
    0:47:44 and thank you, Sonal, for the A16C podcast.

    “Hi everyone, welcome to the a16z Podcast…” … and welcome to our 500th episode, where, for the first time, we reveal behind-the-scenes details and the backstory of how we built this show, and the broader editorial operation. [You can also listen to episode 499, with head of marketing Margit Wennmachers, on building the a16z brand, here.]

    We’ve talked a lot about the podcasting industry, and even done podcasts about podcasting, so for this special episode, editor-in-chief and showrunner Sonal Chokshi reveals the how, what, and why in conversation with a16z general partner (and guest-host for this special episode) podcasting fan Connie Chan. We also answer some frequently asked questions that we often get (and recently got via Twitter), such as:

    • how we program podcasts
    • what’s the process, from ideas to publishing
    • do we edit them and how!
    • do guests prep, do we have a script
    • technical stack

    …and much more. In fact, much of the conversation goes beyond the a16z Podcast and towards Sonal’s broader principles of ‘editorial content marketing’, which hopefully helps those thinking about their own content operations and podcasts, too. Including where podcasting may be going.

    Finally, we share some unexpected moments, and lessons learned along the way; our positions on “tics”, swear-words, and talking too fast; failed experiments, and new directions. But most importantly, we share some of the people behind the scenes who help make the a16z Podcast what it was, is, and can be… with thanks most of all to *you*, our wonderful fans!

  • Brand Building Ideas… and People

    AI transcript
    0:00:02 Hi everyone, welcome to the A6NZ podcast.
    0:00:07 I’m Sonal, and I’m here today with one of our special episodes for our 10-year anniversary
    0:00:08 year.
    0:00:15 This is also the 499th episode of the A6NZ podcast, and the 500th will come next week.
    0:00:18 Both are special behind-the-scenes shows, where for the first time we answer some of
    0:00:23 the frequently asked questions we often get about how things work and how they came about.
    0:00:27 We also did another episode earlier this year for our 10-year anniversary in case you missed
    0:00:32 it, where we had Stuart Brighterfield, CEO of Slack, turn the tables on the show by interviewing
    0:00:38 A6NZ co-founders Mark Andreessen and Ben Horowitz on the topic of entrepreneurs then and now.
    0:00:42 They covered everything from tech shifts to changes in entrepreneurship.
    0:00:47 But in this episode, we go behind-the-scenes on the building of the A6NZ brand during the
    0:00:53 early days up to 2014, because many technical founders, academics, and other experts often
    0:01:00 believe that great products, or their great ideas, sell themselves without effort.
    0:01:02 But in reality, they often need PR.
    0:01:03 How does such brand-building work?
    0:01:08 So A6NZ Operating Partner and Head of Marketing, Margaret Wenmacherz shares her insights using
    0:01:13 the example of A6NZ, which she joined very early on, coming from a leading PR agency she
    0:01:16 co-founded in Silicon Valley called Outcast.
    0:01:21 Finally, in this episode, we reveal how popular pieces like Software Is Eating the World came
    0:01:27 about, as well as the many small and big decisions that go into what to do and what not to do
    0:01:31 when it comes to building a brand, particularly when the product is something abstract as
    0:01:33 many software products are.
    0:01:38 As a reminder, the content here is for informational purposes only, should not be taken as investment
    0:01:44 advice, nor is directed at any investors or potential investors in any A6NZ fund.
    0:02:10 Please be sure to see A6NZ.com/disclosures for more details.
    0:02:14 So we checked with Facebook and Facebook said, “No, thank you, please don’t represent
    0:02:15 this company.”
    0:02:21 So I went back to the entrepreneur, and the entrepreneur was kind of upset and knows Mark
    0:02:23 and asked Mark to intervene.
    0:02:28 But then Mark asked for my contact information, and I had no idea why.
    0:02:30 So he reached out and he’s like, “We’d like to meet.”
    0:02:35 I met Ben and Mark at this place in Palo Alto, I think it’s called the Creamery.
    0:02:36 Oh, yeah.
    0:02:37 That’s like their hangout.
    0:02:38 Apparently, it’s like their hangout.
    0:02:39 It was their hangout because they didn’t have an office.
    0:02:44 So I go to the Creamery and have my little audience, and I made the mistake of bringing
    0:02:46 sort of a standard capabilities presentation.
    0:02:49 And anytime you put a piece of paper in front of Mark, you will just go read it.
    0:02:51 He lost a draw on it, by the way, as you well know.
    0:02:52 Yeah.
    0:02:55 He was lost in a doodling stage at the time.
    0:02:58 And then I was like, “Here’s how we, here are the kinds of clients we’d like to work
    0:02:59 with, blah, blah.”
    0:03:00 And I’m like, “Thank you.”
    0:03:05 And at the time, Ben had just left HP, and they were both angel investing.
    0:03:10 So I thought, well, maybe they’ll do potential referrals if one of their portfolio companies
    0:03:12 is looking for PR representation.
    0:03:13 That was the end of that.
    0:03:15 I forgot about the meeting because nothing was happening.
    0:03:19 And then a couple of months later, Mark got back in touch, and it’s like, “We’d like to
    0:03:20 meet again.”
    0:03:25 Then they said, “Well, we’re going to start this venture capital firm, and we’re going
    0:03:26 to launch it next year.”
    0:03:29 Why do they, so this is actually a very cutting edge idea, and I want to talk about this because
    0:03:32 it’s actually very similar to a lot of our founders who don’t understand the importance
    0:03:35 of PR and marketing in the early days.
    0:03:39 They’re both tech founders who understood the value of, “Hey, we want PR.”
    0:03:40 What was behind that?
    0:03:45 My view is that if you look at the landscape of venture capital firms at the time, the
    0:03:49 list of the top four or five firms was basically etched in stone.
    0:03:51 It hasn’t changed in like 20 years.
    0:03:55 And guess how that list marketed itself with the logos of the companies that invested it?
    0:03:57 We funded Apple, you know?
    0:04:00 So that was the marketing, it’s basically reference selling, if you will.
    0:04:02 So we would have to do something, right?
    0:04:05 And they had done a really thoughtful job of thinking about this, like, how are we going
    0:04:08 to be different, and it turns out the model is actually different.
    0:04:13 So there was actually something to talk about story-wise, but we decided to go like, “Okay,
    0:04:16 if we’re going to win deals, we need to see deals.”
    0:04:17 Exactly.
    0:04:19 You need the flow to get to the actual deal itself.
    0:04:20 Exactly.
    0:04:24 So then the marketing job was essentially initially to go like, “Hello, we’re here.
    0:04:25 The entrepreneurs come see us.”
    0:04:30 And that came in flavors, which was, “We have a point of view on the market.”
    0:04:33 Famously, we argued that there was no bubble, right?
    0:04:35 When everybody was like, “Oh, there’s a bubble.”
    0:04:40 And Ben had a debate with Steve Blank, like an Oxford-style debate, which he lost.
    0:04:41 But we were right.
    0:04:42 There was no bubble at the time.
    0:04:44 You booked that as part of the PR engagement?
    0:04:45 Yeah.
    0:04:50 So initially, the way we launched the firm was we, essentially, I thought, “Look, you
    0:04:55 know, Marc is famous, he co-wrote the browser, so that’s got to become for something,” right?
    0:04:56 And they’re both pretty articulate.
    0:05:02 So I wanted to try and get a cover story, because this sounds old-fashioned now, because
    0:05:05 everybody reads their news on Twitter and so on, online, whatever, but there’s still
    0:05:09 a statement that comes with a cover story that is in print that you see at the airport
    0:05:10 newspaper.
    0:05:13 So that’s fantastic, because I’ve heard Ben tell this story.
    0:05:17 Ben basically was like, “This woman is coming to us,” and saying, “So do you want fortune
    0:05:19 or do you want this cover?”
    0:05:21 And they’re just like, “Oh my God, this person knows what they’re doing.”
    0:05:23 Well, you do get something if you don’t ask for it.
    0:05:24 So it was worth a try.
    0:05:28 I didn’t know going in that it was a done deal, but it turns out it was happening.
    0:05:32 Well, I’m glad you brought up the part about Marc having an existing brand and being known
    0:05:35 as a co-inventor of the browser, because quite frankly, I think a lot of people kind
    0:05:39 of assume this is an easy game, because it’s like, “Oh, it’s Marc Andreessen.
    0:05:40 It’s like a given.”
    0:05:45 So it’s someone who’s actually co-invented a core piece of what we now take for granted.
    0:05:50 That’s a big deal to any engineer that’s like, “I want to meet that guy,” right?
    0:05:56 The challenge of it was that there was a big imbalance between Marc’s brand and Ben’s
    0:05:57 brand.
    0:06:01 So the people who knew Ben were the people who were also in the struggle of building
    0:06:03 a company that was having a hard time.
    0:06:08 He had a really strong reputation with all those founders, but he did not have a brand,
    0:06:09 if you will.
    0:06:10 Right.
    0:06:13 So yes, Bill Campbell, fellow CEOs, they were all like, “Oh my God, Ben has done such
    0:06:18 a great job,” because he took this company from Liveglot to Opsware to the sale to HB,
    0:06:21 actually making money, and Ben has written very eloquently about it.
    0:06:23 That was the challenge from a brand point of view, because you don’t want entrepreneurs
    0:06:28 to come in the door and say, “Well, I’ll take your money if that guy is on my board.”
    0:06:32 A, that doesn’t scale, and B, it doesn’t do anybody justice.
    0:06:36 Well, the big picture that I love about that, if you spin it forward 10 years, is that if
    0:06:40 you think about all the new people coming in, the brand is now a brand.
    0:06:41 It’s an A6 and Z.
    0:06:42 It’s not just Andreessen Horowitz.
    0:06:43 Exactly.
    0:06:45 And in fact, we have this funny little argument.
    0:06:49 I told Mark, I’m just like, “Your name is terrible, Andreessen Horowitz.”
    0:06:52 And I didn’t even know that we were going to have 17 general partners.
    0:06:57 However, one could argue that Andreessen and the Horowitz name, there are assets, particularly
    0:06:58 in the core community, right?
    0:07:02 I was thinking broadly, but the core entrepreneur community, those are fake assets.
    0:07:04 What you needed in the early days.
    0:07:07 So what I love telling people when people ask about the editorial operation, the brand,
    0:07:11 is that much of it’s built on the strong existing culture of writing and communicating that’s
    0:07:12 been here from day one.
    0:07:16 Like one of the things you guys did, for instance, which is really interesting, was write blog
    0:07:18 posts about each announcement, like tell me about that.
    0:07:24 So my observation, having worked with many venture capital firms and with companies that
    0:07:29 took their money, is that VCs don’t do any marketing and you don’t really stick their
    0:07:33 neck out to support the portfolio company until there’s the IPO.
    0:07:36 And then they will call every reporter and say like, “Well, you know, we’ve known one
    0:07:37 thing.”
    0:07:42 But at the beginning of the journey, if you were like, “Here’s why we invested.
    0:07:43 Here’s what we see in the company.”
    0:07:48 You can help them just very tactically with recruiting and business development and like
    0:07:51 sticking your neck out for them.
    0:07:55 If we’re calling it venture capital and it’s high risk, we can’t put all of the owners
    0:07:57 of the risk tagging onto the portfolio company.
    0:07:59 They take the lion’s share anyways, right?
    0:08:03 At least, I mean, the whole point of a brand is that the portfolio companies that don’t
    0:08:05 have a brand yet can kind of borrow our brand.
    0:08:06 It’s an umbrella.
    0:08:07 Right?
    0:08:09 It’s a sort of this brand halo, hopefully.
    0:08:13 But like, if you don’t actually bother to support them actively and visibly, then what’s
    0:08:14 the point?
    0:08:16 I love that because it’s about skin in the game.
    0:08:20 And so you guys started writing these posts and what I also appreciate as an editor is
    0:08:22 that they weren’t actually straight press releases.
    0:08:26 Well, as you know, well, nobody reads press releases.
    0:08:28 There’s no story in press release, right?
    0:08:34 There’s no story about like how this founder’s idea is particularly well suited for their
    0:08:37 experience, the founder idea fit that we talk about.
    0:08:39 There’s just no arc and there’s no rawness to it.
    0:08:45 Like anything that is worth reading has to some sort of raw element that’s real and
    0:08:46 it’s also plain English.
    0:08:47 I call it slippery and I agree with you.
    0:08:51 It needs to have a raw, authentic, slippery feel that’s not perfectly polished with every
    0:08:52 bowtide.
    0:08:54 In fact, I hate things when they’re perfectly done that way.
    0:08:56 And they need to sound like the person, right?
    0:09:01 Like, and that’s why the editorial team, it’s their voices that you help shape, right?
    0:09:02 Exactly.
    0:09:04 So just one more quick note going back.
    0:09:09 When they hired you, what did they ask you to do, like be their in-house PR person?
    0:09:14 So the hired outcast, I basically said, and Mark was really the leader in the main pusher
    0:09:15 of this.
    0:09:19 Although I think Ben was very supportive, but Mark’s like, we want to properly announce
    0:09:20 it.
    0:09:21 We want to treat it very seriously.
    0:09:23 We want to make a statement.
    0:09:24 Can you help us do that?
    0:09:29 I think they called my boss before outcast that I don’t know who else they call.
    0:09:33 I just remember someone called me and it’s like, they asked me about you and she told
    0:09:39 them, it’s like, there will be absolutely never zero BS, which they decided was a feature,
    0:09:40 not a bug.
    0:09:41 Yeah.
    0:09:45 Anyhow, then we decided to launch the firm and we did the cover story and we did lots
    0:09:46 of other interviews and whatnot.
    0:09:51 And then it was sort of a regular client-partner relationship, but you were the co-founder
    0:09:52 of the firm.
    0:09:54 Like, how did you choose to be on this account?
    0:09:56 Like, why don’t you just outsource it to all the junior people?
    0:09:57 No, no, no, no.
    0:09:58 That’s not how we ran outcasts.
    0:10:03 You were always working on work because how can you give, quote unquote, strategic advice
    0:10:06 if you have no idea what media is thinking and whatnot?
    0:10:11 So at any given moment in time, I was always working on a very specific thing.
    0:10:12 Spread out across all the different.
    0:10:13 Yeah.
    0:10:18 And then the rest of your time, you help, you know, a mentor and a power and advise the
    0:10:22 rest of the agency and clients where you kind of sprinkle in, right?
    0:10:26 And I mean, selfishly, I like doing those things where you go, like, can we get a cover
    0:10:29 story because it’s my, it’s like running a marathon, you’re proving to yourself that
    0:10:30 you can do it.
    0:10:31 I love all of that.
    0:10:32 So it was fun.
    0:10:38 I think very shortly, Mark, basically it was the lead recruiter, if you will say, like,
    0:10:40 look, this function is, turns out it’s pretty important.
    0:10:41 It’s critical.
    0:10:43 Like, would you ever consider?
    0:10:45 And then we did this dance for a while.
    0:10:50 And it turns out at the same time, Karen and I had both decided that we wanted to change
    0:10:54 our roles at outcast less from running it more to, you know, if you will, like doing
    0:10:56 actual work and very dusting.
    0:11:02 And we had tried to recruit this fabulous woman for like four years, Alex Constantinople.
    0:11:03 Who runs it today.
    0:11:04 Who is amazing.
    0:11:06 And she finally said, like, I’m ready to do something.
    0:11:10 And so that actually allowed me to even think about leaving my non-human child like your
    0:11:11 baby.
    0:11:12 Yeah, it totally is.
    0:11:14 But like those happen in parallel.
    0:11:19 We had sold outcasts, I think three or four years prior, but it was not your sell and
    0:11:21 leave sale.
    0:11:22 We sold it to a holding company.
    0:11:25 So the day-to-day, it actually didn’t change.
    0:11:28 So I’m glad you brought this up because one of the things that I think is an undertold
    0:11:32 aspect of this story is that there’s some parallels between VC and picking clients.
    0:11:33 Lots of parallels.
    0:11:34 What are they?
    0:11:38 So the good clients you always have to compete for, same with deals, right?
    0:11:43 The thing that makes an agency is the reputation, not the revenue.
    0:11:46 And then the client list you keep, right?
    0:11:48 Just like the portfolio company that that speaks for you.
    0:11:50 That speaks like, are you smart?
    0:11:52 Do you have good judgment?
    0:11:53 Do you know what you’re doing, right?
    0:11:56 That’s by the company you keep, right?
    0:12:02 And then the thing about how to build a business at Outcast is very similar, although the money
    0:12:04 is very different.
    0:12:08 The way you build a business is you find a company that you think has great promise.
    0:12:09 You’re hopefully right about that.
    0:12:12 And you cannot afford to be as wrong as you are in venture capital.
    0:12:13 Definitely not.
    0:12:14 And then you grow with their success.
    0:12:19 So Salesforce was a client when it was Mark and three engineers and his apartment at a
    0:12:20 Coyt Tower.
    0:12:21 Wow.
    0:12:23 And Outcast had that business for 12 years.
    0:12:24 Well, guess what happened?
    0:12:26 The fees went up over time, right?
    0:12:31 And that is much easier from a business point of view than adding, you know, a thousand
    0:12:33 $5,000 accounts, right?
    0:12:38 But what I love is you took some very early bets in making bets, like to make your choices
    0:12:41 for whether to make Salesforce a client or Facebook.
    0:12:42 Tell me a little bit about that.
    0:12:48 So here’s my theory on this, on like picking clients is what people actually say they enjoy
    0:12:54 is not really in all cases what they enjoy, what they end up enjoying is success and making
    0:12:55 a difference.
    0:12:57 Are you going to be able to put on your resume?
    0:12:59 Like you worked on that.
    0:13:04 And on the enterprise side at Outcast, in that decade, there were two enterprise softwares
    0:13:07 franchises that were created Salesforce.com and VMware.
    0:13:08 And we had them both.
    0:13:13 And then you go like, okay, of the clients, right, do we have anything in clean tech?
    0:13:16 Like we made a decision that clean tech wasn’t for us.
    0:13:18 I’m very prescient, in fact, on your part.
    0:13:22 Trust me, our staff would be like, I would love to run our clean tech.
    0:13:26 Like it’s all felt so good, but they were all science experiments and there’s nothing
    0:13:33 really to do because it takes forever to find out if there’s a product in there, right?
    0:13:35 And like that’s about for venture capital as a model.
    0:13:40 But for us, you’re going to do PR for five years, spend a bunch of fees, right?
    0:13:44 That I have a hard time justifying because like there’s no actual business, right?
    0:13:45 Where you can see an impact, right?
    0:13:48 So those are some of the choices that we made.
    0:13:51 It seems to me like you would have been a much better than some of the others who made
    0:13:52 the bets in the clean tech space.
    0:13:55 I did have a VC tell me, you know, your portfolio is better than ours.
    0:13:57 It was good, but I guess it’s also sad.
    0:14:02 The last parallel, which I think is underappreciated is like both are services firms, like in one
    0:14:06 case you take money, in another case you give money, but both what distinguishes you is
    0:14:11 like how you treat the entrepreneurs, what you do for them besides the money, right?
    0:14:16 So I think the parallels are just striking in venture capital.
    0:14:20 What’s slightly different is in venture capital, you make your money on the easy deals and
    0:14:26 you make your reputation on the really hard deals, but both entities, it’s all about reputation.
    0:14:30 In the outcast case, obviously it’s a two-sided marketplace, right?
    0:14:34 You have to have a great reputation with both press and clients.
    0:14:35 I love that analogy actually.
    0:14:39 Tell me more about this two-sided marketplace for more context for those that are interested
    0:14:43 in learning more about the mechanics of PR, how to hire an agency, how to manage crises.
    0:14:46 We’ve actually done other episodes at Market and other guests.
    0:14:52 You can find those on ASICsNC.com under podcasts, but in this context, tell me more about that
    0:14:53 matchmaking dance.
    0:14:58 So I think if you want to succeed, you need to broker what the client’s business goals
    0:15:02 are with what actually makes for a good story.
    0:15:07 And if the client is unreasonable or in an unethical case ask you to like lie or whatever,
    0:15:08 you just can’t do that, right?
    0:15:13 You want your client to be a client for 12 years or in the Amazon Kindle case, I think
    0:15:17 even for longer, like I’ll just launch the Kindle and Amazon is still a client.
    0:15:22 So for that, you need to have high integrity with the client and perform and actually do
    0:15:23 all this stuff.
    0:15:28 But you also need to be an honest broker with a reporter because if you go to the Wall Street
    0:15:32 Journal three times in a row with a terrible idea that’s just off and they would never
    0:15:33 run, you should know better.
    0:15:34 You would ignore them.
    0:15:36 I mean, frankly, this is true of your team.
    0:15:40 When I was at Wired, many of them pitched me, well, there was only two of them at the
    0:15:44 time, but I loved them because they were some of the very few who stood out to me as not
    0:15:45 driving me nuts.
    0:15:49 I love how people like dumping on PR people.
    0:15:52 There’s just as many bad lawyers and lazy reporters.
    0:15:53 It’s like everybody’s favorite punching bag.
    0:15:58 I will say like one of the best compliments was like this guy managing editor, I think
    0:16:00 of Info World Computer Weekly.
    0:16:03 He basically said we would say like, well, if the pitch is from Outcast, we’ll take
    0:16:04 the meeting.
    0:16:05 That is the best compliment.
    0:16:07 I want to ask you a hard question about this.
    0:16:08 Why do you think so?
    0:16:10 I love that you use the analogy of a two-sided marketplace.
    0:16:14 Do you really believe that that broker will exist in the future, especially because our
    0:16:18 business and technology is to disintermediate things?
    0:16:19 I think about that all the time.
    0:16:21 Sometimes I go like, yes, deaf.
    0:16:27 And then sometimes I think like, no, because there’s such an element of translation that
    0:16:32 I’m not sure AI in matchmaking that AI is still well suited like Google Translate is
    0:16:35 really good, but I speak a bunch of languages and it’s just kind of off.
    0:16:36 Well, you don’t mean literal translation.
    0:16:37 You’re meaning translation.
    0:16:41 No, like the subtlety of knowing the 10 last stories.
    0:16:48 I think that the level of EQ and story weaving of those two sides together, I have a hard
    0:16:52 time seeing how that’s going to get disintermediated right away.
    0:16:57 Now I fully realized that a lot of people say that and I crossed my arms and was like,
    0:16:58 that is such BS.
    0:17:04 I don’t know, but I sort of feel like jobs that require a lot of empathy on both sides
    0:17:08 are going to be pretty safe, I think, for a really long time.
    0:17:12 It reminds me of this line that if you act like a robot, expect your job to be automated
    0:17:13 away.
    0:17:17 And so when Chris Anderson wrote this post, because he was so annoyed of all these pitches,
    0:17:20 he got re-outed all the email addresses of all the people who kept pitching him as other
    0:17:22 right editors.
    0:17:25 And that’s a perfect example of essentially doing your job robotically where you’re just
    0:17:27 sending an email, you’re not really customizing it.
    0:17:31 Whereas what you’re describing is less robotic, it’s creative, empathetic, it’s understanding
    0:17:32 what one side wants.
    0:17:34 What is actually the story?
    0:17:36 And what does a person want to hear on the other side?
    0:17:37 The two-sided marketplace.
    0:17:41 And of course, the positive part of the two-sided marketplace, the more good relationships you
    0:17:44 have, the more it benefits your clients.
    0:17:48 The more good clients you have, the more reporters will want to talk to you, right?
    0:17:49 So I have a question.
    0:17:52 So Cade Met’s friend of mine from Wired, he’s now at the New York Times.
    0:17:53 This is before that.
    0:17:54 Right.
    0:17:55 Very good reporter.
    0:17:56 He’s one of the best.
    0:17:57 Are you kidding?
    0:17:59 He’s literally, he and I used to compete for the top plots at Wired, actually, in a good
    0:18:00 way.
    0:18:01 We were friendly competitors because we were the unlike ones.
    0:18:05 Anyway, I saw him recently and I’m going to tell this backstory.
    0:18:11 He did a piece for Wired on the A6NZ library and he reached out to me to be introduced
    0:18:12 to you.
    0:18:14 “Hey, can you just meet a market because I’m going to do this piece?”
    0:18:17 And he’s sort of annoyed because he’s like, “Why does this person tell me I can and can’t
    0:18:18 do this piece A?”
    0:18:22 And B, he didn’t understand the concept, which he wrote about in his piece.
    0:18:26 And I explain it to him where he’s like, “What is she talking about over exposure?”
    0:18:28 You basically said no to him initially.
    0:18:33 So look, in the beginning, it was all about having the chance to compete for the deals,
    0:18:34 right?
    0:18:35 And therefore we were loud and proud.
    0:18:40 But like you can overdo that where you basically at some point started doing gratuitous PR.
    0:18:43 So people come to the office, right?
    0:18:46 And the office is also like the entrance doubles as a library, right?
    0:18:49 So Cade is at the office and he’s like, “I want to write about this.”
    0:18:53 And I was getting to that stage where I put the brakes on a lot where it’s like, “We’re
    0:18:56 not doing no, no, no, no.”
    0:19:00 I was like, “This is another one of those pieces where like, I love Cade.
    0:19:02 He does a really good job.
    0:19:03 It’s wired.”
    0:19:05 But like, do we need another thing about us?
    0:19:07 I want it to be away from us.
    0:19:12 I wanted to talk more about the technologies, the future, the entrepreneurs.
    0:19:16 For me, it’s about a larger picture of like, “Are we actually spending too much time on
    0:19:17 the wrong thing?”
    0:19:19 That is what I think is so amazing.
    0:19:23 I’m so glad we’re talking about this because that is the orchestration behind the scenes
    0:19:26 that is entirely invisible that people don’t see.
    0:19:30 In fact, that there’s so many decisions that go into the thing you see and so many decisions
    0:19:31 that go into things you don’t see.
    0:19:33 The most important decisions you will never see.
    0:19:37 Well, especially in your job in particular, it’s probably the opposite in mine, in fact,
    0:19:38 I would say.
    0:19:40 Well, actually, no, it might be the same because I would argue just in the early days too though
    0:19:44 that one of my number one philosophies as an editor is that the more you kill, the better
    0:19:47 you have content because you’re actually working on the right things.
    0:19:50 But that said, on the key thing, the thing that you didn’t mention is that the reason
    0:19:55 you were concerned about overexposure at that point in the firm’s evolution, I think it
    0:19:57 was actually six years at almost.
    0:20:01 So this is about four years ago, is that you had just approved that the New Yorker could
    0:20:02 do a profile on the firm.
    0:20:07 So let’s talk about one of the most unique pieces I think you’ve done at A6NZ that you
    0:20:12 oversaw that you had your team do, which is around the fact that we let a reporter into
    0:20:18 our hallways and in our pitch room, in fact, to do a profile of the firm for the New Yorker.
    0:20:22 So tell me what your rationale and logic was in greenlighting that piece.
    0:20:25 So it’s not an easy decision.
    0:20:28 At that point, I was at a stage where it was like, enough, we’re done talking about ourselves,
    0:20:29 right?
    0:20:30 So enough.
    0:20:35 They came to us and the way they do these stories is they do the story about like a profession
    0:20:40 or a type of business and they do it through the lens of following this one person.
    0:20:41 Very classic formula.
    0:20:48 So then the ask was, we would like to do this kind of story and we would like to do it with
    0:20:49 Mark’s participation.
    0:20:54 So the decision is then, okay, the New Yorker is the New Yorker.
    0:20:59 So how often is the New Yorker going to write the definitive piece on venture capital once
    0:21:01 in a decade?
    0:21:02 Maybe?
    0:21:04 Well, do I want that to be about whoever or do I want that to be about us?
    0:21:09 At that point, I want to occupy that spot because that’s leadership and that’s the voice
    0:21:11 of innovation, which is what we’re all about.
    0:21:14 But when I remember you telling me, it was very eye-opening for me at the time, was you
    0:21:19 said you wanted not only the firm to have that definitive spot, but you wanted the East
    0:21:21 Coast audience to really understand it.
    0:21:22 Yeah.
    0:21:24 I mean, look, people in the other power centers, right?
    0:21:30 Like primarily New York and DC, sort of feel like we don’t explain ourselves well, right?
    0:21:33 Silicon Valley, there’s some bridging that needs to happen.
    0:21:35 However, here’s the New Yorker, right?
    0:21:41 Like it hits those audiences and it’s a chance to explain our business to those audiences
    0:21:45 in a very legit, very, you know, future forward way, right?
    0:21:49 And I think the headline was like the future’s frontman or Silicon Valley’s frontman.
    0:21:54 Now we have never let anybody sit in on a meeting and whatnot, right?
    0:21:56 But like the New Yorker comes with that.
    0:22:00 In fact, I think there was a lot of compromising on both sides that needed to happen.
    0:22:04 You had death permission for entrepreneurs being able to, you know, talk off the record
    0:22:07 and then give the entrepreneurs some choices about what could go on the record.
    0:22:09 Could they really participate in all of that?
    0:22:14 And what I try to balance is, you know, again, being an honest broker, right?
    0:22:19 Like you get an actual peak and an actual pitch meeting and the actual reactions.
    0:22:21 But I do need to protect our entrepreneurs.
    0:22:22 Like that’s our reputation, right?
    0:22:26 And the other concession that the New Yorker made, which they didn’t like was that all
    0:22:28 of these meetings were staffed.
    0:22:29 Right.
    0:22:32 This is actually a firm policy that I think people here didn’t even understand.
    0:22:36 Even the general partners, I don’t think even saw the point of that until they got it.
    0:22:37 Right.
    0:22:38 No, they definitely get it now.
    0:22:43 But the New Yorker was like, no, no, no, we’d like the familiarity that develops, blah,
    0:22:44 blah, blah.
    0:22:45 I’m just like, we’re not doing that.
    0:22:46 That was going to be a deal breaker.
    0:22:49 Scott Rubin at the time, he was staffing up a bunch, but I think Tat Friend did a really
    0:22:50 good job.
    0:22:52 In fact, the thing that I think is really interesting, you talk about it being the one
    0:22:57 story of the decade, I think it did so well that they ended up doing that kind of a profile
    0:22:59 of multiple people after that in the Silicon Valley VC world.
    0:23:02 I mean, they did Sam Altman, they did a couple of others and they started with this ongoing
    0:23:03 thing.
    0:23:04 Occasionally they ask for suggestions like, what do you think?
    0:23:05 You gave them suggestions.
    0:23:06 I remember that.
    0:23:10 So let’s talk about one of the most defining things that’s, again, about five years in.
    0:23:14 Let’s talk about maybe two years into the firm, which is software eating the world.
    0:23:18 Well, first of all, it came up completely organically, right?
    0:23:22 Like I think people sometimes think PR people sit and go like, we should X.
    0:23:24 It’s just not how it works, right?
    0:23:29 So the way it came about was, you know, the economist writes these special reports, they’re
    0:23:30 super in depth.
    0:23:36 At the time, Martin Giles was the Silicon Valley person for the economist and he came
    0:23:39 to meet with Ben Martin and me.
    0:23:43 We’re talking about the internet and the future of the internet and Mark basically sort of
    0:23:47 starts to riff and he goes, well, your way to think about it is really it’s like software
    0:23:48 is eating the world.
    0:23:51 And he goes through his little thesis and I’m sitting there and going like, that is a
    0:23:53 fricking op-ed.
    0:23:54 This needs a shelf life.
    0:23:58 I basically gave the idea to the reporter and the reporter’s like, well, if Mark Andreessen
    0:24:02 will write it and it’s like that big, we will run it.
    0:24:08 And then I told Mark like, it’s placed, you have a deadline and then kindly he obliged.
    0:24:11 That’s one of the most defining pieces, not just for the firm, but just for the industry.
    0:24:15 I mean, people refer to it over and over and over again.
    0:24:19 Few years later, in fact, maybe a month before I started, there was also a New York Times
    0:24:22 op-ed on why Bitcoin matters.
    0:24:23 What’s the backstory there?
    0:24:29 So there was an opinion written about Bitcoin that was really negative about Bitcoin.
    0:24:34 But more important, it didn’t fully appreciate, I think what was actually happening underneath
    0:24:35 the currency.
    0:24:42 So Mark wrote a response just as an email to the person who had written the op-ed and
    0:24:47 basically just said, like, look, I read your op-ed and we’ve been studying this space and
    0:24:50 I thought it might be helpful for me to lay out how we’re thinking about it.
    0:24:55 And he just writes this whole piece on like why Bitcoin matters and he sees me and I’m
    0:24:57 like, Mark, there’s an op-ed.
    0:25:01 So I think I guess the lesson that I’m learning on this podcast is like, I got to just like
    0:25:03 identify versus ask him to do op-eds.
    0:25:04 Yeah, yeah, totally.
    0:25:07 But what I love about that is that the narrative was very much about the Mount Gox and the
    0:25:13 scariest, but the reality is that the co-inventor of the GUI has a perspective on Bitcoin as
    0:25:14 a protocol.
    0:25:15 Yeah.
    0:25:17 I mean, certainly a legitimate opinion, right?
    0:25:18 And we did not get an answer on our email.
    0:25:20 So well, let’s run it.
    0:25:22 We finally, if you had, you might not have run it.
    0:25:23 Exactly.
    0:25:25 So we’ve been talking about the story of the brand.
    0:25:28 You’ve talked about your background in PR and communications, but you actually run
    0:25:33 marketing, which at ASICS and Z has three distinct functions all under the banner.
    0:25:37 There’s communications in PR, which is where it started, the team you first grew, then
    0:25:38 events and then editorial.
    0:25:41 Tell me about that and what they’re thinking.
    0:25:42 Yeah.
    0:25:45 So, I mean, like marketing for a venture capital firm looks very different from marketing for
    0:25:46 a product company.
    0:25:47 It’s just very different.
    0:25:49 We have such a breadth of investment areas, right?
    0:25:52 We’re not beholden to having to market a product.
    0:25:56 The communications part is figuring out for the general partner sort of like an exact
    0:25:57 comms function.
    0:25:58 What is your platform?
    0:26:00 What’s our point of view on X topic, right?
    0:26:04 So figuring out what they want to do, what are the big things they want to do for the
    0:26:10 year, whether the smaller things for the year and like how to respond to incoming opportunities
    0:26:11 and whatnot.
    0:26:12 Which they get a lot of because of the brand.
    0:26:13 You get tons.
    0:26:14 And it varies by general partner.
    0:26:17 Some are very much in brand building mode, right?
    0:26:19 Some are not in brand building mode.
    0:26:21 I’m glad you pointed that out, by the way, because one of the things you said about the
    0:26:24 evolution of the firm is that there’s a right time and a place and that these things have
    0:26:25 ebbs and flows.
    0:26:28 You’re not just like automatically, robotically applying some script.
    0:26:29 No, no, no.
    0:26:34 There are like 17 flavors of this at that sort of platform level.
    0:26:36 It’s not like a cookie cutter thing.
    0:26:38 So that’s the comms function, right?
    0:26:42 And then the events function, if you think about our brand is we don’t have features.
    0:26:43 We don’t have news.
    0:26:45 There’s nothing you can touch.
    0:26:46 You can’t review it, right?
    0:26:48 Like, so we’re not a product company.
    0:26:51 So events is really the only way to really experience the brand.
    0:26:53 Like physical, I think people will be shocked.
    0:26:56 I think they’re going to end up doing 200 events this year.
    0:26:57 That’s huge.
    0:27:01 Some of them are tiny, very important, but small, very curated things where there’s
    0:27:06 a content component, but really is a way of convening people and like generating like
    0:27:11 productive relationships with our core constituents, right?
    0:27:15 And then we have 10 pull events like with Ben’s barbecue, which he’s now famous for.
    0:27:17 And then we have our big summit every year.
    0:27:20 So the events team, like there’s a broad range, right?
    0:27:23 And then obviously the content operation, I’m here sitting talking to you.
    0:27:27 That is really like, okay, so what is the space between the stories?
    0:27:31 What is the stuff that participants in the future want to know, but like they won’t
    0:27:34 necessarily find in existing outlets, right?
    0:27:35 Or the most in depth.
    0:27:37 We’re for builders, for participants.
    0:27:40 The key verb, I think is explain, right?
    0:27:43 And then there’s a whole thrust of content, sort of the how to stuff.
    0:27:46 Yeah, it’s like the two pillars, tech trends and then company building.
    0:27:49 We need to have a direct channel for two reasons.
    0:27:54 One is to reach the entrepreneurs directly, to reach the participants in the future directly,
    0:27:55 right?
    0:27:59 In an unfiltered way that we want to, and then they can decide how they feel about it, right?
    0:28:01 But you also defensively, right?
    0:28:05 Like if stuff doesn’t go your way, you need to have other options.
    0:28:10 Like how would you completely be disintermediated from contacting your customers other than
    0:28:11 like a customer support mode?
    0:28:12 Why would you not want to have that control?
    0:28:14 I completely agree.
    0:28:18 You totally, you want the ability and you also, it is a major way to express your brand.
    0:28:20 You don’t want to outsource that, you know?
    0:28:24 And then the way this happened is Kim had an op-ed and then she wanted to place it on
    0:28:25 wire.
    0:28:26 She pitched me.
    0:28:27 And guess who she contacted?
    0:28:28 You, right?
    0:28:30 Because you were in charge of that operation.
    0:28:33 And then she kept saying to me, she’s like, you know what, this woman is really good.
    0:28:35 Well, by the way, the funny backstory, I don’t know if you know this.
    0:28:39 I thought she hated my guts because quite frankly, I took the position because I cared very much
    0:28:41 about my section where I’m sorry, you guys.
    0:28:43 I know you’re used to placing things at that edit.
    0:28:45 That is not happening on my platform.
    0:28:49 Well, with the thing is, as you know, that sometimes when you’re dealing with an editor,
    0:28:52 reporter, and a PR person, interests aren’t always aligned.
    0:28:56 So the whole genius of Kim and the rest of the team is to work through that productive
    0:28:57 thing, right?
    0:28:58 Yeah.
    0:29:00 But she ended up coming back and then we went after you.
    0:29:04 So the backstory on the content operation is that we all had decided like we want to
    0:29:06 build out a direct channel, right?
    0:29:11 And Kim, who is not an editor, not a reporter, she took it upon herself and she found Michael,
    0:29:13 who got the initial podcast off the ground.
    0:29:17 And then you obviously got the podcast to where it is today.
    0:29:21 I’ve given this talk a lot where people ask me, you know, you’ve given talks on editorial
    0:29:22 and how it works.
    0:29:26 One of the lines I always say is that I believe that you need to have a two-word lens with
    0:29:28 which to distill the thing you’re looking at.
    0:29:30 So for me at PARC, it was entrepreneurial scientists.
    0:29:32 At Wired, it was informed optimism.
    0:29:36 And when I was interviewing here, I was looking for that two-word lens and you actually gave
    0:29:38 it to me in the form of innovation brand.
    0:29:41 And that’s when I knew I could come here and work here because I was like, I’m not doing
    0:29:42 editorial.
    0:29:43 Not chilling bullshit.
    0:29:46 No, I need to have like big ideas and big things to work on.
    0:29:51 Like, for those who want to participate and build and understand the future, I want them
    0:29:53 to go like, I wonder what Jason Horwitz thinks about that.
    0:29:56 And of course that comes in all kinds of flavors, right?
    0:30:01 Whether that is op-eds or podcasts or written decks or press interviews and any flavor,
    0:30:02 right?
    0:30:05 Like that is what the overall ambition is of the marketing function.
    0:30:10 And then if you look at like the way the team is organized, we basically have four vertical
    0:30:12 areas roughly of investing, right?
    0:30:16 So it’s consumer, it’s enterprise, and then crypto and bio.
    0:30:20 Fintech and real estate belong sort of in the consumer slash B2B bucket, if you will,
    0:30:21 right?
    0:30:26 So the entire team is aligned around those vertical areas so you can really develop depth
    0:30:30 in bio or consumer or enterprise.
    0:30:35 So to the extent that we can be useful to the portfolio, we do all kinds of advising,
    0:30:36 right?
    0:30:37 We call it counsel.
    0:30:40 Here’s how you should think about like the agency world.
    0:30:42 Here’s how you think about the funding announcement.
    0:30:45 Should you disclose this X or the other?
    0:30:47 And then of course we get very involved when something has gone sideways.
    0:30:51 I was about to say crisis and that’s a whole topic of two multiple three podcasts if you
    0:30:53 want to check them out on our website.
    0:30:57 So you talked about this model of the councils and bringing all these networks together.
    0:31:00 I often describe A6 and Z as a network of networks.
    0:31:03 There’s all these different folks and people that come to play.
    0:31:08 What I have for you is the network that you never talk about is the outcast mafia.
    0:31:10 It struck me.
    0:31:14 I went to like multiple events and I was like, holy, there’s an outcast mafia not just in
    0:31:17 the valley but all across the United States and around the world where there are people
    0:31:21 who worked at outcasts at some point and people talk about the PayPal mafia.
    0:31:22 They talk about that.
    0:31:23 You know, the Uber mafia.
    0:31:25 There’s New York Times articles written about it.
    0:31:26 Tell me about the outcast mafia.
    0:31:29 Well, it’s actually it’s something I’m actually really proud of.
    0:31:30 You’re making someone’s career.
    0:31:36 People spend, you know, in one case, 17 years, but like there’s this woman, Jessica, who’s
    0:31:39 now been at outcast longer than I have, right?
    0:31:40 But you’re making someone’s career, right?
    0:31:45 So the time that they’re with you ought to be meaningful and audit forward into whatever
    0:31:46 they want to do next.
    0:31:47 Exactly.
    0:31:50 There are people who started and we did this thing where we never liked the senior talent
    0:31:54 at the other agencies because we were very, you know, our way, blah, blah, blah.
    0:31:58 But like, so we did this intern program and I’m telling you, there are so many people
    0:32:02 who started out as an intern at outcast who now run big teams.
    0:32:03 They have big budgets.
    0:32:05 They have a great career, right?
    0:32:08 Like, and nearest to my heart is Grace.
    0:32:12 Grace is the first person I hired who came out of that intern program and she came out
    0:32:13 of that run.
    0:32:14 She’s so great.
    0:32:16 I mean, everybody who thinks that Ben is so amazing and famous and whatnot.
    0:32:17 He’s great.
    0:32:18 She made him.
    0:32:22 You know how the asset was, you know, Andreessen had co-invented the browser, right?
    0:32:26 Like the challenge of that was, you know, Ben’s brand was just not as big, right?
    0:32:31 So we did a bunch of things, like we did like little tactical things, like we would never
    0:32:35 do any more press meetings with the two of them because then you’re directing questions
    0:32:36 at the person you’ve already met before.
    0:32:42 But like the much bigger effort was Ben, his best format is writing.
    0:32:46 He’s a very good writer and he’s very specific and it’s very him, right?
    0:32:50 So he’s going, you know, in all of his coachiness, right?
    0:32:51 Yeah.
    0:32:54 All of his advice, like we’ll just drip from the blog, right?
    0:32:56 And that turned into the first book, right?
    0:32:58 So Grace then went and fixed that imbalance.
    0:33:02 So the first book, the media interviews, the Forbes cover, right?
    0:33:03 On him.
    0:33:07 And she’s at it again because she’s like working, she’s on the road with him right now, doing
    0:33:08 his second book, right?
    0:33:09 Yeah.
    0:33:11 Because by the way, a book doesn’t sell itself, fun fact.
    0:33:12 No.
    0:33:15 What I also love, by the way, about that Ben and Mark thing is that people actually tend
    0:33:16 to pigeonhole them.
    0:33:18 Even I did before I got here and I realized this.
    0:33:21 They pigeonhole Mark as a big ideas guy and Ben as a business guy.
    0:33:23 They’re actually kind of also swapped.
    0:33:24 Oh yeah.
    0:33:27 Mark is equally as into, if not more, into the human side of the business and the sales
    0:33:30 and the marketing and the business building.
    0:33:32 And Ben is actually really into the big ideas and the trends.
    0:33:33 Oh absolutely.
    0:33:35 I think it’s really fine that people stereotype them sometimes.
    0:33:38 It’s funny how, you know, people talk about superpowers and how important they are, but
    0:33:43 like I think there is sort of this risk that, yes, recognize people’s superpowers and put
    0:33:48 them in that role, but like don’t reduce the person to one feature.
    0:33:50 Maybe just like marketing is not just PR.
    0:33:51 So one last one.
    0:33:55 Can you give me what you learned from building this outcast mafia?
    0:33:59 What was it about the culture that let you build this kind of a mafia?
    0:34:03 Well it took us like three or four years in and then we were very deliberate about like,
    0:34:06 okay, what are our values and how do we define them?
    0:34:07 And we were very meticulous.
    0:34:12 Like, so for example, we would never hire someone who came in and interviewed and they
    0:34:15 said like, I want to work on the sales force business.
    0:34:18 We needed them to actually want to work at outcast because what you get is you get people
    0:34:20 who didn’t get the job at sales force.
    0:34:22 So good, adverse selection, fantastic.
    0:34:28 Raw ambition, the pressure to hire and to compete, you know, because we don’t have stock options
    0:34:29 and all that kind of stuff.
    0:34:31 It was really, really difficult hiring environment.
    0:34:35 So we had to have a really strong culture and we had to hold the line and Karen was very,
    0:34:36 very good at that.
    0:34:38 But we had a very, very high bar.
    0:34:43 And then the other thing that we did very rigorously, Heather England, who was our COO, did a great
    0:34:48 job, was training, consistent training, look, we’re going to roll our own, right?
    0:34:53 But internship program, like people were taught how to do these things, how to do a meet,
    0:34:56 how to staff a press briefing, like what is your role, all these kinds of things.
    0:34:58 And we didn’t leave it up to chance.
    0:34:59 That’s great.
    0:35:00 Thank you for joining the A6NZ podcast.
    0:35:01 Oh, thanks so much.

    Many technical founders, academics, and other experts often believe that great products — or great ideas! — sell themselves, without any extra effort or marketing. But in reality, they often need PR (public relations).

    The irony is, most of the work involved in PR is actually invisible to the public — when it works, that is — and therefore hard for those from the outside to see let alone understand. So how does such brand-building really work? In this 10-year anniversary episode of the a16z Podcast (and our 499th episode), a16z operating partner Margit Wennmachers shares the case study of her work at The Outcast Agency (which she co-founded) and of building the a16z brand (where she heads marketing and was the first and one of the earliest hires).

    What’s the backstory there? What’s the backstory behind some of the most popular media stories and op-eds — like “software is eating the world” — and what can it teach us about how PR and brand-building works in practice? Because — like many software companies — the product is so abstract, and not something you can physically touch, what kind of subtle decisions and tactics big and small does it take? Answering some frequently asked questions (in conversation with editor in chief Sonal Chokshi) that we often get around how things work, Wennmachers reveals (just some;) of the details behind the scenes. Given that technology is all about disintermediating “brokers” in the middle, will tech one day replace PR? And finally, what’s the hidden Silicon Valley network mafia that NO one talks about?

  • Come for the Games, Stay for the Party

    AI transcript
    0:00:05 The content here is for informational purposes only, should not be taken as legal business
    0:00:10 tax or investment advice or be used to evaluate any investment or security and is not directed
    0:00:14 at any investors or potential investors in any A16Z fund.
    0:00:18 For more details, please see a16z.com/disclosures.
    0:00:21 Hi everyone, welcome to the A16Z podcast.
    0:00:24 I’m Lauren Murrow, editor of the consumer team.
    0:00:29 Today I’m here with general partner Andrew Chen and deal partner John Lai, both avid
    0:00:33 gamers, to talk about what they’re calling next generation games.
    0:00:39 That is games that are cross-platform, player driven, self-published, and above all, incredibly
    0:00:40 social.
    0:00:44 We’ll discuss how video games are dominating not only the entertainment industry, but also
    0:00:47 popular culture through the rise of influencer gamers.
    0:00:52 Finally, Andrew and John give inside advice for gaming entrepreneurs.
    0:00:56 What are some common misconceptions in the gaming world that you’d like to debunk?
    0:01:01 So I think there’s a really big distinction between the vast majority of games that have
    0:01:06 existed over the last two decades versus the small set of these franchises that are getting
    0:01:07 built today.
    0:01:10 I think a lot of people will say, “Why are you even looking at this?
    0:01:13 Games is like a hit-striven business, right?
    0:01:14 It’s content.
    0:01:17 You’re going to get this big spike and it’s going to go away.”
    0:01:23 So there’s a phrase called games as a service where you’ll publish across console, mobile,
    0:01:27 and PC and you’ll continually provide updates over time.
    0:01:32 We’re very oriented around things that are really about building communities of people
    0:01:35 that happen to have an activity at the center of it, uniting them.
    0:01:37 Those are things that can last for a really long time.
    0:01:41 I think the other one that I feel like was a thing for a long time was also just that
    0:01:45 a lot of negative connotations about games being like, “They’ll rot your brain.
    0:01:48 It’ll make you anti-social.”
    0:01:52 And I think it just turns out that especially in the genres of games that we’re talking
    0:01:56 about, that these are like the most social things that you can possibly do.
    0:01:57 Games as the virtual mall.
    0:01:58 That’s right.
    0:02:00 The virtual mall and the virtual sports bar.
    0:02:05 That speaks to another trend we’re seeing, which is games as a social media hub.
    0:02:09 People are coming here not only to play, but also to hang out, to interact with their friends.
    0:02:10 That’s right.
    0:02:11 Yeah.
    0:02:16 And if you think about where games was growing up, maybe many of the listeners remember playing
    0:02:21 on Nintendo or Super Nintendo or Xbox or whatever generation of console that you use,
    0:02:25 but a lot of the experience was really kind of solitary, right?
    0:02:31 And I think one of the really interesting changes over the last decade is all of a sudden
    0:02:35 the most popular games have all become multiplayer.
    0:02:36 Come for the games.
    0:02:37 Stay for the party.
    0:02:42 I think games potentially will be the social network of the future where instead of scrolling
    0:02:47 through feeds and web pages of static images and liking and commenting on things, will
    0:02:53 be in virtual worlds and games, like having very real interactions in very emosive environments.
    0:02:55 It’s what these kids in Fortnite are doing these days.
    0:03:00 The battle royale format is a passive activity that’s happening in the background, while
    0:03:04 the actual goal of what they’re trying to do is to just hang out and socialize.
    0:03:08 So all of a sudden, that means that you actually want your friends to play.
    0:03:11 You want to pull them into the game, you want to play at the same time, it becomes another
    0:03:15 way to hang out the way that maybe kids growing up before would have been like, “Oh, let’s
    0:03:18 go play kickball together,” instead it’s like, “Oh, well, let’s actually play Minecraft
    0:03:19 together.”
    0:03:22 Well, and that brings up one thing I’m curious about.
    0:03:24 It’s not just kids anymore, right?
    0:03:26 Who’s playing now and how has that audience grown?
    0:03:32 The majority of these players are young, and so you have essentially teens and tweens that
    0:03:37 are going to grow up lifelong gamers, and this is going to be the type of content that they
    0:03:39 look for for the rest of their lives.
    0:03:45 We’re now seeing parents who are gamers raising kids who are growing up gaming first, sort
    0:03:50 of playing video games before they’re watching TV, before they’re reading books in some cases.
    0:03:55 I think the exciting thing about that is that gaming is truly sort of a cross generation,
    0:03:59 cross gender, and also truly global activity.
    0:04:00 That’s right.
    0:04:06 We joke around about how much we would love to find esports for old people category where
    0:04:12 maybe you’ve lost your kind of twitchy ability to headshot all of your opponents in the latest
    0:04:15 first person shooter, but you still want to play, you still want the feelings of all
    0:04:16 of that.
    0:04:20 I think taking some of these core dynamics and emotions that this gameplay can create
    0:04:24 and bringing it into more demographics I think is very, very interesting, but I think the
    0:04:28 other thing that’s been happening that I think is really fascinating is that League of Legends
    0:04:32 Riot and Teamfight Tactics uses a lot of the same characters.
    0:04:36 I think it’s very possible that we’ll see the next generation Marvel actually coming
    0:04:40 out of characters that are rooted in the video game world first and foremost.
    0:04:46 These are going to be the next kind of character media franchises the same way that Marvel
    0:04:51 and Disney and all of these amazing media companies were built off of like ultimately
    0:04:54 people’s childhood relationships with these characters.
    0:04:58 What that means, if you take that to a natural conclusion, is not only do you have games
    0:05:03 that may last for 10 plus years, but then the actual characters and franchises might
    0:05:09 last 50 years, 100 years in the same way that when we love Mickey Mouse in the black and
    0:05:15 white like Steamboat Willie kind of version, we may look back at the orcs in Warcraft
    0:05:20 2 and 100 years from now think like, “Wow, I like love those characters.”
    0:05:21 That brings up an interesting point.
    0:05:25 So it used to be you buy a game, you play it, you beat it, now games are living things
    0:05:31 that are shaped as you play in some cases going on decades.
    0:05:36 My question for you is it should games go on for 10 years?
    0:05:40 I’m thinking of like Netflix shows where they have, you know, three great seasons and
    0:05:43 then you’re like, “Hmm, should we stop where they were at?”
    0:05:45 Should all good things come to an end perhaps?
    0:05:49 I’m glad you asked that question because I think one of the common misunderstandings
    0:05:52 when people think about games is that they think about it as a hitch-driven industry
    0:05:58 where you have a hit and then it’s more of a fad and that it goes away in a couple of
    0:06:01 weeks if not months or years.
    0:06:05 And I think we’re seeing games have 10 plus year lives, so League of Legends.
    0:06:09 I think they’re coming up into a 10th anniversary in a couple of weeks, World of Warcraft hit
    0:06:15 its 10-year anniversary ready games like Candy Crush, Clash of Plans, also 10-year plus games.
    0:06:20 I think what’s happened with these most successful games is that they’ve evolved to become more
    0:06:22 than just an app.
    0:06:25 They’ve become a lifestyle for the people who are playing them and so a core part of
    0:06:29 their identity is the fact that they’re a League of Legends player.
    0:06:31 And so they don’t think about this as an entertainment product.
    0:06:33 This is part of who they are.
    0:06:34 It’s not just content.
    0:06:35 It’s a lifestyle.
    0:06:36 It’s a social network.
    0:06:42 One great example of that is what’s happening right now in the influencer channels.
    0:06:46 Games like Apex Legends and Teamfight Tactics, which were two of the largest games that came
    0:06:54 out in 2019 so far, have basically gone from zero to over tens of millions of players.
    0:06:58 That’s primarily been driven by players that are going on Twitch and watching their favorite
    0:07:03 streamers play these games, where previously it would have taken months to get that size.
    0:07:07 This took only a couple of weeks, if not days.
    0:07:10 We hear so much about how gaming is growing faster than ever before.
    0:07:11 How big is gaming?
    0:07:18 Yeah, so gaming is a $139 billion industry from the last research report I checked by,
    0:07:20 I believe, New Zoo.
    0:07:24 And it is at that level larger than both film and the music industry.
    0:07:25 Wow.
    0:07:29 So if you add up box office sales and home entertainment, I believe the film industry
    0:07:32 was around $130 billion.
    0:07:36 So at this point in time, it’s safe to say that games is not only the largest, but it’s
    0:07:38 also the fastest growing segment.
    0:07:42 And so do you think we’ll see more of gaming seep into the rest of the entertainment industry?
    0:07:44 It’s already happening.
    0:07:48 So we’ve seen Netflix’s Bandersnatch episode, which was one of the first attempts at essentially
    0:07:53 making an interactive narrative game that could be played just using your TV remote.
    0:07:57 And I think music is also becoming an increasingly larger part of the games industry.
    0:08:03 So DJ Marshmallow had his first in-game concert in Fortnite a couple months ago.
    0:08:08 I think there was about 11 million live concurrent attendees in-game.
    0:08:13 And then the subsequent YouTube repost of the concert drew about 40 million views.
    0:08:14 Did you attend?
    0:08:15 I watched a replay.
    0:08:17 I wasn’t quite cool enough to attend.
    0:08:21 And I think there’s sort of the idea that a lot of pop culture maybe comes into gaming.
    0:08:26 I think the other one that I’m very fascinated with is how something maybe that starts in
    0:08:30 games ends up radiating out into the other forms of media as well.
    0:08:35 And so today we look at something where if you make a movie about a video game, it’s
    0:08:37 probably going to be not very good.
    0:08:40 But honestly, movies made about comic book heroes.
    0:08:45 The first were often quite bad also until more recently they became good, right?
    0:08:50 Like if you watch the Joel Schumacher Batman’s, then you know what I’m talking about, the
    0:08:51 super campy bad ones.
    0:08:53 And so I think that’s one very interesting version.
    0:08:57 I’m also waiting for rappers instead of bragging about what kind of car they have, they can
    0:09:05 brag about what in-game items they’ve purchased as a, you know, status sort of seeking thing
    0:09:06 as well.
    0:09:07 Has it happened yet?
    0:09:09 I don’t think so.
    0:09:10 But it will happen.
    0:09:11 For sure it will happen.
    0:09:14 Drake has gone on record as being an avid Fortnite player, right?
    0:09:18 So I think those days, if they haven’t already happened, I think they’re coming up for sure.
    0:09:22 All of this sort of really speaks to the idea that this next generation, in terms of how
    0:09:25 they want to use technology, it’s going to be more dynamic.
    0:09:26 There’s going to be more video.
    0:09:28 There’s going to be more interactivity.
    0:09:31 There’s going to be music layered on top of visuals, right?
    0:09:34 And what better medium to deliver that than games?
    0:09:37 So then what will these true next generation games look like?
    0:09:42 Obviously, with all the new platforms that are coming out, there’s really fun game startups
    0:09:44 that are trying to go voice first, right?
    0:09:49 As when we have the proliferation of Alexa and like voice apps and like that kind of
    0:09:50 thing.
    0:09:53 And then there’s another one where the killer app, many of the early things that have gotten
    0:09:57 a ton of attraction have been things like Beat Saber, which is an awesome rhythm game
    0:09:59 that everyone should go play.
    0:10:02 Super Hot is also another one of my favorites on the new Oculus Quest.
    0:10:06 And so I think, you know, the other answer to your question is games are intrinsically
    0:10:10 part of every computing platform that gets created.
    0:10:12 Cloud Gaming is also something that’s under horizon.
    0:10:14 And we think there are a variety of ways that can go.
    0:10:19 I think in the near term, most folks in the industry think of it as a distribution channel
    0:10:24 where we’re most excited about it is actually thinking about games that are being made natively
    0:10:25 for the cloud.
    0:10:29 If you think about it from the perspective of this is the first time where both the client
    0:10:34 and the server for a multiplayer game are persisting in the same cloud instance, I think
    0:10:38 the things that you can do from that sort of architecture is potentially really, really
    0:10:43 groundbreaking and we’re seeing some developers and folks out there that are trying to experiment
    0:10:44 on that.
    0:10:48 And I think we’ll see the first wave of those cloud native games and apps pitting and perhaps
    0:10:49 a couple of years from now.
    0:10:52 And are there certain genres that are best aligned with cloud gaming?
    0:10:55 Yeah, I think this is something where we’re all trying to figure it out.
    0:11:00 But I think from looking at the current genres that exist onto the PC and console, like we
    0:11:05 might expect massive multiplayer games like MMOs, things like World of Warcraft, for example,
    0:11:09 things that have a lot of players playing together in the same instance, so battle royales or
    0:11:14 the latest iteration of that, you can expand the size of those sandboxes and those instances
    0:11:16 massively in a cloud environment.
    0:11:22 So instead of having 100% battle royales, maybe you have 1000% battle royales or 1 million.
    0:11:28 And instead of having a server instance that’s spun up and shut down due to a hodeword constraints,
    0:11:33 you have a persistent living world that lasts for weeks at a time.
    0:11:38 I think we’ll see those sorts of sort of experiences more when everything is living in the cloud
    0:11:41 and you can log in regardless of where you are and what device you’re on.
    0:11:45 We’re seeing more and more developers these days thinking about how to build properties
    0:11:50 that are going to be great, not just for one platform, but on every device, mobile, PC,
    0:11:55 console, browser, Minecraft and Fortnite, I think, one of the reasons why they’ve achieved
    0:11:59 the sort of critical mass and the size that they have is because you can play those games
    0:12:02 on legitimately almost every platform there is out there.
    0:12:06 And I think more and more games that we see will be going in that direction as well.
    0:12:08 What’s the shift then?
    0:12:12 Is it the audiences converging, are there different demographics for different kinds
    0:12:14 of play, different platforms, different games?
    0:12:20 It’s not that the audiences are converging, but that people want to play their favorite
    0:12:23 games regardless of where they are in the day.
    0:12:28 And so I might want to play Fortnite when I’m at home and in front of my PC, but then
    0:12:33 when I’m commuting to work and I’m in the subway, I might also want to play and I have
    0:12:36 nothing but my mobile phone or my iPad with me.
    0:12:41 And not only are gamers, you know, playing more and playing for longer, they’re also
    0:12:44 inherently involved in the development of the game now.
    0:12:45 Absolutely.
    0:12:51 We’re seeing players as co-creators these days, so instead of just accepting what developers
    0:12:55 are working on and feeding to them, players these days now have the ability to go out
    0:13:00 and create mods, they have the ability to go out and create entire maps, skins, items,
    0:13:04 and games these days are increasingly being architected in ways where they have systems
    0:13:09 that enable players to easily create these things and drop them into the world.
    0:13:15 And then we also see just sandbox experiences like Minecraft and Roblox where you’re basically
    0:13:18 armed at the very beginning of the game with the shovel and then you go out into the world
    0:13:22 and like the narrative that you create is the one that you make for yourself, right?
    0:13:28 And so today, like we have people building Keen’s Landing and Roblox, these creations
    0:13:30 are great because they also make the game viral.
    0:13:34 And the way that you get it to work is, well, you’re not spending tons of money on TV advertising
    0:13:41 instead, you make your game free, you get people excited about it on Reddit, on Twitch,
    0:13:42 on Discord, right?
    0:13:46 And so what ends up happening is it goes viral the way that we hear about really cool new
    0:13:49 apps or really cool new websites.
    0:13:54 It’s really about the same channels, thus circumventing retail and potentially publishers.
    0:13:58 I would also add on to that, I think a popular sort of misconception that people have these
    0:14:02 days is that they see a lot of news articles about monetization.
    0:14:06 There’s this assumption that free-to-play games and live service games sort of have
    0:14:10 these evil monetization methods where they’re trying really hard to squeeze every drop and
    0:14:11 every dollar out of their players.
    0:14:12 How so?
    0:14:15 So there’s definitely a difference between pay-to-win and sort of free-to-play.
    0:14:17 The two of them often get confused.
    0:14:18 Break that down for me.
    0:14:19 What’s the difference between play-to-win and free-to-play?
    0:14:26 So pay-to-win is essentially a form of monetization where you unlock power behind a paywall.
    0:14:31 So by paying, you unlock access to either higher levels or more powerful forms of equipment
    0:14:34 and players essentially get angry about this because they feel like people who are not
    0:14:38 paying can’t ever beat someone who is paying.
    0:14:41 In a game like League of Legends, they don’t have this problem because there’s no pay-to-win
    0:14:42 component.
    0:14:48 You win or lose purely based on sort of skill and sort of most of the monetization in-game
    0:14:53 comes from cosmetics which allow you to express yourself or they allow you to sort of unlock
    0:14:57 certain champions, none of which are supposed to be more powerful than any of the ones that
    0:15:00 you get access to if you’re a free player.
    0:15:03 So that way, the experience between a free player and a paying player is largely the
    0:15:08 same except you just have more access to cool stuff if you do monetize.
    0:15:13 We talked a lot about this idea here of super apps, so an app in which you’ve got your
    0:15:17 payment information baked in, you’ve got social media, you potentially e-commerce.
    0:15:21 Do you think that’s the way that games are going, where everything we baked into one
    0:15:22 gaming experience?
    0:15:27 Well, one of the most interesting parts about the Epic Games, which is the company that
    0:15:32 has built Fortnite, is that both they and there’s another company called Valve and there’s
    0:15:36 a couple other companies that operate like this, both make the game and they also operate
    0:15:38 a platform around their game.
    0:15:44 So what that means is you play Fortnite and as part of playing it, you end up using this
    0:15:48 application that’s called a launcher that lets you update the game and do all the different
    0:15:49 things that you need to do.
    0:15:53 What they’ve done, which is incredibly fascinating, is they have taken that and they’ve turned
    0:15:55 that into a game store.
    0:16:00 And so there’s a whole effort by Epic to go and ultimately build their launcher into
    0:16:04 a store, partner with many, many other companies in order to promote them.
    0:16:10 They also have bought the Bay Area Company house party, which is a video calling thing,
    0:16:12 group calling thing that you use with your friends.
    0:16:17 And you imagine how a constellation of these different experiences together start to weave
    0:16:21 together the idea that it’s not just about Fortnite, it’s all the things that you do
    0:16:23 in and around Fortnite.
    0:16:28 And especially once you have with the Epic store, you have your credit card in there,
    0:16:33 you have your user ID and your account information in there, you have identity.
    0:16:38 Then all of a sudden, exactly to your point, it very much has a platform or a super app
    0:16:39 like functionality.
    0:16:44 Now, this is actually not the first time that this has happened because there’s a company
    0:16:48 called Valve that did Half-Life many years ago that went through the exact same process
    0:16:52 and ended up with the Steam store on the other side of it.
    0:16:58 This change now and opens the door for entrepreneurs and for startups is all of a sudden you can
    0:17:05 have a group of people that decide they have an amazing new games concept and they’re going
    0:17:06 to build it by themselves.
    0:17:10 And they’re going to actually not go through retail, of course, they’re going to publish
    0:17:13 it on Steam or they’ll publish it on Epic.
    0:17:15 What kind of games are you guys playing right now?
    0:17:16 What are you excited about?
    0:17:20 Well, I’m playing an amazing game called the Untitled Goose Game, which has been all over
    0:17:21 Twitter, which is fun.
    0:17:22 It’s on Nintendo Switch.
    0:17:27 It’s an indie game where you basically you play Goose and you kind of run around and
    0:17:32 you mess with this farmer that’s kind of like trying to plant his crops and all that stuff.
    0:17:38 The other thing that I’m doing is I subscribed to Apple Arcade and so I’ve now gone and downloaded
    0:17:41 a ton of different games out of there.
    0:17:45 And so the one that I am on my home screen right now is Card of Darkness, which is super
    0:17:46 fun.
    0:17:50 And then there’s another one that was recommended to me called Sneaky Sasquatch.
    0:17:54 And it’s a stealth game where you play a Sasquatch and you have to avoid the resident
    0:17:59 ranger who’s trying to track you down and you’re trying to steal food so that then you
    0:18:03 can sell this food to get money in order to save the park that you live in.
    0:18:04 So that’s a really fun one.
    0:18:06 Yeah, John, what are you playing these days?
    0:18:10 I’ve been spending a ton of time, maybe too much time, playing Teamfight Tactics, which
    0:18:13 is the auto chess game that Riot put out.
    0:18:17 And I’ve got maybe two, 300 hours and at this point, then just trying to grind my way slowly
    0:18:18 up the rank queue.
    0:18:21 So I’ve been taking up most of my time.
    0:18:25 I think that the mobile game that’s currently sort of on my home screen is also an Apple
    0:18:30 Arcade title called Bleak Sword, which is basically Dark Souls, but on mobile.
    0:18:34 So both of you see a lot of gamers, you see a lot of entrepreneurs.
    0:18:38 What is your advice for entrepreneurs in the gaming space?
    0:18:46 I think first is the ability to find a long-term partner that understands that making games
    0:18:49 is at its heart a creative process.
    0:18:53 Games can take a long time to build and there can be a lot of twists and turns in that road.
    0:18:57 So Fortnite took a while before it found Battle Royale.
    0:19:02 Roblox took almost 10 years to grow into its current user base.
    0:19:05 Niantic, for example, took a while before Pokemon Go came out.
    0:19:10 And I think that the game that they released before that in grass wasn’t nearly as big
    0:19:12 or as popular as Pokemon Go was.
    0:19:16 And so it can take a while for a studio to find or first hit game.
    0:19:17 And that’s something that we recognize.
    0:19:22 And I think as a sideline to that, if you’re thinking about building a studio that’s going
    0:19:28 to last not just months or years, but potentially decades, you also want to be able to maintain
    0:19:30 control of your IP.
    0:19:35 I think this is something that in the near term may not seem as important, but IP ownership
    0:19:41 enables you to essentially, one, have complete control over sequels, ancillary products like
    0:19:46 merch, videos, comics, books, et cetera, and more importantly, it also makes it so that
    0:19:50 you maintain creative control over the product.
    0:19:52 Someone else has control over your IP.
    0:19:56 That means they can take you off the product and actually put a different team on making
    0:20:01 that exact same game and we’ve all heard of cases in the industry where that’s occurred.
    0:20:05 I think one of the big differences in TAC that John and I have spent time on is the
    0:20:13 fact that you actually need years, sometimes two, three, four years to get the first complete
    0:20:14 version of your product out.
    0:20:21 You actually need to fully finance your game to the release date plus all the live operations
    0:20:22 and content that you’re going to do afterwards.
    0:20:28 And so a lot of that ends up being then navigating the financing world, but then also the various
    0:20:32 stores that are offering minimum guarantees, the publishers that have certain contract
    0:20:36 structures, et cetera, and these are things that if you’re a brand new entrepreneur, even
    0:20:41 if you’ve developed killer games before, you may not know how to navigate that world.
    0:20:43 Andrew, what is your advice to entrepreneurs?
    0:20:49 So my advice really comes from meeting teams that often have worked on really breakthrough
    0:20:54 amazing franchises at some of the established games companies, but then are going off and
    0:20:57 starting their new thing by themselves for the first time.
    0:21:01 And I think that there’s a lot of facets that they have to master in addition to creating
    0:21:02 the game.
    0:21:06 The very first thing is that the entire process of self publishing and going to market is
    0:21:08 a skill unto itself.
    0:21:13 It’s something where you want to build the right relationships with influencers, with
    0:21:17 streamers, with platforms like YouTube and Twitch and so on.
    0:21:20 Those become incredibly important as a way to popularize your game.
    0:21:26 Similarly, many of these games actually end up being just like mobile apps and websites
    0:21:27 and anything else.
    0:21:30 You’re going to need to think about what’s my paid marketing budget?
    0:21:31 What is my onboarding flow?
    0:21:35 What is the LTV and CAC of my users?
    0:21:39 And so bringing that all together overlaid on top of a great product.
    0:21:42 So what qualities do you look for in game developers and entrepreneurs?
    0:21:44 Are there certain criteria?
    0:21:49 I think the very first one is it is really clear that the folks that are spinning out
    0:21:53 of Valve, that are coming out of Riot, that are coming out of Supercell, that are coming
    0:21:55 out of Blizzard.
    0:21:59 For many of these teams, they have worked on amazing, amazing games that we all love
    0:22:00 and we all play.
    0:22:05 But at the same time, those companies have gotten to a point where maybe they’re big
    0:22:06 established players, right?
    0:22:11 And so some of that creative energy starts to be a little bit more difficult in a large
    0:22:12 team.
    0:22:16 And so what we’re often seeing is these groups spinning off and starting something.
    0:22:20 And especially over the last couple of years, a lot of the entrepreneurial energy that we’ve
    0:22:25 seen at places like Blizzard or Riot, once they’re done shipping this big game that they’ve
    0:22:28 been working on for years, they’re ready to move on to the next thing.
    0:22:32 And so we’re excited to meet teams that are ready for their next adventure.
    0:22:33 Great.
    0:22:34 Well, thank you so much for joining us.

    The games industry is in the midst of a tectonic shift. Powered by platform convergence, games-as-a-service, and user-generated content, modern video games—what we call next-generation games—are unlike anything we’ve seen before. In the past decade, gaming has grown from a niche hobby into a global, culture-defining phenomenon.

    Not only are the games themselves becoming increasingly immersive, the way we develop and discover them has fundamentally changed. In contrast to the hits-driven business model of the past, now games are shaped in real time by player feedback. And thanks to the rise of influencer gamers, the experience of finding new games has become organic and social.

    In this episode, a16z general partner Andrew Chen, deal partner Jon Lai, and host Lauren Murrow discuss how gaming is dominating not only the entertainment industry, but also pop culture at large. (Why can’t we quit you, Untitled Goose Game?!) Andrew and Jon share how they think about emerging technologies in the space, as well as the features they look for in next-gen games and game developers.

  • AI in B2B

    AI transcript
    0:00:05 The content here is for informational purposes only, should not be taken as legal business
    0:00:10 tax or investment advice or be used to evaluate any investment or security and is not directed
    0:00:14 at any investors or potential investors in any A16Z fund.
    0:00:18 For more details, please see a16z.com/disclosures.
    0:00:19 Hi, everyone.
    0:00:21 Welcome to the A16Z podcast.
    0:00:22 I’m Das Rush.
    0:00:27 In this episode, we talk with Ola Griginski, the founder of People AI, a platform for sales
    0:00:28 and marketers.
    0:00:31 Well, the broader question we’re tackling is beyond just sales and marketing, to really
    0:00:36 how AI is taking data from across the enterprise to change how we work, regardless of our
    0:00:37 function or industry.
    0:00:42 Also joining us in this conversation is Peter Lauten from the A16Z Enterprise investing
    0:00:43 team.
    0:00:46 We’re going to cover everything from how to design AI to be a co-pilot for knowledge
    0:00:51 workers, to the founder’s playbook for spotting the next AI opportunity, and then how to take
    0:00:53 a product to market once you do.
    0:00:58 First, we begin with why AI and B2B, that is business to business, is so different from
    0:01:00 business to consumer.
    0:01:05 In the last five years, more and more areas of human existence or activity are adopting
    0:01:06 the AI.
    0:01:12 And in particular, AI is finally proliferating B2B Enterprise world, which is very different
    0:01:15 to work with than your classic B2C scenario.
    0:01:17 B2C is much more reactive.
    0:01:22 You build something, you throw it at a million users in Australia, and then see what happens.
    0:01:24 And if it doesn’t work, you can pull it back.
    0:01:28 With B2B, you cannot do it because you have five customers and each one of them is paying
    0:01:29 you.
    0:01:34 So you better go ahead and do the research in advance and make something enterprise is
    0:01:35 one.
    0:01:41 And so with that, it’s a very different level of risk, but also a very different level
    0:01:45 of data instead of having a large number of users out there that all contribute a little
    0:01:47 bit of data to you.
    0:01:53 You have very few users that contribute a lot of very valuable, very private, secure
    0:01:55 and needle-moving data.
    0:02:00 It’s much harder because you have to make those companies very comfortable with the
    0:02:06 fact that their data will be anonymized, aggregated, will not be shared with competitors, will
    0:02:08 not be leaked if you get hacked.
    0:02:13 And one of the big calculations that particularly big customers would be doing is how do I compare
    0:02:18 the gains of machine learning being applied this way against the cost of actually doing
    0:02:19 it.
    0:02:24 And so if you think about the cost of collecting, cleaning and maintaining the data, like that’s
    0:02:28 certainly gotten cheaper over time, particularly in the last decade with cloud compute and
    0:02:31 AWS, GCP, Azure, etc.
    0:02:37 But there are scenarios where the value out of the data you get maybe isn’t so obviously
    0:02:39 worth the cost of actually collecting it.
    0:02:46 And so when we think about how this generation of technology will get deployed over even
    0:02:52 the scale of decades, a lot of it is, where is the greatest yielding application of these
    0:02:54 technologies by industry?
    0:02:56 And then let’s aim our efforts there.
    0:02:58 And then what’s the next best industry?
    0:03:03 So it’s also a function of just how valuable is the promise you’re making to customers
    0:03:06 against their cost of being able to achieve it.
    0:03:07 Interesting.
    0:03:12 That’s how companies are evaluating AI, but what about on the startup side?
    0:03:15 How should an entrepreneur look at the market for AI?
    0:03:20 For aspiring entrepreneurs, there is a pattern that if there is an area of human activity
    0:03:24 or existence that generates activity data of how humans do something and the data is
    0:03:28 not being captured today, there is a ripe opportunity.
    0:03:34 There is a time series activity stream, someone doing something, moving shipping containers,
    0:03:40 ordering readings from a wind farm, recording emails from a salesperson, recording location
    0:03:42 of an Uber driver.
    0:03:48 And as long as you can collect reliable, comprehensive, non-manually entered high-volume activity
    0:03:54 data from many wind farms or from many containers and ships or from many salespeople in one
    0:03:59 place, aggregate and start seeing the big picture and then use that big picture to analyze
    0:04:04 the micro trends and predict what’s the best next action for the operator, the salesperson,
    0:04:10 the Uber driver is, that’s where it brings in network effects and significant acceleration
    0:04:11 of growth.
    0:04:17 So my theory is that every industry is going to switch into this business model of collecting
    0:04:21 activity data, understanding its scale and turning into best next actions in the next
    0:04:23 five, ten years.
    0:04:26 You mentioned network effects there as an accelerator of growth.
    0:04:29 What exactly do you mean by those network effects?
    0:04:35 The more sensors, edge computing devices, salespeople, Uber drivers you have in the
    0:04:40 network, the more data you collect, the more the patterns of behavior you see.
    0:04:45 When you put them all into one centralized graph, the smarter this graph becomes for
    0:04:52 everybody, the better the predictions it can produce about the best next actions.
    0:04:55 Now this is where the second loop of the network effect starts.
    0:05:00 The better the predictions are, the more money Uber drivers make, the more money salespeople
    0:05:02 make, the less wind farms break.
    0:05:08 So more and more players will be lured in with this better efficiency to become part
    0:05:11 of the network, contribute even more data into this shared graph.
    0:05:13 So it becomes kind of this virtuous cycle.
    0:05:14 Exactly.
    0:05:18 Imagine you’re a wind farm operator and you know that your wind farms are going to break
    0:05:23 after they broke and there’s a wind farm next to you, same wind, same everything, but they
    0:05:27 come in and practically fix them and have zero downtime because they start collecting
    0:05:30 the data about their wind farms breaking five years before you.
    0:05:34 If your competitor automated the business process and you did not, you are at disadvantage
    0:05:38 but you can go to the same vendor and buy the same assembly line and catch up.
    0:05:42 If you miss the AI boat, the results are very different.
    0:05:47 If you did not collect the data early enough, there’s nothing you can do to make your AI
    0:05:49 better than your competitors.
    0:05:54 Even if the data is shared, the AI has been trained on your peculiar behavior and the
    0:05:56 market responds to it for three years longer.
    0:05:59 It’s seen more examples, more samples, it’s just smarter.
    0:06:07 And so unlike automation, like industrial revolution from 100 years ago, AI arms race is a zero
    0:06:08 sum game.
    0:06:13 So my prediction is that 10 years from now, Fortune 500 will look very different than now
    0:06:19 because some companies did not get into collecting the data and training their machinery models
    0:06:20 early enough.
    0:06:25 Is there a tipping point where this balance of power around the data shifts from the customers
    0:06:31 you’re serving it up to, to the vendors because your AI, your model becomes such a competitive
    0:06:34 advantage that they’re going to have to play by your rules.
    0:06:38 They’re going to have to allow you access to that data and to reuse that data for training.
    0:06:41 The competitive dimension part of that is really interesting.
    0:06:46 In theory, if one customer is contributing their data to that corpus, certainly their
    0:06:51 data is anonymized and no one else in the customer base would really have access to their data.
    0:06:56 But in theory, anything you observe at one customer is informing generalized models that
    0:06:58 all the customers benefit from.
    0:07:03 And so I think part of it is just being super honest in the sales process that yes, of course,
    0:07:04 that’s how it works.
    0:07:08 But I think the calculation that most of the customers are doing is, okay, that’s fine.
    0:07:13 I realize I’m helping everyone else out a little bit, but you’re helping me so much
    0:07:17 that I’m willing to contribute a little bit of the signal from my data to help everyone
    0:07:18 else.
    0:07:22 It’s kind of like you push the boulder uphill getting first customers, but then you roll
    0:07:27 downhill with the network effect becomes so strong and the value of joint data set, joint
    0:07:30 knowledge becomes so big that people just go ahead with it.
    0:07:35 And so one reaction to how nervous customers can be around, “Oh, I don’t know if I want
    0:07:41 other people to benefit from my data at all,” is that’s kind of analogous to people writing
    0:07:46 contracts that say, “You can only exclusively sell your software to me,” because in abstract,
    0:07:49 these are just tools and technologies that everyone’s going to get access to eventually.
    0:07:55 And so any hesitation I think customers have about it, that’s going to be a relic years
    0:07:56 from now.
    0:08:00 One trend, and actually I think I heard it from Marc Andreessen here, is that when data
    0:08:03 model changes, systems of record die.
    0:08:10 So there were systems of record like CRMs built on, not relational, but on hierarchical
    0:08:12 databases in the 70s.
    0:08:13 Do you know of any today?
    0:08:15 They don’t exist anymore.
    0:08:19 Then the next data model that happened was on-prem SQL, C-Belt.
    0:08:21 Then the cloud SQL happened.
    0:08:23 And now we’re talking about Salesforce.
    0:08:28 The next generation of data model is likely to be a graph, which is the data model that
    0:08:35 allows you to train AI in the best way possible, federated shared graph of data.
    0:08:40 Together with data model shifts, the way you consume the software has been changing.
    0:08:47 Instead of you pulling data and looking for it in bunch of Excel reports or Salesforce
    0:08:53 reports or websites, it’s actually being pushed to you in a pre-packaged, we call it personalized
    0:08:58 actionable insights way, where everything you need to know to complete this action is
    0:09:01 right here pushed to you through the channel through which you’re most likely to engage
    0:09:02 with it.
    0:09:08 Most of the systems of the future will have this feed or minimum choice, a maximum focus
    0:09:10 on one thing in front of you.
    0:09:13 And once you complete it, the next thing will come and then the next thing will come.
    0:09:17 And that will make you much more productive and much more focused at what you’re doing.
    0:09:20 So you mentioned that the way we consume software is changing.
    0:09:21 Say a little bit more about that.
    0:09:24 What does that change mean for product design?
    0:09:26 It’s not the case that the product is simpler.
    0:09:31 It’s that the UX is designed such that there’s a level of intent that you can observe from
    0:09:32 the user.
    0:09:35 You should generally know what they’re trying to do such that you don’t have to expose the
    0:09:39 entire complexity of a product to the user and overwhelm them.
    0:09:42 You just say, we’re quite certain this is what you actually want to do at this stage
    0:09:43 of the product.
    0:09:44 That’s all we’re going to show you.
    0:09:47 And you’re going to be able to very efficiently execute that function.
    0:09:52 It sounds like the prediction here is this next wave of AI companies, this next generation
    0:09:58 of enterprise software, it starts to make worker lives easier because it gets simpler.
    0:10:00 And give you the last tabs in Chrome.
    0:10:01 Totally.
    0:10:07 And part of that is just the interaction between how do you map UX and design against this
    0:10:11 like increasing orchestration of the knowledge worker labor force?
    0:10:14 So what does that mean then for kind of the enterprise worker of the future?
    0:10:18 It seems to me like in that scenario, you’re getting workers to be increasingly focused.
    0:10:21 Does that mean they’re also getting increasingly specialized?
    0:10:22 I think it’s two things.
    0:10:29 They’re able to focus on what really needs human judgment, really complex rare situations
    0:10:33 that maybe there’s not a sufficiently big data corpus to make an interesting inference
    0:10:35 on with a machine learning application.
    0:10:39 And so what you get is humans can not only do the hardest IQ work that compute can’t
    0:10:43 really replicate yet, but also they do become more empathetic.
    0:10:47 Your accountant spends more time thinking about your specific needs and how they communicate
    0:10:50 with you versus them doing simple math.
    0:10:53 There are two modes in which AI operates with people.
    0:10:56 We call one autopilot and another one is copilot.
    0:11:01 So autopilot is when you are doing as a human, you’re working on something mundane, some
    0:11:04 repetitive low value at task.
    0:11:07 And so AI can easily automate that for you.
    0:11:12 So think of our Uber analogy of them receiving a phone call, typing in the computer, picking
    0:11:15 up the ham radio, delivering it to you.
    0:11:20 That’s just not the best use of all those billions of neurons in your brain.
    0:11:24 So AI comes in and automates those functions, freeing up your time to do something much
    0:11:26 more productive and much more effective.
    0:11:31 The second bucket in which we see AI play in the role is what we call copilot.
    0:11:38 In copilot cases, AI is augmenting your ability to make decisions.
    0:11:42 Think of you are in a race car and there’s someone next to you that knows what’s around
    0:11:47 the curve and is whispering in your ear what to be ready for, what’s the best next thing
    0:11:48 you could do.
    0:11:54 While autopilot makes us super productive, copilot allows us to focus on more human,
    0:12:00 more face to face, more EQ driven things that machines will not be able to do for a long,
    0:12:01 long time.
    0:12:07 Oleg, I’m curious, a lot of these companies that have some sort of copilot goal, there’s
    0:12:12 some sensitivity around the employees and the users not wanting to be tracked.
    0:12:15 For some people who didn’t grow up on the internet, they say, oh, this is a violation
    0:12:16 of my privacy.
    0:12:20 I don’t want Oleg to know the magic of how I deliver my sales.
    0:12:24 To be honest, if I have some really good weeks and I have some bad weeks, I don’t want them
    0:12:26 to know about my bad weeks.
    0:12:28 How do you get the end user comfortable?
    0:12:30 Record the 10x rule.
    0:12:38 You have to be visually in a very simple, explainable way, promising and delivering 10x the value
    0:12:42 of being on the system than being off the system.
    0:12:47 Now, to simplify that, we go to our customers, we say, great, let’s not put you on the platform,
    0:12:51 let’s A/B test and see what happens in another quarter when the guy next to you or the girl
    0:12:58 next to you did 10x your results and the only variable we have is you were afraid of being
    0:13:00 a user of a modern system.
    0:13:02 So break that down for me a little bit more specifically.
    0:13:05 You’re making this technology for sales and marketers.
    0:13:08 What are sales and marketers doing today that they’re not going to have to do five years
    0:13:12 from now and how is AI going to change the way that they work?
    0:13:17 Is this just about their efficiency or is it going to fundamentally shift how those industries
    0:13:18 work?
    0:13:20 It will definitely shift how the industries work.
    0:13:22 So let’s think about the day of a salesperson.
    0:13:28 In an average week, salespeople spend about a third of their time on manual data entry.
    0:13:35 Another third of their time is supposed to be spent on prospecting, so finding who else
    0:13:41 looks like my current customers, which from computer science perspective is a very classic
    0:13:45 lookalike problem we’ve solved 30, 40 years ago and then only a third of that time is
    0:13:51 spending face-to-face meetings actually selling, actually building relationships.
    0:13:55 Now the first two parts, the manual data entry, it should be gone.
    0:13:58 It should be fully automated through autopilot capability.
    0:14:04 The second part is who should you talk to next is also very easy to solve with the help
    0:14:11 of lookalike modeling, machine learning, pointing you to very high value ad prospects
    0:14:15 of customers and actually helping you automate the outreach to them.
    0:14:21 And then a third part, which is being face-to-face with customers, truly building relationships
    0:14:23 is where machines cannot replace humans.
    0:14:29 So five, 10 years from now, salespeople or any white collar kind of knowledge workers
    0:14:37 will be actually focused on EQ-driven relationship-building activities still with copilots help because
    0:14:40 by then copilot will recommend how to better build a relationship.
    0:14:46 So you can think of, in particular, the sales org of the future is really high EQ people
    0:14:51 showing up and then compute is aiming them at where their labor is best suited.
    0:14:54 I mean, this all sounds really fascinating, but then I think about the older generation
    0:14:58 of Salesforce out there being told they have to use this new tool.
    0:15:03 We’ve been going about their methods of selling and they’ve got their kind of day-to-day.
    0:15:07 How do you go about with that habit change for those sorts of workers?
    0:15:12 Or is this a generational shift in terms of how AI technologies get adopted in the enterprise?
    0:15:18 If you think about it, the salespeople themselves, they are ingrained in their habits because
    0:15:21 something they’ve done over and over again worked.
    0:15:26 What autopilot does, it frees up a bunch of their time to experiment more.
    0:15:32 And so if we approach any problem that involves AI with autopilot freeing up your time and
    0:15:38 copilot teaching you the new ways, eventually you will be able to retrain the people who
    0:15:42 are ingrained in their old ways into new ways by showing them that trying new stuff actually
    0:15:44 yields results.
    0:15:49 This training at the end point exactly where the knowledge worker is doing their job, we’ll
    0:15:51 say these are the next top priorities for you.
    0:15:55 This human can learn from that and they start to understand, okay, this is the best way to
    0:15:56 sell.
    0:16:00 The way that this is playing out is it’s kind of unbundling these horizontal, like learning
    0:16:03 management systems of two decades ago.
    0:16:09 This kind of dance between the knowledge worker and the software, the knowledge worker and
    0:16:12 the machine learning algorithms trains them live on the job.
    0:16:16 You learn in the software while you do your job.
    0:16:20 We hear a ton about we have to retrain the workforce, but this is, I think, the first
    0:16:24 time I’ve heard it articulated that some of that retraining gets built into the products
    0:16:30 especially at the point where it sounds like the products are augmenting what humans do.
    0:16:32 How are products going to look different?
    0:16:34 What does the product of tomorrow look like for me?
    0:16:40 In the next 15 years, every area of our existence will probably go through a transition and
    0:16:45 will be, instead of being inundated by a bunch of Chrome tabs, it’ll be inundated by a bunch
    0:16:47 of feeds that tell us what to do.
    0:16:53 I think there are cycles of bundling and unbundling playing out here already in the latest wave
    0:16:55 of machine learning applications.
    0:16:59 The use cases are getting increasingly precise and tailored to the end user.
    0:17:03 One of the consequences of that is as these systems get richer and deliver more promises
    0:17:08 to the user and then help them do their job in more and more ways, I think you just get
    0:17:11 much fatter workflow applications.
    0:17:13 We see that already happening in B2C.
    0:17:17 The bundling of services as they figure out the right workflow.
    0:17:18 Think of Uber.
    0:17:19 It used to be just rides.
    0:17:20 Now it’s food delivery.
    0:17:22 Now it’s freight and stuff like that.
    0:17:23 It’s coming from the same app.
    0:17:27 You can ship something, you can get somewhere, or you can get food delivered or whatever
    0:17:29 you want to have delivered.
    0:17:36 Once the company finds an optimal user interface that allows for suggesting best next action,
    0:17:41 then it just makes sense to bundle in more and more functionality and take over more and
    0:17:43 more of the attention span of the user.
    0:17:46 I think this actually goes to a question that I’m really curious about, too, which is the
    0:17:49 broader trends of how these products are coming into the market.
    0:17:54 Are you finding that you have to really drive that adoption at the enterprise through your
    0:17:58 user first, or is it still more of a traditional top down?
    0:18:02 You’re going in, you’re selling to somebody because they want to automate what their sales
    0:18:03 force is doing.
    0:18:07 So that has been an interesting point for us because we want to build a bottoms up approach.
    0:18:08 Right now we’re top down.
    0:18:11 We come in through kind of standard procurement channels.
    0:18:17 The part that is tricky there is that you have to make the organization comfortable with
    0:18:20 your security posture, your privacy posture.
    0:18:26 And so having that is what slows down the bottoms up approach, you cannot give someone
    0:18:30 an AI that’s going to learn from individual user without checking in with the company
    0:18:31 first.
    0:18:35 It’ll be a very tricky balance played out over the next few years where the users will
    0:18:40 be demanding more and more powerful and data hungry products, while the enterprise will
    0:18:43 be saying, well, I still want to be in control of it.
    0:18:47 I think there’s a distinction between the types of enterprise apps.
    0:18:55 The apps that build AI based on user behavior and that do not require merging of that behavior
    0:19:02 data with proprietary enterprise data such as Zoom or Slack, those will have much easier
    0:19:06 time with bottoms up adoption because they just need the user to log in and do stuff.
    0:19:10 It’s a workflow or a utility tool that a single player can use in a single player mode.
    0:19:15 The flip side is when the value you create is based on or is significantly amplified
    0:19:20 by the historical proprietary knowledge of the company.
    0:19:25 So in our case, at people AI, we need to know what’s in your CRM in order to not give you
    0:19:27 random suggestions.
    0:19:33 And so having access to this proprietary information that the company has under the lock by the
    0:19:39 security IT is where you have to go and be very transparent and open with the kind of
    0:19:46 top down IT security infosec teams and work with them to get access, but also work with
    0:19:49 them to explain to them the value that the end users are going to get.
    0:19:53 You’ve both been working around these AI technologies for a few years now.
    0:19:57 I know, Oleg, you’ve gone through a few different companies and iterations, getting to people
    0:19:58 AI.
    0:20:01 What have been the biggest surprises for you in this space and what have been some of
    0:20:03 the biggest lessons learned?
    0:20:07 So the first company I joined, I started my career as an inside sales person back in
    0:20:08 2006.
    0:20:12 I was pounding the phones before LinkedIn existed and before Twitter existed, Smile
    0:20:13 and Dial Style.
    0:20:21 The company that I was at went out on Toronto Stock Exchange right before the downturn.
    0:20:23 So the first lesson I learned was timing is everything.
    0:20:27 And if you get an opportunity to move forward aggressively.
    0:20:32 Second lesson I learned was with Cementria, the company I started in 2011.
    0:20:36 That’s where I realized why the size of the market really matters.
    0:20:43 We started a sentiment analysis API, beautiful technology, scales nicely.
    0:20:47 The only problem is there was only 20, 30 companies that really needed it in the world.
    0:20:53 So Cementria ended up being a very small market and we ended up owning probably 80% of the
    0:20:59 market within three years while still doing single millions of revenue, which was kind
    0:21:00 of crazy.
    0:21:03 It’s really striking that you mentioned you’ve been an inside sales, you’ve done the Smile
    0:21:05 and Dial, you’ve been a marketer.
    0:21:09 How much did your personal experiences inform your product development?
    0:21:10 Oh, 100%.
    0:21:16 I’ll never forget the moment in 2007 when CEO of the company, where I was actually at
    0:21:20 that point leading inside sales team, grounded me and my whole team in a room in a pretty
    0:21:27 small sweaty conference room for a week, having us go and clean Salesforce record by record.
    0:21:32 And then a week later, we came out and we used the new clean, amazing Salesforce for
    0:21:33 a week.
    0:21:37 And by the end of the month, it was just as bad as it was before.
    0:21:41 And so that was one of the first formative experience where I knew something is really
    0:21:45 wrong with how we do sales and marketing today.
    0:21:48 And then I had to run my own sales team.
    0:21:51 And when I was running my own sales team, I could not get the data.
    0:21:52 I like data.
    0:21:53 I understand it.
    0:21:57 I could not understand what’s going on in the sales team and my people were working really
    0:22:03 hard, but I could not pinpoint why it’s not working out, why we are losing deals, why
    0:22:09 we are not ramping quickly, why we need to hire more people while seemingly our productivity
    0:22:12 seems to be fine, but we are not doing enough.
    0:22:16 And so all these why questions that you’re supposed to have the data in the CRM, but
    0:22:23 you never actually have it led me to really start thinking about starting people AI.
    0:22:27 I love that the way that like the product development has been informed by your personal
    0:22:28 experiences.
    0:22:32 I think that’s a beautiful tie-in to just how you can have all the data in the world,
    0:22:37 but there’s still something about human experience, human empathy, that you really can’t replace
    0:22:39 with a computer or a data set.
    0:22:44 I get to spend almost every single day of my life meeting founders on the frontier of
    0:22:47 building products for knowledge workers.
    0:22:52 And there’s a huge disconnect between their optimism for these people against what you
    0:22:57 hear in the policy realm and all this doomsday thinking.
    0:23:02 This whole wave of automation and augmentation that is making people pretty nervous at the
    0:23:07 macro picture, I see all this micro level evidence that it’s just really transforming
    0:23:12 the workforce and people really get more meaning out of their jobs and they really start to
    0:23:15 love that they can focus on exactly what they’re good at.
    0:23:21 You’re really good at something, like you want to be the best musician, you want to
    0:23:24 be the best artist, the best computer scientist.
    0:23:28 That’s what deep inside we’re all striving towards.
    0:23:35 And that self-mastery is what AI, the co-pilot specifically, helps you amplify.
    0:23:40 The autopilot takes away the time that you spend on stuff that you don’t care about on
    0:23:42 your way to mastery.
    0:23:47 And then the co-pilot actually gives you guidance on how to become better, more effective,
    0:23:51 learn faster on becoming a master at what you do.
    0:23:56 So I think the side effect or the primary effect of AI eventually is going to be that
    0:24:01 a lot more people will be insanely good at that specific thing.
    0:24:02 Great.
    0:24:04 I think that’s a fantastic note to end on.
    0:24:07 So I want to thank you Oleg for coming in and thank you Peter.
    0:24:08 Thanks for having me here.
    0:24:09 It’s been a lot of fun.
    0:24:10 Yeah, thanks to us.

    Consumer software may have adopted and incorporated AI ahead of enterprise software, where the data is more proprietary, and the market is a few thousand companies not hundreds of millions of smartphone users. But recently AI has found its way into B2B, and it is rapidly transforming how we work and the software we use, across all industries and organizational functions. 

    In this episode, Das Rush interviews Oleg Rogynskyy, founder of People.ai, an AI platform for sales and marketers, and Peter Lauten from the a16z Enterprise investing team about what the rise AI in B2B means for enterprises, workers, and startups. They explain why AI provides a strong first mover advantage to enterprises that adopt it early; how it can automate lower level tasks, maximize our focus, and, ultimately, make our work more meaningful; and for startups, they provide a playbook for seizing the next AI opportunity.